American Airlines Inc v. Travelport Limited et al

Filing 46

***UNFILED PER ORDER OF 6/7/2011, DOC. 58*** AMENDED COMPLAINT against All Parties filed by American Airlines Inc. Clerk to issue summons(es). (Yetter, R) Modified on 6/7/2011 (klm).

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
FORT WORTH DIVISION

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American Airlines, Inc., a Delaware corporation, )
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Plaintiff,
)
)
vs.
)
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Sabre, Inc., a Delaware corporation; Sabre
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Holdings Corporation, a Delaware corporation
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and Sabre Travel International Ltd., a foreign
)
corporation, d/b/a Sabre Travel Network;
)
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Travelport Limited, a foreign corporation;
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Travelport, LP, a Delaware limited partnership, )
d/b/a Travelport;
)
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and
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Orbitz Worldwide, LLC, a Delaware limited
)
liability company, d/b/a Orbitz,
)
)

Civil Action No.: 4:11-CV-00244-Y

Defendants.

FIRST AMENDED COMPLAINT
INTRODUCTION AND SUMMARY
1.

Plaintiff American Airlines, Inc. (“American”) brings this suit to stop and recover

the damages it has suffered as a result of the anticompetitive conduct of defendants Sabre, Inc.;
Sabre Holdings Corporation; and Sabre Travel International Ltd. (hereinafter collectively
referred to as “Sabre”); and Travelport Limited and Travelport, LP (hereinafter collectively
referred to as "Travelport"). As this Complaint describes, Sabre and Travelport each effectively
control the distribution of airline tickets to a large number of business travelers. American also
brings suit against defendant Orbitz Worldwide, LLC, which operates an online travel agency

and benefits from Travelport’s monopoly. Each of Defendants Sabre and Travelport has
engaged in exclusionary conduct, and Travelport and Orbitz have entered into agreements with
one another and with others to exclude competition and maintain Travelport’s monopoly power.
2.

Sabre and Travelport operate global distribution systems ("GDSs"). GDSs

distribute airline fare, flight, and availability information provided by American and other
airlines to travel agents, and enable those travel agents to make reservations and issue tickets on
the airlines' flights (hereinafter referred to as “the provision of airline booking services”). Travel
agents rely almost exclusively on GDSs to sell airline tickets, and a majority of American’s
passenger revenues come from tickets sold by travel agents. As such, GDSs are the gatekeepers
between American (and other network or "hub-and-spoke" airlines) and travel agents and their
customers.
3.

Five GDSs operate in the United States: Sabre, Galileo, Apollo, Worldspan,

and Amadeus. Sabre controls the largest GDS in the United States, which accounts for more
than 60% of all airline ticket sales made by U.S.-based travel agencies. Travelport controls three
of the five GDSs—Galileo, Apollo, and Worldspan—which together account for over 30% of all
airline ticket sales made by U.S.-based travel agencies. In the past year, over $7 billion of
American’s sales were booked through Sabre and more than $2.7 billion were booked through
Travelport's GDSs.
4.

Travelport effectively controls the ability of American and other network

airlines to distribute fare, schedule, and availability information to Travelport's travel agency
subscribers, including defendant Orbitz, and to obtain reservations and sell tickets through those
travel agencies. Many business travelers will only purchase tickets through the travel agency
with which their company has a contract. Because Travelport provides virtually 100% of the
bookings for a large number of corporate customers whose travel agents subscribe to one of
Travelport's GDSs, it has monopoly power over American.
5.

Sabre effectively controls the ability of American and other network airlines to

distribute fare, schedule, and availability information to, and to obtain reservations and sell
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tickets through travel agents that subscribe to its GDS. Because, Sabre, like Travelport, provides
virtually 100% of the bookings for a large number of corporate customers whose travel agents
subscribe to its GDS, it has monopoly power over American.
6.

Travel agents do not pay to use the services of the GDSs. Rather, the GDSs

charge the airlines a supracompetitive “booking fee” for each reservation that a travel agent
makes through a GDS. American annually pays tens of millions in booking fees to Sabre and
Travelport.
7.

The GDSs frequently share with the travel agents that use their systems a portion

of the supracompetitive booking fees they charge the airlines for reservations made by the
agents. Thus, when travel agents decide what GDS to use, they often have an incentive to
choose the GDS that charges the highest, not the lowest, booking fees.
8.

In recent years, American has developed an alternative method of providing

airline booking services to travel agents—called AA Direct Connect—that is based on modern,
efficient, flexible, and less costly technology than the technology that the GDSs use. AA Direct
Connect allows American to provide its own flight, fare and other ticketing information directly
to travel agencies and compensate them directly for any bookings they make. Sabre and
Travelport recognize that AA Direct Connect poses a significant competitive threat to their
power to charge supracompetitive booking fees and its ability to impede technological
investment and change.
9.

Recognizing that American’s AA Direct Connect could undermine the GDS

providers’ dominance in the provision of airline booking services to travel agencies, defendants
and other industry participants with an interest in preserving the GDSs' dominant market
positions have engaged in a broad and unlawful multi-part anticompetitive scheme.
10.

Specifically, each of Sabre and Travelport has engaged in various forms of

unlawful exclusionary conduct intended to significantly limit the incentive and ability of its
travel agent subscribers to shift bookings among different providers of airline booking services
in response to ordinary market forces. In doing so, each has ensured that American and other
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network airlines that rely on travel agents to distribute tickets remain dependent upon Sabre and
Travelport to access the critical group of travel agents that subscribe to their respective GDSs. In
this way, Sabre and Travelport have obtained and maintained monopoly power over American
and other network airlines. Their exclusionary acts and practices include:
(i)

Imposing anticompetitive contract terms in their agreements with participating
airlines that severely limit the airlines’ ability to develop, promote, or use
competing distribution channels;

(ii)

Entering into long-term restrictive agreements with travel agent subscribers that
require or incentivize travel agents to use their GDSs exclusively, or nearly
exclusively;

(iii)

Entering into long-term restrictive agreements with travel agents that give those
agents a shared financial interest in maintaining their GDSs’ market power vis-àvis American and other airlines;

(iv)

Unreasonably refusing to deal with technology companies whose products
threaten to erode barriers to entry in the distribution of airline services to travel
agents; and

(v)

Retaliating against American and other companies that take action that potentially
threatens the GDS monopoly position.

11.

Further, because they recognize that a threat to the control of any one GDS over

access to its travel agency subscribers constitutes a threat to the current GDS airline ticket
distribution model, including the anticompetitive benefits this model generates for its non-airline
participants, defendants and other industry participants have, individually and collectively,
retaliated against American in an unprecedented manner in response to American’s direct
connect technology initiative. Defendants and other industry participants recognize that if
American is successful in its effort to increase the prevalence of direct connect technology,
increased competitive pressure on the GDSs will have a negative impact on companies that have
a financial interest in preserving the dominance of that model. Similarly, there is a common
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recognition that other network airlines may pursue similar strategies if American’s competitive
efforts meet with any success. Therefore, the defendants and other industry participants have
undertaken attacks against American that have been swift and punitive.
12.

Among other things, Travelport doubled American’s booking fees for reservations

made outside the United States, and subsequently intentionally misrepresented American’s fares
in a manner that made them appear more expensive than they actually were to consumers outside
the United States. As a result, American's flights were displayed less frequently relative to other
airlines’ flights, thereby causing American to sell fewer airline tickets to customers traveling to
and from the United States.
13.

Sabre intentionally biased its electronic display of American flight and fare

information—placing other airlines’ more expensive or otherwise less desirable flights above
American flights on travel agents’ displays—and more than doubled booking fees on all
American flights booked in the United States, Puerto Rico, and the Caribbean. Sabre also
announced its intentions to double its booking fees on American flights booked outside the U.S.
Furthermore, Sabre has retaliated against third-party software developers who have sought to
work with American and others to develop more efficient methods of distribution.
14.

Defendants and other industry participants have also retaliated against American

by altering their displays to disfavor American’s flights, refusing to deal with American, or
encouraging consumers not to purchase tickets on American, among other retaliatory actions.
15.

As described below, defendants have undertaken this course of exclusionary

conduct and concerted behavior to force American to provide airline booking services to travel
agencies within the confines of the GDS distribution model. American’s agreements with the
Sabre and Travelport GDSs expire later this year, and in anticipation of that expiration American
has approached travel agents about implementing AA Direct Connect. In advance of
negotiations with American over continued participation in their GDSs, Sabre and Travelport
have sought to convey a message to American: Stop trying to innovate and inject more
competition into the provision of airline booking services or they will continue to punish
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American and, ultimately, cut off American's access to a critical group of corporate customers.
Defendants’ conduct has harmed not only American, but also U.S. consumers, in violation of the
federal antitrust laws, specifically Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2, as
well as provisions of Texas law.
16.

As a result of defendants' anticompetitive conduct, American has suffered

significant harm in the form of exorbitant booking fees, outdated and inflexible technology, lost
sales, and loss of goodwill with the travel agency community, corporate customers, and
consumers. Unless these practices are enjoined, American will continue to suffer harm,
including in the form of an inefficient system for the distribution of airline services, lost
goodwill, and excessive distribution costs.
17.

