The Airlines' Ongoing Struggle With Price Aggregation Sites

from the airlines-vs.-aggregators? dept

It's proving pretty difficult to figure out exactly what happened between American Airlines and Kayak last week. Last Wednesday TechCrunch reported that American Airlines was pulling its listings from the airfare search engine. Comments left by Kayak's CEO Steve Hafner and VP Keith Melnick chalked the split up to Kayak's display of AA fares from Orbitz: American had demanded that Kayak suppress the Orbitz listings, and Kayak refused.

Presumably one of two things is making American want to avoid comparison to Orbitz prices: either, as TechCrunch speculates, users clicking the Orbitz option put AA on the hook for two referral fees -- one to Kayak and one to Orbitz; or AA has struck a deal with Orbitz that provides the latter's users with cheaper fares than can be found on aa.com.

Either way, the news doesn't appear to be as dire as it first sounded. It doesn't seem that AA flights will be disappearing from Kayak -- it's just the links to buy them at aa.com that will go missing. As Jaunted points out this might wind up costing flyers a few more dollars, but it shouldn't be a major inconvenience for Kayak customers.

The more interesting aspect of this episode is how it reveals the stresses at play in the relationship between the airlines and travel search engines like Kayak. It's no secret, of course, that the airlines are having a rough time as rising fuel prices put even more pressure on their perennially-failing business model. But while an airline attempting to control the distribution of its prices is nothing new, one can't help but wonder whether ever-narrowing margins might lead to a shakeup of this market.

Kayak, like most travel search sites, gets its data from one of a handful of Global Distribution Services: businesses that charge airlines a fee to aggregate price and reservation information. Some airlines, like Southwest, opt out of the GDS system in order to avoid those fees. Others, like American, participate in the system but try to send as much online business as possible to their own sites. Presumably each airline tries to find an equilibrium point at which the business brought in by participation in a GDS and the payments associated with it add up to the most profit.

But so long as the financial temptation to retreat from the GDSes persists, GDS data will be less than complete. And that creates an opportunity for another kind of fare-aggregation business -- one based upon scraping the data from the airlines' websites. It's been done before, after all, albeit on a limited scale. And since most people recognize that prices can't be copyrighted, there doesn't seem to be any legal barrier stopping such an aggregator from stepping in (nothing besides the need to write a lot of tedious screen-scraping software, that is). Though, of course, that won't stop airlines from suing, but the legal basis for their argument seems pretty weak.

Whether such a business is likely to emerge and succeed, I couldn't say. But it does seem certain that as fuel prices rise we'll be seeing more and more travel industry infighting -- and more and more hoops for online fare-shoppers to jump through.



Reader Comments (rss)

(Flattened / Threaded)

  1.  
    identicon
    Shohat, Jul 29th, 2008 @ 3:49am

    Commercial gain?

    Unlike regular products, I don't think that providing pricing data online or having any sort of online presence would actually increase the amount of people that take a flight.
    Usually the decision to fly is made before shopping for tickets, not due to some spontaneous banner click.

    Considering the very understandable crisis in the Airline industry (especially in the US, where management is incompetent and is paid well even it runs into Chapter 11), maybe they should rethink their approach to this "internet" thing, and just avoid it completely, maybe there is nothing to gain from online presence nowadays.

     

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  2.  
    identicon
    Anonymous Coward, Jul 29th, 2008 @ 4:09am

    Re: Commercial gain?

    i think the point i took from your comment is that perhaps we should do away with this 'management' thing instead

     

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  3.  
    identicon
    comboman, Jul 29th, 2008 @ 5:23am

    Who's business model is broken?

    users clicking the Orbitz option put AA on the hook for two referral fees -- one to Kayak and one to Orbitz

    So if I create an airline search site and link to the Kayak price, does that mean AA is now on the hook for three referral fees? And if someone else links to my price, there are four referral fees? The airlines are right to be pissed off at these sites draining away what little profit there is in air travel without adding any value. A single referral fee should be split evenly among any sites that contribute to selling the ticket.

     

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  4.  
    identicon
    Sorry U. Areallwrong, Jul 29th, 2008 @ 5:52am

    price aggregation

    Just wanted to point out that this analysis is all wrong.

     

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  5.  
    identicon
    Chuck Norris' Enemy (deceased), Jul 29th, 2008 @ 5:58am

    Re: Who's business model is broken?

