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The OTAs have struck back: Expedia announced it has signed US Airways to a long-term agreement. In a statement, Expedia said, “US Airways has committed to offer all of its content to Expedia through the global distribution system (GDS) model, a central reservation system which is used by travel agencies to search and book travel.” Expedia described the deal as a “multi-year strategic partnership” involving the agency’s Expedia, Hotwire, and Egencia sites.
Expedia, you will recall, dropped American Airlines from its roster after American began to push its direct connect model on the industry. In that setup, airlines and OTAs bypass the GDS and exchange fares and transactions directly. American says this approach would save money (for the airline), while OTAs and other critics say direct connect gives airlines too much control over which fares they make available to consumers. American pulled its fares from Orbitz in December when Orbitz refused to participate in its direct connect, and Expedia dropped American a few weeks later. Earlier this week, Priceline signed on to use American’s direct connect.
The most striking aspect of the deal, however, is that Expedia will market US Airways’ Choice Seats program in conjunction with US Airways fares. In the statement, Expedia said, “Expedia has committed to working with US Airways to enable the distribution of its Choice Seats product (offering customers the benefit of purchasing window or aisle seats toward the front of Coach class) through new channels, including the Expedia online travel marketplace.” American has said one of the main reasons it prefers the direct connect model is that it allows airlines to sell that sort of add-on feature. Ancillary fees and extra add-ons have become a crucial part of the airlines’ bottom lines, so effectively selling them is key to the business model.
Expedia’s deal shows that OTAs and airlines may be able to market those additional services through existing systems. The true feasibility of the model depends on the consumer experience and sales, of course, but for the time being this seems like a major win for Expedia and the OTA model. It could be a win for the airlines, too, because presumably they’d take in much more revenue from those services by having them available through far more points of sale.
But what about consumers? If OTAs and airlines can figure out how to market those extra services, the two sides may be able to strike a compromise that preserves the existing OTA-airline relationship.
Readers, what do you think about the Expedia deal?
(Editor’s Note: SmarterTravel is a member of the TripAdvisor Media Network, an operating company of Expedia, Inc. Expedia, Inc. also owns Expedia.com.)