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JetBlue Drops 12 Online Travel Agencies in Bid to Cut Costs

JetBlue Drops 12 Online Travel Agencies in Bid to Cut Costs

(Bloomberg) -- JetBlue Airways Corp. has withdrawn its flights from a dozen online travel sites in the first phase of a broader effort to trim $20 million from its ticket-selling expenses.

JetBlue is remaining with larger agencies including Priceline.com and Expedia Inc., along with Expedia’s Travelocity.com and Orbitz.com units. The airline favors sites like Kayak Software Corp.’s Kayak.com where consumers can comparison shop for prices and schedules, but then are redirected to the website of the selected airline to book their travel.

The changes are the latest skirmish between airlines and online travel agencies that sell tickets based on fare and flight data provided by global distribution systems, or GDS. Carriers in general pay five-times more for a typical booking made through such travel sites than on their own website, said Henry Harteveldt, founder of Atmosphere Research Group. Airlines are trying to get more control over the information and the so-called distribution costs involved.

“It tends to be the lowest-revenue customers coming through in a market where we pay the same distribution costs for a customer paying $39 as one paying $339,” Marty St. George, JetBlue’s executive vice president for commercial and planning, said in an interview. “Distributing really low fares through these channels is very, very expensive for us.”

How It Works

Online travel agencies depend on global distribution systems to provide the price and schedule data used by many consumers to purchase airline tickets. The GDS companies historically have collected fees from the airlines for handling that fare and flight data, then share the fee with sites that sell the tickets. That means selling a ticket through such sites is more expensive than other options.

Sabre Corp. and Travelport Worldwide Ltd. are the largest U.S.-based GDS operators, while Amadeus IT Group SA operates primarily in Europe. The three handle about 90 percent of worldwide airline data distribution.

A typical reservation having 3.2 flight segments and made through a GDS-dependent site would cost a carrier $10.40, excluding agency incentives or commissions, Harteveldt said. That same trip would cost an airline less than $2 to process through its own website or mobile app, he said.

The “overwhelming majority” of JetBlue’s bookings come from its own website, St. George said. Southwest Airlines Co., the biggest discount airline, has never sold tickets online outside of Southwest.com.

In future phases of its cost-cutting effort, JetBlue may seek to renegotiate contracts with its distribution partners to limit which fares are offered through them, or make other changes, St. George said. Current contracts prevent it from adding a fee to bookings made outside its own website, as some European airlines are doing.

The travel sites dropped by JetBlue are LBF Travel’s SmartFares.com, MyFlightSearch.com, VacationExpress.com, Vayama.com, WhatsCheaper.com, Vegas.com, JetSetVacations.com, CheapFlightsFares.com, QuickTravels.com, Kiwi.com, FlyFar.com and FlightNetwork.com.

--With assistance from Justin Bachman

To contact the reporter on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net.

To contact the editors responsible for this story: Brendan Case at bcase4@bloomberg.net, Susan Warren, Jeran Wittenstein