Air war: Expedia vs. American Airlines

American Airlines, the nation's third largest carrier, no longer has its flights listed on Expedia and Orbitz as a result of an escalating feud with the travel sites. What's going on, and will anyone win in this web war?

Who started this fight?

Tensions have been brewing between airlines and travel sites for some time, but the latest skirmish appears to have begun on Dec. 21, when American Airlines announced that it was pulling its flight information from Orbitz. American is trying to direct more customers to its own website and says it can cut distribution costs and offer lower fares this way. Delta has also recently yanked its data from several smaller sites. Expedia responded by first making American flights less visible and then removing them altogether, saying American's new policies are "anti-consumer and anti-choice."

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Will this move help the airline?

American doesn't anticipate a "significant" drop in business and says that after it pulled its flights from Orbitz, sales improved over the same time a year ago. But there's a risk, says the New York Daily News, "since its flights are no longer available to millions of consumers checking a given site." Industry experts say American could lose some customers for good, even if it succeeds in encouraging many people to check out Expedia competitors such as Priceline and Kayak or to visit to AA.com.

Could this hurt Expedia?

The website is making a risky bet, too. Web-based travel agencies attract customers by promising them a way to find the lowest fare, and by dropping American's 3,400 daily flights Expedia might find it harder to convince travelers they're getting the best deal. In a possible sign of how investors think the feud might shake out, Expedia's stock fell 19 cents to $25.09 the day the news broke. Shares of AMR, American's parent company, rose 3 cents to $7.79.

Is this good for travelers?

American says yes, Expedia says no. The airline says that the online travel sites are increasing its costs and keeping it from offering passengers the lowest possible fares. But Expedia, in a statement issued to Reuters, says American's new "direct connect model" will bring "higher costs and reduced transparency for consumers, making it difficult to compare American Airlines' ticket prices and options with offerings by other airlines."

Sources: The Motley Fool, NY Daily News, Dallas Business Journal, Bloomberg, Reuters