Airline passengers have also been and continue to be harmed because defendants'

unlawful conduct has deprived them of the benefits of competitive distribution of airline tickets
and product innovation.
18.

Unless the Court acts to enjoin this unlawful conduct, defendants and other

industry participants will continue to take actions to thwart initiatives designed to introduce
competition into the distribution of travel services, and both American and the traveling public
will continue to suffer the anticompetitive consequences.
THE PARTIES
19.

Plaintiff American Airlines, Inc. is a domestic and international airline that

operates approximately 3,500 daily departures. American is a corporation organized and existing
under the laws of the State of Delaware, with its principal place of business located at 4333
Amon Carter Boulevard, Fort Worth, Texas.
20.

Defendant Sabre, Inc., is a Delaware Corporation with its principal place of

business located at 3150 Sabre Drive, Southlake, Texas, 76092. Sabre, Inc. owns and operates
the Sabre GDS used by travel agencies and others for the sale and distribution of air
transportation services and information. In 2006, approximately $90 billion in travel-related

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services were sold through Sabre GDS. Sabre, Inc. transacts substantial business in this District.
Its registered agent for service of process is Corporation Service Co., 211 E. 7th Street, Suite
620, Austin, Texas 78701.
21.

Defendant Sabre Holdings Corporation (“Sabre Holdings”) is a Delaware

Corporation with its principal place of business located at 3150 Sabre Drive, Southlake, Texas,
76092. Defendants Sabre, Inc., and Sabre Travel International Ltd. are subsidiaries of Sabre
Holdings Corporation. Sabre Holdings directed and/or participated in the actions of these
subsidiaries described in this complaint and is jointly and severally liable for their conduct. As
such, Sabre Holdings transacts substantial business in this district. Its registered agent for
service of process is Corporation Service Co., 211 E. 7th Street, Suite 620, Austin, Texas 78701.
22.

Defendant Sabre Travel International Ltd. (“Sabre Travel”) is an Irish

corporation, with its principal place of business located at 3150 Sabre Drive, Southlake, Texas,
76092. Sabre, Inc. and Sabre Holdings have used Sabre Travel as a corporate vehicle for holding
contracts with airline participants in the Sabre GDS, including American. As such, Sabre Travel
transacts substantial business in this district.
23.

Defendant Travelport Limited (“Travelport LTD”) is a Bermuda corporation with

its principal place of business at 405 Lexington Avenue, #57, New York, NY 10174. According
to Travelport LTD, it owns, controls and/or operates, either directly or indirectly, three GDSs —
Apollo, Galileo and Worldspan — used for the provision of airline booking services to travel
agencies. As such, Travelport LTD transacts substantial business in this District. It has appeared
by counsel in the case.
24.

Defendant Travelport, LP is a Delaware limited partnership with executive offices

located at 300 Galleria Parkway, N.W., Atlanta, Georgia 30339. Travelport, LP is an indirect
subsidiary of Travelport LTD. Travelport, LP says it is the successor in interest to two contracts
relevant here: the Preferred Fares Amendment to the Galileo International Global Airline
Distribution Agreement with American, and the Subscriber Services Agreement with Orbitz.

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Travelport, LP transacts substantial business in this District. It has appeared by counsel in the
case.
25.

Defendant Orbitz Worldwide, LLC ("Orbitz") is a Delaware limited liability

company with its principal place of business located at 500 West Madison Avenue, Suite 1000,
Chicago, Illinois 60606. Orbitz is a party to the Subscriber Services Agreement with Travelport
that requires it to use Travelport “exclusively” as its GDS provider for North American air travel
bookings. Additionally, Orbitz is party to an agreement with Travelport that provides payment
contingent on its refusal to adopt a direct connect relationship with American for booking airline
tickets. Orbitz transacts substantial business in this District. It has appeared by counsel in the
case.
JURISDICTION AND VENUE
26.

This Court has jurisdiction over all claims asserted against defendants pursuant to

28 U.S.C. § 1331, 28 U.S.C. § 1337(a), 28 U.S.C. § 1367(a), 15 U.S.C. § 4, 15 U.S.C. § 15, and
15 U.S.C. § 26.
27.

Venue is proper in this District under Section 12 of the Clayton Act, 15 U.S.C. §

22, and under 28 U.S.C. § 1391(b) and (c). For venue purposes, defendants can be found in and
transact business in this District.
INTERSTATE COMMERCE
28.

The provision of airline booking services occurs in interstate commerce.
FACTUAL BACKGROUND

A.

American Is Dependent Upon Travel Agencies to Distribute Airline Tickets
29.

Network airlines like American are dependent upon travel agencies to sell airline

tickets to consumers. Although these airlines do sell tickets directly to consumers through their
websites, call centers, and ticket offices, the majority of airline passenger revenues are generated
by tickets sold through travel agencies. These travel agencies include both traditional “brick and

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mortar” agencies, including major agencies such as American Express or Carlson Wagonlit
Travel, and online travel agencies such as Orbitz. Approximately 51% of American’s revenue is
generated by brick and mortar travel agencies, and another 10-15% is generated by online
agencies.
30.

Business travelers are particularly dependent upon travel agents. As is true for

most network airlines, business travelers account for a disproportionately high share of
American’s total passenger revenue.
31.

According to a recent report by the National Business Travel Association, less

than 10% of corporate travel is booked through the Internet. Instead, many businesses contract
with a travel agency to manage their employees’ business travel, and require that employees use
that travel agency when they purchase airline tickets for business travel, even if the traveler
locates a less expensive fare on a website. Businesses prefer travel agencies because they offer a
variety of services, such as ensuring compliance with corporate travel policies, negotiating and
implementing corporate contracts for discounted airfares, and accounting and other data
management services. Because of the additional services offered by travel agencies, these
business customers would not substitute purchases of tickets directly from individual airlines in
response to an increase in the price of services charged by travel agents.
B.

American Has No Alternative But to Participate in Sabre’s and Travelport’s
GDSs in Order to Sell Tickets through the Travel Agents That Subscribe To
Those GDSs
32.

GDSs, or computerized reservations systems (“CRSs”) as they are sometimes

called, connect airlines and other travel suppliers with travel agents. GDSs enable travel agents
to search for flights, fares and seat availability on airlines that participate in the GDS, and to
make reservations and issue tickets for airline travel.
33.

Originally, GDSs were created and owned by airlines, and beginning in the early

1980s, they were regulated by the US Department of Transportation (“DOT”) (or its predecessor,
the Civil Aeronautics Board). The regulations promulgated by the DOT were intended to

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address the fact that the GDSs had significant market power that could be abused to restrict
competition, both among GDSs and in airline markets. By 2004, the GDSs were no longer
owned by airlines, and the DOT decided that it should deregulate GDSs. In doing so, however, it
cautioned that “the systems continue to have market power over airlines, as argued by the Justice
Department; that there is some potential for conduct by the systems that could prejudice airline
competition (most notably the sale of display bias); and that systems could engage in practices
that could unreasonably preserve their market power.” However, the DOT concluded that
“[v]igorous enforcement of antitrust policy” rather than regulation was the better way to prevent
anticompetitive conduct.
34.

Travel agents today have no commercially reasonable alternatives to using a GDS

to sell air travel. Even a travel agent that elects to use AA Direct Connect is still dependent upon
a GDS to obtain information and make bookings on other airlines' flights. Although it is
technologically feasible for travel agents to use alternative distribution channels such as airline
websites to obtain information, for several reasons travel agents do not perceive this as a
commercially reasonable alternative.
35.

First, airlines rather than travel agents pay when travel agents make reservations

or issue airline tickets through a GDS. The GDS charges participating airlines a booking fee for
each “segment” (each point-to-point flight in a traveler’s itinerary) booked through the GDS.
Pursuant to long-term subscriber agreements between the travel agents and their GDS suppliers,
travel agents receive a share of the supracompetitive booking fees that the airline pays to the
GDS when the travel agents make reservations. Thus, travel agents generally have an incentive
to make as many reservations as possible through the GDS, rather than directly with the airline.
36.

Second, GDSs enable travel agents to conduct a single search for flights, fares and

availability on multiple airlines and to review the search results in a single integrated display. As
explained below, although there are alternative technologies available that would enable travel
agents to search and aggregate information obtained from multiple airlines in a single display

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without using a GDS, the GDSs have engaged in exclusionary acts and practices that have made
it nearly impossible for many travel agents to use these technologies.
37.

Third, most travel agents rely on software applications for accounting, contract

management, customer relations, user interfaces, and online booking tools. When a travel agent
sells a ticket through a GDS, it needs to be able to share information about that ticket sale with
these applications. Consequently, these software applications often must be able to interoperate
with the travel agent’s GDS. As explained below, Sabre and Travelport have engaged in
exclusionary acts and practices that make it more costly and difficult for these software
applications to function properly if a travel agent uses an alternative to the GDS to sell an airline
ticket.
38.

