US Airways Plans Direct Connect; Travelport Gets TRO

Travelport was granted a temporary restraining order that prevents American Airlines from terminating its agreement with Orbitz Worldwide until a hearing on a preliminary injunction is held on Dec. 2 and 3.

American had said it will no longer allow Orbitz to issue American tickets effective Dec. 1 because the two companies could not agree on the carrier’s direct-connect strategy – the distribution of ancillary products only through agencies that connect with American via its XML technology. Travelport became involved because it is the largest shareholder in Orbitz and the online agency is its largest customer.

The temporary reprieve came as another major carrier said it too is pursuing a direct-connect strategy.

John Gustafson, director of distribution strategy for US Airways, told attendees at last week’s PhoCusWright conference in Scottsdale, Ariz., that he feels “pretty confident that some time in 2011 we will have distribution with agencies and TMCs on a direct basis.”

Speaking on an airline panel at the conference, Gustafson positioned that scenario as “part of” US Airways’ strategy, not necessarily as the only possible solution.

When US Airways developed its Choice Seats product, he said, it had discussions with GDS companies about the conditions under which it could be distributed through the GDS. The important thing, he said, was that “we maintain and manage the pricing. That’s what we brought to the GDSs, but unfortunately, nine months later we haven’t made any progress.”

So US Airways is continuing to have conversations with agencies who want to sell the new content, he said, and “we recently launched a direct connect with an international point of sale.”

Robert McDowell, managing director of distribution and e-commerce for United Airlines, noted that United has come to agreements with both Sabre and Travelport to distribute its Economy Plus product through the GDSs.

But, he added, referring to backlash against direct connections, “as soon as an airline wants to innovate, people say they want to maintain the current method of distribution.”

American’s Good Intentions
Cory Garner, director of distribution strategy for American, said the carrier’s intention is not to sever ties with Orbitz.

“Our intention is to come to an agreement with Orbitz that works for them and works for us,” he said. The issue may have been resolved without any attention were it not for Orbitz’ obligation as a publicly traded company to notify the Securities and Exchange Commission of any event that could materially affect its value, he said.

“There are ways that airlines and agencies can partner together to create new solutions and deliver new content, including optional services, that makes economic sense for both sides,” he said.

“We have a lot of respect for Travelport,” Garner said. “We think they are a very talented company from a technological perspective, and we have a lot of confidence in their ability to work with us from a technical standpoint in the way we’ve asked them to work with us.”

He noted that Travelport recently signed an agreement with Southwest under which the carrier will connect with Travelport via its Universal API, “a deal that is effectively exactly what we’ve asked for.” The deal was concluded “on economic terms that are presumably much different from ours,” he added.

Garner said he believes that Travelport and the other GDS companies will work with American and other airlines to accommodate merchandising strategies.

“If you think about what a GDS does, it aggregates direct connects,” he said. Just as they do now, travel agents “will need a system on their side” to aggregate them as well.

Garner said that the three new desktops being rolled out by the GDS companies – Amadeus One, Sabre Red and the Travelport Universal Desktop – are all “geared toward doing that.”