Saturday, July 11, 2009

Expedia Not So Happy About United's Credit-Card Plan

Major online travel agencies have been missing-in-action about their take on United Airlines' plan to make some travel agencies foot the airline's credit card fees, beginning July 20.

Expedia recently broke the silence, if you read between the lines.

Expedia Inc. spokeswoman Katie Deines, noting that had not been included in the United plan yet, said: "Expedia has not received a letter on this topic from United. We won't speculate on how hypothetical actions taken by our supply partners may or may not impact Expedia's business, but we are unsupportive of actions by travel suppliers that increase costs to consumers. We are closely monitoring the developments and have no further comment at this time."

So, Expedia is "unsupportive of actions by travel suppliers that increase costs to consumers."

This means that if United forced to pay United's credit card fees when customers book a United flight, then likely would pass on the cost to travelers.

The development occurs just as the dust has settled on the move by and its competitors to eliminate consumer booking fees on flights, and could force them to reinstitute the booking fees, implement new fees of some sort or eat the costs.

PhoCusWright financial analyst Jake Fuller has estimated that Expedia and Orbitz earn about $10 per ticket in GDS incentives and commissions, while Priceline gets about $2 on retail flights. Paying the airlines’ credit card fees would cost the online agencies about $6 to $8 per ticket, effectively wiping out the bulk of their GDS incentives and commissions.

The other OTAs have been reluctant to step into the line of fire on the sensitive topic.

In late June, Travelocity stated: "We are engaged with United to understand their planned actions regarding payment processes, but aside from that we don’t have anything else to say on the matter at this time. Thanks for understanding."

And, Orbitz Worldwide and Priceline both declined to comment on the issue.

Likewise, Amadeus has been the lone global distribution system (GDS) vendor taking a stance.

Amadeus North America spokeswoman Debbie Iannaci told me: "Airlines need to be cautious about adopting policies which could potentially have a detrimental affect on travel demand in the current environment. And we have always believed that the marketplace ultimately determines the success of any model. This action could potentially shift significant costs and risk to travel agencies at a time when they can least afford the burden. That cost could also inevitably be passed on to the traveler. Those additional costs and inefficiencies could have a detrimental effect on demand at a time when the industry needs travelers traveling."

Behind the scenes, I'm sure the OTAs and GDSs have plenty to say to United on the credit card issue.

It's good to see Expedia and Amadeus, at least, having the guts to be public about it.

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