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.

Filed Under: aggregation, airlines, global distribution services, scraping, ticket prices
Companies: american airlines, kayak


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  1. identicon
    Tom Lee, 29 Jul 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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