American Ditches Kayak, But Let’s Clear Some Things Up

I first saw the news on TechCrunch a couple days ago. Once I noticed Kayak’s Keith Melnick and Steve Hafner confirm it in the comments section, I figured it was true. American has decided to stop participation in Kayak. After reading the blog post and many of the misinformed comments that followed, I figured I’d give a little primer on how Kayak works and why this move shouldn’t change your opinion of whether to use it or not.

Kayak, Sidestep, Mobissimo, and PriceGrabber Travel, the site I ran until we shut it down last year, are (were) all metasearch sites, or aggregators. (Yes, there are more out there as well.) The basic idea is like that of any shopping comparison site. Kayak (and the others, but I’ll stick with Kayak from now on) doesn’t sell anything itself. It aggregates fares from a variety of sources. Here’s an example of a result I just pulled up on Kayak (the AA relationship doesn’t end until August 1).
Kayak Results Sample
When the user finds the flights that he wants, he picks the “seller” he wants to buy from and Kayak sends him over to that seller. In this case, it’s either AA.com or Orbitz, but Kayak works with a bunch of them. (I believe Orbitz/CheapTickets are the only big air providers other than airlines, but that’s a story for another day.)

Anyway, in this case AA.com looks cheaper because the fee includes all booking fees, and the airline site almost always has none (excluding US Airways). Of course, the online travel agent (OTA) usually has one (except for Priceline).

How does Kayak make money? They get paid a little bit when they send you over to the seller or they get paid more when the purchase is actually completed (like a traditional commission). They also make money off advertising, but that’s not relevant to this discussion. (I’ve really got to stop using so many parentheses.)

Now, according to American (via BudgetTravel):

Kayak/Sidestep has advised American Airlines that they will no longer display our content.

We are disappointed and hopeful that this issue can be resolved in the near future so that American Airlines will again display on the Kayak/Sidestep sites.

Hmm, this doesn’t sound right. But then I noticed Kayak chief Steve Hafner’s comment on TechCrunch and it makes sense of what’s going on. He said:

American asked us to suppress search results from competing websites as a condition to displaying their fares. This is simply not something that Kayak will do. Imagine Sony telling Best Buy that they couldn’t sell Panasonic?

Now this quote is hardly using an apples-to-apples comparison. It would be like Sony telling Best Buy that they couldn’t sell Sony products provided by third party resellers. But the point I take from this is that American says it will participate in Kayak only if no results from OTAs are displayed for their flights. Kayak told them to take a hike.

Why does Kayak want results from Orbitz or other online travel agents in the first place? Backfill. It’s hard to develop a relationship with every airline, and some don’t ever want to participate, so Kayak would have an incomplete offering if it couldn’t fill in the blanks with an online travel agent. In some cases, this means that results from multiple sellers will be displayed. American doesn’t like that so they’re walking away.

TechCrunch inaccurately states that “American Airlines has a particular beef with Kayak because it tends to show AA flights through its partnership with Orbitz instead of directly from American. That means American has to pay a double tax, once to Kayak and once to Orbitz.”

It is possible that some flights are being shown through Orbitz and not AA.com, but my last search showed the opposite was true. The reality is that American and Orbitz have different connections with different data transfer speeds to Kayak, so different numbers of flights results get returned. So you will have some occasions when one seller shows up and not the other, but ideally they would both show up on each flight. This is good for you, because sometimes you can find one site happens to be cheaper than the rest.

If Kayak is, in fact, suppressing results from AA.com and only showing Orbitz because they can make more off Orbitz, then that is absolutely inexcusable. I would be surprised to see that happening.

One thing that seems certain is that American would never pay a double fee, unless Kayak has instituted some sort of listing fee and that would surprise me. Payment historically hasn’t been upon display but rather when the click occurs or when the purchase occurs. AA will either pay Kayak directly or Orbitz will pay Kayak and American will pay Orbitz its usual commission. Those are the only options. Maybe the Kayak guys will read this and can offer some clarification if that’s not true.

Whichever “CEO of a competing travel site” leaked this information to TechCrunch appears to have an axe to grind with Kayak. Just remember this. If you go to Kayak, you may not see AA.com, but you’ll still see those flights from Orbitz. Save $6 and go directly to AA.com to book, but don’t think that the Kayak results will now be incomplete. If you liked shopping there before (and I know there are mixed feelings on that one), this shouldn’t change your mind.


20 Responses to American Ditches Kayak, But Let’s Clear Some Things Up

  1. Axel Sarkissian says:

    Ineresting…

  2. Greg says:

    What a great post — it all makes a lot of sense. Well, not the American part of it! I love Kayak as I feel it’s a great way to shop the market between two cities, and its Web 2.0 feel is welcome.

  3. Jennifer says:

    I have always used a minimum of two aggregators for my iniitial searches for our company. Once I have the general schedules & best prices, I’ll usually go directly to the airline (not clicking a link)….mostly because our people have flyer miles they want to use to upgrade their seats.

    I do use Sidestep–but suppose I may have to find another, since AA is one of our primary’s out of this region.

  4. Ari says:

    Very interesting!

