American heightens distribution tension with Travelport-Orbitz lawsuit

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American Airlines is claiming that GDS owner Travelport and its affiliate Orbitz are engaging in anti-competitive practices and has solidified its argument through a lawsuit against the travel company.

It's the latest salvo in a battle that bubbled to the surface earlier this year when American yanked its inventory from online travel site Orbitz, which is 48% owned by Travelport.

American prefers to deal with travel agents through its own direct connect model, which essentially eliminates the need to interface with global distribution system (GDS) companies, whose business includes collecting booking fees from airlines and in turn giving a portion to the travel agent, both traditional and online entities. Travel agents currently access an airline's fares and inventory through one of the GDS firms.

Although the Internet is prolific among leisure travellers, American explains in its legal documentation that lucrative business travellers largely still rely on brick and mortar travel agencies since those entities offer a wide range of services, including ensurance of compliance with corporate travel agencies.

American estimates 51% of its revenue is generated by traditional travel agencies.

Highlighting Travelport's stature in the GDS industry, American explains that the company owns three of the five GDS companies operating in the US, which account for more than 30% of ticket sales stemming from US-based travel agencies.

Travelport disputes those estimates, arguing only 13% of passengers boarding US flights purchase their tickets through its GDS travel agent subscribers.

American believes GDS providers are worried its direct connect technology could undermine their dominance in supplying booking services to travel agencies, and "Travelport, Orbitz, and other industry participants with an interest in preserving the GDSs' dominant market positions have engaged in a broad and unlawful multi-part anticompetitive scheme", American states.

The Oneworld carrier claims retaliation carried out against it by Travelport includes doubling American's booking fees for reservations made outside the US, and intentionally misrepresenting the carrier's fares "in a manner that made them appear more expensive than they actually were to consumers outside the United States".

Further, American believes Travelport caused its flights to be displayed less frequently relative to other carriers' flights, triggering fewer tickets sales by American to international customers.

Not surprisingly Travelport has issues a strong retort, citing American's claims both ad ludicrous and contain "significant factual inaccuracies".

Additionally Travelport contends American "made no mention of any material impact to the company as a result of any action by Travelport in its most recent earnings release to investors and in its regulatory 10-Q filing".