Although some travel agencies subscribe to more than one GDS, most rely on a

single GDS in any particular location or for any given corporate customer. Using multiple GDSs
imposes additional costs on the travel agent because of the additional time, effort, and expense
needed to enter a search in more than one GDS, because using multiple GDSs requires additional
training costs, and because the travel agent’s accounting, billing, and recordkeeping systems
typically are designed to interoperate with a particular GDS. As a result, even if a travel agent
subscribes to more than one GDS, it cannot easily switch from using one GDS to using another
for any given corporate customer. Technologies exist that would mitigate these costs and make
it easier for travel agents to shift bookings among different providers of airline booking services,
but as explained below, Travelport has erected barriers to use of these technologies.
39.

In addition, subscriber agreements between travel agents and GDSs often include

anticompetitive provisions that discourage travel agents from shifting airline bookings among
different providers of booking services. As noted above, a travel agent typically receives a
portion of the supracompetitive booking fees that the airlines pay to the GDS when the travel
agent makes a reservation. Those payments are tied to “productivity commitments” by the travel
agent, i.e., a commitment to use the GDS service for a specified volume of bookings, coupled
with financial penalties or disincentives if those commitments are not reached. A travel agent
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that shifts some of its bookings to an alternative provider of airline booking services would risk
losing those payments with respect to all of its bookings.
40.

Moreover, most subscriber agreements between travel agents and GDSs involve

multi-year commitments, with contractual provisions such as incentive payments or liquidated
damages clauses that discourage travel agents from terminating their agreements prior to contract
expiration.
C.

Sabre and Travelport Each Possesses Monopoly Power over American
41.

Because travel agents continue to be the dominant channel for selling airline

tickets, especially to business travelers, and because travel agents continue to rely almost entirely
on a single GDS to serve specific corporate customers, from the standpoint of airlines such as
American, different GDSs are not substitutes for one another. As a practical matter, each GDS
controls the ability of network airlines to access a discrete, but critical, group of travelers whose
business is essential to those airlines' competitive and financial viability. If American wants to
sell tickets to business travelers who rely on a travel agent that subscribes to one of defendants’
GDSs, it has no choice but to participate in that GDS or risk losing a substantial number of those
ticket sales.
42.

In theory, American could encourage the GDSs to compete with respect to

booking fees by withholding its participation in a particular GDS since, over time, a GDS that
does not provide airline ticketing services for an airline like American would be less valuable to
consumers and thus to travel agents. In reality, however, any such action would cause the airline
to suffer immediate and significant harm from the loss of ticket sales by travel agent subscribers
to the GDS. The GDS, on the other hand, would suffer only future, and uncertain, costs due to
its inability to sell American's tickets because it is protected from immediate harm by high
switching costs and long-term contracts with travel agents. The loss of a significant number of
ticket sales is a sacrifice that neither American, nor any other network airline, can afford to make
and remain a viable airline competitor.

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43.

For these very reasons, both the Antitrust Division of the U.S. Department of

Justice (“DOJ”) and the DOT repeatedly have concluded that GDSs are not substitutes for one
another from the perspective of the airlines and that each GDS individually possesses market
power over participating airlines. As the DOJ stated in comments filed with the DOT:
Each CRS provides access to a large, discrete group of travel agents, and unless a
carrier is willing to forego access to those travel agents, it must participate in
every CRS. Thus, from an airline’s perspective, each CRS constitutes a separate
market and each system possesses market power over any carrier that wants travel
agents subscribing to that CRS to sell its airline tickets.
Comments of the Department of Justice to Notice of Proposed Rulemaking, Computer
Reservation System Regulations, Department of Transportation (Docket No. OST-96-1145)
September 19, 1996 (available at http://www.justice.gov/atr/public/comments/0881.htm).
44.

The DOJ reached the same conclusion in 2003, when it noted that although a

growing number of price-sensitive leisure travelers are purchasing tickets using the Internet
rather than brick-and-mortar travel agents, airlines remain reliant on GDSs and travel agents—in
large part because the vast majority of business travelers still book tickets through travel agents.
The DOJ wrote:
CRS market power over airlines derives primarily from the inability of most
airlines to withdraw from any CRS. For most airlines, travel agents continue to be
a critical distribution outlet. Travel agents, in turn, rely heavily on CRSs, even
though almost all travel agencies have Internet access. Further, most travel agents
rely primarily on one CRS. It is often costly and inefficient for agents to use
multiple CRSs because it requires agencies to incur additional training costs and
to implement accounting, billing and recordkeeping systems that consolidate all
of the CRS transactions.
Reply Comments of the Department of Justice to Notice of Proposed Rulemaking, Computer
Reservation System (CRS) Regulations, Department of Transportation (Docket Nos. OST-972881, OST-97-3014, OST-98-4775, OST-99-5888), June 9, 2003 (available at
http://www.justice.gov/atr/public/comments/201081.htm).
45.

Similarly, at the time it deregulated the GDSs, the DOT concluded that GDSs

have monopoly power, noting that “the systems’ [GDS] fees exceed competitive levels for the

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reasons set forth in the notice of proposed rulemaking. We have not seen evidence that the
systems’ fees generally respond to market forces . . . .” Final Rule, Computer Reservation
System (CRS) Regulations, Department of Transportation (Docket Nos. OST-97-2881, OST-973014, OST-98-4775, OST-99-5888), January 7, 2004 (available at
http://edocket.access.gpo.gov/2004/pdf/03-32338.pdf).
46.

In fact, the booking fees that American pays have increased over the last decade,

even though analogous electronic and data input expenses have declined or remained flat over
that same period. American believes that, were it not for the anticompetitive conduct of
defendants and other industry participants, it could distribute tickets using AA Direct Connect at
an average cost of less than half what it currently pays for bookings made through a GDS.
47.

Each of Sabre and Travelport possesses monopoly power over American in the

provision of booking services to their respective travel agency subscribers and have exercised
that monopoly power by charging American excessive booking fees and by engaging in
exclusionary conduct to prevent competition from alternative distribution systems such as AA
Direct Connect. In addition, because Sabre and Travelport are not subject to competitive
discipline from other providers of booking services to travel agents, they have failed to innovate
and modernize their technology. As a result, American and its customers have been forced to
rely on aging, inefficient, and inflexible technology for the distribution of airline tickets and
services.
48.

That Sabre and Travelport each have monopoly power with respect to American

and other network airlines is powerfully demonstrated by recent actions they have taken to
punish American for trying to foster competition in airline ticket distribution. As discussed
below, both Sabre and Travelport imposed astronomical price increases on American—doubling
the booking fees they charge for certain ticket sales. Notwithstanding this dramatic and
anticompetitive increase in prices, American had no choice but to continue to participate in
defendants’ GDSs or risk losing a significant number of ticket sales to its airline competitors.

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D.

Defendants’ Anticompetitive Agreements and Exclusionary Acts and
Practices
(i)

Exclusionary Provisions in Participating Carrier Agreements

49.

Both Sabre and Travelport have used their monopoly power to impose

anticompetitive terms and conditions on airlines that participate in their GDSs. These
restrictions have the purpose and effect of foreclosing the few avenues available to the airlines to
promote and encourage competition between different GDSs, as well as competition between
GDSs and emerging distribution channels.
50.

Because travel agents share in the supracompetitive booking fees that a GDS

charges airlines, they have a financial incentive to use the GDS that generates the highest
booking fees. In the past, participating airlines have offered unique content, such as special
discounted fares, through certain alternative distribution channels that are less costly for the
airline as a way to encourage travel agents to use that distribution channel instead of the more
costly GDS. Sabre and Travelport have responded to these attempts to generate competition
first, by imposing contract terms on the airlines that effectively protect the GDSs from this type
of competitive discipline, and second, by retaliating against airlines that have engaged in this
type of effort, including American.
51.

Specifically, Sabre and Travelport make widespread use of most-favored nation

("MFN") provisions in the form of “full content” or “content parity” provisions in their
participating carrier agreements that limit participating airlines’ ability to encourage the use of
one GDS over another or the use of alternative providers of airline booking services other than
GDSs.
52.

For example, Section 2.1 of the “Preferred Fares Amendment” to the agreement

between American and Travelport relating to Travelport’s Galileo GDS, provides:
“American will provide Full Content to Galileo for distribution by Galileo via its GDS to
Galileo Agencies in the Territory, at no additional charge to Galileo, and at levels and
amounts that are at least as favorable to Galileo as those upon which American makes
the same or substantially the same types of Full Content available through any other
GDS or distribution channel in the Territory.”

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53.

Similarly, the amended PCA between American and Sabre requires that American

provide Sabre with “Full Content”. Full Content means |||||||| ||||||||||||||||| |||||||||||||||||||| ||||||||||| |||||||| |||||
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54.

These MFN clauses effectively require participating airlines such as American to

offer each GDS the same content on equivalent terms as those offered to any other GDS or
through alternate distribution channels such as an airline’s website or through a direct
connection. In this way, they prevent participating airlines from encouraging travel agents or
consumers to use alternative, less-costly distribution channels by making certain content
available only through those channels. For example, a participating airline that has signed an
agreement that contains a full content provision cannot offer special discounted fares only
through the airline’s website. Similarly, an airline cannot make certain fares available only on a
GDS that charges lower booking fees as a way to encourage travel agents to use that GDS rather
than a GDS that charges the airline a higher booking fee.
55.

