American Airlines Inc v. Travelport Limited et al

Filing 108

Appendix in Support filed by American Airlines Inc re #107 Response/Objection to Travelport's Rule 12(b)(6) Motion to Dismiss (Garcia, Yolanda)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
FORT WORTH DIVISION
)
)
)
)
Plaintiff,
)
)
vs.
)
Sabre, Inc., a Delaware corporation; Sabre )
)
Holdings Corporation, a Delaware
)
corporation and Sabre Travel
)
International Ltd., a foreign corporation,
)
d/b/a Sabre Travel Network;
)
Travelport Limited, a foreign corporation )
)
and Travelport, LP, a Delaware limited
)
partnership, d/b/a Travelport;
)
)
and
)
Orbitz Worldwide, LLC, a Delaware
)
)
limited liability company, d/b/a Orbitz;
)
)
Defendants.
American Airlines, Inc., a Delaware
corporation,

Civil Action No.: 4:11-cv-0244-Y

APPENDIX IN SUPPORT OF
AMERICAN AIRLINES INC.’S RESPONSE IN OPPOSITION TO
TRAVELPORT’S RULE 12(b)(6) MOTION TO DISMISS

American Airlines, Inc. respectfully files this Appendix in Support of its
Response in Opposition to Travelport’s Rule 12(b)(6) Motion to Dismiss.
Exhibit

App.
Pages

Date

1

1-49

11/8/10

Description
Verified Complaint for Declaratory Judgment

APPENDIX IN SUPPORT OF AMERICAN AIRLINES, INC.’S
RESPONSE IN OPPOSITION TO TRAVELPORT’S RULE 12(b)(6) MOTION TO DISMISS
US_ACTIVE:\43765561\02\14013.0135

PAGE 1

DATED: July 18, 2011
Respectfully submitted,
/s/ Yolanda Garcia
Yolanda Garcia
R. Paul Yetter
State Bar No. 22154200
[e-mail]
Anna Rotman
State Bar No. 24046761
[e-mail]
YETTER COLEMAN LLP
909 Fannin, Suite 3600
Houston, Texas 77010
713.632.8000
713.632.8002 (fax)
Yolanda Garcia
State Bar No. 24012457
[e-mail]
Michelle Hartmann
State Bar No. 24032401
[e-mail]
WEIL, GOTSHAL & MANGES LLP
200 Crescent Court, Suite 300
Dallas, Texas 75201-6950
214.746.7700
214.746.7777 (fax)

APPENDIX IN SUPPORT OF AMERICAN AIRLINES, INC.’S
RESPONSE IN OPPOSITION TO TRAVELPORT’S RULE 12(b)(6) MOTION TO DISMISS
US_ACTIVE:\43765561\02\14013.0135

PAGE 2

Bill Bogle
State Bar No. 025661000
[e-mail]
Roland K. Johnson
State Bar No. 00000084
[e-mail]
HARRIS, FINLEY & BOGLE, P.C.
777 Main Street, Suite 3600
Fort Worth, Texas 76102
817.870.8700
817.332.6121 (fax)
Attorneys for Plaintiff American Airlines, Inc.
Of counsel to Plaintiff:
Richard A. Rothman
[e-mail]
James W. Quinn
[e-mail]
WEIL, GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, New York 10153
212.310.8426
212.310.8285 (fax)
M.J. Moltenbrey
[e-mail]
DEWEY & LEBOEUF LLP
1101 New York Avenue, N.W.
Washington, D.C. 20005
202.346.8738
202.346.8102 (fax)

APPENDIX IN SUPPORT OF AMERICAN AIRLINES, INC.’S
RESPONSE IN OPPOSITION TO TRAVELPORT’S RULE 12(b)(6) MOTION TO DISMISS
US_ACTIVE:\43765561\02\14013.0135

PAGE 3

CERTIFICATE OF SERVICE
I hereby certify that all counsel of record who are deemed to have consented to
electronic service are being served with a copy of the foregoing document via the Court’s
CM/ECF system pursuant to the Court’s Local Rule 5.1(d) this 18th day of July, 2011.
/s/ Robert S. Velevis
Robert S. Velevis

APPENDIX IN SUPPORT OF AMERICAN AIRLINES, INC.’S
RESPONSE IN OPPOSITION TO TRAVELPORT’S RULE 12(b)(6) MOTION TO DISMISS
US_ACTIVE:\43765561\02\14013.0135

PAGE 4

.

i

IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS
COUNTY DEPARTMENT, CHANCERY DIVISION
TRAVELPORT, LP, a Delaware Limited
Partnership,
Plaintiff,
V.

AMERICAN AIRLINES, INC., a Delaware
company,
Defendant,

VERIFIED COMPLAINT FOR DECLARATORY JUDGMENT
Travelport, LP, successor in interest to Galileo International, LLC ("Travelport" or
"Plaintiff'), by its attorneys, Duane Morris LLP, for its declaratory judgment complaint against
American Airlines, Inc. ("AA") states as follows:
I. NATURE OF ACTION
This case is about AA putting its corporate knee on the neck of one of
Travelport's largest customers, Orbitz Worldwide ("Orbitz"), to force a result that violates AA's
contract with Travelport. Specifically, AA is coercing Orbitz into changing its existing business
model to one that AA believes will more thoroughly stuff AA's pockets. AA is engaging in
these heavy handed and coercive tactics, which include its unilateral decision to terminate
Orbitz's ability to book AA tickets, notwithstanding that: i) AA's termination would result in an
egregious breach of many of AA's contractual obligations to Travelport; ii) AA's proposed
termination would eliminate a distribution outlet for AA tickets through which consumers obtain
transparent access to AA inventory thereby enabling them to make an informed travel choice by
comparing AA products with other airline products; and iii) the distribution model AA wants to
impose is inefficient, costly, anti-competitive and anti-consumer.

DMI\2391359 1

Travelport brings this declaratory judgment action against AA pursuant to 735
ILCS 5/2-701(a) because Travelport has a legal tangible interest in this matter and an actual
controversy with AA. The actual controversy concerns whether AA can make good on its threat
to discontinue Orbitz's ability to book AA tickets, and to prohibit access to AA's fares, pricing,
availability, and other airline information, without breaching Travelport's contract rights. If AA
terminates Orbitz, then AA will have breached its contract with Travelport, including by
depriving Travelport's affiliates of full content, and thereby cause substantial harm to Travelport
and to companies in which Travelport has a substantial pecuniary interest.
By this action, Travelport therefore seeks a declaratory judgment as to this
existing dispute so that the Court can settle and fix the rights of the parties before AA initiates an
irrevocable change in the position of the parties that will jeopardize the parties' respective claims
of right.
II. PARTIES
4.

Travelport, LP is a Delaware limited partnership formed under the laws of

Delaware.
American Airlines, Inc. is a Delaware company which is authorized to do
business in and has offices in Illinois. AA, one of the world's largest airlines, has one of its
major hubs at O'Hare International Airport in Chicago, Illinois.
III. JURISDICTION AND VENUE
6.

Jurisdiction is proper in Illinois under 735 ILCS §5/2-209 because AA and

Travelport consented by contract to the personal jurisdiction of the Circuit Court of Cook
County, Illinois. As separate and independent additional bases for jurisdiction, AA owns assets
in Illinois, and conducts substantial business in Illinois through its agreement with Travelport
and the operation and provision of airline services in and throughout Illinois.

DMl\2391359.1

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Venue is proper in Cook County, Illinois under 735 ILCS §5/2-101 because AA
consented by contract to venue in Cook County, Illinois, and Cook County, Illinois is the
location in which some part of the transaction giving rise to this action occurred.
IV. FACTS
A.

Travelport Provides Sophisticated And Highly Valued Travel Services That Are
Dependent On Contracts That Guaranty Full Content
Travelport and its affiliated Travelport entities (collectively, "Travelport") own

and operate computerized reservation systems ("CRSs") under the trademarks Galileo, Apollo
and Worldspan. CRSs, which are also known as global distribution systems ("GDS"), enable
online and offline travel agents, travel service providers, travel-related websites, and the general
public to search for and/or book airline tickets, hotel rooms, rental cars, and associated products
and services.
9.

Travel agencies, travel service providers and consumers rely heavily on GDSs

because the GDSs are integral to the users' ability to efficiently obtain the travel services they
need at the cost they desire.
10.

For its part, Travelport spends a tremendous amount of money on the

sophisticated infrastructure and technology that is required to timely and accurately deliver its
broad ranging and high value travel services on a massive scale. For example, Travelport has
operations in 160 countries and has 1,300 IP professionals who help to process up to 1.6 billion
messages per day. In 2009 Travelport processed 148 million tickets, serviced 60,000 travel
agencies and its search engine processed 75 million searches per day.
11.

In simplistic terms,.Travelport's GDS acts as a clearing house that aggregates,

processes, reformulates and makes available travel data. The GDS obtains data from travel
providers like airlines, hotels and rental car companies. That data can then be accessed and

DM1\2391359.I

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reviewed by travel agents, consumers and others who may ultimately choose to book desired
travel through the GDS.
12.

Given the nature of the services Travelport provides, it is critical to Travelport's

success and competitiveness that it has full access to complete and up-to-date data and
information from major airlines, like AA, including all of their air fares, flights, best seats,
lowest fares, and promotions.
13.

For that reason, Travelport enters into contracts with the major airlines

("Suppliers") that require the Suppliers to provide Travelport with full and complete access to
each respective Supplier's content.
14.

Travelport, through its predecessor in interest, Galileo International, L.L.C.,

entered into an agreement with AA on July 5, 2006 titled "Preferred Fares Amendment" pursuant
•to which Travelport obtained full content from AA (the "Full Content Agreement"). The Full
Content Agreement.was an Amendment to an earlier agreement between Travelport and AA
called the Galileo International Global Airline Distribution Agreement ("GIGADA") which the
parties executed on December 15, 1993.
15.

