AA’s direct connect gambit and why it matters to consumers

by Charlie Leocha on November 29, 2010

With copious statements that American Airlines (AA) has the ultimate goal of providing full transparency of its complete ticket prices, including ancillary fees, the airline announced that it would pull ticketing permission from Orbitz unless the online agency agreed to change the technological underpinnings of their business.

According to AA, this change will allow the airline to better serve the traveling public. Hold onto your wallets and don’t fall for this AA scam. It may be a battle between inside-the-airline-world corporations at the moment, but it will have dire consequences for consumers if AA is permitted to evade competitive pricing in the name of personalization.

AA wants Orbitz to institute a direct connect program with them that would ostensibly allow AA to send their total pricing (including all ancillary fees) back and forth with the agency but avoid any price comparisons with other airlines.

Cory Garner, American Airlines’ Director of Distribution Strategy, has basically admitted that his airline has made purchasing airline tickets so complex that airlines need to resort to more powerful computer models to serve the needs of consumers. According to published reports, Mr. Garner noted that the old world of three products — first, business and coach — has evolved into an ever-growing complex of ancillary fees that can be customized by the airlines for the specific needs of individual customers.

Rather than accede to a system of openly revealing AA’s ancillary fees to travel agents and travelers so that they can decided which ancillary fees travelers might choose to purchase, AA is determined to serve up the ancillary fees that it feels travelers should purchase.

AA wants consumers to buy what AA wants to sell. They want to control the buying environment. AA does not want to compete openly using cross-airline platforms and does not want to give consumers informed choices between different airlines (or airline alliances).

AA wants to override the will of the consumer as revealed by real-time purchasing patterns. Instead the airline will substitute their marketing and merchandising objectives based on past customer purchasing patterns that have been gleaned from scouring computer usage behavior and frequent flier records.

Worse, AA wants to change the current system that provides customers an opportunity to compare airfares (and hopefully with the help of DOT, ancillary fees) across airlines. The world that AA envisions is one where cross-airline comparisons would become more and more difficult for the traveling public.

Their aim is to prevent their airline product from being easily compared to other similar airline products. AA wants to avoid having its airline seats looked as at a commodity. They want to make any price comparisons as difficult as possible in order to provide a benefit to the customer of their creation. From the airline’s point of view,it will be a more personalized, richer and profitable product marketed with as little competition as possible.

In return for closing their corporate eyes to competition AA has even gone so far as to suggest that they may make ancillary fee information available to corporate travel managers to allow them to track costs and control spending by their travelers.

By taking away the customers’ ability to compare prices across airlines, AA promises to provide full transparency so that both corporate and leisure travelers can have greater visibility, choice and control of their travel experience. But, only travel agents who agree to give up the ability to compare prices across airlines will be provided the transparency to see the airlines’ secret sauce, their ancillary fees that can be mixed and matched to create the “perfect” trip.

I’m not sure what AA has been smoking in its boardroom or whether the protections afforded the airline industry over the years by DOT have affected the way that the airlines approach marketing, but there are giant problems with this new my-way-or-the-highway approach AA is pushing.

As the battles take place in the corporate stratosphere, we consumers will start with two big questions and issues with this new “direct connect” approach to providing airline pricing — the ability to compare total pricing and privacy issues regarding limits on use of data.

1. The proposed system is anti-competitive. It attempts to remove the passengers’ ability to openly compare total travel pricing across airlines, including ancillary fees such as baggage fees, telephone fees, seat selection fees, reservation fees, early boarding fees, etc.

2. The airlines with their new approach of serving up specific, personalized prices based on a traveler’s past behavior as recorded in frequent flier records and computer logs begs a far more activist approach to privacy as it applies to airlines and their backroom shenanigans.

This battle is just warming up. There will be more.

In the meantime, the Department of Transportation should continue to move relentlessly forward toward full airline ticket transparency so that consumers can pick and choose whatever services they wish.

After the airlines begin providing full, open and transparent pricing for the total cost of travel, they can begin to package and merchandise their products as they see fit, but not at the expense of the consumer’s ability to easily compare prices across airlines and not at the cost of privacy.

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  • MVFlyer

    So let me get this straight: AA wants to display the lowest possible fare, without any fees, and then have the agency charge the consumer whatever fees AA feels appropriate *after* they’ve chosen the fare? Isn’t that known as “bait and switch”?

    The airline industry is very ‘copy-cattish’–I bet AA is hoping the other airlines will copy their model so it’ll stick to the wall…if the other lines don’t bite, it’s dead.

  • DaveS

    Ok, it’s clear you’re really upset about this – quite a diatribe, sort of saying the same thing over and over again, really. Could you cite a few examples to make it clearer to the reader exactly what you mean? How am I, the consumer, impacted in booking a fare from Point A to Point B? I need some cases in point to decide whether I’m enraged or shrug this off as inside baseball stuff.

  • http://www.tripso.com/author/leocha Charlie Leocha

    @DaveS You’re right. This is a bit of inside baseball, but the ramifications of this will be the elimination of the ability to compare prices easily across airlines. AA wants the relationship to be directly between you and the airline or between your agent and the airline without the opportunity for comparison shopping. The prices you will pay will increase. You will be sent what the airline wants you to purchase and comparison search will become far more difficult.

    Imagine having to go to 8 different sites to collect prices of the 8 different airlines serving the DC to Orlando route. Or imagine a world where flights out on one airline and back on another are not displayed at all and require a visit to heavens knows how many sites. Perhaps AA would work with its alliance partners (an impossibility today because AA doesn’t have the technology, only the GDSs do), but all others would be excluded from their display.

    Part of this direct connect world will be serve you flight prices and ancillary services based on what you are used to paying and buying, not based on the lowest prices — another bad omen for customers. We need to keep an eye on this development. It may end up being a step back almost two decades in consumer transparency to the days of biased airline-owned computer reservation systems.

  • http://mobilesyncbrowser.com VaughnSC

    Yeah, I revisited this AA-Orbitz subject recently and this time around, it clicked; this parallels the scuffle between Apple and publishers over online subscriptions, where the latter party is miffed because they aren’t privy to/in control of the customer relationship and data.

    As Charlie posits, yes they would gladly obfuscate ‘choice’ and use your past purchase history against you. By keeping the control of the customer AWAY from the airlines, the latter cannot pull this stunt and must ‘blindly’ offer up their lowest prices.

    Note that they (AA) trumpets that their new system changes stuff in the ‘back-end’ and is ‘transparent’ to users. This is a techie way of saying users won’t notice any benefits on their end.

    So yeah, seen that way, I will be trying to avoid AA and whatever sites kow-tow to their tactics; no matter what AA says, know that it serves their interest, not yours. The ‘anticompetitive’ bleating and ‘tailored choices’ spiel is PR spin, smoke and mirrors.

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