A number of airlines are trying to take back their booking business from travel websites like Priceline.com Inc. (NASDAQ: PCLN), Orbitz Worldwide Inc. (NYSE: OWW), Expedia Inc. (NASDAQ: EXPE), TripAdvisor Inc. (NASDAQ: TRIP), Kayak Software Corp. (NASDAQ: KYAK), and privately held Travelocity. The airlines want to recover the commissions they are paying to the travel websites, which are currently in the range of $10 to $25 per seat booked.
The latest airline to make it more difficult and more costly for travelers to book through the travel sites is Frontier Airlines, which is owned by Republic Airways Holdings Inc. (NASDAQ: RJET). JetBlue Airways Corp. (NASDAQ: JBLU), Spirit Airlines Inc. (NASDAQ: SAVE) and Virgin America also provide incentives for customers to book flights directly from the airlines’ websites. Southwest Airlines Co. (NYSE: LUV) has never allowed booking through travel websites, and American Airlines got into a dispute with Orbitz in 2010 during which the airlines temporarily refused to allow Orbitz to display pricing information for flights.
According to the Associated Press, Frontier will try to induce customers to book directly by allowing them to choose their seats (something they can no longer do when booking on a travel website) and by cutting frequent flyer miles in half for those customers who use a travel site. Change fees will also be increased by $50 for customers using the travel sites.
Frontier claims it costs the airline $55 to $60 million a year for commissions to travel sites, and that in the first half of the year the airline derived 42% of its $723 million in revenue from booking its own flights. The airline wants to raise that percentage to 65%.
The denial of booking services combined with reductions in the number of flights available could be a real drag on revenue at the travel websites. Shares of all the travel sites took a dive in early August on weak quarterly results from Priceline and Orbitz. Most have recovered somewhat since then, but Orbitz has continued to plunge to levels not seen since last November. And in an uncertain economy, the travel sites could be hit even more.
Paul Ausick
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