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What American Airlines leaving Orbitz means for consumers

Marketplace Staff Jan 20, 2011

What American Airlines leaving Orbitz means for consumers

Marketplace Staff Jan 20, 2011


TESS VIGELAND: So how many of you living in the Midwest or along the Eastern seaboard checked on flights to southern California this week? You should’ve, it was gorgeous. And of course booking your own travel is a snap these days. Just head on over to Travelocity or Orbitz or Kayak, do a little comparison shopping, and done.

But there’s a kink in that system now. American Airlines is taking their ball and going home. The carrier recently announced it will no longer list fares on the popular travel site Orbitz. Then Expedia dropped them. So there!

American’s not the only airline doing this. So we asked George Hobica of AirfareWatchdog.com to help us figure out what this means for the world of do-it-yourself booking. George, welcome aboard!


VIGELAND: So as someone who has very much enjoyed booking my own flights and doing the research myself, boy that didn’t last long.

HOBICA: No, I think we’re going back to the 1970s when you had to call every airline separately.

VIGELAND: Seriously. So why is this happening? Give us a rundown.

HOBICA: It’s pretty simple. American Airlines just reported not very stellar financial results. And the reason they’re not doing very well is because they have the highest costs in the industry. So they need to cut costs and they need to raise ancillary revenue. So if you book a ticket on Travelocity, let’s say, you’ll notice that you never get a chance to buy the American Airlines credit card or to upgrade your seat or do all the other things. The only thing you actually ever get a chance to do is maybe buy insurance, but guess what, Travelocity is selling you that insurance product.

VIGELAND: At this point, there are only a couple of airlines that have basically told the aggeregators to go fly a kite, but they all tend to mimic each other eventually. Does this mean the death of these aggregators?

HOBICA: I’m not sure it means the death as far as all travel, but it may mean that airfares are not going to be distributed in the same way as in the past. Now, Southwest hasn’t had their fares on third-party sites for years. And in fact, I think American Airlines is looking at Southwest’s success and thinking, well Southwest is making a lot of money, American isn’t. Southwest doesn’t share their fares with third-party sites, so maybe American is actually copying Southwest.

VIGELAND: Or maybe Southwest just has better service?

HOBICA: Well, that’s one way to look at it. They have very friendly flight attendants who tell jokes and they don’t charge for first and second bags.

VIGELAND: What does this mean, then, for those of us who have been using these services. Are we actually going to go back to travel agents?

HOBICA: Well, travel agents are sometimes your best friends. There are many, many reasons why you may want to use travel agents. One good example is something called the codeshare. That’s when airline A buys seats on airline B, but they’re vastly different prices. For example, Delta might buy seats on Alitalia and sell New York to Rome for $1,000, but on Alitalia it’s $500. A travel agent would tell you that. They’d say, it’s the same flight, but it’s vastly different airfares. And if you only go to Delta.com, you’re only going to see the higher fare. So it’s going to make it much more difficult for consumers to compare. And in fact we’re seeing that people are going back to travel agents, you know, the bricks-and-mortar travel agent on the corner.

VIGELAND: It seems so counter-intuitive in this day and age, though, that you would have this kind of consumer control just snatched away from you because in so many other aspects, we have become the decision makers and the comparison shoppers.

HOBICA: It is a step backwards for sure, Tess. But however, there are many airlines now that don’t sell their tickets on third-party sites. Southwest.com is one. There’s an airline called Allegiant Airlines, a little airline that’s growing called Vision Airlines, again, only sells its tickets.

VIGELAND: But those are smaller airlines except Southwest.

HOBICA: That’s true, but they’re making money. And some of the airlines weren’t making money. The other thing, too, is that airlines have for years now been trying to drive traffic to their own websites through nefarious means, such as promo codes. For example, right now there’s a promo code on Air France, 10 percent off on any ticket if you go to AirFrance.com. You’re not going to see that on Kayak, you’re not going to see that on Priceline. So I think this is a trend that’s been going on for a long time.

VIGELAND: This is has just got to mean that fares are going to be higher.

HOBICA: People are going to pay more for airfares, and that is the whole point. I mean, American Airlines wants to get higher fares.

VIGELAND: And they’re not pretending that there’s another reason behind it?

HOBICA: Well, they kind of do. They say it’s a better experience for the consumer. In some respects it is because you can do a one-stop shop. You can buy your seat, upgrade, you can buy other products. But I think the world is going to be a sadder place without online travel agencies. It’s just not going to be as convenient and people are going to end up paying more money.

VIGELAND: George Hobica is the founder of AirfareWatchdog.com and he’s joined us from New York to talk about the new developments in not getting a great deal on airfares. Thanks so much.

HOBICA: It’s a pleasure.

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