    I am sure you would need to cut a deal with the airline before they start paying you for referrals. I would hope that they check how you plan to send referrals to them also. You aren't going to get anything unless you cut a deal. Kayak has a kink with linking to Orbitz info for AA flights. Why should AA want to pay twice? I would be mad, too.

     

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  6.  
    identicon
    No U. Arevague, Jul 29th, 2008 @ 6:00am

    Re: price aggregation

    Care to point out what is wrong?

     

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  7.  
    identicon
    Anonymous Coward, Jul 29th, 2008 @ 6:25am

    Re: Re: Commercial gain?

    Nah, you need managers. Just not the managers we have.

    I'm starting to wonder if we should work to make it like public transportation. I mean given with all the security issues, problems with plane maintenance, and bankruptcies I'd really rather see a "FedAir" or something.

    C-Tran with wings, ya know?

    Of course then there is all the downsides to it being a federal thing but it is approaching a point where it won't matter.

     

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  8.  
    identicon
    anonymous, Jul 29th, 2008 @ 6:58am

    whats wrong

    - Kayak does scrap screens and doesn't use the GDS.
    - AA pays commissions to orbitz and wants kayak to direct straight to AA.com to avoide the commissions. They don't pay kayak for a click to Orbitz, only for a click to AA.
    - If AA pulls from Kayak, they likely would pull from Orbtiz so that Kayak has no access to list AA flights/prices.

     

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  9.  
    identicon
    Sean, Jul 29th, 2008 @ 6:58am

    Ryanair screenscraping case in Irish courts right now

    Ryanair have started a case against some Dutch company to stop them screenscraping. Arguing breach of webiste terms&conditions, and copyright of information (some vagueness about whether a website is a database).

    They've already gotten an injunction in Germany against a German company doing the same thing, pending the outcome of the Irish case, if I understand correctly.

     

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  10.  
    identicon
    Cheap Traveler, Jul 29th, 2008 @ 7:15am

    "might wind up costing flyers a few more dollars" ???

    Are u kidding me??? Saving money, thats what I use online searching and booking for!

    -says a man who traveled from Massachusetts to Florida by paying just $20. Poor skybus!

     

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  11.  
    icon
    Eric Goldman (profile), Jul 29th, 2008 @ 7:45am

    Retailers Can Control Their Servers

    Even if prices are not copyrightable (a generally true statement, but see Kapes v. CDN), retailers still can shut down aggregators using multiple trespass to chattels doctrines (common law trespass to chattels, the Computer Fraud & Abuse Act, state computer crime laws), contract law and technological controls. So where you write "there doesn't seem to be any legal barrier stopping such an aggregator from stepping in....Though, of course, that won't stop airlines from suing, but the legal basis for their argument seems pretty weak," you are descriptively wrong as a legal matter. Eric.

     

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  12.  
    identicon
    ShoHat Disciple, Jul 29th, 2008 @ 7:53am

    Re: Commercial gain?

    AssHat! Hi!

    You're right--no point in having an internet presence of any sort. They should pack it up and go home.

     

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  13.  
    identicon
    Keith at Kayak, Jul 29th, 2008 @ 8:52am

    Clear the air

    To clarify a few things:

    1. AA does not get double charged when a user clicks on an Orbitz result for an AA flight. If the user books that flight on Orbitz, then AA pays Orbitz. Kayak gets nothing from AA.

    2. No deal was struck to provide Orbitz or Kayak lower fares then AA.com.

    AA told us that we had to suppress search results from other web sites if we wanted to keep showing their fares and we said "no". I can't speak for AA's reason for doing this, but they were certainly not being double charged.

     

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  14.  
    identicon
    Matt Bennett, Jul 29th, 2008 @ 8:55am

    American Airlines is just going down the tubes, generally. Charging for even the first bag checked, for water onboard, any water at all! They have no customer service line, at all, etc....

     

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  15.  
    identicon
    Tom Lee, Jul 29th, 2008 @ 11:56am

    Thanks for the thoughtful comments, everybody.  In particular thanks to Keith from Kayak for explaining what's been going on between his company and AA -- my analysis was based on guesswork already done by TechCrunch as to why American is going down this path.  It appears that their motives are going to remain opaque, at least for now.

