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Expedia Drops American Airlines -- Right After Orbitz Battle

Right before the holidays, American (AMR) forced Orbitz to stop selling its flights on the site. Now, Orbitz's rival Expedia (EXPE) has jumped into the fray by kicking American out of its flight search results. It may seem counter-intuitive for a rival to give up a competitive advantage that it recently gained, but Expedia isn't looking at it that way. Expedia is seeing this as a long term survival issue. And it's worried that American might triumph.

It's not that American doesn't want Orbitz to sell tickets on the airline. It's that American doesn't like the way Orbitz is doing it. Instead of using third-party reservation systems (some of which are owned by Orbitz's parent company), American wants Orbitz to work directly with its own reservation system. Orbitz balked and American walked away. If you go to Orbitz, you won't see a single flight on American for sale.

You would think that American Airlines' decision to leave Orbitz would be great news for its rival Expedia. If customers can no longer book American flights on Orbitz, that would push more people to sites like Expedia or Travelocity where they can still see American compared side-by-side with other airlines.

So why would Expedia turn around and block American flights from being sold itself?

While Expedia might like the advantage over Orbitz, it's looking at the bigger picture here. It doesn't like that American is trying to throw its weight around and force Orbitz to move away from third party reservation systems. If every airline does that, it will involve a ton of expense for the online agencies like Expedia and it might result in disruption of its business during the transition. Expedia knows this isn't just an Orbitz issue, and if it lets Orbitz take the fall, Expedia will be one of the next ones in line.

So Expedia is trying to make American feel the pain by not only having the airline lose Orbitz bookings but also those from Expedia. Will that make American think twice? So far, no -- at least not publicly. American says it is seeing stronger bookings directly via AA.com and it's happy about that. That, of course, is the public statement. We don't know what's happening behind the curtain right now.

What we do know is that this fight has now escalated to a point where someone is going to have to blink. If American loses enough bookings, then it will be the one to blink. If not, then Orbitz and Expedia have to decide if there's really a place in the world for them where they don't show fares from two of the top four airlines in the US. (Nobody shows Southwest.) It's effectively a monumental game of chicken. Expedia is clearly afraid that American might come out the winner, so it's jumping into the fray.

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Photo via Wikimedia Commons user Secondarywaltz
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