Citing an Expedia decision to raise booking fees for US Airways reservations, the airline last night pulled all inventory from Expedia.com. US Airways said it made the "difficult but necessary" decision after the online distributor raised customer fees for US Airways bookings from $5 to $8.99, while leaving fees for other airline bookings unchanged at $5. The dispute, which Expedia described as "short-term," is centered around the contractual relationship between the two parties, which technically ended in June.
US Airways, which said its decision to cease participation impacts all Expedia products, including Expedia Corporate Travel, said Expedia made the move without notification around Thanksgiving, though both parties had been operating under the old agreement since its expiration.
Expedia told
Business Travel News, however, that Expedia Corporate Travel clients can continue booking US Airways through a special services desk and that all fees associated with those agent-assisted transactions currently are being waived.
"We did have the $8.99 fee on the leisure side, not the corporate side," said Matt Hulett, Expedia vice president of corporate travel, adding that fee variance is "not unusual" based on the specifics of individual contracts between Expedia and airline suppliers. "In the corporate travel business, there are longer business cycles, so the structure needs to be more consistent and flat."
The increased fee on the leisure side was enough reason for US Airways to bail. "Despite Expedia being the world's largest online travel distributor, it is also our most expensive online distribution channel," said US Airways senior vice president of marketing and planning B. Ben Baldanza. "The combination of higher fees to consumers, higher costs for us and a discriminatory booking fee that applies only to our customers led to this regrettable decision. We cannot allow them to differentiate, and we won't."
Baldanza added that Expedia likely increased the customer fee on US Airways transactions after Expedia could not negotiate higher fees paid to it by the airline. "The extra burden on the customer came about because of their frustration," he said. "But our goal is to lower the cost of selling through Expedia. We want lower transaction fees and to have a direct connection. They have been unwilling to do the direct connect and the fee they want to charge us would actually be higher."
He also stated concern regarding US Airways corporate customers that use Expedia Corporate Travel. "It is very much in our interest to be back in Expedia."
Though the vast majority of Expedia's transactions are consumer-oriented, the ECT product has been gaining interest from several corporations and this summer scored Akamai Technologies as its biggest client to date (BTN, Sept. 22). Should US Airways keep its fares out of Expedia, however, ECT's ability to attract certain corporate clients could be jeopardized. Bellevue, Wash.-based Expedia began charging airlines $5 per booking last December, but does not share any commissions.
Both sides said they continue to work toward a resolution, but a US Airways official said, "We are not going to budge on this. As we are lowering our costs, we can't increase distribution fees."
Hulett said supplier disputes won't impact ECT clients in the future as Expedia moves its leisure business and corporate business onto separate platforms with different ARC connections. That separation, which Expedia hopes to complete by mid-2004, will mean suppliers negotiate two separate contracts with the online distributor.
There have been numerous squabbles in recent years between airlines and Internet distributors. Northwest Airlines, whose fares temporarily were removed from Expedia last year until a contract dispute was resolved, last month ended participation on CheapTickets.com. Southwest Airlines in 2001 stopped filing its fares with the Airline Tariff Publishing Co. to prevent Orbitz from using its fares and flight information
(BTN, July 16, 2001).
Airline-distributor spats are not confined to Internet channels. Worldspan, from which Expedia obtains most airfares, last year threatened to boot US Airways from its global distribution system unless the airline agreed to provide full content, including Web-only fares, without receiving anything in return. US Airways earlier had reached full-content agreements with the Galileo and Sabre GDSs that provided the airline discounts on booking fees.
(BTN, Nov. 11, 2002).