The Full Content Agreement had an effective commencement date of September

1, 2006 and continues for a specific period unless terminated pursuant to its terms. As of the
filing of this Verified Complaint, the Full Content Agreement remains in full force and effect and
AA has no basis upon which to terminate it.
16.

AA and Travelport each have copies of the Full Content Agreement, and each is

familiar with its terms. Because the Full Content Agreement contains a confidentiality
provision, Travelport has not attached a copy of it to this complaint. Further, the Full Content
Agreement contains certain highly confidential and proprietary commercial and business

4
DMI\2391359.1

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information of Travelport. The disclosure of that information to Travelport's competitors and
others would be highly damaging to Travelport's business and otherwise severely prejudice its
existing and future commercial operations. However, Travelport will make a copy of the Full
Content Agreement available to the Court for an in camera inspection.
B.

Travelport Has A Substantial Corporate, Ownership and Pecuniary Interest In
Orbitz Worldwide
17.

Travelport has a legal tangible interest in AA's performance of its obligations

under the Full Content Agreement.
18.

Travelport also has a legal tangible interest in Orbitz and its affiliates with whom

Travelport has a variety of contracts, and in which Travelport entities have a substantial
pecuniary interest.
19.

By way of background, Orbitz is a publicly held company. Orbitz is a leading

global online travel company that uses technology to enable leisure and business travelers to
research, plan and book a broad range of travel products. Orbitz owns a portfolio of consumer
brands that includes Orbitz, CheapTickets, ebookers, HotelClub, RatesToGo, the Away Network,
and a corporate travel brand called Orbitz for Business.
20,

Orbitz is a Travelport customer, makes substantial use of Travelport CRSs, and

generates more airline travel revenues for Travelport than any other travel agent.
21.

Along with being one of Travelport's biggest customers, Orbitz also has a

substantial corporate relationship with Travelport. For example, a Travelport affiliated company
owns 48% of Orbitz's stock.
22.

Simply put, Travelport has a legal tangible interest in Orbitz because of the many

contracts between them, and because what happens to Orbitz and its businesses is of great
pecuniary importance to Travelport.

DMI\2391359.1

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C.

AA's Termination of Orbitz's Agreements
23.

Orbitz recently filed an SEC Form 8-K (Termination of a Material Definitive

Agreement). In the Form 8-K, Orbitz disclosed that AA notified Orbitz on November 1, 2010
that AA would be terminating as of December 1, 2010: i) Orbitz's Second Amended and
Restated Airline Charter Associate Agreement; ii) Orbitz's Supplier Link Agreement; and iii)
Orbitz's ability.to ticket AA flights. Exhibit E.
24.

This issue between Travelport and AA has been brewing for a substantial period

of time. Indeed, for the last approximately two years, Travelport has been in discussions with
AA to extend and/or renew the Full Content Agreement. Those discussions included terms that
would guaranty the continued provision of full AA content to Travelport's affiliates and
thousands of other travel agencies.
25.

Under the current contracts, and in very broad terms, AA provides its travel

content to Travelport, and consumers use Orbitz to conduct searches and book travel through
Travelport. AA pays Travelport a small fee for the AA trips that are booked through Travelport.
Travelport pays Orbitz a fee for the AA trips that Orbitz books through Travelport.

26,

This highly efficient and pro-competitive model.has been used successfully by

airlines, GDSs, travel agencies and consumers for years.

27.

AA desperately wants to change this model by eliminating GDSs, and ultimately

online travel agencies, such that consumers search for and book travel directly with the carrier
without the ability to comparison shop with full transparency of all available travel choices,
Alternatively, AA would likely continue using Travelport, but even more drastically reduce the
amount it pays Travelport for each booking (or even try to pay nothing at all).

DMI\2391359.1

6

28.

Unfortunately, consumers suffer while AA plays its games because the model AA

wants to employ is inefficient and costly (but highly lucrative for AA). Indeed, along with
ultimately depriving consumers of the ability to make informed travel choices, the model will
immediately increase costs and create inefficiencies by requiring the creation of new
infrastructure to connect directly to each airline (rather than using a single GDS which allows
access to hundreds of content providers though the one GDS portal).
D.

Travelport Has A Substantial Legal Tangible Interest
29.

Travelport's legal tangible interest in these issues is highly material as the damage

by AA's conduct is significant and immediate.
30.

AA's termination intentions forced Orbitz to make the public Form 8-K filing

referenced above.
31.

Not surprisingly, Orbitz's disclosure resulted in the immediate proliferation of

high profile and highly prejudicial news articles that have appeared in the Wall Street Journal,
Bloomberg, AP News and various other national news outlets. Group Exhibit F.
32.

To get a sense of the tremendous damage that AA's improper actions have

already caused, one need only look to an article that ran the highly prejudicial headline "AA
Dumping Orbitz." Id.
33.

In articles describing AA's termination, it was reported that Orbitz shares lost

18% in one day. Id. Given the Travelport entities' 48% ownership interest in Orbitz, this decline
had a direct, substantial and negative impact on Travelport. In dollars, that impact reflected an
approximately $50 million loss in share value to Travelport. Additionally, AA's highly
prejudicial actions have caused and will likely continue to cause Travelport significant additional
business losses.

DMI\2391359.1

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34.

Travelport has a legal tangible interest in its contracts, and its revenue, business

and good will (and in that of its largest customer Orbitz).

REQUEST FOR DECLARATORY JUDGMENT
35.

Travelport repeats and realleges paragraphs 1 -34 which are fully incorporated

36,

Travelport brings this request for declaratory judgment against AA pursuant to

herein.

735 ILCS § 5/2-701

37.

Travelport has performed all of its obligations under the Full Content Agreement.

38.

The Full Content Agreement is a legally binding and enforceable contract that is

still in effect.
39.

Travelport has a legal tangible interest in the Full Content Agreement and in AA's

full and complete performance of the terms of that agreement.
40,

The Full Content Agreement was the result of lengthy negotiations with AA. The

core of the parties' agreement was that Travelport would accept drastically reduced booking fees
from AA in exchange for AA's commitment that, during the term of the Full Content
Agreement, and notwithstanding AA's rights under any other agreement, AA would make its full
content available to Travelport to enable Travelport to provide such full content to all of its travel
agency customers and specifically to Travelport's affiliates such as Orbitz. Said another way,
but for AA's commitment to the provision of full content and other commitments by AA relating
to Travelport's affiliates, Travelport would not have provided AA with the deeply discounted fee
schedule which AA continues to enjoy today.

8
DMI\2391359.1

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41.

Thus, the core of Travelport's declaratory judgment claim is that AA's fulfillment

of its termination of Orbitz's ticketing authority would violate the express terms of the Full
Content Agreement by depriving Travelport's affiliates of full content and other benefits.
42.

Under the Full Content Agreement, AA specifically undertook and agreed that

during the term of the Full Content Agreement, AA would make Preferred Channel Extras (e.g.,
the ability to sell upgrades and other highly valued additional products and services) available to
Orbitz to the same extent that it makes such extras available to other online travel agencies. (See
Section 3.5(b)). By withdrawing ticketing authority from Orbitz, AA would be in breach of the
Full Content Agreement, would deprive Travelport of the benefit of its contracted for bargain,
and frustrate the essential purpose of the Full Content Agreement.
43.

Under the Full Content Agreement, AA specifically undertook and agreed that it

would offer bulk/wholesale fares to Galileo OTA Affiliates, which includes Orbitz, on terms no
less favorable then the terms AA offers to either of the two largest OTA competitors in the
United States. (See Section 3.5(c)). By withdrawing ticketing authority from Orbitz, AA would
be in breach of the Full Content Agreement, would deprive Travelport of the benefit of its
contracted for bargain, and frustrate the essential purpose of the Full Content Agreement.
44.

On November 1, 2010, after learning that AA sent the termination notices to

Orbitz, Travelport informed AA by letter that AA's intended terminations would violate the Full
Content Agreement. Specifically, Travelport informed AA that the terminations, which would
result in AA no longer distributing AA inventory on Orbitz, would constitute a breach of the
above-referenced sections of the Full Content Agreement.
45.

Having a strong desire to avoid litigation and to find an amicable resolution with a

valued supplier, Travelport reached out to AA multiple times to seek a business resolution.

9
DNMlA2391359.1

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Unfortunately, AA remained steadfast and rebuffed Travelport's repeated efforts at compromise.
These efforts included Travelport requesting that AA withdraw its termination notices.
46.

Given AA's failure to withdraw the termination notices, an actual controversy

exists between Travelport and AA regarding the parties' rights and obligations under the Full
Content Agreement. AA thereby has an opposing interest to that of Travelport with respect to
AA's purported right to terminate its agreements with Travelport's affiliates.
47.

Travelport maintains that AA's fulfillment of its promise to terminate the affiliate

agreements would violate the express terms of the Full Content Agreement by depriving
Travelport and its affiliates of full content and other benefits.
48.

This would cause great harm and prejudice to Travelport, and to Travelport's

affiliates in which Travelport has a substantial pecuniary interest.
49.

A declaratory judgment would afford security and relief against the uncertainty of

the issues raised herein.
50.

