American and Travelport close in on temporary agreement


American Airlines and Travelport "are very close to reaching a temporary agreement under which Travelport would agree not to exclude American from its GDS until January 31, 2012," according to court documents filed this week by the carrier.

In the meantime, American faces the imminent threat from Travelport of increased booking fees, similar to actions Sabre took against the carrier earlier this month, the airline said.

American and Travelport did not immediately reply to requests to elaborate on their pending agreement.

American also disclosed in court documents that Sabre has "dramatically increased American's booking fees yet again in order to force American to abandon Direct Connect, and Travelport has threatened to do the same."

Sabre on July 8 enacted "new and substantially higher fees for some American bookings," according to a Thursday Securities and Exchange Commission filing by American's parent, AMR Corp.

Sabre would not comment, and American is "challenging these increases" through the courts, according to the SEC filing.

Travelport, meanwhile, "has already informed American that it will dramatically raise its booking fees as of August 1 and engage in display bias if American takes the only self-help measure available to it to recover these increased costs," according to court documents filed by American.

American did not immediately reply to a request to elaborate on that "self-help measure."

"American will be irreparably harmed if the GDS defendants exclude American from their GDS systems, resume biasing of American's flights or raise the booking fees they charge American to unsustainable levels," the carrier claimed.

American alleged that "Sabre has now declared that unless American capitulates it will completely bar American from participating in the Sabre GDS as of August 31, 2011 — knowing that taking such action would irreparably harm American."

According to court documents filed by American late last month, Sabre processed "$7.7 billion of American's sales last year." The carrier reported $16.8 billion in total mainline passenger revenue in 2010.

As such, Sabre is "far-and-away the largest distributor of American content and the distribution channel through which American does the majority of its business," according to court documents.

"There is no secret to the fact that there is enormous revenue at risk here, and there are enormous stakes in the outcome of these discussions with the GDSs," AA CEO Gerard Arpey told analysts, investors and media tuning into the company's second-quarter earnings call this week.

"That's why, candidly, they have wound up in court. What we're trying to do is break some of these monopolistic practices. Whether or not we will be successful remains to be seen. But there's no doubt there's a tremendous amount at stake."

Rodman & Renshaw airline analyst Dan McKenzie asked AA executives whether corporations would be "no longer obligated to honor their marketshare arrangements" if the carrier's content "becomes invisible to corporate travel managers from the Sabre dispute." CFO Bella Goren declined to answer.

"At this point, we are fully available in the GDSs," she offered instead, "and so I think it probably would not be productive to speculate as to various outcomes."

This report originally appeared Friday in sister publication The Beat.


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