American Airlines and Expedia reach settlementNewsBy Dennis Schaal | April 4, 2011Share This article was originally published on American Airlines and Expedia signed a memorandum of understanding, paving the way for the airlines' flights to get back on Expedia websites.Fares and schedules for American Airlines and American Eagle are back on Expedia websites and those of sister company Hotwire.It appears the two parties reached a compromise on the hot-button direct-connect issue.Under the terms of the agreement, Expedia commits to accessing American's flights via direct-connect within 12 months, according to a source.The joint announcement states: "Expedia said it plans to access American's fares, schedules and customized travel products and services via American's direct connect link by using aggregation technology provided by a GDS," the companies said.The precise aggregation technology, whether it comes from American Airlines contractor Farelogix or GDS-provided aggregation technology has not been determined, the source says.So, for now, at least search and ticketing for American's inventory has been restored to Expedia and Hotwire sites via the same global distribution system, Sabre, which was used by the online travel agency in the U.S. before Expedia removed American Airlines' flights Jan. 1.One reason the two parties are using GDS technology for now is it would take development time to implement direct-connect, the source says."Expedia is committed to working with airlines, GDS and other technology partners to ensure continued innovation within the Expedia marketplace," the companies said. "Direct-Connect through the GDS was a surprise," writes analyst Herman Leung of Deutsche Bank in a research note. Given that Sabre, the GDS powering Expedia tickets in the US, is still going through the courts with American and seems to be strongly against the direct-connect model, it is a bit surprising the GDS is enabling direct-connect."Share this quote However, the joint announcement doesn't state that Sabre will be the GDS involved once Expedia implements American Airlines direct connect.If Sabre balks at direct-connect, given its vehement opposition, perhaps Amadeus might get involved. Expedia uses Amadeus internationally on some of its sites."Perhaps the direct-connect model does truly offer more opportunity to make higher margin on ancillary services, but could potentially mean a lower margin was negotiated on the transaction value," Leung states.