A declaratory judgment would settle and fix the parties' rights before there is an

irrevocable change in the parties' positions that will jeopardize their respective claims of right.
WHEREFORE, Travelport requests that this Court: i) determine the rights and
obligations of the parties to the Full Content Agreement, and specifically determine that AA's
threatened termination of the agreements with Travelport's affiliates will be a breach of the Full
Content Agreement and a violation of Travelport's rights thereunder; ii) preliminarily enjoin AA
during the pendency of this action from terminating the agreements referenced in paragraph 23
of this complaint and from terminating Orbitz's ability to ticket AA flights; iii) grant Travelport
its costs and fees incurred in bringing this action; iv) enter an order allowing all relief available

10
DMI\2391359.1

10

under 735 ILCS 5/2-701; and v) enter an order granting such other and further relief that the
Court deems appropriate.
TRAVELPOJ1 LP

B:
One Of Its orneys
Paul E. Chronis, Esq.
John T. Schriver, Esq.
Duane Morris LLP
190 S. LaSalle St., Suite 3700
Chicago, Illinois 60603
312-499-6700
312-499-6701 (fax)
Firm ID: 38820

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DM112391359.1

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SECTION 1-109 VERIFICATION
The undersigned certifies that the statements set forth in this Verified Complaint for
Declaratory Judgment are true and correct, except as to those matters therein stated to be on
information and belief and as to such matters the undersigned certifies as aforesaid that he verily
believes the same to be true.
Dated:

S

2p(0

d

Cr-"- trod

b .cr

12

13

Item 1.02. Termination of a Material Definitive Agreement.
On November 1, 2010, American Airlines, Inc. (" AA") notified Orbitz Worldwide, LLC, a whollyowned subsidiary of Orbitz Worldwide, Inc. (the "Company") and direct parent of Orbitz, LLC ("Orbitz"),
of its election to terminate the Second Amended and Restated Airline Charter Associate Agreement,
dated December 19, 2003, by and between AA and Orbitz, LLC (the "Agreement"). The termination will
be effective as of December 1, 2010.
The Agreement sets forth the terms under which Orbitz can offer air travel on behalf of AA to
consumers and requires AA to provide the Company with agreed upon transaction payments when
consumers book this travel. The Agreement also provides Orbitz with nondiscriminatory access to seat
availability for published fares as well as marketing and promotional support. In exchange for this
information and support, the Company pays AA a portion of the global distribution system ("GDS") fees
that the Company receives from the GDS for AA transactions booked on the Orbitz,com and Orbitz for
Business websites. The Agreement was scheduled to otherwise expire on December 31, 2013. The
foregoing description of the Agreement is qualified in its entirety by reference to the form of the airline
charter associate agreement entered into with AA and certain other airlines, a copy of which is filed as
Exhibit 10.x to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009
("Annual Report").
In the notice, AA also exercised its right to terminate the Supplier Link Agreement that it
entered into with Orbit i in February 2004. The Supplier Link Agreement establishes a direct link
between Orbitz.com and AA's internal reservation systems and requires that Orbitz book certain airline
tickets through that direct link rather than through a GDS. In return, AA pays Orbitz a per ticket fee. The
termination of the Supplier Link Agreement will also be effective as of December 1, 2010, A copy of the
form of Supplier Link Agreement entered into with AA and certain other airlines is filed as Exhibit 10.x to
the Annual Report.
Additionally, AA has informed the Company that it will terminate the Company's authority to
ticket AA flights on its Orbitz.com and Orbitz for Business websites, to take effect as of December 1,
2010.

14

--_ (

t

15

Chicago Tribune —11/4/10
Shares of online travel agency Orbitz Worldwide Inc. tumbled 18 percent on news that American
Airlines has threatened to stop selling tickets on Orbitz sites.
Orbitz said American, the fourth-largest U.S. airline, was threatening to pull its content if the
travel agency did not use a direct link to the carrier's inventory instead of a global distribution
service, which negotiates prices.
The threat overshadowed Orbitz's report of higher-than-expected quarterly profit. Orbitz shares
were down $1.27 to $5.55 in afternoon trading on the New York Stock Exchange.
"Given Orbitz has significantly higher exposure to air and domestic bookings than the other
OTAs (online travel agencies), it will, face the biggest headwind from this change, followed by
Expedia, with Priceline impacted the least," Michael Olson, senior analyst at Piper Jaffray, said
in a research note.
American, a unit of AMR Corp, said it would stop selling tickets on Orbitz starting Dec. 1 if
Orbitz did not use a direct link to the airline's inventory.
The move would end American's contract with Orbitz three years early and erode revenue the
company earns from air travel bookings.
Orbitz declined to say how much it earns from American's bookings. Airline bookings represent
about 38 percent of Orbitz's business.
"We believe the current GDS model is the right solution for consumers to ensure that travel
agents have access to full content and consumers are able to get access to all of an airline's
publicly available fares," Orbitz Chief Executive Barney Harford told Reuters in an interview.
He said Orbitz was still negotiating with American.
"This is very much a fight that American is taking to the industry," Harford said, noting that
airlines renegotiate terms with third-party bookers every few years.
American has long argued that it needs to cut its distribution costs and says the GDS model
prevents it from offering the lowest possible fares. Rival Southwest Airlines has relatively low
distribution costs because it avoids selling tickets through online travel agencies.
"It is important that our distribution channels be cost-effective and efficient," said AMR
spokeswoman Mary Sanderson.
"Customers benefit when inefficiencies in the travel distribution marketplace are addressed," she
said.

Orbitz, which owns travel sites Orbitz.com and Cheaptickets.com , said third-quarter net profit
more than doubled to $15.3 million, or 15 cents a share, from $7.0 million, or 8 cents a share,"a
year earlier.
Analysts on average were expecting 9 cents a share, according to Thomson Reuters I/B/EIS.
The company said revenue rose 4 percent to $194.5 million, below forecasts for $196.1 million.
Orbitz said it expected a 1 percent to 2 percent increase in revenue for the full year.
The travel. industry has been battered in recent years by an economic downturn that drained
demand for airline tickets and hotel rooms.
"Last year was certainly a weak year for travel demand, and I think we've certainly seen
business travel come back over the course of 2010," Harford said.
The company's third-quarter gross bookings rose 12 percent to $2.81 billion, helped by higher
air fares and increased transaction volume, Orbitz said in a statement.
The results follow news last week of a strong third quarter at rival Expedia Inc and suggest that
travel demand is picking up after the recent recession.
Expedia, the largest online travel agency, said last week that the total value of its bookings rose
17 percent in the third quarter.
The other publicly traded online travel agency, Priceline.com Inc, is due to report earnings on
Monday.

17

4th UPDATE: American Threatens To Pull Listings From Orbitz - WS7.com

Page ] of 3

NOVEMBER 4, 2010, 7:05 P. M. ET

4th UPDATE: American Threatens To Pull Listings From
Orbitz
(Updates with more details about American Airline program in the sixth paragraph.)
By Shara Tibken
Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--AMR Corp.'s (AMR) American Airlines said it would pull its flight listings from Orbitz
Worldwide Inc. (OWW), beginning Dec. 1, unless the two companies can agree on how the online-travel agent
gets access to the data.
Airlines--American in particular--have been vocal in wanting travel agents and online travel sites to share the
expenses of accessing flight listings, American's move is an attempt to change how that data are distributed,
reduce the airline's costs and enable it to get a bigger piece of online-travel purchases.
Orbitz said American is threatening to disrupt the current system.
American wants to "force agencies to connect directly to [American's] system to access content as opposed to
using global distribution systems," or GDSs, Orbitz President and Chief Executive Barney Hanford said Thursday.
Traditionally, a GDS--such as Travelport Ltd. and Sabre Holdings Corp. (TSG)--acts as intermediary between
travel agents and travel providers, facilitating the search and booking of flights. The GDS charges the airline a fee
when a travel agent books a flight.
Cory Garner, American Airlines' director of distribution strategies, disagreed with Orbitz's characterization. He said
American isn't looking to bypass the GDS; rather, the airline wants to use new technology that routes the data
differently and allows flights to be customized. It also would make optional service costs, like priority seating and
baggage fees, more transparent,
Garner said American also would like to include the option of communicating directly with travel agents through its
Direct Connect program. He said American has been in talks with the GDS companies about using Direct
Connect, but no agreement has been reached.
GDS companies were established before the Internet to make it easier for travel agents to access flight booking
information. Sabre was built by American in the 1960s and was spun off from the company in 2000. GDS
companies remain big players in linking airlines to high-margin business travelers via travel agents and corporate
accounts.
American's Garner, however, said the cost has risen beyond what American considers market-competitive prices,
leading the company to rethink the distribution model.
The travel industry was hit hard during the recession, with consumers and business travelers scaling back on

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http://online.wsj.com/article /BT-CO- 201 0 1 1 04-727640.html

11/5/2010

4th UPDATE: American Threatens To Pull Listings From Orbitz - WSJ.com

Page 2 of 3

spending. To deal with waning revenue, airlines slashed capacity and costs, and charged customers for everything
from beverages to checked luggage. With little left to cut, airlines have looked to distribution costs as the next big
frontier in terms of reducing expenses.
American said the decision wasn't made because of anything Orbitz did and that the airline is in various stages of
discussion with other online travel agents.
"It's very clear that American has drawn a line in the sand and is girding itself for a fight," Forrester Research
analyst Henry Harteveldt said. "I understand American's desire to reduce costs and have more control over its
distribution strategy, but if it pulls out of GDS, it's possible it may be the only airline doing this and it may be
counterproductive."
Orbitz CEO Harford said no other airlines or partners have approached Orbitz to terminate their agreements like
American has.
"We have very strong relationships with the vast majority of our supply partners," Harford said. "This really is an
initiative that is unique to American."
Orbitz shares, down 23% this year, closed down 17% to $5.63. Representatives from United Continental Holdings
Inc. (UAL), Delta Air Lines Inc. (DAL) and US Airways Group Inc. (LCC) didn't respond to requests for comment.
American said customers can still compare and purchase American fares on Orbitz sites at this time and that the
airline continues to negotiate with Orbitz to reach a "viable, mutually beneficial agreement."
Travelport said American's action may violate its "contractual obligations" and could lead to inefficiencies and
associated costs. Travelport said it would take "a number of actions to defend travel agents and consumers" but
didn't specify its moves,
Travelport, which owns about 48% of Orbitz, is a private company owned by Blackstone Group L.P. (BX), One
Equity Partners, Technology Crossover Ventures and Travelport management.
Representatives from Orbitz rivals Expedia Inc. (EXPE) and Priceline.com Inc. (PCLN) didn't respond to requests
for comment, nor did Sabre, which also owns online travel agent Travelocity.
A representative from Travelocity said in an emailed statement that the company "has not received any
correspondence from [American] on this matter" and said the company has nothing else to say at this time.
Expedia shares slid 5.3% to $27.17, and Priceline added 13 cents to $380.12.
Meanwhile, Orbitz reported a third-quarter profit of $15.3 million, or 15 cents a share, above year-ago earnings of
$7 million, or 8 cents a share, and the average estimate of analysts surveyed by Thomson Reuters of 9 cents a
share,
Revenue increased 4% to $194.5 million. The company in August projected revenue growth of 3% to 6%, below
analysts' views at the time.
Gross bookings climbed 12%, mostly on higher air fares and transaction volume. Flights bookings rose 13%, while
hotel-room nights soared 57%,

m
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http://online.wsj.com/article/BT-CO-201 0 1 1 04-727640.html

