Airlines assign their customers to different classes. I like to do the same to the airlines, and I have about as many different classes as a trans-Pacific jumbo jet.
In first class, I put airlines that give me a fair deal, a comfortable seat and as reliable a ride as the infrastructure and weather permit. Southwest and JetBlue are both first-class airlines by my standards. For travel to and from Brazil, I also include TAM.
Delta and Continental occupy my second tier (although Continental’s recent merger with United might affect its standing). A bit further down the aisle are the old leviathans: American, United and USAir. I will fly them, but not happily and not if I have any other choice. Finally, I maintain my own personal no-fly list of airlines where I have experienced or observed unacceptably poor customer service. I won’t buy tickets on these airlines for myself and try not to do so for my family or business associates. My no-fly list currently includes AirTran and Spirit, though if Southwest’s plans to acquire AirTran go through, Spirit might be left as the sole member of this less-than-prestigious club. I recognize that these are subjective judgments and many travelers’ opinions differ from mine.
When an airline goes out of its way to treat me well, I go out of my way to give it my business. So, even though Southwest only sells online tickets through its own site, I don’t mind taking the extra time to check its site in addition to looking at an online travel agency site like Orbitz, Travelocity or Expedia. Since I fly Southwest so frequently, I’m familiar enough with its routes to know when a flight might be available to take me where I need to go.
But when a second- or third-tier airline decides to make its flights harder to find, I’m likely to just choose a different airline. Which is why I probably won’t be flying American Airlines anytime soon.
American decided in 2009 that it was no longer interested in paying the people who bring in a large portion of its business. CEO Gerard Arpey said, “I can see a day, and maybe I’m dreaming here, where those folks who are the intermediary between us and our customer have to pay for access to our product rather than us paying them to distribute our product.”
Now, tired of waiting for that day to arrive on its own, Arpey is taking action.
Airline ticket information is ordinarily processed by global distribution system (GDS) services, which compile data from different airlines and then deliver it to both online ticket sellers, including the likes of Orbitz, Travelocity and Expedia, and offline travel agents. Hoping to reduce costs by bypassing the global distribution systems, American Airlines developed its own system, called Direct Connect, to deliver information directly to travel agents. At the same time, it pushed to reduce the fees it pays to travel agencies to display and sell its flights.
So far, however, travel agents haven’t been willing to go along with the program. Paul Ruden, senior vice president of legal and industry affairs for the American Society of Travel Agents, complained that getting information through Direct Connect would be more costly for travel agents without giving them any benefit. “American is saying ‘We want to have control over the data that comes to you, and you will bear the burden of reintegrating the information.’ The problem with their way is it is inefficient and expensive for everyone else,” he said.
In November, disputes over Direct Connect and fees led American Airlines to announce that it would not renew its contract with Orbitz, the smallest of the top three publicly traded online travel agencies. Meanwhile, Expedia decided on its own not to renew its contract with American.
Sabre, a major GDS service that was established by American in the 1960s but which became independent about a decade ago, responded to American’s attack on the online travel agencies by pushing American flights toward the bottom of its listings. American is suing to stop the process, but Sabre maintains that it has the right to use the order of its listings to defend the status quo that makes its business model function. “We are confident that the court will affirm Sabre’s contractual right to protect our customers’ interests and support airlines that value transparent and efficient comparison shopping,” Nancy St. Pierre, a spokeswoman for Sabre, said in a statement.
Kevin Crissey, who follows airlines and online travel agencies for UBS, explained the price difference American is fighting to The New York Times: For each domestic round-trip ticket sold by an online travel agency, American pays around $10 to $12 in fees, compared to the $2 to $3 it must spend to sell the same ticket through its own website. If American thinks saving that $7 to $10 is the best way to improve its profitability, it is welcome to try to do so. However, in turning down the services of the global distribution systems and online travel agencies, it is taking a huge gamble.
To succeed on its own, American will have to convince travelers that its flights are worth going out of their way to search for. Henry Harteveldt, vice president of Forrester Research and a travel and airline industry analyst, questioned why anyone would bother: “American doesn't have free checked baggage (like Southwest Airlines); it doesn't have Wi-Fi on all its domestic flights like Delta. American doesn't have the best on-time performance, the best baggage reliability nor is it the largest airline.”
With its mediocre customer service, so-so reliability and limited amenities, American has earned only an economy ticket, at best, but it’s expecting customers to give it first-class treatment. That’s not going to fly.
