Value of a Platform to a Seller : Case of American Airlines and Online Travel Agencies

We examine the financial consequences of a reseller excluding a certain supplier. The American Airlines dispute with Expedia and Orbitz provides a natural experiment, in which American Airlines travel options were suspended during the first and second quarters of 2011. We analyze price data for the first and second quarters of 2010 and 2011, employing a simple difference-in-differences identification strategy to evaluate changes in American Airlines' domestic fares during the conflict. We find American Airlines domestic fares were lower than similar fares charged by its main competitors, with the effect most clearly pronounced on one-stop markets. We estimate the carrier's revenue loss due to this conflict at $122 to $133 million. The long-term impact on American Airlines profit, however, is unclear because the carrier may have gained some bargaining power with Expedia and Orbitz