11/5/2010

4th UPDATE: American Threatens To Pull Listings From Orbitz - WSJ.com

Page 3 of 3

CEO Harford said Orbitz factored in the potential impact from the American Airlines issue into its financial forecast
for the year. The company said it expects revenue to rise 1% to 2% from 2009. It also lowered its expectations for
full-year earnings before interest, taxes, depreciation and amortization to 4% to 6% growth from previous
estimates for 5% to 10% growth.
-By Shara Tibken, Dow Jones Newswires; 212-416-2189;[e-mail]

AJ
http://online.wsj ,com/article/BT-CO-20 1011 04-727640.htm1

11/5/2010

Orbitz Shares Drop on American Airlines Ticket Threat - Bloomberg

Page 1 of 3

Bloomberg
Orbitz Shares Drop on American Airlines Ticket
Threat
nv Mary 8th Ia ngenslu in and Will On

- Nov 4, 2 010
2

Orbitz Worldwide Inc, fell the most since February after American Airlines said it would stop
providing fare data to the online travel agency, blocking it from selling tickets after Dec. 1 unless a
new contract is reached.
For now, customers may continue to buy the airline's tickets on Orbitz and Orbitz-powered sites,
Mary Sanderson , a spokeswoman for American, said in an e-mail. Orbitz disclosed the plan by
American, the third-biggest U.S. airline, in a U.S. Securities and Exchange Commission filing .
American is pushing for online travel agencies such as Orbitz to obtain flight and fare information
directly from the airline, instead of through a global distribution system such as Sabre Hol dings Corp.
or Travelport LLC's Galileo and Worldspan, said Barney Harford , Orbitz chief executive officer. There
is no indication that other airlines will follow American's lead, he said in an interview today.
"This is a broad attack by American on the travel distribution landscape," Harford said on a
conference call with analysts and investors. "Clearly our announcement today is the first salvo here."

Orbitz dropped $1.16, or 17 percent, to $5.66 at 3:12 p.m. in NewYork Stock Exchange composite
trading. The shares fell as much as 19 percent earlier, the biggest intraday decline since Feb. 23.
AMR, based in Fort Worth, Texas, increased 6 cents to $8.43.
`Call American's Bluff
American can't afford to pull its content off all the global distribution systems, and its conflict with
Orbitz is a "private negotiation that suddenly became public," said Jay Sorensen , president of
aviation consultant Ideaworks and a former marketing director at Midwest Airlines.
"I don't see an agenda here for American to remake the travel industry," Sorensen said in an
interview. "American is doing what's smart in terms of negotiating. You threaten to do something
that you in fact are willing to do. Orbitz may call American's bluff."

21
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Orbitz Shares Drop on American Airlines Ticket Threat - Bloomberg

Page 2 of 3

American will seek to "negotiate mutually beneficial contracts" with other agencies as existing ones
expire, the airline said in an e-mailed statement.
Travelocity.com Inc. has not been contacted by American on the issue, said Joel Prey, a spokesman
for the Fort Worth, Texas-based travel agency. Priceine.com Inc., Kayak.com and Expedia Inc. didn't
immediately return calls for comment.
'Range of Issues'
A "range of issues" are being negotiated by Orbitz and American, Sanderson said. She declined to
comment on specifics because negotiations continue. The airline doesn't agree with Harford's
characterization of the dispute, she said,
"We continue to negotiate in good faith to reach a viable, mutually beneficial agreement with Orbitz,"
Sanderson said, "We believe it is important that our distribution channels be cost effective and
efficient."
Orbitz is among a number of onlinetravel agencies that allow customers to book airline tickets, rent
cars and hotels. Consumers are able to compare prices and schedules of various airlines before
making a choice.
American, which has said it pays "hundreds of millions of dollars annually" to global distribution
systems such as Sabre and Galileo, has developed its Direct Connect service to provide information
on fares and options directly to larger online travel agencies. Smaller companies still may use a
content aggregator to obtain their data.
'Completely Inefficient'
Global distribution systems "ensure travel agents can offer consumers a comprehensive choice of
airlines," Harford said. "It is completely inefficient for, each travel agency to have to connect to
hundreds of airlines. We are actively working to resolve this issue."
Travelport , based in Atlanta, said in a statement that an attempt by American to force a move to a
more restrictive distribution system may violate the airline's contract. The company said it was
"taking a number of steps" in response, without providing specifics.

American declined to provide a figure for ticket sales through Orbitz or other online agencies. Orbitz
also declined to break out income from American sales.
Orbitz said today third-quarter gross bookings rose

12

percent from a year ago to

$2.81 billion.

Net
22

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Orbitz Shares Drop on American Airlines Ticket Threat - Bloomberg

Page 3 of 3

income more than doubled to $15.3 million, Airline-ticket sales provide about 38 percent of Orbitz's
total revenue, Harford said.
Orbitz and AMR entered into an agreement in December 2003, according to the SEC filing.
To contact the reporters on this story: Mary Schla enstein in Dallas at mar, c.s bloomber net;
Will Dam in New York at wdalevvvgbloomberg.net
To contact the editor responsible for this story: Ed Dufner at edufner(a~bloomberQ.net
®2010 BLOOMBERG L.P. ALL RIGHTS RESERVED.

23
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American Airlines could pull tickets off Orbitz - News - CNBC.com

Page 1 of 1

tSSn`.00m

American Airlines could pull tickets off Orbitz
The Associated Press 104 Nov 2010101:08 PM ET
DALLAS - American Airlines could pull its ticket listings from Orbitz on Dec. 1 In a dispute over how the online travel website gets Information about flights and
prices.
The news on Thursday caused shares of Orbitz Worldwide Inc. to plunge more than 17 percent.
Barney Harford, the CEO of Orbitz Worldwide Inc., said American was trying to force travel agencies to get Information directly from the company Instead of
through middlemen called global distribution systems, or GDSs. He said American's strategy would limit consumers' ability to compare airline prices.
Orbitz Is controlled by privately held Travelport Limited, which also owns the Woridspan and Galileo GDSs.
American spokeswoman Mary Sanderson disputed Orbitz's statements but declined to give specifics, saying the two companies were still negotiating over the
Issue.
Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
URL: hill+.I/w v'v onbe,com/id/400 1 4 705/

© 2010

CN13C.com

24
http://www ,cnbc.coin/id/40014705/print/1/displaymode/1098/

11/5/2010

USA Today: American Airlines threatens to pull flight information from Orbitz, November
5, 2010
American Airlines is threatening to pull its flight information and tickets from Orbitz on Dec, I
if they can't agree on new financial terms more favorable to the airline.
Shares of Orbitz, an online travel agency, fell sharply on the news Wednesday, ending 17%
lower. Orbitz revealed its row with American Airlines in a filing for the Securities and Exchange
Commission.
American Airlines is insisting that online travel agencies such as Orbitz obtain flight information
directly from the airline, instead of getting them from global distribution systems. GDS
companies, such as Sabre, Galileo and Worldspan, provide computerized airline information to
travel agencies and other Internet companies for booking tickets. Orbitz is controlled by
Travelport, which also owns the Worldspan and Galileo GDSs.
"Customers still can compare fares and purchase tickets for travel on American Airlines on
Orbitz and Orbitz-powered sites today, and we will continue to negotiate in good faith to reach a
viable, mutually beneficial agreement with Orbitz," American Airlines said in a statement
released Wednesday. "AA's position remains that our distribution channels need to be costeffective and efficient while also enabling more choices for customers through new
products/service offerings."
American spokeswoman Mary Sanderson told the Associated Press that travel agencies could get
more information tailored to individual consumers by connecting directly to American's
reservations system, "and we won't have to pay as much for it."
Airlines pay GDS companies each time consumers search or book a flight, but have been looking
to cut distribution costs, American must compete against low-cost airlines such as Southwest that
sell tickets directly on their own websites and save money they would otherwise pay third-party
distributors. Customers wishing to book Southwest flights must buy directly from the carrier's
website.
American Airlines says it can deliver "more customized and relevant products and services" to
its customers through its partners. But "products and services in air travel continue to evolve as
airlines distinguish themselves from one another and the same must be true for how products are
distributed,"
American Airlines would find it difficult to pull its content from GDS companies, Jay Sorensen,
president of aviation consultant Ideaworks, told Bloomberg. "American is doing what's smart in
terms of negotiating. You threaten to do something that you in fact are willing to do. Orbitz may
call American's bluff."

25

Travelport and AA Clash Over Direct Connect

Page 1 of 3

font size:

A

A A emait' .l print

and AA Clash Over Direct Connect
Nov 0'l, 2010 Ily: George Dooley iravelAgentcontral i?t7Cr Cr4
fj uke

] One person likes this.

