How will AA’s bankruptcy filing affect its distribution strategy?

American Airlines and its parent company, AMR Corp., filed for Chapter 11 bankruptcy reorganization in U.S. Bankruptcy Court for the Southern District of New York. Although distribution costs are not at the top of the list of concerns for the as it restructures under Chapter 11 protection, the carrier will have some key decisions to make regarding its direct-connect strategy and its antitrust lawsuits against Sabre and Travelport.

Henry Harteveldt, chief research officer and airline practice leader of Atmosphere Research Group, said the carrier may determine that pursuing the lawsuits is in its best long-term interests as it fights to lower the cost of distributing through GDSs.

On the other hand, he said, it may decide that the lawsuits are too expensive in the short term.

As for its direct-connect strategy, American has failed to convince a significant number of travel management companies to use its XML technology, rather than a GDS, to connect with its fares and inventory.

“American is heavily dependent on the corporate market, Harteveldt said, “and GDSs remain the preferred tool of travel management companies. American shouldn’t have to pay more than it needs to for distribution, but it should not take steps to cut off the corporate market when it needs it most.”

As a carrier with a complex network serving four continents – six including points service by its alliance and code-share partners – and a complex fare structure “American will never get the same amount of direct bookings that a Southwest is able to achieve,” he said.

Harteveldt believes the time may be ripe for travel management companies to embark on a new relationship with airlines and GDSs.

“The age of inducements is coming to an end,” he said. He advocates a wholesale-type relationship, in which airlines provide agencies with a slightly discounted fare, which they would mark up to the level at which the airline sells to the public. The difference would be used to pay the GDS fee, he said.