Sabre and Travelport both contend that they offer “discounts” on their booking

fees in exchange for participating airlines’ agreement to the anticompetitive MFN provisions.
However, these “discounted” booking fees are still well above competitive levels. In reality, an
airline has no economically reasonable alternative but to accept the MFN clause because refusal
to accept would result in even higher, uncompetitive, booking fees, impeding the airline’s ability
to compete with other airlines with respect to their fares.
56.

Furthermore, upon information and belief, in recent negotiations with US

Airways, Inc., Sabre refused even to quote a price for a contract that did not contain an MFN
provision, and told the airline that it would be required to provide Sabre with full content even if
it chose to pay the rack rate, thus demonstrating that MFN provisions do not merely result from
bargaining over "discounted" booking rates.

16

57.

Both Sabre and Travelport have staggered the termination dates of their

agreements with participating airlines, which maximizes their bargaining leverage against each
carrier. An airline negotiating with a GDS knows that its competitors have signed agreements
that contain an MFN. If the airline does not agree to the MFN, it knows it will be placed at a
significant competitive disadvantage relative to other airlines that are paying “discounted,” albeit
supracompetitive, booking fees to the GDS.
58.

Given the dominance of the GDS distribution channel and the cost structure of the

airline industry, American could not survive if excluded from or materially disadvantaged in the
Sabre or Travelport GDSs or any other significant GDS.
59.

Because of their potential to exclude competition, MFN provisions in GDS

contracts were historically prohibited by government regulation. While these prohibitions were
lifted by the DOT in 2004, both the DOT and DOJ recognized their potential for abuse by the
GDSs to foreclose the development of alternate distribution channels. For example, the DOJ
stated:
[MFN clauses] may reinforce CRS market power over airlines, particularly if they
discourage the development of alternative distribution channels. For example, a low-cost
distribution channel on the Internet may not offer the same level of functionality as a
CRS, but may nonetheless be able to attract usage if it has preferential access to desirable
fares and inventory from a significant number of airlines. By negotiating [MFN clauses]
with a sufficient number of airlines, a CRS may be able to prevent the growth of this
alternative, effectively imposing a barrier to entry into the air travel distribution
marketplace.
Reply Comments of the Department of Justice to Notice of Proposed Rulemaking, Computer
Reservation System Regulations, Department of Transportation (Docket Nos. OST-97-2881,
OST-97-3014, OST-98-4775, OST-99-5888), June 9, 2003 (available at
http://www.usdoj.gov/atr/public/comments/201081.htm).
60.

Similarly, in its 2004 comments accompanying the final order that deregulated the

GDS market, the DOT stated:
[C]lauses requiring participating airlines to provide all fares as a condition to
participation may similarly constitute unfair methods of competition because they
17

unreasonably limit each airline’s ability to choose how to market its services.
That would buttress the system’s market power…a system's contract clause
requiring an airline to provide access to all fares as a condition to any
participation would also be analogous to an unlawful tying arrangement.
Computer Reservations Systems (CRS) Regulations; Final Rule, 69 Fed. Reg. 999 (January 7,
2004) (to be codified at 14 C.F.R. pt. 255).
61.

Not satisfied with the extent to which the preceding contract provisions

hamstrung American’s ability to foster competition among the GDSs, and determined to quash
American’s new Direct Connect technology, Sabre imposed the following provision in
American’s PCA in order to make it difficult for American to even disseminate information
about the benefits of its technology:
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62.

The sole purpose of this provision is to raise American’s costs and impede its

ability to promote its direct connection technology. By preventing American from promoting
Direct Connect in ways that are unacceptable to Sabre, Sabre sought to further protect itself from
the competitive threat that this alternative distribution channel poses to its monopoly position.
(ii)

Exclusionary Terms in Travel Agency Subscriber Agreements

63.

Both Sabre and Travelport enter into long term contracts with travel agents,

typically three years but sometimes longer. Most of these contracts include some type of
provision that either requires or provides financial incentives for the travel agent to use one GDS
exclusively, or nearly exclusively.
64.

These provisions help to ensure that airlines have no choice but to participate in

each GDS if they want to be able to sell tickets through travel agents that subscribe to that GDS.
65.

Some agreements between the GDSs and their subscribers contain an express

provision that requires the travel agent to use one GDS exclusively, either for all its bookings or
for bookings at particular locations or for particular corporate customers. Other subscriber
agreements reward travel agents that meet certain booking volume targets with rebates,

18

sometimes called “incentive payments.” With these payments, Sabre and Travelport effectively
share with travel agents some of the supracompetitive booking fees they receive from the airline.
Moreover, if the travel agent does not meet the minimum volumes, it must compensate the GDS
for the shortfall in booking fees. The payment of incentive fees under the GDS-travel agent
contracts, and penalty fees for missing minimum volume commitments, creates a powerful
disincentive for a travel agency to shift bookings from one GDS provider to another or to less
costly non-GDS alternatives.
66.

Thus, to encourage travel agents to change to a less expensive GDS or alternative

distribution channel, an airline would have to compensate the travel agent for the loss of
incentive payments the travel agent would receive not only for ticket sales on that airline but for
all the travel agent’s ticket sales on competing airlines as well.
67.

Some Sabre and Travelport subscriber agreements include provisions that prohibit

travel agents from aggregating information obtained from the GDS with information obtained
from any other source, such as AA Direct Connect. Anticompetitive prohibitions such as these
have the effect of significantly impeding the introduction of an effective competitor to GDSs,
which in turn allow Sabre and Travelport to maintain monopoly power.
68.

These provisions preserve Sabre’s and Travelport’s control over access to

valuable business customers, impede the introduction and growth of new, more efficient and
lower-cost forms of distribution, and have the purpose and effect of unreasonably restraining
competition in order to maintain Sabre’s and Travelport’s monopoly powers in the provision of
airline booking services to their subscribers.
(iii)

Exclusionary Agreements Between Travelport and Orbitz

69.

Orbitz has an agreement with Travelport, called the Subscriber Services

Agreement (“SSA”), that requires it to use Travelport “exclusively” as its GDS provider for
North American air travel bookings through 2014. In exchange for this exclusivity commitment,
Travelport provides Orbitz with a “segment incentive” rebate per booking, which is a substantial
portion of the booking fee that American provides to Travelport.
19

70.

The SSA requires Orbitz to meet domestic annual minimum segment

commitments. For example, Orbitz’ 2009 minimum requirements were 36 million domestic
segments booked through Travelport GDSs. Additionally, Orbitz was contractually obligated to
book at least 95% of its European segments through Travelport GDSs. Failure to meet these
minimum commitments is costly: Orbitz must pay Travelport “shortfall fees” to account for any
deficit in segment bookings.
71.

In addition to the use of powerful financial incentives to discourage Orbitz from

using alternatives to the Travelport GDS, the Travelport SSA prohibits Orbitz from entering into
new direct connect relationships with any airline and from expanding or renewing any existing
direct connect agreement with any airline, including American, that would bypass the Travelport
GDS. With respect to those direct connect relationships that already exist, Orbitz is contractually
required to ensure that they are “terminated as soon as commercially practicable.” These
provisions are plainly intended to restrict Orbitz from entering into a direct connect-style
arrangement with any airline.
72.

As Orbitz itself describes this provision in its 2010 10-K filing:

[O]ur GDS service agreement with Travelport limits our ability to modify the
terms of our agreements with existing suppliers or to pursue direct connections
with new or existing suppliers during the term of the agreement, which expires on
December 31, 2014. These contractual obligations may reduce our flexibility to
implement changes to our business in response to changing economic conditions,
industry trends, or technological developments. As a result, the limitations
imposed by the GDS service agreement could place us at a competitive
disadvantage and negatively impact our business and results of operations,
particularly in the current economic environment where our suppliers are under
increased pressure to reduce their overall distribution costs.
73.

As explained below, American and Orbitz were parties to agreements that

required Orbitz to maximize its use of an older direct connect technology, and to cooperate with
American to develop and implement newer direct connect technologies. When Orbitz’ failure to
fulfill its direct connect obligations with American caused American to terminate Orbitz’
authority to book travel on American flights, Travelport agreed to make financial contributions

20

to Orbitz to help make up for that lost business, rather than risk an expansion of the OrbitzAmerican direct connect relationship that would compete with the GDS distribution model.
(iv)

Exclusionary Acts and Agreements Targeting Applications Developers

74.

When a travel agent sells a ticket through a GDS, it needs to be able to share

information about that ticket sale with various other software applications, such as accounting,
and quality control. Consequently, these software applications often must be able to exchange
information—or "interoperate"—with the travel agent’s GDS. The GDS thus sits at the center of
most travel agency IT systems, serving as a platform for the agency’s front, mid, and back office
applications.
75.

A typical agent’s IT system is illustrated below:

76.

For an alternative provider of airline booking services such as AA Direct Connect

to be a practical substitute for use of a GDS from the perspective of a travel agent, the travel
agent needs to be able to transfer information about tickets sold through that service to its front,
mid, and back office applications. Thus, in order for AA Direct Connect and similar offerings by

21

other airlines to provide more effective competition with GDSs, travel agencies must have the
ability to exchange information with the other software applications used by the travel agencies.
77.

