Expedia Retaliates Against American In Defense of Orbitz

Expedia.com and Orbitz.com are competitors when it comes to online travel, but they are also -- it turns out -- allies.

When American Airlines announced this week that it was removing its flights from Orbitz, in a dispute over the way Orbitz collected its flight data, Expedia retaliated by making American's fares harder to find on its site.

When consumers searching for the best deals on flights use Expedia now, they no longer see any American flights in the initial search results. Only by clicking through to additional pages on the site do they get to the American fares.

Retaliation

Expedia issued a statement Wednesday making clear this was no accident.

"This has been done in light of both American Airlines' recent decision to prevent Orbitz from selling its inventory and a possible disruption in Expedia's ability to sell American Airlines tickets when our contract with American Airlines expires," the company said.

American yanked its fares from Orbitz in what it said was a cost-cutting move. The airline said the use of "middlemen" to obtain the airline's information about flights added to the cost of the relationship. It would be more efficient, American said, for Orbitz to get the data directly from American.

Serious blow

American's move represents a potentially serious blow to Orbitz.  Its stock fell nearly six percent and financial analysts said Orbitz would be "at a competitive disadvantage" to its rivals, including Priceline and Expedia.

American bookings accounted for about five percent of Orbitz' new revenue for the first nine months of the year, with the company saying it sold $800 million in American Airlines tickets in the last fiscal year.

The move by American was not totally unexpected. It had attempted to pull out of its Orbitz agreement earlier this year, but was blocked by the website's temporary restraining order. When a judge in Illinois this week lifted the order, American moved quickly to cut the cord with Orbitz.

American characterized the retaliatory move by Expedia as "unwarranted." It said it would look into its options to address the situation, though it wasn't immediately clear what those options might be.

No winners

Wall Street's immediate reaction was that both firms were losers in the spat. In Thursday's trading shares of Expedia fell 1.3 percent while American Airlines stock prices fell 3.0 percent.

In the end, the travel sites could end up the bigger losers. Consumers often complain that Expedia and other travel sites like Priceline.com and Orbitz don't offer such great deals.