    A couple of questions Cranky:

    Excluding the commission fees, what’s crawled by these “travel search engines” is the same as you would expect at the airline site?

    It always bothers me that Southwest and JetBlue opt out of these systems. If they are really price leaders, why do they stay out, just to avoid the commission?

  5. CF says:

    Ari – If the airlines work directly with the metasearch sites, then theoretically you should see the same results you would see on their own sites, but there can be exceptions.

    1) Some airlines have Kayak search a proxy instead of their own site. So Kayak will search someone like ITA software, get availability, and then send people off to book. The problem is that those aren’t completely synched up. So that’s why you’ll see Kayak reconfirming the price before they send you over sometimes. That’s one reason I actually don’t like Kayak, but it probably allows them to show more than other sites.

    2) I mentioned the data transfer speed in the post. You might get more options on the airline site because they couldn’t send all of their options over to the metasearch site fast enough to get them displayed. That doesn’t mean anything is inaccurate, but it does mean some could be missing.

    Southwest opts out because they want people coming to their website and only their website. They’re starting to soften that with some participation in global distribution systems, but that’s primarily for the business traveler and not for public-facing sites. Why pay the commission if you’ve already trained people to come to your site on their own?

    JetBlue, on the other hand, does participate. Ultimately, it’s weighing the cost of participating against the extra revenue it generates.

  6. Oliver says:

    How much do airlines pay sites like Orbitz for a domestic or international ticket? I seem to recall the boig bruhaha a few years ago when airlines eliminated commissions to travel agents (leading to travel agents introducing their own fees for their customers). Did they retain commissions for sites like Orbitz?

  7. CF says:

    Oliver – It can vary. While basic commissions were eliminated, there are still agreements in place with the biggest guys. I’ve been out of it for awhile now, so I’m not sure what those look like anymore.

  8. Ron says:

    Cranky, I think Southwest have motives other than just wanting to avoid paying a commission to other sites. There are plenty of people who have been trained to go to southwest.com years ago when Southwest were pretty much the only player in the low-cost market. Making it difficult for these people to comparison shop makes it more likely that they’ll purchase tickets from Southwest even when the alternatives are substantially cheaper.

    Business travelers are traditionally much less of a Southwest crowd: they’re less likely to go to southwest.com, so it makes sense to sell where they do their booking. This is why Souuthwest flights are absent from Expedia but appear on ExpediaCorporate (recently rebranded as Egencia).

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  10. CVK says:

    A key reason AA would prefer Kayak refer only to AA.com is that it is indeed the lowest cost channel for AA to sell a ticket. A ticket sale vis Orbitz costs AA booking fees paid to Orbitz (say that is a wash with thereferral fees to Kayak) but also a GDS fee, which could be steep depedning on who the OTA is. However, AA canot just do this with Kayak; it must consider not selling via GDS powered channels as a whole, which is cannot quite fathom doing at this stage.

  11. Inside says:

    “That means American has to pay a double tax, once to Kayak and once to Orbitz.”

    Why would AA have to pay Kayak for a booking on Orbitz? Orbitz will pay Kayak and AA will pay Orbitz.

  12. MS says:

    I like and am a huge fan of parenthesis. Keep ‘em coming.

  13. Charlton says:

    I think it comes down to the fact that AA will probably has to pay more to sell flights through Orbitz/Expedia/Etc. than a site like Kayak. Makes sense for them to push for a direct sale.

    Most of the time I prefer a meta search that just kicks off searches on several sites like that kayak comparison thing or traveldealzone.com

  14. Richard says:

    Personally, I read it as yet another “nickel-and-diming” initiative by American. They’re out to take what they can get, from whoever they can (e.g. leading the industry in baggage charges etc.). Cutting out these Kayak types of deals wil likely save them – nickles and dimes.

    The customer remains the biggest loser while AA will eventually go under – because they don’t have the courage to raise their fares to cover their costs. The quality of the flying experience these days with the bigger national airlines is equivalent to that of the budget European airlines – go figure.

  15. Michael says:

    I love using Kayak to find flights. I’m very disappointed in American (my usual favorite airline) for not working with Kayak anymore. I never use Kayak and then go to Orbitz for an AA ticket. First, the Orbitz tickets are usually more money. Second, the ability to change tickets, request upgrades and get boarding passes directly from the AA site is very important to me. Which is why I liked Kayak in the first place – I searched on them and then booked on AA.com. Looks like JetBlue might be my new favorite airline from Boston.

  16. Anon says:

    Sorry…if Kayak is all about choice, why do they just offer Orbitz as the only OTA option? The crappiest of the lot? If Kayak is the consumer choice advocate then Expedia, Priceline, Travelocity should all be listed. Let the consumer have full choices.

    This fight is all about the money and I thought I heard somewhere before that AA has/had unique deal w/Kayak where they paid differently than the other airlines (I can’t find the source). This may amount to a kind of listing fee as you mention above. If true then they are getting double dinged. It’s also easier to take risks when your capacity is going down by 10%+ – need less help filling seats.

    But kudos to Kayak for all this free publicity! It’s amazing and will only take them to the next level.

    They win regardless of how this turns out.

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