In addition, for many travel agents, an alternative distribution channel such as

direct connect will be attractive only if the travel agent has a means by which to aggregate and
compare the content that it obtains from multiple suppliers, whether through multiple direct
connections or through a direct connection and a GDS. There are various technologies and
technology providers capable of performing this function for travel agencies.
78.

Some travel agencies, especially the online travel agencies that are themselves

technology companies, but also some larger brick and mortar agencies, have their own
technology capable of aggregating content from multiple sources. Indeed, Orbitz currently
receives some content via direct connections that it aggregates and displays to customers in a
single integrated display. Other travel agencies may rely on technology companies to provide
this service, whether through the purchase of a turn key operation or by licensing technologies
that would enable the agents to implement their own content aggregation system.
79.

Numerous companies have the technological capability to efficiently and cost-

effectively aggregate travel content from multiple sources, including direct connections to the
airlines and other service providers, as well as the GDSs, so that travel agents can search for,
compare, and book flights of all the major airlines using one user-friendly interface. However,
Travelport has engaged in exclusionary practices that make it difficult or impossible for these
companies to interoperate with its GDSs.
80.

Sabre and Travelport allow only authorized third-party applications developers to

obtain access to their GDSs’ applications programming interfaces or “APIs.” These APIs allow
applications to interoperate with the GDS.
81.

Both Sabre and Travelport have refused to authorize applications developers to

access their APIs, or have terminated developers from their programs, if the developer works
with or promotes alternative distribution channels to the GDSs.

22

82.

For example, Farelogix is a third-party technology provider and content

aggregator that helped American develop its AA Direct Connect technology and that offers
content aggregation and related services to travel agents that want to establish a direct connection
with American or other service providers. Farelogix was a member of Sabre’s “authorized user”
program beginning in June 2005, and signed the original Sabre Developer Agreement in August
2007. In January 2009, however, as it became increasingly clear to Sabre that direct-connect
technology presented a serious potential competitive threat to the GDS model, Sabre reversed
course. Sabre terminated Farelogix’ developer agreement because Farelogix was working to
help airlines, especially American, establish direct connections with travel agents. Without a
valid developer agreement, Farelogix does not have access to the APIs that are needed to allow
its software to interoperate with Sabre subscribers’ front-, mid-, and back-office systems.
83.

Sabre also directed another developer, PASS Consulting, to restrict Sabre access

to Farelogix and its customers, and even threatened to terminate Pass Consulting’s own
authorized developer agreement for concern that it was working with Farelogix and direct
connect technology. Other software developers working with American and Farelogix on Direct
Connect development have reported similar threats from Sabre that they are not to work with
Farelogix or any other entity that facilitates direct connections.
84.

Similarly, on December 28, 2010, after American terminated Orbitz’ ticketing

authority, Travelport terminated its third-party developer agreements with Farelogix because it
concluded that Farelogix was not “aligned” with Travelport, presumably due to its cooperation
with AA Direct Connect. Other software developers have been told that under their agreements
with Travelport they are not permitted to work with Farelogix or AA Direct Connect.
85.

Sabre’s and Travelport’s refusals to deal with Farelogix, or with any other

applications developer that is working with Farelogix, makes it harder for travel agencies
interested in establishing a direct connection with American to use Farelogix technology to
create an integrated display that aggregates content from non-GDS sources such as AA Direct
Connect with information obtained from the GDS.
23

86.

Ironically, both Sabre and Travelport have used the fact that it makes it difficult

for travel agents to integrate content from multiple sources to disparage American’s direct
connect initiative, alleging in various public statements that AA Direct Connect could create
fragmentation and does not allow comparisons between different airlines' offerings. That irony
has not gone unnoticed by their travel agency customers. On January 5, 2010, the Association of
Retail Travel Agents (ARTA) and its Canadian affiliate issued a press release in part responding
to the GDS providers’ criticism of AA Direct Connect, noting:
It does seem quite disingenuous for GDSs to use the "what’s good for the travel
agent and consumers" argument when some of these very GDSs have for years
maintained restrictive covenants in their agent/GDS contracts preventing the use
of agency tools which blended GDS airline inventory with non-GDS airline
inventory—all in a monopolistic attempt by the GDSs to prevent comparative
displays and non-GDS bookings—no matter how good the schedule or fare
information may have been for the consumer. Let’s be honest, this is all about
GDSs protecting their segment fee earnings and keeping those fees as high as
possible.
87.

Through these various exclusionary acts, Sabre and Travelport have been

successful in their quests to impede the development and adoption of non-GDS distribution
models. As the DOT observed when it deregulated GDSs, despite the “development of sources
of airline information and booking capabilities on the Internet [that] has created additional
resources that travel agents can use…[travel agents] continue to make most of their
bookings through a [GDS] system ....” As indicated by the January 5, 2010 statement by
ARTA, travel agencies' stated “preferences” for using their GDS systems are not simply
because the GDSs offer a superior product or service.
(v)

Defendants’ Retaliatory Attacks Upon American

88.

Defendants and other industry participants recognize that AA Direct Connect

poses a significant competitive threat of eroding the GDSs’ power to charge excessive booking
fees and their ability to impede technological investment and change. One industry commentator
has observed, “[y]ou can expect Sabre, Amadeus and Travelport to stand shoulder to shoulder
in an effort to spank American Airlines for having the audacity to break with what it views as a

24

broken GDS model.” Dennis Schaal, Behind Expedia Action Against American Airlines and
Supply Chain Wrath, Tnooz.com, Jan 3, 2011, http://www.tnooz.com/2011/01/03/news/behindexpedia-action-against-american-airlines-and-supply-chain-wrath/. Sabre, Travelport, Orbitz,
and other industry participants have, in fact, stood “shoulder to shoulder” in punishing American
for promoting the use of technology that could disrupt their monopolistic distribution system.
(a)
89.

Orbitz’ Dispute With American Over Direct Connect Technology

American’s dispute with Orbitz, the third largest online agency in the U.S., was

the triggering event for defendants’ most recent retaliations. In 2001, Orbitz was established as a
direct-connect-centered agency by its then airline owners, using a system called “Supplier Link”
to search for and make bookings without using a GDS. American and Orbitz entered into an
agreement called the Orbitz Supplier Link Agreement (the “OSLA”), effective February 3, 2004.
Under the OSLA, Orbitz could book eligible tickets through the Supplier Link interface.
American was not required to (and did not) pay a booking fee to any of Travelport’s GDSs for
travel booked through Supplier Link.
90.

Orbitz and American also entered into the Second Amended and Restated Airline

Charter Associate Agreement, effective December 19, 2003 (the “ACAA”). Like the OSLA, the
ACAA required Orbitz to display American’s flight data in an unbiased manner. In section
3.6 of the ACAA, Orbitz also agreed to use “commercially reasonable efforts to develop and
implement distribution technologies that lower the cost of distributing [American’s] products and
services through the [Orbitz website].” Based largely on the terms of the OSLA and the ACAA,
prior to mid-2006, Orbitz booked over 70% of its American tickets through the Supplier Link, as
opposed to through Travelport’s GDSs.
91.

In 2006, a Travelport affiliate acquired a controlling interest in Orbitz. As a

result of a subsequent partial divestiture, Travelport retains a 48% equity interest in Orbitz.
For purposes of the antitrust laws Orbitz is a separate legal and economic entity.
92.

After it became affiliated with Travelport, and in contravention of its contractual

obligations to American, Orbitz began increasing its use of GDSs to distribute American’s
25

product by reducing the number of bookings processed by “Supplier Link.” As a result, Orbitz
became a particularly high-cost distributor of American’s tickets.
93.

In mid-2010, American was in negotiations with Orbitz to return Orbitz to its

roots as a cost-effective, direct-connect agency by, among other things, establishing a new
AA Direct Connect link between the two companies. As negotiations progressed, it became
clear that Orbitz was unwilling or unable to implement AA Direct Connect. Unbeknownst to
American at that time, Travelport, intending to replace Orbitz’ direct-connect bookings with
more expensive Travelport GDS bookings, had entered into a contract with Orbitz — the
Travelport SSA — that expressly prohibited Orbitz from using an American direct connection
system. In late 2010, Orbitz announced that it would not implement a new direct connection
system with American. As a result, on November 1, 2010, American notified Orbitz that it was
terminating their relationship.
94.

American’s termination of its relationship with Orbitz due to Orbitz’ refusal to

abide by its contractual direct connect obligations set off a series of retaliatory acts against
American.
95.

As set forth below, the attacks launched by defendants against American were

part of a coordinated campaign to isolate and punish American for supporting a direct connect
distribution alternative to the anticompetitive GDS system.
(b)
96.

Travelport Retaliates Against American

On November 1, 2010, the very same day American terminated its relationship

with Orbitz, Travelport notified American that it would double the booking fees it charged
American for bookings made by travel agents outside the United States. Travelport’s actions
were purely punitive and coercive, and lacked any legitimate business justification.
97.

