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American Airlines Sues Travelport, Orbitz Seeking Damages

Airlines & Airports | American Airlines | April 13, 2011

American Airlines filed a lawsuit on April 12 in U.S. federal district court in Fort Worth, Texas, against Travelport and Orbitz saying it wants to recover damages due to uncompetitive conduct by those two companies. American is accusing Travelport and Orbitz of engaging in exclusionary conduct that is part of a broader effort to thwart American’s effort to connect directly with distribution channels in order to save money.

American says Travelport controls three of five GDSs - Galileo, Apollo and Worldspan - which account for more than 30 percent of all airline ticket sales made by U.S.-based travel agencies. Travelport also owns just under 50 percent of Orbitz. American said its suit that in the past year more than $2.7 billion of its sales were booked through Travelport’s GDSs. Travelport also provides bookings for a large number of corporate customers whose travel agents subscribe to one of Travelport’s GDSs. American said that means Travelport has monopoly power over American.

In response to American’s suit, Orbitz promptly issued a statement challenging the legal action and calling it “baseless” and the “latest in a series of tactics to force Orbitz to adopt an airline ticket distribution model that limits consumer choice and inhibits competition.” Orbitz pointed out that American pulled its fares from Orbitz. The move was part of a larger dispute between American and Travelport. “Having failed to force Orbitz to adopt unproven technology that does not meet the needs of our customers, American Airlines is now resorting to groundless litigation in a desperate attempt to revive an unsuccessful strategy,” Orbitz said.

American maintains that the fees GDSs charge airlines are shared with travel agents. It says the GDS that shares the highest fees gives those agents an incentive to use that GDS. American calls the booking fees the GDSs charge airlines “supra-competitive.”

American’s lawsuit is the latest development in an ongoing battle between the airlines and the GDSs over the evolution of airline distribution. The GDSs have been the marketplace for airlines to market and sell their tickets for the last half century. GDSs, in turn, get their fares from airlines through the Airline Tariff Publishing Company as well as through direct connections. Traditionally, airlines pay GDSs booking fees for their technology and distribution services. However, in rare instances some carriers, such as Southwest Airlines and easyJet, have upended that model.

As part of this battle, Expedia had pulled American’s content, but the Expedia and American are now doing business together again after reaching a settlement. Reportedly a GDS is involved in providing Expedia with content from American, but the name of that GDS has not been disclosed. For more information, visit www.travelport.com, www.orbitz.com and www.aa.com.

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