Travel agents and travel management firms are at the center of a clash
between global distribution giant Travelport and American Airlines (AA)
over AA's Direct Connect program.

zt

?"

z

Travelport said AA's decision to implement Direct Connect is "anti-consumer
and anti-competitive" and that Travetport will take action to "defend travel
agents and consumers."
Travelport is also communicating its position to travel agents and asking for comments. A detailed
backgrounder on the issue was also sent to agents.
According to AA, the AA Direct Connect provides a direct link into AA's host reservation system to
facilitate the availability, shopping and pricing, booking, ticketing, and post-ticketing servicing
transactions.
"The AA Direct Connect utilizes modern technology links and XML messaging, which can handle more
robust and flexible transactions," Travetport said. "The AA Direct Connect is designed to support future
merchandising and ancillary services." AA has invited agents' participation in the program. Visit
littp;,/ /_directconnect.ga,yom.
Travetport counters by arguing that it "strongly supports the consumers' right.to maximum transparency
and the ability to shop, compare, and book travel services wherever they choose," and believes that
AA's action to coerce a more restrictive model under threat would violate AA's contractual obligations
with Travetport.
"AA's plans and the resulting inefficiencies and associated costs would be detrimental to airline
customers, travel agencies and consumers," Travelport said. "Travetport's dispute is solely with AA.
Travelport hopes to resolve this dispute to the benefit of consumers and travel agents."
Travetport's 'Myth- Busting' communication with travel agents urged agents to took behind the myths
and separate facts from fiction. Travelport's position:
Myth: Direct Connect makes the best economic sense for agencies.
Fact: Travelport understands that AA wants to drastically reduce agency distribution payments even
though those payments already represent a very small percentage of the value of the tickets sold. AA is
aggressively trying to persuade agencies to bypass the GDSs by offering agencies short-term incentives
to shift AA bookings to a direct connection. But a successful direct connection will result in the 100
percent long-term loss of an agency's financial assistance (FA) through the GDS for all of its AA
bookings. Also, even if AA offers an agency an increased incentive to offset the lost FA for some period,
the agency is stilt left with the inefficiencies of booking most airlines through the GDS, and having to
book AA through a direct channel. If some additional carriers require the same, then the inefficiencies
will be even worse.
Myth: Direct Connect is efficient.

26
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Travelport and AA Clash Over Direct Connect

Page

2 of 3

Fact: Direct Connect would require agencies to connect directly to AA's systems to book a flight. Direct
Connect would therefore require an agency to spend time and money to change its computer systems to
allow the booking to be made on AA's internal system, Direct Connect would also generate multiple
travel records that agents would be required to coordinate, thereby creating still more inefficiencies.
Additionally, typical GDS processing (i.e. availability, pricing, shopping, PNR creation, and ticketing)
would be moved within AA's platform, causing the agency to create duplicate steps in day-to-day
processes. The Direct Connect process will not allow shopping and booking to be completed in the GDS
which eliminates the tremendous one-stop efficiencies that led to the creation of the GDSs by the
airlines in the first place. Again, if additional carriers follow AA's lead, these inefficiencies will be
compounded.
Myth: Direct Connect is the best alternative for consumers.
Fact: American Airlines says it would like to offer individual customization so each customer would
receive a fare or bundle of services based on the individual customer's travel patterns, preferences,
etc. Travelport would be pleased to work with AA to deliver additional customization functionality to
our agency customers, and our evolving technology platforms are fully capable of delivering customized
offers. But AA's proposed Direct Connect solution is really confusing because you will be forced to use
multiple systems thereby causing great difficulties in providing your customers informed choices. The
comparisons you make every day to serve customers' best interests - to match their preferred flight
times and find the best routings and fares - will be dramatically more difficult.
Myth: The GDS can't support the individual customization that American Airlines wants.
Fact: Travelport is ready, willing and able to work with AA to deliver the customization AA is talking
about. The Travelport Universal Desktop and Travelport Universal API products demonstrate
commitment to invest in new technology that solves for individual customization and aggregation of
new content not historically available within the GDS, white creating an efficient desktop for travel
agents that also allows suppliers to customize and differentiate their content. While Travelport would
be pleased to work with American Airlines to deliver these products to our agency customers, AA
apparently intends to limit all GDS agencies' access to full content such as low fares and ancillary
services based solely upon AA's own criteria. Travelport will not support discrimination against its
agency customers."
Travelport said it is actively leading industry efforts to "deploy new technology and new economic
models," as evidenced by its existing long term full content agreements with most of the other major
U.S. carriers including Continental, United, and Delta.
'The GDS infrastructure is exceptionally reliable and capable of delivering on all the carriers'
requirements and customization initiatives," Travelport said in its analysis. "Forcing airlines and
agencies to spend tens of millions of dollars to build an entirety new system is simply unnecessary, and
your business should not be subjected to such disruption, The most efficient course to enhance your
business, provide broad distribution, and ensure consumer choice and transparency is for us to continue
to work closely together and with economics that are beneficial for all participants in the distribution
network. We at Travelport are always open to your thoughts and concerns."
Visit www.Travelport com,

Bookmark it:

*r' digg %' propeller . deLicio.us lz Technorati

11 Travetsookmarking

Rate this content *****
l

27
http://www.travel agentcentral.com/home-based/technology/travelport-and-aa-clash-over

-di.. . 11/5/2010

5e

:

REUTERS

UPDATE 3-AMR threat sends Orbitz shares tumbling
Thu Nov 04 19:01:03 UTC 2010

* American Airlines threatens to pull content on Dec. 1
* Orbitz shares down 18 percent
* Orbitz Q3 EPS 15 cents vs Wail St view 9 cents (Recasts; adds analyst comment; updates shares)
By Kyle Peterson
CHICAGO, Nov 4 (Reuters).- Shares of online travel agency Orbitz Worldwide Inc <OWW.N> tumbled
18 percent on news that American Airlines has threatened to stop selling tickets on Orbitz sites.
Orbitz said American, the fourth-largest U.S. airline, was threatening to pull its content if the travel
agency did not use a direct link to the carrier's inventory instead of a global distribution service, which
negotiates prices.
The threat overshadowed Orbitz's report of higher-than-expected quarterly profit. Orbitz shares were
down $1.27 to $5.55 in afternoon trading on the New York Stock Exchange.
"Given Orbitz has significantly higher exposure to air and domestic bookings than the other OTAs
(online travel agencies), it will face the biggest headwind from this change, followed by Expedia, with
Priceline impacted the least," Michael Olson, senior analyst at Piper Jaffray, said in a research note.
American, a unit of AMR Corp <AMR.N>, said it would stop selling tickets on Orbitz starting Dec. 1 if
Orbitz did not use a direct link to the airline's inventory.
The move would end American's contract with Orbitz three years early and erode revenue the company
earns from air travel bookings.
Orbitz declined to say how much it earns from American's bookings. Airline bookings represent about 38
percent of Orbitz's business.
"We believe the current GDS model is the right solution for consumers to ensure that travel agents have
access to full content and consumers are able to get access to all of an airline's publicly available fares,"
Orbitz Chief Executive Barney Harford told Reuters in an interview. He said Orbitz was still negotiating
with American.
"This is very much a fight that American is taking to the industry," Hayford said, noting that airlines
renegotiate terms with third-party bookers every few years.
American has long argued that it needs to cut its distribution costs and says the GDS model prevents it
from offering the lowest possible fares. Rival Southwest Airlines <LUV.N> has relatively low distribution
costs because it avoids selling tickets through online travel agencies.
"It is important that our distribution channels be cost-effective and efficient," said AMR spokeswoman
Mary Sanderson.
"Customers benefit when inefficiencies in the travel distribution marketplace are addressed," she said.
Orbitz, which owns travel sites Orbitz.com and Cheaptickets.com , said third-quarter net profit more than
doubled to $15.3 million, or 15 cents a share, from $7.0 million, or 8 cents a share, a year earlier.
Analysts on average were expecting 9 cents a share, according to Thomson Reuters I/B/E/S.
[ID: nASA00ZG 3]
The company said revenue rose 4 percent to $194.5 million, below forecasts for $196.1 million.
Orbitz said it expected a 1 percent to 2 percent increase in revenue for the full year.
The travel industry has been battered in recent years by an economic downturn that drained demand for
airline tickets and hotel rooms.
"Last year was certainly a weak year for travel demand, and I think we've certainly seen business travel
come back over the course of 2010," Harford said.
The company's third-quarter gross bookings rose 12 percent to $2.81 billion, helped by higher air fares
and increased transaction volume, Orbitz said in a statement.
The results follow news last week of a strong third quarter at rival Expedia Inc <EXPE.O> and suggest
that travel demand is picking up after the recent recession.
Expedia, the largest online travel agency, said last week that the total value of its bookings rose 17
percent in the third quarter. [ID:nN28128596]

CA ocumenis and Settings\sew207\Desktop\reutersZ.docx

28

The other publicly traded online travel agency, Priceline,com Inc <PCLN.O>, is due to report earnings
on Monday. (Reporting by Kyle Peterson in Chicago and Bijoy Koyitty in Bangalore; Editing by Lisa Von
Ahn and John Wallace)
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Page 1 of I

FT.com print article

~+
r

F

COMPANIE S'
T:.Com Airlines
vrnu+cucnnr.'s

r Close

American Airlines stops giving data to Orbitz
By Jeremy Lerner in New York
Published: November 4 2010 23:55 I Last updated: November 4 2010 23:55
Shares in Orbitz slumped 17 per cent on Thursday after the online travel company said that American Airlines
had decided to stop providing it with data — a move that would effectively prevent it from selling American tickets
from next month,
American has long pushed for iraveilers and agents to connect directly with its computers and website to book

tickets rather than using third-party sites and global distribution systems — intermediaries that collate pricing and
reservations data — to reduce costs.
Barney Harford, Orbitz chief executive, said the move was a "broad attack on the travel distribution landscape",
not just his company.
American said it was negotiating in good faith to reach cost effective deals with Orbitz and others.
Michael Olson, analyst with Piper Jaffrey, noted that "given Orbitz has significantly higher exposure to air and
domestic bookings than the other online travel agencies, it will face the biggest headwind from this change".
Sales of airline tickets have been declining as a proportion of revenues as Orbitz has focused on selling hotel
rooms, but ticket sales still contributed about 38 per cent to total revenues in the third quarter.
Despite the news, Orbitz reported improved quarterly results. Net income more than doubled to about $1 5m on
revenues, up 4 per cent to $194m.
Orbitz shares slid to $5.63 and are now down about 23 per cent year to date.
Copyright The Financial Times Limited 2010. Print a single copy of this article for personal use. Contact us if you wish to print
more to distribute to others.