In an effort to offset Travelport’s retaliatory booking fees, and to encourage travel

agents to shift bookings to other less costly distribution channels, American introduced a
recovery fee — a “Booking Source Premium” — for Travelport subscribers who booked
American flights from outside the United States using a Travelport GDS. American informed
26

travel agents that alternative distribution platforms, including the Sabre and Amadeus
GDSs and AA Direct Connect, would not require a Booking Source Premium.
98.

In response to the Booking Source Premium, Travelport took further action to

place American at a competitive disadvantage vis-à-vis its airline competitors. Travelport added
the premium to American’s fares as if it were a tax on consumers, effectively mandating that
travel agents pass along the Booking Source Premium to their customers. This had the effect of
making American’s fares appear on subscribers' computer screens, and in turn to consumers,
higher than they actually were. In this way, Travelport was falsely and fraudulently
misrepresenting American’s fares to travel agents and to the public. It also effectively biased its
display to disfavor American’s flights because the "higher fare" resulted in American's flights
being displayed after its competitors' flights.
99.

Display bias is a powerful tool that GDSs can use to disadvantage disfavored

airlines. It has been condemned by the federal courts. In In re Air Passenger Computer
Reservations Systems Antitrust Litigation, 694 F. Supp. 1443 (C.D. Cal. 1988), where a GDS
that was then owned by an airline biased its displays against competing airlines, the court
declared:
“Display biasing is unreasonably restrictive of competition in that it restricts competition
on the merits in the air transportation business. When consumers attempt to purchase a
ticket on the best available flight their final decision is not solely based upon the
merits of the particular flight (flight time, price, service, etc.). The consumer bears
the brunt of this practice by getting a less than optimal flight, and the airline with the
better flight has lost a sale it should have otherwise made. This type of competitive
advantage depends upon the perpetration of a fraud upon the consumer. It is
unreasonable and therefore an unwarranted competitive advantage because it inhibits
competition on the merits.”
100.

Travelport’s display bias had the desired effect. Because American’s fares were

made to appear higher than they actually were, American began to lose sales at agencies using
Travelport’s GDS, which forced American to abandon the Booking Source Premium.
(c)

Travelport and Orbitz Agree to Stand Together Against American

27

101.

Travelport also entered into an express agreement to ensure that Orbitz would

stand firm in its refusal to work with AA Direct Connect. Travelport agreed to pay Orbitz
significant monetary consideration to offset any lost profits that resulted from American’s
termination of Orbitz’ ticketing authority — conditioned only on Orbitz’ continued refusal to
adopt AA Direct Connect.
(d)
102.

Sabre Retaliates Against American

Similarly, rather than seeking to benefit from the Travelport-American disputes

and its ability to promote the absence of a Booking Source Premium for its customers to gain
additional travel agency customers and bookings, Sabre joined the fray and began retaliating
against American. Sabre made it clear that it would rather punish American’s efforts to reduce
the stranglehold of the GDSs than compete with Travelport.
103.

On January 5, 2011, Sabre gave public notice that, effective immediately, it would

more than double the fees it charged to American for bookings made by Sabre subscribers of
American’s flights in the United States, Puerto Rico and the Caribbean, and effective on
February 4, 2011, it would significantly increase the fees it charged American for bookings made
in Canada, Mexico, Europe, the South Pacific, Asia, Latin America, the Middle East and Africa.
104.

At the same time, Sabre gave public notice that it would no longer display in a

non-biased manner American’s flight and fare content within the Sabre GDS. Sabre admitted
that it made changes in its GDS “that alter the order in which some of American Airlines’ flights
appear in availability and shopping displays.” Sabre further admitted that far from seeking to
capitalize on its American relationship relative to Travelport, its actions relative to American
caused customer “concerns regarding the potential impact of these actions on these operations.”
By biasing the display of American information, Sabre intentionally de-valued the service it
provides to its travel agent subscribers. Those subscribers could no longer rely on the accuracy
of flight and fare displays in the Sabre GDS and had to engage in extra time-consuming effort to
search out the best flights for their customers.

28

105.

For example, American is a primary provider of non-stop service between two

of its hubs, Chicago and Dallas. Yet, on the flight display, Sabre placed the first non-stop
American flight at the end of the third display screen, behind fourteen connecting flights on other
carriers. Similarly, between New York and Los Angeles, the first non-stop American flight
appeared at the eighth display screen, behind forty-five flights on other carriers.
106.

Display bias is a practice that Sabre had contractually agreed not to use. To

justify its actions, Sabre claimed that its anti-bias obligation was terminated because American
publicly had “marketed” a direct connect program to GDS subscribers in violation of a provision
in American's Amended Sabre Participating Carrier Agreement.
107.

Sabre’s actions are inconsistent with a competitor seeking to obtain the highest

number of bookings. Notably, Sabre took this action to discourage bookings on American flights
despite the fact that it had already doubled American’s booking fees, and thus, would
earn greater revenue on bookings with American than with other participating airlines.
108.

That Sabre’s actions were contrary to its legitimate economic self-interest is not

subject to meaningful dispute. In comments it filed with the US Department of Transportation in
support of deregulation of GDSs, Sabre represented that it would not bias its displays because
“[u]nlike airline-owned CRS, independent CRSs have no economic incentive to skew or thwart
airline competition – indeed, their sole nature is to improve the quality and scope of data to
offer the best, more reliable booking facilities on all airlines to obtain the highest number of
bookings, which are facilitated by lower fares.” Reply Comments of Sabre Inc. to Notice of
Proposed Rulemaking, Computer Reservation System Regulations, Department of
Transportation (Docket Nos. OST-97-2881, OST-97-3014, OST-98-4775, OST-99-5888), June
9, 2003, at 24.
109.

On January 10, 2011, American filed a lawsuit in the district court in Tarrant

County, Texas alleging that Sabre’s retaliatory conduct was a breach of its obligations under the
Amended Sabre Participating Carrier Agreement. That same day, the Texas state court issued a
temporary restraining order prohibiting Sabre from continuing to bias its displays against
29

American. American and Sabre thereafter reached an agreement to stay litigation between the
parties until June 1, 2011.
(e)
110.

Effects on American’s Direct Connect Initiative

In implementing this retaliatory campaign against American, defendants and other

industry participants intended to do more than merely punish and coerce American. Their
attacks sought to send a message to other airlines, travel agents, and technology providers that
efforts intended to erode the power of the GDS distribution model and/or to introduce more
competition into the provision of airline booking services will be met with a quick, collective,
and harsh response.
111.

After observing defendants’ unlawful conduct, travel agencies that either had

agreed or were in active negotiations with American to implement AA Direct Connect informed
American that they feared retaliation from Sabre and Travelport if they continued to work with
American. As a result, defendants have significantly impeded American’s ability to compete in
the provision of airline booking services to travel agents.
HARM TO AMERICAN AND
HARM TO COMPETITION
112.

Supracompetitive GDS booking fees constitute a significant component of

American’s costs. These costs reduce the competitiveness of American and harm airline
passengers who are deprived of the benefits of competition that otherwise would exist.
113.

Sabre and Travelport have been able to maintain their per-segment booking fees

at monopolistic levels, and American is entitled to recover the resulting overcharges.
114.

As a result of defendants’ anticompetitive conduct, absent relief from this Court,

American will be forced to continue paying monopoly prices for access to Sabre’s and
Travelport’s GDSs, and defendants will continue to block price competition among GDSs as
well as competition from newer technology and more efficient means of distribution of airline
services to travel agents.

30

115.

Further, Sabre’s and Travelport’s retaliatory manipulation of American’s fare

displays has deprived American of sales that it otherwise would have made through their
affiliated travel agents. American is entitled to recover these damages and all other losses caused
by Sabre’s and Travelport’s conduct.
116.

Because the GDSs are not subject to competitive discipline from other

distribution channels and have effectively foreclosed alternative distribution technologies from
the market, they have failed to innovate and modernize their own technology. As a result,
airlines and consumers are forced to rely on aging, inefficient, and inflexible technology for the
distribution of airline tickets and services.
MARKET DEFINITION
117.

The distribution of airline fare, flight, and availability information and the

provision of reservations and ticketing capability to travel agents ("the provision of airline
booking services”) is a relevant product market. The overwhelming majority of business
travelers rely on travel agents to identify flights and fares and to purchase tickets for travel on
network airlines. These travelers do not view other ways of purchasing airline travel, such as
purchasing through an airline website, as a reasonable substitute for purchasing tickets through a
travel agency. Because an airline that does not distribute its tickets through travel agencies
would lose a significant number of ticket sales for business travel to competing airlines,
American does not consider the use of other distribution channels, such as an airline’s website, to
be a reasonable substitute for the provision of airline booking services to travel agents.
118.

The provision of airline booking services to Sabre subscribers is a relevant

product submarket. As explained above, due in substantial part to the anticompetitive and
exclusionary conduct at issue in this case, American has little ability to shift bookings from
customers of Sabre's subscribers to other GDSs, direct connect, or other distribution channels
when Sabre increases its booking fees or degrades the quality of its displays. Thus, other
providers of airline booking services do not serve as a competitive check on Sabre's ability to

31

raise prices or reduce the services it provides to American. If American and other network
airlines want to sell tickets to travelers that use a Sabre travel agency, they have no practical
alternative but to participate in the Sabre GDS.
119.

