JetBlue puts online travel sites on notice, tells clients to book directly

Whether they like it or not, travel companies have become increasingly dependent on online sites like Priceline to bring them customers – and those online services expect to get a cut of each booking. Now JetBlue is pushing against the tide, taking its flight listings off of 12 online services and directing people to buy directly on jetblue.com.

JetBlue already gets "well over half" of its bookings from people who come straight to jetblue.com, according to Marty St. George, who is in charge of planning, sales and marketing at JetBlue. Frequent JetBlue customers who use the website can get better perks than those who book on aggregator sites. But JetBlue and others still rely on outside services to fill their seats, paying a fee to the service when people book.

By going it alone, JetBlue is confident that it can fill those seats without all of those listings. It doesn't mean that the airline will pull its listings from every service – it's still on the big ones like Expedia – but it's getting rid of services that help fill its lower-cost seats, because they chip away at JetBlue's profits too much. The services it is leaving include less well-known names like VacationExpress.com and WhatsCheaper.com.

"They are our lowest fare channels, and our highest cost of sales channels," St. George said, meaning JetBlue has to pay higher fees on each sale. In short, if JetBlue has to pay a high fee to sell a $39 one-way ticket, it's not making much on that ticket.

But JetBlue plans to continue cutting these costs, and could start to chip away at the fees charged by larger online travel companies. It calls this move the "first phase" of its plan to cut distribution costs. In Phase 2 the company could consider various options, including adding a surcharge when people buy seats through an online intermediary instead of going direct through jetblue.com. Or the company could simply not distribute its cheapest fares on outside sites.

So, does this give JetBlue leverage with the bigger online companies? "Leverage is not a very JetBlue word," St. George said. "We don't really think of the world that way. We're going to go through each individual channel and make individual decision as far as what the best way to distribute our product is."

For Expedia and Priceline, the two biggest online travel companies by far, JetBlue's decision probably won't have a huge impact. They make a small fraction of their revenue from airplane tickets, because the airline industry is concentrated and is better able to control distribution. The hotel industry is the largest sales generator in online travel. Until hotels get better at reaching customers online, they're likely to remain reliant on online services. Priceline stock was slightly down and Expedia stock was slightly up on Thursday.

Nonetheless, JetBlue's move is significant, and it's worth watching where the airline goes next. If more travel companies figure out how to connect directly with customers, they'll have more leverage (yes, we said it) with the middlemen. (WSJ)