The Most Important Airline Fight You Aren't Watching

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Parents and kids squabble all the time, especially when said kids become teens. But it's a different matter when corporate kids take on their former owners. Privately held Sabre Holdings is in that sort of spat with AMR Corp. (NYSE: AMR  ) .

Sabre and AMR, otherwise known as the holding company for American Airlines, are fighting over fees. American wants to sell more seats directly to customers and thereby reduce payments to Sabre and its ticket-distributing peers.

Like Orbitz Worldwide (NYSE: OWW  ) and Expedia (Nasdaq: EXPE  ) , Sabre has retaliated by giving American flights less desirable placement in its fare-booking engine. (Think of it as the retail equivalent of placing product on the bottom shelf.)

Why should you care? Sabre is the world's largest ticketing system. Created by American in the 1960s to improve reservations management, Sabre today serves more than 57,000 travel agencies as a clearinghouse for booking flights, hotels, and even cruises. Sabre owns online travel agency Travelocity and serves several of its competitors, including Expedia and American Express' (NYSE: AXP  ) travel services arm.

With a footprint that big, Sabre's downplaying of American fares could make it much harder for the airline to capture travelers who aren't locked into a frequent flier relationship. Travelers who are searching for nothing more than the best route or fare.

Spat spiraling out of control
The fight's now in the courts, and this week a judge ordered Sabre to give American equal treatment in its system. But the injunction is temporary, and Sabre shows no signs of backing off its stance.

"Sabre is confident that our actions are well within our contractual rights, and we will aggressively defend against American Airlines' baseless claims to the contrary," a Sabre spokeswoman told The Wall Street Journal.

Investors need to watch this brawl. If American wins, it'll be yet another blow to online travel agencies, whose ability to generate fees is already under assault by fare search services supplied by the likes of Google (Nasdaq: GOOG  ) .

On the other hand, if Sabre wins, it'll once more reveal how dependent on outside forces legacy carriers have become. Either way, there's a lot at stake for American and its big airline peers.

Now it's your turn to weigh in. Would you bet on the carriers or the OTAs in this fight? Use the comments section below to explain your thinking. You can also rate AMR Corp. in Motley Fool CAPS.

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Interested in more info on the stocks mentioned in this story? Add AMR Corp., Expedia, Orbitz Worldwide, American Express, or Google to your watchlist.

American Express and Google are Motley Fool Inside Value picks. Google is also a Motley Fool Rule Breakers recommendation. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Rule Breakers stock-picking team. He owned shares of Google at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool owns shares of Google. The Fool is also on Twitter as @TheMotleyFool. Its disclosure policy can take a licking and keep on ticking.

Read/Post Comments (2) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 13, 2011, at 6:46 PM, cstillwell55 wrote:

    As a customer I prefer to use a site like that searches multiple sites directly and produces results sorted by price. I know Farecompare searches both Orbitz and AA so you can still get the cheapest flight.

  • Report this Comment On January 14, 2011, at 3:18 PM, jolipep wrote:

    When did Sabre take over Expedia? What did I miss?

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