WASHINGTON, 20 December 2003 — Consumers could come out as winners in an emerging battle between the nation’s airlines and the major travel websites over ticket pricing.
Some airlines claim that the travel sites are charging unfair marketing fees to sell the carriers’ tickets online — a move that’s driving up prices. The conflict is focusing renewed attention on ticket prices and could ultimately help keep prices down, or even drive them lower. In addition, the airlines are trying to lure more travelers to their own websites and are considering offering perks to draw travelers in.
The spat between the travel sites and the airlines flared into the spotlight last week when US Airways pulled its flights from Expedia.com after the site increased the fee it charges the airline.
The dispute has revealed the widespread friction between the travel websites and the airlines as the online ticket shops grow ever larger and increase their muscle over the carriers. The airlines contend that the travel sites make it harder for travelers to find their tickets if the carriers do not pay increased fees.
Expedia declined to comment on specific airline agreements. “We have a good relationship with our partners, and we try to do everything we can to work with them in a way that’s mutually beneficial,” spokeswoman Andrea Riggs said. She added that Expedia, which is visited by nearly 20 million consumers a month, provides a “robust marketplace” for travelers and airlines.
The airlines and some hotel chains are trying to pull increasing numbers of customers to their own websites to offset the uncertainties they believe they face with the online travel companies. The airlines are also recognizing the cost savings of directing more passengers to their own websites. Two of the nation’s most successful airlines, the low-cost operators Southwest and JetBlue, have never offered their fares on travel websites. Travelers have to go directly to the carriers’ sites to book a flight.
Ben Baldanza, US Airways senior vice president of marketing and planning, said the airline’s cost to sell a ticket on a travel website is $15 to $23. The airline incurs a cost of about $10 on its own website.
“Clearly the lowest cost for us is to sell it directly through our website,” Baldanza said. “We need to find out how to sell more tickets from our site.
US Airways sells only about 10 percent of its tickets through its website, with the rest mostly bought through travel agents and over the phone. Baldanza said the airline would like to increase online sales to 20 percent in the next 12 months, a steep order given that sales on the site have grown only about 2 percent since 2002. Baldanza said the airline is looking at a variety of ways to lure travelers to its website, including offering special fares not available anywhere else. US Airways, like other airlines, already offers bonus frequent-flier miles for ticket purchases on its website.
Northwest Airlines has encountered its own problems with the travel sites. Al Lenza, vice president of Northwest’s e-commerce and distribution unit, said the airline got embroiled in a fee dispute with Travelocity that soured relations between the carrier and the website. Lenza said Northwest’s fares are still on Travelocity “for now” but that the airline was in talks with the site and 45 days from now, “we’ll know if we’re still going to be doing business with them or not.”
Northwest is no stranger to such battles. Last year, the airline pulled its fares off of Expedia for several weeks because of a pricing dispute. Last month, it stopped offering its fares on Cheaptickets.com, claiming that the site favored airlines that paid higher fees. Lenza said the travel sites have started a competition to give the best placement on their search screens to those carriers that pay the highest fees. “We’re not going to enter that race,” Lenza said “The consumer is being shown the airline that has entered the most lucrative agreement with the site, not the best schedule or fare.”
Travelocity spokesman Al Comeaux said the site does give airlines that pay higher fees special incentives such as distributing special e-mails, promotions or other marketing advertisements to travelers. But the higher-paying airlines aren’t given top placement on the website. “Airlines cannot and do not pay for placement,” he said.
Seeking to level the online playing field, five of the biggest carriers, United, American, Delta, Northwest and Continental airlines, launched their own travel site, Orbitz.com in 2001.
The airlines said they plan to continue to sell tickets through other travel sites. “But we need to make sure that these guys don’t get so big that they can dictate the terms and conditions,” Lenza said.
In the past few months, several major hotel chains such as Marriott, Hilton, Starwood and Choice have also begun a campaign to lure more travelers away from general travel sites. The hotel chains said they would match any rate found on Travelocity, Expedia and Hotels.com.
“If we get people to come to our site versus going to the other sites, our hotels make a lot more money,” said Tom Keltner, president of Hilton’s brand and franchise development group. The hotels sell rooms to travel sites at wholesale.
Internet expert Henry Harteveldt, senior analyst for Forrester Research, said that as the economy strengthens and travel rebounds, the battles between the airlines and hotels will likely intensify.
“The suppliers are saying they are tired of taking the abuse by these travel sites and they’re striking back,” Harteveldt said. “But the sites believe they have the right to fair compensation. It’s going to be interesting.”