"FP' and "Financial Times" are trademarks of the Financial Times. Pdvaq policy I Terms
© Copyright The Financial Times Ltd 2010.

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REUTERS
WRAPUP 6-Qantas says A380 engine failure may be "design issue"
Fri Nov 05 15:58:23 UTC 2010

* Qantas A380 safety checks to take 24-48 hours
* Singapore Airlines resumes A380 flights
* EU safety body asked for checks on engine "wear" in August
* Qantas 747 on same route turns back on Friday
* Qantas confirms second engine on QF32 failed to shut down
* Qantas shares end down 1 pct, vs broader market up 1,2 pct
(Updates with 747 on same route turning back on Friday)
By Michael Perry and Victoria Thieberger
SYDNEY/MELBOURNE, Nov 5 (Reuters) - A faulty part or design issue may have caused the severe
damage to an engine that forced a Qantas Airways <QAN.AX> Airbus A380 to make an emergency
landing in Singapore, Qantas's boss said on Friday.
Separately, a European Union air safety body confirmed it told airlines in August to make checks after
finding "wear, beyond engine manual limits" on the type of Rolls-Royce <RR.L> engines fitted to the
Qantas jet and some other A380s,
And less than 48 hours after the A380 incident, a Qantas Boeing <BA.N> 747 flying the same Sydney
route returned to Singapore, also as a result of engine trouble. [ID:nSGA127687]
The A380 engine failure on Thursday, which scattered debris over an Indonesian island, was the
biggest incident to date for the world's largest passenger plane, in service only since 2007.
The incident saw Qantas ground its fleet of six A380s pending safety checks which will take 24-48
hours, and led other airlines to check their own A380s, All A380s have four engines.
"We believe this is probably most likely a material failure or some sort of design issue," Joyce told a
news conference in Sydney. "If we don't find any adverse findings in those checks the aircraft will
resume operations. ". <AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA EU watchdog
flagged engine wear in August [ID:nSGE6A401 F] Incident poses Airbus cost challenge
[ID:nLDE6A30KT] FACTBOX-Qantas has never had fatal accident [ID:nSGE6A306M] FACTBOX-Sizing
up the Airbus A380 [ID:nLDE6A31OWj TIMELINE-Events leading up to A380 incident [ID:nLDE6A31 KZ]
For a graphic, click: link.reuters.com/fan73g Slideshow of Qantas plane: r.reuters.com/pum73g
AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA >

The Australian Transport Safety Bureau said there was no indication foul play had contributed to the
incident on the Sydney-bound flight.
Singapore Airlines <SIAL.Si> resumed flying its A380s on Friday, lifting a grounding order imposed after
the Qantas incident.
Singapore's clearance of its 11 A380s -- the second largest fleet after Emirates [EMIRA.UL] -- will be a
relief for European planemaker Airbus <EAD.PA> and British enginemaker Rolls-Royce, which lost over
$1.5 billion in combined market value on Thursday.
EADS shares were flat on Friday, after Thursday's 4 percent fall, while Rolls-Royce shares fell a further
3,3 percent to 601 pence after a 5 percent slide the previous day.
German airline Lufthansa <LHAG.DE > said it had withdrawn an A380 from a Frankfurt-Johannesburg
flight because it had not had enough time to check the engines before departure,
British A380 engine maker Rolls-Royce told A380 operators to perform safety checks on Trent 900
engines. [ID:nLDE6A322A]
FADS also told A380 operators using Rolls-Royce engines to have them inspected.
Speaking to Reuters in Paris on Thursday at a ceremony where Chinese buyers were signing to buy
Airbus planes, sales chief John Leahy said he had not received pressure from airlines about the A380's
safety. [ID:nLDE6A32M4]
"No concerns whatsoever," he said, asked if Airbus customers had expressed safety worries following
the engine scare, adding: "We have to find out the reason for the engine failure".
One passenger aboard flight QF32 reported hearing a "massive bang" while photographs of the engine

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31

showed its outer, rear casing had been torn apart.
"The fact that it survived the damage is a credit to the design. Twenty years ago that would probably
have taken the aircraft out of the sky," said John Page, senior lecturer in Aerospace Engineering at the
University of New South Wales.
Passengers also reported a second engine on the stricken Qantas aircraft failed to shut down once on
the tarmac, sparking fears it could ignite spilling fuel from the failed engine.
SECOND ENGINE PROBLEM
Joyce confirmed the other engine had failed to shut down after landing but said it could have been
affected by the mishap to the first engine which caused parts to fly off. "We are still investigating the
causes," he said.
Passengers said after landing they had been told of the dangers of using any electronic device as fire
fighters sprayed the aircraft which was leaking fuel from a hole in the wing.
"Obviously in the back of your mind you are concerned about a very hot engine next to leaking fuel,"
passenger Christopher Lee said. "Obviously, you are in a state of anxiety."
Qantas said its engineers, along with those from Airbus and Rolls-Royce, were working to determine
what went wrong.
"Rolls-Royce have identified a number of potential areas," said Joyce. "This issue does not relate to
maintenance."
Rolls-Royce has maintained the engines since they were installed on the aircraft, he said. The company
gets a goodly proportion of its revenues from such service contracts.
Qantas shares ended down 1 percent at A$2.86 on Friday, underperforming the broader market
<.AXJO> which advanced 1.2 percent to a six-month high.
Commonwealth Bank aviation analyst Matt Crowe said there was unlikely to be long-term reputational
damage, as investors had tended to move on from previous safety incidents which have never resulted
in a fatal crash for Qantas.
Joyce said it was too early to assess the financial impact of grounding its six A380s, but Crowe
estimated the grounding could cost up to A$20 million ($20.3 million) in revenues if the planes remained
on the ground for a week.
By comparison, the volcanic ash cloud that disrupted European air travel in April this year lasted about
two weeks and cost Qantas A$46 million in costs and lost revenue. (Editing by Mark Bendeich and Dan
Lalor)
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32

Travel Agent Central: AA Responds to Travelport, Threatens End to Participation in
Orbitz, November 5, 2010
Customers still can compare fares and purchase tickets for travel on American Airlines on Orbitz
and Orbitz-powered sites, American Airlines (AA) said in response to statements by Orbitz and
Travelport critical of AA's decision to launch Direct Connect.
"We will continue to negotiate in good faith to reach a viable, mutually beneficial agreement
with Orbitz," the carrier said in a statement. "AA's position remains that our distribution
channels need to be cost-effective and efficient while also enabling more choices for customers
through new products/service offerings."
American responded to Travelport's charges that AA's Direct Connect policy was
anticompetitive, in addition to issuing a December 1 threat to end to AA participation in Orbitz.
"American Airlines can deliver more customized and relevant products and services to our
customers through our travel partners, but we must look beyond the current paradigm to succeed
in this quest," AA said in its statement. "Products and services in air travel continue to evolve as
airlines distinguish themselves from one another and the same must be true for how products are
distributed. This is an opportunity for our travel agency partners to distinguish themselves from
their competition and better serve our joint customers."
Barney Harford, Orbitz Worldwide's president and CEO, also addressed the issue, confirming
that Orbitz may face a December 1 termination of AA's participation. "American Airlines sent
us a letter earlier this week indicating its intent to terminate its participation on our Orbitz and
Orbitz for Business sites effective December 1," Harford said, "American Airlines has publicly
expressed its intention to force agencies to connect directly to its systems in order to access its
content. The current GDS model, is pro-competitive and pro-consumer. GDSs ensure that travel
agents have access to 'full content,' i.e. all an airline's publicly available fares.
"Furthermore, GDSs enhance competition between airlines, and create transparency, by ensuring
that travel agents can offer consumers a comprehensive choice of airlines," Harford continued.
"A number of business travel and consumer advocacy organizations have criticized American's
effort, and we join them in that criticism. By taking this action, American is attempting to limit
travelers' choices when they can least afford it. At Orbitz Worldwide we operate websites
globally that serve millions of consumers every month, and we sell tens of millions of airline
tickets every year. American and Orbitz are both important participants in the travel distribution.
landscape. Orbitz is working actively to resolve this issue to the benefit of our mutual
customers."
Paul Ruden, ASTA's senior vice president of legal and industry affairs said that he expected
ASTA to issue a statement on the controversy early next week. Central to AA's position is its
efforts to recruit agents and travel management firms to use AA's Direct Connect system.
The Business Travel Coalition (BTC) and the Interactive Travel Services Association (ITSA) are
also expecteed to weigh in on the issue.

33

Tnooz: Direct connect dispute — American Airlines to pull flights off Orbitz Dec. 1,
November 4, 2010
ShareUPDATE: Barney Harford, president and CEO of Orbitz Worldwide, blasted American's
threat to remove its flights from Orbitz Dec. 1 as "a broad attack by American on the distribution
landscape."
Speaking during Orbitz's third quarter earnings call, Harford says Orbitz continues to negotiate
with American over the issue, but believes the airline's actions are designed to fragment content,
limit consumer choice and force travelers to bear American's distribution costs.
Harford said GDSs play an essential role in negotiating with airlines on behalf of travel agencies
and that a direct-connect approach would serve to fragment content. Although a public company,
Orbitz Worldwide is controlled by Travelport, which operates the Galileo and Worldspan GDSs.
Harford said he was unaware if American is taking a similar approach with other online travel
agencies.
The original story follows:
American Airlines apparently has expanded its direct-connect drive beyond the GDSs and taken
it to the online travel agencies, specifically Orbitz.
In a regulatory filing, Orbitz says American notified Orbitz Worldwide that Orbitz.com and
Orbitz for Business will no longer have the authority to ticket American flights beginning Dec. 1,
2010, Orbitz says.
The dispute, according to a source, revolves around American's demand that Orbitz connect to
AA Direct Connect for flight inventory and ancillary services, and consequent distribution
economics. American wants to take control of its own merchandising through AA Direct
Connect rather than have it handled by third parties, including OTAs and ,GDSs. Farelogix is
contracted to handle direct-connects for American.
Orbitz says the airline notified it Nov. 1 that it will terminate Charter Associate and Supplier
Link agreements with Orbitz Dec, 1.
The charter associate agreement had its origins when American and other major carriers founded
Orbitz in 2001. It was due to expire at the end of 2013.
The charter associate agreement provides Orbitz with transaction payments, marketing support
and nondiscriminatory access to seat availability for published fares. Also as part of the
agreement, Orbitz pays a portion of American's GDS costs.
The Supplier Link agreement, signed in 2004, requires Orbitz to book an agreed-upon number of
flights through a direct-connect between Orbitz and American's internal reservation instead of
through a GDS.

