By going direct to clients, American is hoping to bypass GDS. It's a risky strategy that could cost them customer business by limiting their distribution channels. But the benefits of succeeding could be significant. GDS is the 800 pound gorilla of the airline sales channel. If AA can pass on the savings to clients, it could build a pricing advantage over its competitors.
American Airlines Reaches Pact With Priceline
AMR Corp.'s American Airlines signed a new distribution pact with online travel agency Priceline.com, giving the airline some traction in its high-stakes drive to overhaul how airfares are sold to U.S. consumers.
American said Tuesday that the website of Priceline.com Inc. will get the carrier's fares and schedules directly from American instead of a global distribution system, or GDS, which has long acted as a middleman between airlines and travel agencies.
The agreement with the fourth-largest U.S. online travel agency by bookings comes as American risks becoming isolated amid escalating disputes with other key intermediaries that oppose the airline's attempts to cut distribution costs and reduce the middleman role of GDSs.
American is also battling with Sabre Holdings Corp., which owns the largest GDS and Travelocity.com, the third-largest online travel agency. American secured a temporary restraining order against Sabre from a Texas court last week after Sabre began displaying American's fares less prominently than those of rival airlines. The next court hearing is in February.
American, like many other airlines, sells about two-thirds of its seats through third parties. But several other U.S. carriers are also eager to cut their distribution costs and sell more tickets directly to consumers, though they have avoided full-blown disputes with key intermediaries.