For the same reasons, the provision of airline booking services to Travelport

subscribers is also a relevant product submarket. As explained above, due in substantial part to
the anticompetitive and exclusionary conduct at issue in this case, American has little ability to
shift bookings from customers of Travelport's subscribers to other GDSs, direct connect, or other
distribution channels when Travelport increases its booking fees or degrades the quality of its
displays. Thus, other providers of airline booking services do not serve as a competitive check
on Travelport's ability to raise prices or reduce the services it provides to American. If American
and other network airlines want to sell tickets to travelers that use a Travelport travel agency,
they have no practical alternative but to participate in the Travelport GDSs.
120.

Each country served by American in which Sabre or Travelport accounts for a

substantial percentage of airline bookings is a relevant geographic market, including the United
States, the United Kingdom, Belgium, and Switzerland. Sabre accounted for more than 60% of
all bookings made by U.S.-based travel agencies in 2010 and Travelport accounted for 34%.
Travelport accounted for 55% of all bookings made in Switzerland, 48% of all bookings made in
the United Kingdom, and 34% of all bookings made in Belgium in 2010. Because most travelers
purchase airline tickets from travel agents located where they work or reside, the provision of
airline booking services in one country is not a substitute for the provision of such services in
another country.
BARRIERS TO ENTRY
121.

The relevant markets defined above are characterized by durable barriers to entry

by new GDSs that protect the monopoly power of the incumbent GDS providers. Since 2004, at
least three companies, ITA, G2 Switchworks, and Farelogix, have attempted to launch a new
GDS, and all have failed. There has been no successful entry of a new GDS in the U.S. in over

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twenty-five years. Defendants’ anticompetitive conduct and agreements have reinforced these
barriers to entry by rival GDSs.
122.

Newer, more efficient technologies such as AA's Direct Connect do not face the

same entry barriers from fixed costs and network effects as a GDS entrant. However,
defendants’ anticompetitive conduct and agreements have erected substantial barriers to entry by
alternative methods of providing airline booking services, and have effectively foreclosed AA
Direct Connect from the market.
MONOPOLY POWER
123.

The market for the provision of airline booking services in the United States and

other geographic markets is highly concentrated, with only a few market participants. Travelport
possesses substantial market power in this market in the United States, the United Kingdom,
Belgium, and Switzerland, and numerous other countries. Sabre possesses substantial market
power in this market in the United States.
124.

Sabre possesses monopoly power in the submarket for the provision of airline

booking services to Sabre subscribers in the United States. In this submarket, Sabre possesses a
dominant market share.
125.

Sabre’s monopoly power over American is clearly demonstrated by recent events.

Sabre was able to double American’s booking fees while simultaneously degrading the quality of
services it provides American by biasing its displays against it. Sabre was not constrained in its
ability to take this action against American because it knew that American would not be able to
respond to Sabre’s actions by shifting its tickets sales to alternative distribution channels.
126.

Travelport possesses monopoly power in numerous submarkets, including the

markets for the provision of airline booking services to Travelport subscribers in each of the
United States, the United Kingdom, Belgium, and Switzerland. In each of these submarkets,
Travelport possesses a dominant market share.

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127.

Travelport’s monopoly power in these markets is dramatically demonstrated by

recent events. Travelport was able to double American’s booking fees in certain regions, while
at the same time biasing its displays to make American flights appear less attractive to
consumers. Travelport was not constrained in its ability to raise price and reduce the quality of
its services by the threat of competition from competing providers of airline booking services.
American could not shift bookings from Travelport's GDSs to other providers of airline booking
services.
FIRST CLAIM FOR RELIEF: MONOPOLIZATION OF THE DISTRIBUTION
OF AIRLINE TICKETS TO SABRE’S GDS SUBSCRIBERS IN VIOLATION OF
SECTION 2 OF THE SHERMAN ACT
128.

American incorporates the material fact allegations of paragraphs 1 through 127.

129.

Sabre possesses monopoly power in the market for the provision of airline

booking services to travel agencies that subscribe to its GDSs. Through the anticompetitive and
exclusionary acts and practices described herein, Sabre has willfully maintained, and unless
restrained by this Court, will continue to maintain and abuse, that monopoly power. Sabre has
acted with intent to illegally maintain its monopoly over the provision of airline booking services
to its subscribers and its illegal conduct has enabled it to do so in violation of section 2 of the
Sherman Act, 15 U.S.C. § 2.
130.

Sabre’s illegal conduct has directly and proximately caused injury to American’s

business and property. Specifically, American will be forced to continue paying monopoly
prices for access to Sabre’s GDS, and Sabre will continue to block price competition among
GDSs as well as competition from newer technology and more efficient means of distribution
of airline services to travel agents. These injuries, in the form of higher prices and less
innovation, are of the type the antitrust laws are intended to prohibit and thus constitute antitrust
injuries.

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SECOND CLAIM FOR RELIEF: MONOPOLIZATION OF THE
DISTRIBUTION OF AIRLINE TICKETS TO TRAVELPORT’S GDS
SUBSCRIBERS IN VIOLATION OF SECTION 2 OF THE SHERMAN ACT
131.

American incorporates the material fact allegations of paragraphs 1 through 127.

132.

Travelport possesses monopoly power in the market for the provision of airline

booking services to travel agencies that subscribe to its GDSs. Through the anticompetitive and
exclusionary acts and practices described herein, Travelport has willfully maintained, and unless
restrained by this Court, will continue to maintain and abuse, that monopoly power. Travelport
has acted with intent to illegally maintain its monopoly over the provision of airline booking
services to its subscribers and its illegal conduct has enabled it to do so in violation of section 2
of the Sherman Act, 15 U.S.C. § 2.
133.

Travelport’s illegal conduct has directly and proximately caused injury to

American’s business and property. Specifically, American will be forced to continue paying
monopoly prices for access to Travelport’s GDSs, and Travelport will continue to block price
competition among GDSs as well as competition from newer technology and more efficient
means of distribution of airline services to travel agents. These injuries, in the form of higher
prices and less innovation, are of the type the antitrust laws are intended to prohibit and thus
constitute antitrust injuries.
THIRD CLAIM FOR RELIEF: CONSPIRACY TO MONOPOLIZE THE
DISTRIBUTION OF AIRLINE TICKETS THROUGH TRAVEL AGENTS IN
VIOLATION OF SECTION 2 OF THE SHERMAN ACT
134.

American incorporates the material fact allegations of paragraphs 1 through 127.

135.

Travelport, Orbitz, and other unnamed industry participants have entered into

agreements with one another and engaged in concerted activities intended to punish and retaliate
against American for its direct connect initiative, with the specific intent of preserving defendant
Travelport’s monopoly over the provision of airline booking services to its travel agency
subscribers in violation of section 2 of the Sherman Act, 15 U.S.C. § 2.

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136.

Defendants’ agreements have unreasonably restrained competition and harmed

consumers, and they have directly and proximately caused injury to American’s business and
property. Specifically, American will be forced to continue paying monopoly prices for access
to Travelport’s GDSs, and Travelport will continue to block price competition among GDSs as
well as competition from newer technology and more efficient means of distribution of airline
services to travel agents. These injuries, in the form of higher prices and less innovation, are of
the type the antitrust laws are intended to prohibit and thus constitute antitrust injuries.
FOURTH CLAIM FOR RELIEF: SABRE’S AND TRAVELPORT’S
AGREEMENTS WITH PARTICIPATING AIRLINES AND TRAVEL AGENT
SUBSCRIBERS UNREASONABLY RESTRAIN COMPETITION IN
VIOLATION OF SECTION 1 OF THE SHERMAN ACT
137.

American incorporates the material fact allegations of paragraphs 1 through 127.

138.

The restrictive provisions in Travelport’s contracts with travel agency

subscribers, including provisions in its agreements with Orbitz, constitute agreements in
unreasonable restraint of interstate commerce in violation of Section 1 of the Sherman Act.
139.

The restrictive provisions in Sabre’s contracts with its travel agent subscribers

constitute agreements in unreasonable restraint of interstate commerce in violation of Section 1
of the Sherman Act.
140.

The restrictive provisions in Travelport’s long-term contracts with participating

airline carriers constitute agreements in unreasonable restraint of interstate commerce in
violation of Section 1 of the Sherman Act.
141.

The restrictive provisions in Sabre’s long-term contracts with participating airline

carriers constitute agreements in unreasonable restraint of interstate commerce in violation of
Section 1 of the Sherman Act.
142.

Sabre's and Travelport’s anticompetitive agreements with travel agency

subscribers and with participating airlines have harmed competition in the market for the
provision of airline booking services to travel agents, and have directly and proximately caused

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injury to American’s business and property. Specifically, American will be forced to continue
paying monopoly prices for access to Sabre’s and Travelport’s GDSs, and Sabre and Travelport
will continue to block price competition among GDSs as well as competition from newer
technology and more efficient means of distribution of airline services to travel agents. These
injuries, in the form of higher prices and less innovation, are of the type the antitrust laws are
intended to prohibit and thus constitute antitrust injuries.
FIFTH CLAIM FOR RELIEF: TORTIOUS INTERFERENCE BY TRAVELPORT
WITH EXISTING AND PROSPECTIVE CONTRACTUAL REALTIONSHIPS
143.

