Airlines’ come back to low air fares
Online Air Fares Platform
Searching for the lowest air fares online used to be quite difficult. The creation of central air fares selling platforms like Expedia.com and Orbitz.com help consumers ease that pain. These platforms allow users to compare air fares from different airlines as well as combine different airlines in a trip to get the cheapest price.
American Airlines’ Announcement
American Airlines recently announced that it wants to bypass these platforms and sell directly to consumers, so they have terminated their contracts with Expedia.com and Orbitz.com (Tickets are still available on other travel sites such as Priceline.com and Kayak.com). American Airlines’ justification for this announcement is that they will be able to lower their air fares because of disintermediation. Disintermediation is defined as removing the intermediaries in the “supply chain” or removing the “middleman”. Although this seems to benefit customers, American Airlines wouldn’t be able to offer online search comparison that made Expedia and Orbitz so successful.
Effect of Disintermediation
With disintermediation, airlines can monitor their customers better as well as offer discounts to attract customers. This will lead to a greater extend of brand loyalty. If airlines can eventually bypass these intermediaries, those who do not want to spend as much time comparing for the lowest air fares may fly with the airlines they trust the most, especially if airlines offer frequent flyer or loyalty programs. To ensure customers are getting what they care about the most, American Airlines claims that they have the lowest price guaranteed and customers can fill out a form if they find out another airline has a lower price. It’s hard to say if American Airlines actually has the lowest prices, but few customers would actually go that far to fill in a form to get $30-$50 price difference from American Airlines. On the other hand, airlines are trying to create value instead of competing for the lowest price. By value, I mean, providing excellent customer service and the seat’s comfortability, etc. I think this may work for travelers flying Business class who want a comfortable ride. However, for those who are in the economy class, they may not care about value as much as the price, unless the airline has really bad customer service.
My Experience
I personally enjoy the convenience sites like Expedia.com and Orbitz.com offer and wouldn’t mind paying a small commission to them to receive this convenience. In the past, I would have to call my travel agent to ask for a quote during their operating hours and had to put up with their attitude. With these online platforms, I can find the lowest price on my own, at any time of the day. These sites are very useful for travelling and for airlines that have a smaller market share. Without these sites, consumers would directly go to the airline that first pop into their mind and they tend to be big airlines. With these sites, consumers are open to airlines that they are somewhat familiar with which they haven’t flown with yet. I really hope that American Airlines would lose in this fight and these sites can continue to give us the convenience we experience from them.
Source: New York Times
