In the airline business, the Internet is busy doing what it does best: disintermediating, removing layers, costs, and jobs. The current contract flap between online travel booker Expedia and Northwest Airlines epitomizes the fight that airlines are waging to lower costs, often at the expense of established online booking sites and travel agents.
At midnight Monday, Expedia pulled Northwest flights from its listings without publicly saying why, and everybody ran Northwest's explanation. The airline said that Expedia had refused to extend to it the same fees and distribution terms offered by Orbitz, the rival travel booker backed by Northwest and four other airlines.
The AP coverage of the Expedia-Northwest contract dispute, which many news outlets picked up, pointed out the stakes for the airlines. "The cost of distributing tickets is the industry's third-largest expense behind labor and fuel," the AP wrote, without citing a source. Expedia had become Northwest's "highest-priced distribution outlet, both online and off," the report continued, citing a letter released by Northwest on Tuesday.
The New York Times added that Northwest was not fond of Expedia's practice of giving higher visibility to airlines that pay more for the privilege, a bias claim that Expedia denied. "We do all kinds of marketing and promotional activities with any carrier that wants to," the Times quoted an Expedia spokesman.
The Wall Street Journal ran the AP copy yesterday, and today took the opportunity to look indepth at the underlying battle between the airline-backed Orbitz and the rest of the ticket-distribution industry. The Journal's Stephen Power described the tactics the two sides have used, beyond the campaign contributions and Washington lobbying one might expect.
Both Orbitz and its opponents have contributed money and other considerations to the influential think tanks that politicians turn to for ideas on legislation. Power was careful to point out that no one was accusing the think tanks of selling their influence -- in all the cases he cited, the contributions followed the think tanks' decisions on which side they favored. Power concluded with a sketch of the many federal investigations into Orbitz its opponents have spurred. So far none has found Orbitz to be operating against the interest of consumers -- but watch for a report from the Department of Transportation's inspector general due within the next few weeks. - Keith Dawson
Expedia and Northwest in contract dispute (AP, SFGate)
Expedia Drops Northwest Air in Fee Dispute
Orbitz and Rival Web Firms Enlist Intellectuals for Duel
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Expedia grounds Northwest over contract