Sky scraping: airlines battle bookings without revenues

Washington DC
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The airline fight to control distribution and the cost of getting a ticket into a passenger's hands - and a passenger into a seat - is far from over and two carriers at extremes of the business, full-service network carrier American Airlines and bare bones upstart Ryanair, are at the forefront.

It is Ryanair that has garnered the greatest attention, with chief executive Michael O'Leary following through in mid-August on his pledge to cancel the reservations of would-be flyers who bought through so-called "screen-scrapers". American has taken a far more low-key approach in its fight against screenscapers, forcing kayak.com and sidestep.com, the largest US comparison shopping sites, to remove its seats and inventory from their sites and filing suit against them.

Screen-scrapers, a term that covers a wide variety of sins and sinners, are travel sales sites that merely grab an airline's fares and seating inventory from the airline's computer and then display them on another site, often a comparison-shopping site. Sites that display multiple carriers, known as aggregators, access a target site by logging in as a customer, then electronically reading and copying information from the page, and then redisplaying the information on the aggregator's own site. These screen-scrapers take up computer system time and slow down the processing of requests, says Richard Clarke, director and co-founder of advisory firm Travel Technology Research.

And the airline gets no cut of the fare because the screen-scraper that sells it has simply grabbed or expropriated the fare data. Alex Bainbridge, managing director at e-commerce consultants Travel UCD, says that "third party travel websites have been 'gaming' the Ryanair website for years. You can't block screen-scrapers because they look in essence just like consumers using home computers".

Denouncing the screen-scrapers with his usual colourful language ("crooks", "Internet scam artists"), O'Leary began cancelling passenger reservations made through these unauthorised channels. He says that some of the travel sites add surcharges, and explains: "We hope that by getting rid of screen-scrapers, we will speed up passenger processing times on ryanair.com as well as ensuring that Ryanair passengers are not paying unnecessary handling charges or higher fares." O'Leary stresses that ryanair.com, through which the carrier takes about 98% of its bookings, offers a lowest fare guarantee.

This may seem an extreme way of preserving a company's control over its inventory, but Ryanair has won injunctions against a German website, Vtours, and an Irish site, Bravofly. Ryanair says the number of cancellations was between 300 and 400 a week, adding: "We think many of our customers understand."

Forrester Research senior analyst Henry Harteveldt says that "what Ryanair is doing is perfectly legal, but the way they are going about it is just outrageous". UK, Spanish and other European consumer protection authorities announced that they would investigate, but Ryanair says it has yet to be contacted by any agencies.

Beyond the issue of legality, the Ryanair move raises many questions of motive. Steven Rice, marketing manager at ebookers.ie, the Irish site of the Orbitz subsidiary ebookers, says: "We think that the main reason they are making such a big deal about this is because they want to become a one-stop shop for all travel products. Ryanair sell not just flights but hotels, car hire and travel insurance as well." Ryanair is well on the way to O'Leary's goal of deriving 20% of its total revenues from ancillary sources within the next three years these revenues increased by 35% in the most recent quarter.

A senior airline executive who prefers not to be identified agrees that "it's about control of ancillary revenue. If someone is booking on the website of another company, the person will likely buy their ancillary stuff from the other company too".

So why have no other airlines tried this firm line in the sand? The unnamed airline executive explains: "The difference between Ryanair and other airlines that would like to do the same is market power. Ryanair just owns its market segment and the screen-scrapers do not have a credible product if they do not include Ryanair as a price comparison. The problem for screen-scrapers is that this totally undermines their business model."

Some observers such as Harteveldt note that the consumer is held hostage here in a sense, but in battles such as these that is often the case. In the case of American, consumers who want to use Kayak are out of luck.

PhoCusWright consultant Cathy Schetzina calls Kayak "the star of the meta-search category", and notes it grew from the 40th ranked travel website in March 2006 to the 15th spot in February 2008. Kayak and American had developed a strong relationship in the early days of the so-called meta-search engines, or sites that search multiple sites and offer comparison shopping. In May 2005, American signed a pact with Kayak giving it access to its fares.

But in recent months, American says, Kayak began taking the airlines fares and data not from the American website but from a third party, Orbitz, and its subsidiary, cheaptickets.com. Kayak, which bought a similar site, SideStep, in December 2007, would put a link near the fares and when the user clicked on it, the link would take the user to Orbitz. Thus American gets very limited revenue from the booking. Kayak and SideStep stopped displaying American's inventory on 1 August, but the lawsuit in state court remains, and neither Kayak nor American will comment on it.

But Harteveldt says that the disputes "show that airlines are not going to give up control of their distribution. They're going to fight for their bookings, in court or in the marketplace".