American Airlines Changing How Airfares Are Sold With Priceline.com

By Adriana Barnes on January 18, 2011, 4:57 pm

American Airlines announced it has signed a new agreement with Priceline.com in a move the airline hopes will begin to change the face of how airfares are sold within the United States. It’s a high stakes gamble, but one American is anticipating will gain traction.

Priceline.com, an online travel agency, will no longer get the carrier’s airfares and schedule of flights from a global distribution system. Instead, the website will get a feed directly from American itself.

Traditionally, the global distribution system or GDS has served as the middleman between airlines and travel agencies. GDSs, in exchange for data aggregation and delivery to travel agencies, typically charge the airline when a booking is made splitting the fee with the travel agent booking the flight on behalf of the customer. American is seeking to cut out the fees and additional overhead of GDSs by working directly with travel agencies.

The move has proven to be a difficult one to convince popular travel agencies to take on. American fares have already been removed by both Orbitz Worldwide Inc. and Expedia Inc. when each refused to connect directly with American Airlines’ booking platform and bypass the GDS system.

Agents and their agencies are concerned the new arrangement will translate into higher cost and reduced profit margins. Last year, about 16% of all airline bookings were made through travel web sites, while another 45% were booked through traditional brick and mortar locations. Overall, the industry was roughly $110 billion in 2010.

 

The outcome could make or break American Airlines and it’s ability to connect with customers.