Online travel agents, which allow passengers to compare the cost of flights on different airlines, have suffered a major legal setback, as American Airlines, one of the largest carriers in the US, was allowed to pull its business from one of the country's most popular travel websites.
Shares in Orbitz plunged yesterday and passenger groups warned that it would become harder for consumers to get cheap deals. Travelport Ltd, which owns a 48 percent stake in Orbitz, lost its battle for a court injunction to prevent American's move.
The ruling dramatically shifts the balance of power in what is becoming a major tussle between the airlines and the online travel agents, as the airlines try to persuade more customers to book tickets directly through their own website – where the airlines do not have to share a portion of the ticket price with third-party agents.
Shares in Orbitz had slipped more than 6 per cent by lunchtime trading in New York, and shares in another online travel agent Expedia were also lower as investors worried that the ruling will embolden airlines to negotiate lower fees for third parties, or pull their flights all together.
The dispute between Orbitz and American is focused not only on price but also on the technology used to provide data on flight schedules and prices. American has been pushing to reduce the costs by imposing a new data system that cuts out intermediaries. American has developed a system of its own called Direct Connect.
"In today's competitive marketplace, it is important for American to be free to customise its product offerings to improve the customer experience, as well as distribute its products in a way that does not result in unnecessary costs," an American spokesman said.
A Chicago judge sided with American, denying a request for an injunction by Travelport, the travel-reservation systems provider which partly owns Orbitz, and American flights have now been removed from Orbitz.
Bookings on American accounted for about 5 per cent of Orbitz's total net revenue of $575.1m for the first nine months of this year, the company said.
American's move provoked an outraged response from the Consumer Travel Alliance, which campaigns for passengers' interests. Charlie Leocha, director, said: "At its core, this dispute has nothing to do with business agreements, legal arguments, or distribution technologies. This is simply a heavy-handed attempt by American Airlines to prevent consumers from easily searching and comparing its fares against those of other airlines. In short, the only 'direct connect' American really seems to want is a 'direct connect' to consumers' wallets."
Analysts predicted ongoing skirmishes between airlines and the major online travel agents. Attention yesterday was focusing on Delta, the largest airline name, which recently pulled its flights from a string of smaller travel websites.