This hasn’t received a lot of attention amidst all the holes in airplanes and smoke in cockpits, but there was a huge development in American’s fight with the third party reservation system providers (aka the GDSes) yesterday. In my eyes, American has won a huge battle and the GDSes are going to be scrambling. For the customer, it should be a good thing.

American announced that it had reached a deal with Expedia to start displaying fares and selling tickets from the airline again. That’s good news for Expedia, the airline, and for customers. What was announced in the second paragraph, however, is not good news in the short term for the GDSes by any stretch. But they’re the only losers here.

Expedia said it plans to access American’s fares, schedules, and customized travel products and services via American’s direct connect link by using aggregation technology provided by a GDS.

Wow. One of the big online travel agents has now decided to go with American’s direct connect model. That alone is a big deal. Priceline had agreed before, and that was big, but getting Expedia is a bigger deal, by far. If American can get Expedia to go along, then this could be like dominoes for other airlines in their dealings with Expedia. The ones that have the capability will be knocking at Expedia’s door as soon as the contract is up asking for a similar thing to help bring costs down. That crack in the door is going to grow quickly.

But what’s really interesting is that a GDS is going to provide the aggregation technology. Today, it’s the GDSes that provide the link between the online travel agent (actually, any travel agent) and the airlines. Each GDS charges the airline a big chunk of change when a booking is made, and that’s been the bread and butter of the GDS industry. But now, American is taking back much of the control.

The booking will be done with American via the direct connection, but Expedia won’t be dealing with this itself as Priceline did. Instead, it is going to have a third party handle the connection and then deliver it in a properly formatted way to Expedia. Companies like Farelogix have built systems to aggregate like this, but Expedia is going with a GDS to do it. So Expedia can link to that one GDS and that GDS will do the work to integrate American and presumably, eventually, other airlines. It’s a big win in the long term for the GDSes because it means that they will still have a place in the purchase flow, whereas I’m not convinced they would if they continued to push back on change. But in the short term it will mean pain.

It wasn’t announced which GDS was involved, but it couldn’t have been Worldspan or Galileo. Those two are owned by the same company that owns Orbitz and are generally believed to be behind the fight between American and Orbitz. Had one of those GDSes decided to become this aggregator, then we probably would have heard about a deal with Orbitz as well. That means it’s either Sabre or Amadeus. Amadeus has been working on this technology so it wouldn’t surprise me if they were the ones behind it. But Sabre would be a very interesting possibility as well.

Now, despite the lobbying you’ve heard from a lot of different groups out there, this should be a good thing for you the customer. If anything, the airlines will now be able to show you more info about fees and charges to make it a better purchase experience. (That will be up to Expedia but they will now be able to offer it in ways they couldn’t before.) You also again have the option to buy tickets for American on Expedia, so that’s good as well. For Expedia, it gets American back. For that one GDS that did the deal, it’s the beginning of a big change. It’s good to see one of these companies stepping up to participate in the future as opposed to fighting it so vehemently as many have done so far.

When I did airline pricing at America West a decade ago, I found that just about everyone I met thought they could do a better job than I. “Why are fares so high? If you lower fares, you could get more people to fly and make more money.” Now US Airways has decided to let people prove that they’re right by lowering fares in Rochester, New York.

In general, it makes sense that if you cut fares, you should have more people flying and then hopefully you’ll make more money. Even if your planes are full, you can cut walk-up fares and sell more of those and less of the leisure seats. The ultimate result is that profit would go up and that’s good.

The problem is that is doesn’t usually work this way. Often the fare cuts won’t bring enough extra to make up for the loss in revenue per customer.

US Airways is going to test this out in Rochester by cutting fares and seeing what happens. It looks like walk-up fares (purchased on the day of departure) will be going down anywhere from 31 percent (in Melbourne, Florida) to a whopping 76 percent (in Jackson, Mississippi). Here’s a chart with all the cities that are getting lower fares:

But it’s not just walkup fares. Other fares are being reduced as well. To Philly, a key market because it’s nonstop, leisure fares will drop 48 percent, for example. That ain’t bad. Down to $198 roundtrip from $378 roundtrip.

I like this move because it effectively tells people . . . “You think you know how to price? Great. Now put your money where your mouth is.” The residents of Rochester now either have to put up or shut up.

It’s also important to note that this was being done in partnership with Rep Louise Slaughter (D-NY) who has Rochester in her district. She’s the ranking Democrat on the House Rules Committee, so I imagine that it can’t hurt for US Airways to build up a little political capital there.

So now it’s up to the people of Rochester. Your fares are now lower by far, but will more of you fly? Will it stick?

US Airways says it will examine results over the next couple of months. For those cities that don’t see a revenue increase, the old fares will come back. For the successful ones, those will stay.

Anyone want to guess which markets will keep the fare cuts?

Don’t let turbulence freak you out – CNN Out of the Office
This week I tackle turbulence. It’s not going to kill you, even it scares you senseless.

Shrinking Subsidies: Can Southwest Serve Mid-Tier Cities Profitably? – BNET Headwinds
It’s sort of a jump to get to this title, but subsidies are starting to shrink thanks to government budget cuts, and AirTran has a lot of cities it serves thanks to subsidies. Will Southwest be able to continue that?

New Entrants Race to Build Small Airplanes – BNET Headwinds
The 70 to 100 seat market is getting crowded with both Sukhoi and Mitsubishi throwing their hats into the ring. Chances for success seem slim to me.

Alaska to compensate fliers caught in computer outage – The Seattle Times
The reporter seemed very concerned that Alaska hadn’t immediately offered compensation to people impacted by the computer meltdown over the weekend. I said that it would have been foolish to focus on that when people just needed to get places. Worry about compensation after the fact.

In the Trenches: Why I’m Not Using Google AdWords – Intuit Small Business Blog
I’ve tried using Google AdWords a couple times and so far, no luck. But that doesn’t mean I won’t go back.

Ryanair is unhappy that it has to pay compensation under EU rules to people who are canceled or delayed even if it isn’t the airline’s fault. So, it has introduced a €2 compensation levy on all bookings. Some say it’s awful that Ryanair is charging a fee just to compensate people if something goes wrong. Others applaud Ryanair for highlighting the tremendous cost of a rule that may not make sense. What do you think?

And yes, I realize today is April Fools’ Day, but this ain’t no joke.