    Now for the criticisms raised in this thread:

    First, Kayak does use a GDS -- see here. They use QPX from ITA systems (Wikipedia also indicates that they use SABRE, but I have not been able to confirm this).  QPX isn't one of the old-guard GDSes, it's true, but the fact remains that it's a fare aggregation firm that sells its services to the airlines.  The economics underlying my argument remain the same: to the extent that the airlines can extricate themselves from these middlemen, they will.

    As to Eric's comment re: the legality of screen-scraping -- he's right, and my phrasing was poor.  As the post indicated, the airlines certainly would be able to file suit or take technological countermeasures against scrapers.  However, the matter is not as settled as Eric indicates.  See here (PDF) for what seems like a decent overview.  In short: trespass to chattel has been successfully used to shut down some screenscraping operations (e.g. eBay v. Bidder's Edge) but has failed in others (Ticketmaster v. Tickets.com).  The issue does not appear to have been definitively resolved -- and, as you might imagine, we here at TechDirt feel that trespass to chattel will ultimately be found to be inapplicable to these sorts of cases, as the doctrine was created with physical property in mind, not computer networks.  Other attempts to suppress these sorts of activities are also less-than-bulletproof, as the withdrawal of DMCA claims (linked in the original post) indicates.

    So the upshot: Eric may be overstating the viability of legal options available to airlines being scraped, but I certainly understated them, and I apologize for that.  Certainly a well-lawyered airline could make plenty of legal trouble for someone scraping its website.

    It remains an open question, of course, whether the airlines would pursue such remedies against scraping operations if their upshot is to make the airlines more money.  And with the continuing and unstoppable rise of mashup-like technologies' significance, it seems like only a matter of time before the law stops recognizing attempts to shut down the sharing of facts.  There are various companies (e.g. Wesabe) who are making a go of this sort of business model (and raising significant capital to do so) despite the possibility of the sorts of legal claims that Eric points to.

    Finally, Sean's point regarding similar litigation in Europe is interesting, but not relevant to American companies like Kayak.  The laws surrounding the copyright protections afforded databases are very different outside the U.S., for one thing.

     

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  16.  
    identicon
    another anon, Jul 31st, 2008 @ 5:11am

    no gds

    glad to see this article mostly corrected...but you're still wrong re: GDS. ITA's QPX system is their pricing capability, NOT their GDS or booking capabilities. Kayak uses ITA - among other sources - for gathering airfare data, not for sending bookings. AA and Orbitz (and many others) also use ITA's QRS.

    two comments:

    1. perhaps the hubbub can be explained by a june hitwise report that showed that Orbitz and the other online agencies benefited far greater from the existence of Kayak than the airline websites. It ran completely counter to Kayak's "supplier friendly" positioning. they are just another layer in the distribution chain and suppliers are all about removing the layers.

    2. perhaps Kayak has given in to AA (and others who you know feel the same way on this). Kayak's service has changed in the past few weeks. First, they don't default to the Priceline cross check on the home page like they used to. Second, checking Kayak for west coast flights (LAS, LAX), the display showed mostly airline.com with not an Orbitz.com option to be seen. Third, it's rumored Kayak has sent notice to the online agencies that changes are coming.

    Kayak may be crying foul in public, but I think they are playing with AA's idea on a limited basis. If it goes ahead, what will Kayak's public position be then?

    it's fun to watch, that's for sure!

     

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  17.  
    identicon
    another anon, Jul 31st, 2008 @ 5:19am

    quick fix

    i meant to say AA and Orbitz (and many others) also use ITA's QPX/pricing service. ITA's only GDS/booking/QRS customer (as I know it) is AC.

     

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  18.  
    identicon
    anon, Jul 31st, 2008 @ 8:49am

    Compete Inc. recently analyzed the issue. It looks like American Airlines stands to lose more than Kayak.

    Kayak - AA.com Brief

     

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  19.  
    identicon
    anon, Jul 31st, 2008 @ 3:33pm

    Re:

    it hurts less when your capacity is coming down by 10% in september. now is the time to be bold in the airline world. expect others to join the aa parade...

     

    reply to this | link to this | view in thread ]

  20.  
    identicon
    دردشه, Jul 5th, 2009 @ 4:22pm

    tankyo

     

    reply to this | link to this | view in thread ]

  21.  
    identicon
    شات صوتى, Jul 17th, 2009 @ 8:42am

    hi

     

    reply to this | link to this | view in thread ]


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