American and Expedia Make Up as the Reservation System Model Crumbles

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.