34

American apparently is insisting that Orbitz connect directly to AA Direct Connect instead of
through the current supplier link setup, a move that Orbitz is resisting because of the integration
disruption, allegedly unproven track record of AA Direct Connect and unfavorable distribution
economics.
Under the Supplier Link agreement, which American intends to terminate Dec. 1, the airline had
to pay Orbitz a transaction fee for each ticket sold.
It looks like the Orbitz-American dispute is shaping up as a test case for American's future
relationships with OTAs, and it could have repurcussions for other airlines' OTA contracts, as
well.
Consider American's notification to Orbitz as an opening salvo in their negotiations over the
issue.
"For now, customers still can compare and purchase American's fares on Orbitz and Orbitzpowered sites," says Cory Garner, American's director of merchandising strategy, referring to
the Dec. 1 cutoff date. "American values its longstanding relationship with Orbitz.and desires an
agreement that works for both parties."
Garner adds: "We continue to negotiate in good faith to reach a viable, mutually beneficial
agreement with Orbitz. We believe it is important that our distribution channels be cost-effective
and efficient. Consumers benefit when inefficiencies in the travel distribution marketplace are
addressed."
Orbitz also released its third quarter financial results today
In the third quarter, Orbitz Worldwide's net income increased 120% to $15.3 million on revenue
of $194.5 million, a 4% jump.
Orbitz says the earnings growth was driven by gains in gross bookings, transactions and global
room nights.
In the Orbitz Worldwide portfolio, eBookers was a particular standout. Room nights at eBookers
climbed 57% in the third quarter, compared with a year earlier, Orbitz says.

35

Travelpulse: Travelport Attack on AA Escalates Airline, GDS Content Wars, November 4,
2010
Travelport has fired a broadside against American Airline's Direct Connect program, which is a
direct link into American's reservation system for shopping pricing, booking, ticketing and postticketing transactions. Travelport, which owns two GDSs and Orbitz, issued a statement calling
Direct Connect a GDS bypass that requires travel agencies to spend time and money to change
their computer systems to allow bookings to be made on AA's internal system. Travelport also
said Direct Connect would make more work for agencies because it means agencies have to have
create and maintain duplicate records, because these transactions would be housed in American's
internal systems. If other carriers follow American's lead, it compounds the inefficiencies,
Travelport said.
Travelport said that American claims that Direct Connect enables individual customization that
GDSs can't provide -- but Travelport says that's untrue.
"Travelport is ready, willing and able to work with AA to deliver the customization AA is
talking about," Travelport said in its statement.
In addition, Travelport issued another statement saying that it "believes that AA's action to
coerce a more restrictive model under threat would violate AA's contractual obligations with
Travelport. AA's plans and the resulting inefficiencies and associated costs would be detrimental
to airline customers, travel agencies and consumers."
The exchange is part of an ongoing battle between airlines and the GDSs, the technology systems
that airlines created, The GDSs make money off the airlines when agents and consumers shop
and book tickets on the GDSs; airlines continue to try to whittle those costs down.
The battle is becoming more complicated with the advent of ancillary fees, which the airlines say
the GDSs are unable to handle. The GDSs say, however, that they have the functionality, but
airlines are balking because they view making those fees transparent to agents and the public
could put them at a competitive disadvantage. For more information, visit www.travelport.com .

36

American Airlines threatens to pull inventory from Orbitz I Travel Weekly

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Orbitz CEO Barney Harford said American Airlines has launched the "first salvo' at weakening third-party distributors by planning to "terminate the
company's authority to ticket AA flights on its Orbitz.com and Orbitz for Business websites as of Dec. 1."
Harford told Wall Street analysts about American's Intentions during Orbitz's third-quarter earnings call on Thursday.
American contends it is trying to offer passengers the most customized booking process it can as efficiently as possible.
Orbitz publicly detailed the American termination plan In documents fled with the U.S. Securities and Exchange Commission. The company
essentially said that the airline Was exercising one of the provisions in a decade-long agreement signed in 2003 to give a 30-day termination notice.
Some analysts and other Industry experts say American's tactic may be little more than a negotiation ploy to renegotiate its agreement with Orbitz.
'It's a private negotiation that has become public," said Jay Sorensen, president of consulting firm IdeaWorks. This type of thing probably happens
more than we realize."
UBS analyst Kevin Crissey said he thought American and Orbitz would work out some type of agreement. In a note to investors, he said the
cancellation notice could be 'leverage for a new deal."
"American has been targeting distribution costs for some time now, but this move is Interesting,' Crissey said.
American spokeswoman Mary Sanderson denied the termination notice was any negotiation ploy. The notice shows "we are serious,' she said.
The American move certainly is a serious matter, Gurion said, with Implications that could shake up the entire Industry.
"This Is a broad attack by American on the broad distribution landscape," he told analysts.
It's a move to bypass online travel agencies and other distributors, and drive business to American's websits, he said.
That's not true, Sanderson said.
"We are negotiating In good faith with Orbitz to reach a mutually beneficial agreement that provides broad, efficient distribution while also enabling
more choices for customers," she said in an emoted statement.
"Together with our travel partners, we can deliver more customized and relevant products and services to our customers, but we must look beyond.
the current paradigm to succeed. Products and services in air travel continue to evolve as airlines distinguish themselves from one another. This Is
an opportunity for our travel agency partners to distinguish themselves from their competition and better serve our joint customers."
Online agencies and others using GDS platforms simply can't deliver the type of customized booking product that American can, Sanderson said.
Travelport, Orbitz's largest investor, said, "AA is aggressively trying to persuade agencies to bypass the GDSs by offering agencies short-term
incentives to shift AA bookings to a direct connection."
Travelport, a major player In the SOS business, owns the Galileo and Worldspan reservation systems.
'A successful direct connection will result in the 100% long-term loss of an agency's financial assistance through the GDS for all of. its AA bookings,"
said Travelport.
'Also, even if AA offers an agency an Increased incentive for some period, the agency Is still left with the inefficiencies of booking most airlines
through the GDS, and having to book AA through a direct channel. If additional carriers require the same, then the inefficiencies will be even worse.
This just does not make the best economic sense.'
Sabre officials say its GDS Is ready to offer the kind of customized product American is touting.
"The GOSS are prepared from a technology perspective to help airlines market and sell their products, including targeted marketing to specific
passengers," Sabre said. "We all are driving toward the adoption of an Industry technology standard so the airlines and 5055 can quickly put Into
ace
pl ace the merchandising strategies the airlines are continuing to develop

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American Airlines threatens to pull inventory from Orbitz

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Page 2 of 2

CORRECTION: Orbitz CEO Barney Hanford made the American Airlines announcement during the earnings call.
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11/5/2010

American Airlines To Yank Content From Orbitz - Business Travel News

Page l of I

avel NEWS

ORATE TRAVEL INtELLiGENGE

Home > News > T ravel Management
2010

American Airlines To Yank Content From
Orbitz
By David Jonas and Jay Campbell
November 4, 2010
American Airlines has informed Orbitz Worldwide that it would "terminate the company's authority to
ticket AA flights on its Orbitz.com and Orbitz for Business Web sites" as of Dec. 1, according to an
Orbitz filing with the Securities and Exchange Commission.
The two parties were operating under an agreement signed in 2003 that was set to expire in 2013.
"We continue to negotiate in good faith to reach a viable, mutually beneficial agreement with Orbitz,"

according to an AA statement . "We believe it is important that our distribution channels be costeffective and efficient."
Orbitz Worldwide CEO Barney Harford today told analysts that American Airlines' decision represents
the "first salvo" in a "broad attack ... on the travel distribution landscape," including global distribution
systems and "agencies in general."
Travelport, which owns 48 percent of Orbitz Worldwide, today said it is "taking a number of actions to
defend travel agents and consumers commensurate with AA's anti-consumer and anti-competitive
actions," but offered no further detail .

M
http://www.businesstravelnews.com/print.aspx?id =14231

11/5/2010

Examiner.com: American Airlines, Orbitz at odds over reservations technology, November
4, 2010
American Airlines will terminate the authority of Orbitz to ticket AA flights on Orbitz.com and
other Orbitz outlets by December 1, reported Air Transport World Thursday. Statements from
American Airlines and Orbitz owner Travelport do not mention the last date American flights
can be ticketed by Orbitz, but Orbitz references American's decision to withdraw ticketing from
the online travel agency, while American states it still hopes to reach a "viable, mutually
beneficial agreement with Orbitz". Failing an agreement, AA tickets may be available from a
more limited array of online vendors by next month. Travelocity, which is wholly owned by
onetime American Airlines subsidiary Sabre Holdings told ATW they had received no similar
communication from American. Expedia refused to comment to the airline industry news
magazine.
American, grew to become the largest carrier in the United States on the strength of it's then-inhouse SABRE system. American and other large carriers were in battles to install their systems
into travel agencies throughout the country from their genesis in the 1960s through the zenith of
travel agency airline sales in the days before airline tickets were made for sale on the internet.
Today, the majority of airline tickets are sold airline and travel agency websites, although most
airlines simply connect the sites to their reservations systems - technology which, in several
cases, including SABRE, is entering it's fifth decade of existence.
American claims Global Distribution Systems (GDS), such as SABRE that it helped design are
based on an older Edifact connection which does not allow the systems to display the more
complicated add-ons and extras such as baggage fees and premium seat fees now offered by
many legacy carriers, American prefers a more comprehensive yet largely untested XML
connection with the GDS systems.
Travelport denies the claim that the traditional GDS programs are unable to deliver the level of
customization that American requires. ATW reports that a number of distributors have said using
American's technology would incur research, development, and implementation costs, noting
that if other airlines follow suit, there would be mass confusion and a breakfdown of data
communications between airlines and travel suppliers. However proponents of the XML
connection point out that low cost carriers in Europe have used it to connect to traditional GDS
platforms for years, albeit without the same level of complexity that is present at AA.