American incorporates the material fact allegations of paragraphs 1 through 127.

144.

Travelport had actual knowledge of American’s contractual relationship with

Orbitz and the negotiations between American and Orbitz related to new contracts.
145.

Travelport willfully and intentionally interfered with American’s previously

existing contractual relationship with Orbitz by, among other things, entering into exclusionary
contracts with Orbitz on terms that required and induced Orbitz to breach its contracts with
American, including the OSLA and the ACAA. Specifically, Travelport’s exclusionary
agreement with Orbitz prevented Orbitz from selling American tickets via direct connect
technology when tickets were eligible for purchase through Supplier Link, in violation of the
OSLA. Likewise, the exclusionary agreement prevented Orbitz from working with American in
good faith to develop and implement AA Direct Connect, in violation of the ACAA’s terms.
146.

Travelport acted with a conscious desire to interfere with American’s existing

contractual relationship with Orbitz, and absent Travelport’s interference, Orbitz would not
have breached the OSLA and the ACAA in the manner described in this Complaint.
147.

Moreover, Travelport engaged in independently tortious and unlawful acts to

prevent American from continuing in its previous contractual relationship with Orbitz or entering
into new contracts with Orbitz. Specifically, Travelport acted in unlawful retaliation against
American, including by:

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a.

Doubling the fees for the majority of bookings made through Travelport’s GDSs

in violation of Travelport’s contracts with American;
b.

Using display bias to skew American’s fare and flight information in violation of

Travelport’s contracts with American;
c.

Disparaging American by making false or misleading representations of fact

regarding American’s services and business;
d.

Causing confusion or misunderstanding regarding the source or sponsorship of

goods or services in violation of the Texas Deceptive Trade Practices-Consumer
Protection Act;
e.

Engaging in unlawful conduct, as stated herein, in violation of federal antitrust

laws; and
f.

Misrepresenting and displaying the Booking Source Premium—the recovery fee

introduced by American to offset Travelport’s retaliatory and drastic increase in its
booking fees — as part of American’s fares in violation of the Texas Deceptive Trade
Practices-Consumer Protection Act, including provisions thereof that prohibit:
•

passing off goods or services as those of another;

•

representing that goods or services have sponsorship, approval,
characteristics, ingredients, uses, benefits, or quantities which they do not
have;

•

disparaging the goods, services, or business of another by false or misleading
representation of facts;

•

making false or misleading statements of fact concerning the reasons for,
existence of, or amount of price reductions (by falsely inflating American’s
prices to make it appear that other airlines’ tickets include price reductions);

•

representing that an agreement confers or involves rights, remedies, or
obligations which it does not have or involve, or which are prohibited by law;
and
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•

failing to disclose information concerning goods or services which was known
at the time of the transaction if such failure to disclose such information was
intended to induce the consumer into a transaction into which the consumer
would not have entered had the information been disclosed (by making the
Booking Source Premium appear to be part of American’s airfare so that
consumers would not buy tickets on American).

148.

But for Travelport’s tortious and unlawful conduct, there is a reasonable

probability that American and Orbitz would have continued their contractual relationship or
entered into new contracts, including with regard to AA Direct Connect.
149.

Travelport knew (and, indeed, intended that) its conduct would result in Orbitz

breaching its contracts with American and severing its direct connect relationship with
American. Travelport also knew and intended that its conduct would interfere with any
prospective AA Direct Connect contract between American and Orbitz.
150.

Travelport’s conduct has proximately caused harm to American by causing

American to lose, among other things, (i) higher costs in terms of having to pay Travelport
excessive booking fees when such flights should have been booked through the Supplier Link,
(ii) ticket sales that would have resulted from Orbitz booking tickets on American flights absent
the interference by Travelport, (iii) lost revenue resulting from continuing under the OSLA, and
(iv) lost profits that would have resulted from the prospective AA Direct Connect contract.
Travelport’s conduct also has caused a significant amount of unwarranted confusion,
frustration, and anger among the air traveling public in general and American’s corporate
customers in particular. Consequently, American’s goodwill and its relationships with
corporate customers – which took years for American to develop – have been damaged.
151.

Because Travelport acted with actual malice to interfere with American’s existing

contractual and prospective relationship with Orbitz, American seeks and is entitled to recover
exemplary damages.

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SIXTH CLAIM FOR RELIEF: TORTIOUS INTERFERENCE BY SABRE AND
TRAVELPORT WITH EXISTING CONTRACTUAL RELATIONSHIPS
152.

American incorporates the material fact allegations of paragraphs 1 through 127.

153.

In order to sell tickets to the general air traveling public on American’s flights, all

travel agents must be granted written permission to do so by American, such as, by way of
example, American’s execution of the ARC Reporting Agreement and the American Addendum
thereto with Orbitz. Consequently, American has existing contractual relationships with
numerous travel agents, including both brick and mortar travel agencies and online travel
agencies, such as Orbitz, Priceline, and Travelocity (collectively, the “Travel Agent
Subscribers”). Additionally, American has existing contractual relations with numerous
corporate partners to grant them written permission to sell tickets on American flights, including
to their employees (collectively, the “Corporate Subscribers”).
154.

By virtue of their position as the two largest GDS operators in the United States,

their specific knowledge of the industry in general, and their contractual relationships with the
travel agents and entities using their GDSs, including the Travel Agent and Corporate
Subscribers, Sabre and Travelport had actual knowledge of the existing contracts between
American and the Travel Agent and Corporate Subscribers.
155.

As heretofore alleged, Sabre and Travelport willfully and intentionally interfered

with American’s contracts with the Travel Agent and Corporate Subscribers. Their retaliatory
actions have misled and confused the Travel Agent and Corporate Subscribers regarding
American’s fares and have thwarted the ability of the Travel Agent and Corporate
Subscribers to make reservations for and otherwise sell airline tickets for flights on
American.
156.

American has suffered actual damage as a direct and proximate result of Sabre’s

and Travelport’s interference. Specifically, American has suffered, among other things, a
decrease in ticket sales, an undermining of American’s goodwill and its positive corporate

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customer relationships with the Travel Agent and Corporate Subscribers, and unwarranted
confusion among the Travel Agent and Corporate Subscribers.
157.

Sabre and Travelport knew (and, indeed, intended that) its conduct would result

in significant harm to American. Because Sabre and Travelport acted with actual malice in
interfering with these existing contractual relationships, American seeks and is entitled to
exemplary damages.

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RELIEF REQUESTED
158.

American requests that the Court declare that the conduct of Sabre and

Travelport as specified in this Complaint violates Section 1 and 2 of the Sherman Act, as
well as other provisions of Texas law.
159.

American further requests that the Court issue a permanent injunction

forbidding Sabre and Travelport from threatening or engaging in unlawful retaliatory conduct
against American.
160.

American further requests that the Court issue such other permanent

injunctive relief, as the Court deems appropriate, designed to create market conditions
capable of dissipating Sabre’s and Travelport’s unlawfully maintained monopoly power.
161.

American requests that the Court require Sabre and Travelport to pay

American treble the amount of damages American has suffered as a result of their illegal
conduct.
162.

American requests that the Court require Travelport to pay punitive

damages in the amount to be determined at trial as a result of Travelport’s willful and
intentional interference with American’s contractual relationships with the Travel Agent
Subscribers, Corporate Subscribers, and Orbitz, and for its willful and intentional
interference with American’s prospective contractual relations with Orbitz.
163.

American requests that the Court require Sabre to pay punitive damages in

the amount to be determined at trial as a result of Sabre’s willful and intentional interference
with American’s contractual relationships with the Travel Agent Subscribers and Corporate
Subscribers.
164.

American further requests its costs for bringing this action, including

reasonable attorneys’ fees.
165.

American also requests such other relief as the Court may deem just and

proper.

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DATED: June 1, 2011

Of Counsel:
DEWEY & LEBOEUF LLP
M.J. Moltenbrey
[e-mail]
1101 New York Ave. NW
Washington, D.C. 20005
202.346.8738
202.346.8102 (Fax)
WEIL, GOTSHAL & MANGES
Richard A. Rothman
[e-mail]
James W. Quinn
[e-mail]
767 Fifth Avenue
New York, New York 10153
212.310.8426
212.310.8285 (Fax)

Respectfully submitted,

/s/ R. Paul Yetter____________________
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)
Bill Bogle
State Bar No. 02561000
[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)
Michelle Hartmann
State Bar No. 24032402
[e-mail]
WEIL, GOTSHAL & MANGES
200 Crescent Court, Suite 300
Dallas, Texas 75201-6950
214.746.7700
214.746.7777 (Fax)
ATTORNEYS FOR PLAINTIFF
AMERICAN AIRLINES, INC.

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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) on this 1st day of June, 2011.

/s/ R. Paul Yetter____________________
R. Paul Yetter

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