NEW YORK — Carriers are offering more deals to passengers who book flights directly on their websites as part of an effort to steer people away from online travel agencies such as Expedia, Orbitz and Travelocity.
While travelers may save money, they must do without the convenience of one-stop shopping.
Frontier Airlines is the latest carrier to jump into the fight, announcing Sept. 12 that it will penalize passengers who don’t book directly with the airline. Those fliers won’t be able to get seat assignments until check-in and they’ll pay more in fees while earning half as many frequent flier miles.
“Particularly for families, it provides an incentive to book directly,” said Daniel Shurz, Frontier’s senior vice president, commercial. “There is no logical reason for our customers to want to book anywhere else.”
Contracts with the online travel agencies prohibit airlines from offering lower fares on their sites. Instead, airlines such as JetBlue Airways Corp., Spirit Airlines Inc. and Virgin America often provide discount codes in e-mails to their frequent fliers or through Facebook and Twitter.
The savings for booking directly can be significant.
Toronto-based Porter Airlines frequently offers codes that save travelers up to 50 percent. A recent search of flights from Chicago to Toronto for November produced an airfare of $249.61 using a code at flyporter.com. The same flights would have cost $404.38 through Travelocity.
The airlines face a delicate balance. The online travel agencies account for the bulk share of ticket sales - charging the carriers commissions of roughly $10 to $25 a ticket. But airlines want to trim the fees that eat into their profit margins.
Besides the discounts, the airlines say their sites offer passengers a better experience, providing up-to-date seat maps, details about inflight entertainment and more seamless booking.
Henry Harteveldt, cofounder of Atmosphere Research Group, said the airlines and travel sites have “a very, very dysfunctional business relationship.” The travel sites treat all flights equally. Price is the only differentiator.
“The online travel agencies either won’t or can’t talk about how an airline might have Wi-Fi on a plane or extra-legroom seats available,” he said.
The online agencies say they provide travelers with several advantages, including comparison shopping and the ability to mix and match airlines for a single trip.
“That’s something you can’t do on an airline’s site,” said Dara Khosrowshahi, president and chief executive officer of Expedia Inc.
Simon Bramely, vice president of transportation and lodging for Travelocity, part of Sabre Holdings, noted that “the flight is one element of the trip.” He said online travel agencies can save travelers hassle and money by creatingpackages that include hotel rooms and car rentals.
The battle is not new.
Southwest Airlines Co. was a pioneer in cutting out the middleman. The airline does not list its fares on third party sites. That means travelers have to search both southwest.com and then elsewhere to compare fares. Southwest hopes fliers will never make it to another site.
“We think we can have better control over the customer experience by dealing directly with them,” said Southwest spokesman Chris Mainz.
Most of the big carriers have remained quiet. American Airlines, part of AMR Corp., was the exception. In December 2010, American cut off Orbitz Worldwide, Inc. from displaying its fares and selling its tickets to protest the commissions and the failure to display extras such as seat upgrades. The site had been selling about 3 percent of the airline’s overall tickets. Expedia joined the fight by making American’s fares harder to find. All sides eventually settled their disputes.
Frontier, part of Republic Airways Holdings Inc., is making its changes specifically to cut the commissions.
A four-segment itinerary - say, a roundtrip flight from Sioux Falls, S.D., to Phoenix connecting in Denver each way - booked directly through Frontier costs the airline $1.60 to process. That same itinerary booked through an online travel agent costs Frontier $20 to $26, depending on which website the ticket is booked on, according to Shurz.
Those commissions add up: Shurz said Frontier spends about $55 million to $60 million annually on distribution fees. In the first half of 2012, 42 percent of Frontier’s $713 million in revenue came through tickets sold directly with the airline. Shurz hopes to increase that figure to 65 percent in a few years, cutting expenses in the process.
Business, Pages 60 on 09/23/2012