The Beat: Crissey: OTAs Not Surprised By AA's Orbitz Move, Expect Other Carriers To
Follow, November 5, 2010
UBS analyst Kevin Crissey today issued a research note suggesting online travel agencies
probably were not surprised by American Airlines' decision to cut off Orbitz, effective Dec. 1.
"They've known for a while that airlines feel current agreements favor the OTAs and will push
for better terms when contracts allow," he wrote, "The airline ticket agency business has been in
decline for a long time and will continue to be."
Crissey added that "American is not unique in its desire to renegotiate distribution terms. Other
airlines will likely be aggressive in pursuing this strategy, as well."
He pointed to the now infamous comments last year by AA CEO Gerard Arpey and Delta CEO
Richard Anderson, who each put forward the notion that OTAs should pay airlines for content
rather than airlines paying OTAs.
"The thought is that the OTAs make lots of money from selling hotels but customers come to the
OTAs to first purchase airline tickets," Crissey continued. "Without airline tickets, OTAs
wouldn't sell nearly as many higher-margin hotel rooms."
Crissey offered several reasons why airlines look unfavorably on OTA bookings: they are
generally low-yield leisure bookings; they "cannibalize" airline websites, which he estimated as
incurring $2 per segment in distribution costs versus an OTA's $5 per-segment cost; and they
generally don't "upsell" customers into higher-priced seats. He also suggested that "clever
airlines are negotiating contracts with OTAs which provide OTAs with bigger financial
incentives for bookings in 'backhaul' markets outside of their hubs,"
Before year-end, AA and Orbitz will settle on new terms, Crissey predicted. Ultimately, "We
think American is likely to receive better financial terms," he wrote, and meanwhile "Orbitz has
to diversify into hotels quickly.
AA's decision also impacts Orbitz for Business, the company's corporate travel division.
In assessing the financial hit to Orbitz, Crissey explained that the OTA's problem is less about
AA's individual stance and more about the likelihood of several other airlines looking to
similarly renegotiate their Orbitz deals,
"Unfortunately for Orbitz, 36 percent of its trailing 12 -month revenue came from air," he wrote.
"This exposes far too much revenue to pricing pressure." As such, UBS lowered its 2010
estimated earnings per share for Orbitz to $0.17 from $0.23 and its 2011 estimated EPS to $0.30
from $0.37.

41

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Carriers operate in strict compliance with the relevant government aviation security requirements and
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The Association of Asia Pacific Airlines (AAPA) has consistently emphasised the need for government
agencies and the aviation industry to work cooperatively together to maintain a secure supply chain.
Regarding the need for new security measures, AAPA Director General, Andrew Herdman said, "We
long ago learned that it is human nature that each new security incident prompts a desire to introduce
yet more security measures, but it takes a certain political maturity to remain calm, and not fall into the
trap of knee jerk reactions by the imposition of new security measures of unproven effectiveness.
Security comes at a cost, already measured in tens of billions of dollars annually for aviation alone, and
new security procedures are only justified when it can be demonstrated that the benefits outweigh the
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On a positive note, Mr Herdman stressed, "The key lessons from this, and previous terrorist incidents,
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Mr Herdman concluded by saying, "We must not forget that good security is all about comprehensive
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See also: Video Interview with the CEO of atar Airway as a very interesting part of the interview
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Airline Seeuri

43
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11/5/2010

PR N ewswi re
,'.)
Urulcd Bu;i e ,,t Ni h
•

FORT WORTH, Texas, Nov. 4, 2010 /PRNewswire via COMTEX/ -- Customers still
can compare fares and purchase tickets for travel on American Airlines on Orbitz
and Orbitz-powered sites today, and we will continue to negotiate in good faith to
reach a viable, mutually beneficial agreement with Orbitz. AA's position remains
that our distribution channels need to be cost-effective and efficient while also
enabling, more choices for customers through new products/service offerings.
American Airlines can deliver more customized and relevant products and
services to our customers through our travel partners, but we must look beyond
the current paradigm to succeed in this quest. Products and services in air travel
continue to evolve as airlines distinguish themselves from one another and the
same must be true for how products are distributed. This is an opportunity for our
travel agency partners to distinguish themselves from their competition and
better serve our joint customers.
About American Airlines
American Airlines, American Eagle and AmericanConnection(R) serve 250 cities in
40 countries with, on average, more than 3,400 daily flights. The combined
network fleet numbers more than 900 aircraft. American's award-winning
website, AA.com (R), provides users with easy access to check and book fares, plus
personalized news, information and travel offers. American Airlines is a founding
member of the oneworld(R) Alliance, which brings together some of the best and
biggest names in the airline business, enabling them to offer their customers
more services and benefits than any airline can provide on its own. Together, its
members serve nearly 700 destinations in more than 130 countries and
territories. American Airlines, Inc. and American Eagle Airlines, Inc. are
subsidiaries of AMR Corporation. AmericanAirlines, American Eagle,
AmericanConnection, AA.com , We know why you fly and AAdvantage are
trademarks of American Airlines, Inc. /quotes/comstock/13*lamr/quotes/nls/amr
(AMR 8.34, -0.03, -0.36%)
DMI\2192925.1

44

Current AMR Corp. releases can be accessed on the Internet.
The address is http://www.aa.com
SOURCE American Airlines

45

Orbitz: AA Decision First Salvo' In 'Broad Attack'
The Beat — a travel business newsletter
Danbury, Conn.
11/4/10 10:51 AM
Orbitz Worldwide CEO Barney Harford today told analysts that American Airlines' decision to
terminate its relationship with Orbitz represents the "first salvo" in a "broad attack ... on the
travel distribution landscape," including global distribution systems and "agencies in general."
Though he said Orbitz is not privy to AA's relationships with other online agencies, Harford
indicated a belief that others would be impacted, as well.
American Airlines informed Orbitz Worldwide that it would "terminate the company's authority
to ticket AA flights on its Orbitz. corn and Orbitz for Business Web sites" as of Dec. 1.
"AA has publicly expressed its intention to force agencies to connect directly to its systems in
order to access its content," Harford said. "A number of business travel and consumer advocacy
organizations have criticized American's effort, and we join then in that criticism. By taking this
action, American is attempting to limit travelers' choices where they can least afford it,
"Orbitz is working actively to resolve this issue to the benefit of our mutual customers," Harford
added.
Orbitz executives would not detail the expected financial impact of AA's decision, and Harford
said "there is no reason to believe other airlines are pursuing a direct-connect strategy the way
American clearly is at this stage."
An American Airlines official provided the following statement regarding the carrier's decision.
"For now, customers still can compare and purchase American's fares on Orbitz and Orbitzpowered sites. American values its long-standing relationship with Orbitz and desires
an agreement that works for both parties. We continue to negotiate in good faith to reach a
viable, mutually beneficial agreement with Orbitz. We believe it is important that our
distribution channels be cost-effective and efficient. Consumers benefit when inefficiencies in
the travel distribution marketplace are addressed."
When asked by email if AA has made similar decisions regarding other online distributors, AA
manager of merchandising strategy Cory Garner wrote, "We're going to stick to our holding
statement for now."
Orbitz Worldwide's stock price at press time was off about 11 percent at $6.06 per share.
David Jonas

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"The agreement

European Airlines Report Strong
Financial Performance

Management.travel
Orbitz for Business reported 32
percent growth in gross bookings for
the third quarter...

sets forth the
terms under which Orbitz can offer air travel
on behalf of AA to consumers and requires
AA to provide the company with agreed-upon

• INTERVIEY Ai3c Q Q:Ble_ciM il~

transaction payments when consumers book

,.r:,

American Airlines has Informed Orbltz
Worldwide that it would "terminate the
company's authority to ticket AA
flights...
Election Takes Toll On House
Transportation Committee Democrats
Voters in San Francisco yesterday
defeated an initiative that would have
raised the city's hotel tax by two

percentage points....
NBTA PAC Hopeful On FAA Bill
t3 3

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Hertz reported third-quarter net
income of $156.6 million...
Hyatt Hotels Corp. reported thirdquarter net income of $30 million...
Dollar Thrifty Automotive Group
reported $49.2 million in net income
for the three months ending Sept.
30...
Egencia's third-quarter revenue
jumped 28 percent year over year to
$35 million...
Wyndham Hotel Group reported an 11

percent increase in third-quarter
revenues...

this travel," according to the filing. "The
agreement also provides Orbitz with

nondiscriminatory access to seat availability
for published fares as well as marketing and
promotional support. In exchange for this
information and support, the company pays
AA a portion of the global distribution system
fees that the company receives from the
GDS for AA transactions booked on the
Orbitz.com and Orbitz for Business Web
sites.
"AA also exercised its right to terminate the
Supplier Link Agreement that it entered into
with Orbitz in February 2004," the filing
stated. "The Supplier Ll~r k Agregmer! eaLab!iahes
a_ direct link b&c.n Orbit3,ggm and MIS rnl

resery loo s ste s and requires that Orbitz
book certain airline tickets through that direct

link rather than through a GDS. In return, AA
pays Orbitz a per ticket fee. The termination
of the Supplier Link Agreement will also be

P_ em

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+ GUEST: Gille spie On Innovation 1 10.07.10

•

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09,10.10

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effective as of December 1, 2010."
Orbitz later this morning is due to hold a
conference call with analysts, ostensibly to
discuss its third-quarter performance, which
included a $15 million net profit and 32
percent year over year gross bookings
volume growth at Orbitz for Business.
1 rotweet

Jay Campbell

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