Call it negotiating bluster or principled stance, but Expedia may be digging in its heels and preparing to do without American Airlines flights for an extended period of time.
At the same time, 2011 is shaping up as a critical year for the airline's distribution strategy as American Airlines is not only engaged in bitter contract disputes with Orbitz, Travelport and Expedia, but is one of the few -- or perhaps only -- major U.S. airlines to have its contracts with all three GDSs expire this year.
You can expect Sabre, Amadeus and Travelport to stand shoulder to shoulder in an effort to spank American Airlines for having the audacity to break with what it views as a broken GDS model in the airline's drive to establish direct-connects with intermediaries and force more favorable distribution economics.
As one observer put it, American Airlines is "playing a very dangerous game."
In other words, if American Airlines is feeling any pain from its disputes with Orbitz, Travelport and Expedia, then the airline ain't seen nothing yet.
Undoubtedly, none of this comes as a surprise to American Airlines, which has played hardball with the GDSs several times in recent years. And, the carrier certainly is making contingency plans and increasing its marketing to prepare for looming battles.
Meanwhile, additional information is dribbling in regarding the American-Expedia contract negotiations, which led to the online travel agency de-preferencing the airline's flights and fares Dec. 22 and removing them altogether from Expedia Inc.'s leisure websites globally on Jan. 1, 2011.
Expedia's move Dec. 22 to remove American flights from the online travel agency's flight matrix might be viewed as a show of force, but it also had practical motivations.
With negotiations on their contract, which eventually expired Dec. 31, going nowhere in mid-December, Expedia likely did not want to face the prospect Jan. 1 of American Airlines removing Expedia's ticketing authority, which would have barred Expedia from servicing customers who had purchased American Airlines tickets.
Expedia would probably have envisioned another Orbitz-type situation with American Airlines in the offing. American removed its fares from Orbitz leisure sites Dec. 21.
Expedia sells tens of thousands of American Airlines tickets daily and the booking window is about 12 to 14 days on average.
So, by making American Airlines' flights difficult to book on Expedia as of Dec. 22, there would be far fewer customers holding American Airlines tickets booked on Expedia if the airline removed the online travel agency's authority to sell American Airlines' tickets Jan. 1.
Thus, Expedia, at least in part, likely was trying to mitigate a potential customer service problem.
Of course, it is possible that American might have taken no action against Expedia Jan. 1 and perhaps would have preferred to keep the dialogue going. American isn't saying what action it would have taken with no contract in place.
While the details are fuzzy, it's clear that American Airlines stood resolute in the talks in its position that Expedia would have to tie into AA Direct Connect to continue to access American Airlines flights, ancillary services and other products.
And, it is believed that Expedia stood firm in its backing of the GDS model, taking the view that AA Direct Connect is unproven and costly.
And, of course, the talks centered around economics, with American Airlines committed to lowering its distribution costs and Expedia facing a loss of revenue in the form of GDS incentives.
With American's flights absent from Expedia websites as of Jan. 1, the question now is which party can endure the situation the longest, and how the standoff fits into American's overall strategy.
American Airlines flights account for an estimated 1% of Expedia's revenue, and Expedia is responsible for a much greater percentage of American's revenue, it is believed.
Of course, American said Jan. 1 and earlier that it is detecting a booking upswing since Dec. 22, although it is unclear what factors led to that increase.
So, as 2011 unfolds, it is clear that American Airlines will face vehement opposition from most of the big online travel agencies in the U.S. [Orbitz, Expedia and presumably Travelocity] and all three GDSs.
Priceline has yet to be heard from on the issue and much of the industry is watching to see if Priceline would break ranks and be more amenable than its peers to a direct link with American Airlines.
If it goes that route, Priceline likely would face retribution from its GDS suppliers.
Many other questions remain.
Is American prepared to pursue a Southwest Airlines-style distribution strategy if the supply-chain heavyweights gang up on the airline in unison?
Does the solidarity of the opposition bring up any competition concerns and regulatory issues?
Will American Airlines continue to stand alone in taking on the GDS distribution model or will other carriers join the fight?
At any rate, stay tuned for a wild ride in 2011.