Posted by Larry M. Elkin, CPA, CFP®
Airlines assign their customers to different classes. I like to do the same to the airlines, and I have about as many different classes as a trans-Pacific jumbo jet.
In first class, I put airlines that give me a fair deal, a comfortable seat and as reliable a ride as the infrastructure and weather permit. Southwest and JetBlue are both first-class airlines by my standards. For travel to and from Brazil, I also include TAM.
Delta and Continental occupy my second tier (although Continental’s recent merger with United might affect its standing). A bit further down the aisle are the old leviathans: American, United and USAir. I will fly them, but not happily and not if I have any other choice. Finally, I maintain my own personal no-fly list of airlines where I have experienced or observed unacceptably poor customer service. I won’t buy tickets on these airlines for myself and try not to do so for my family or business associates. My no-fly list currently includes AirTran and Spirit, though if Southwest’s plans to acquire AirTran go through, Spirit might be left as the sole member of this less-than-prestigious club. I recognize that these are subjective judgments and many travelers’ opinions differ from mine.
When an airline goes out of its way to treat me well, I go out of my way to give it my business. So, even though Southwest only sells online tickets through its own site, I don’t mind taking the extra time to check its site in addition to looking at an online travel agency site like Orbitz, Travelocity or Expedia. Since I fly Southwest so frequently, I’m familiar enough with its routes to know when a flight might be available to take me where I need to go.
But when a second- or third-tier airline decides to make its flights harder to find, I’m likely to just choose a different airline. Which is why I probably won’t be flying American Airlines anytime soon.
American decided in 2009 that it was no longer interested in paying the people who bring in a large portion of its business. CEO Gerard Arpey said, “I can see a day, and maybe I’m dreaming here, where those folks who are the intermediary between us and our customer have to pay for access to our product rather than us paying them to distribute our product.”
Now, tired of waiting for that day to arrive on its own, Arpey is taking action.
Airline ticket information is ordinarily processed by global distribution system (GDS) services, which compile data from different airlines and then deliver it to both online ticket sellers, including the likes of Orbitz, Travelocity and Expedia, and offline travel agents. Hoping to reduce costs by bypassing the global distribution systems, American Airlines developed its own system, called Direct Connect, to deliver information directly to travel agents. At the same time, it pushed to reduce the fees it pays to travel agencies to display and sell its flights.
So far, however, travel agents haven’t been willing to go along with the program. Paul Ruden, senior vice president of legal and industry affairs for the American Society of Travel Agents, complained that getting information through Direct Connect would be more costly for travel agents without giving them any benefit. “American is saying ‘We want to have control over the data that comes to you, and you will bear the burden of reintegrating the information.’ The problem with their way is it is inefficient and expensive for everyone else,” he said.
In November, disputes over Direct Connect and fees led American Airlines to announce that it would not renew its contract with Orbitz, the smallest of the top three publicly traded online travel agencies. Meanwhile, Expedia decided on its own not to renew its contract with American.
Sabre, a major GDS service that was established by American in the 1960s but which became independent about a decade ago, responded to American’s attack on the online travel agencies by pushing American flights toward the bottom of its listings. American is suing to stop the process, but Sabre maintains that it has the right to use the order of its listings to defend the status quo that makes its business model function. “We are confident that the court will affirm Sabre’s contractual right to protect our customers’ interests and support airlines that value transparent and efficient comparison shopping,” Nancy St. Pierre, a spokeswoman for Sabre, said in a statement.
Kevin Crissey, who follows airlines and online travel agencies for UBS, explained the price difference American is fighting to The New York Times: For each domestic round-trip ticket sold by an online travel agency, American pays around $10 to $12 in fees, compared to the $2 to $3 it must spend to sell the same ticket through its own website. If American thinks saving that $7 to $10 is the best way to improve its profitability, it is welcome to try to do so. However, in turning down the services of the global distribution systems and online travel agencies, it is taking a huge gamble.
To succeed on its own, American will have to convince travelers that its flights are worth going out of their way to search for. Henry Harteveldt, vice president of Forrester Research and a travel and airline industry analyst, questioned why anyone would bother: “American doesn't have free checked baggage (like Southwest Airlines); it doesn't have Wi-Fi on all its domestic flights like Delta. American doesn't have the best on-time performance, the best baggage reliability nor is it the largest airline.”
With its mediocre customer service, so-so reliability and limited amenities, American has earned only an economy ticket, at best, but it’s expecting customers to give it first-class treatment. That’s not going to fly.
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