American Airlines Assails Sabre in Data-Business Trial

(Corrects to replace dropped word from lawyer’s argument in 23rd paragraph of story published yesterday.)

American Airlines accused Sabre Holdings Corp., the flight reservations and data business it spun off 12 years ago, of trying to “crush new competition” from its former parent as a trial began.

American, a unit of bankrupt AMR Corp. (AAMRQ), alleges that a Sabre unit doubled the fees charged the airline for displaying its flight data while other Sabre entities organized a boycott to punish the airline for trying to develop a new data and reservations system. The jury trial started today in Fort Worth, Texas.

“This is a story of how a very powerful company, in a secret way, set out to crush new competition,” American attorney Paul Yetter told the jury in his opening statement.

The lawyer said the airline has sustained $993 million in damages as a result of Sabre’s acts.

“We cannot have fair competition in our state unless juries like you enforce the law,” Yetter said.

Sabre lawyer Chris Lind told the jury of eight women and four men that the parties were embroiled in a business dispute that should have been resolved out of court.

“This is a commercial contract dispute,” he said of the six-year-old disagreement between the companies, not an antitrust case. “We’ll be asking you to reject American’s claims,” Lind said.

The case before District Judge David Cleveland is part of a broader dispute spurred by Fort Worth-based American’s push to provide data directly to travel agents rather than going through a company such as Sabre.

Sabre’s Business

Such businesses compile the information from airlines and distribute it to travel agents. Some airlines want to use their own technology to customize offerings for travelers and boost revenue.

Sabre, created by American in 1960 and spun off in 2000, operates the world’s largest such company, linking more than 350,000 travel agents to more than 400 airlines through its global distribution system, or GDS, according to its website. It also runs the only bookings site Travelocity.

“Its GDS is and long has been the largest non-direct source of bookings for American,” according to the airline’s complaint. Travel agent sales of its plane tickets through Sabre’s system accounted for more than $7.7 billion in revenue for the carrier in 2010, it said.

Sabre, a closely held company based in Southlake, Texas, countersued, accusing the carrier of antitrust violations and breach of contract, according to American’s answer to Sabre’s allegations and to court records. The document was submitted under seal, as are most other Sabre filings in the case.

Earlier Ruling

Another judge, Don Cosby, on Sept. 17 denied Sabre’s motion for partial judgment on its contract claim and granted judgment in favor of American. Two days later, the GDS operator filed additional motions seeking judgment on certain claims.

Nancy St. Pierre, a Sabre spokeswoman, declined by e-mail to comment on the litigation.

The company has accused American in federal court of trying to eliminate global distribution systems by refusing to furnish them with complete fare information, forcing travel agents to use the carrier’s nascent “Direct Connect” system.

American, in its heavily redacted complaint, accused Sabre of “biasing” the carrier’s data, meaning that a travel agent searching for a client’s preferred ticket pricing or flight scheduling may not see American’s information on the first screen of results no matter how closely it matches the search parameters.

Cosby enjoined the practice by court order in January 2011.

Antitrust Claim

American has also accused Sabre of violating Texas antitrust laws. The carrier in August won a federal judge’s ruling blocking Sabre’s exit from the parallel federal case in which the airline accused it and another GDS operator, Travelport LP, of violating federal antitrust law.

“The judge did not say American’s claims were valid,” St. Pierre said then, “only that American had made allegations sufficient to meet the minimal pleading requirements of federal court.”

Yetter told jurors today that Sabre had carried out an aggressive campaign against the airline once the carrier began rolling out its own booking service. He showed the jury e-mails from Sabre executives in which they discussed how they would “hurt” and “cripple” the carrier.

Corporate Clients

The reservation service contacted travel agencies and longtime American corporate clients, including Goldman Sachs Group Inc. (GS) urging them to shun American and its Direct Connect system, Yetter said. Then, in late 2010 and early 2011, Sabre began biasing search results against American data, he added.

In his own opening remarks, Lind said the biasing was permitted under the parties’ 2006 contract. He also said America used its market strength to obtain the lowest fee contract in the industry from Sabre.

“These two companies negotiate very hard. They used to be one company,” Lind said of the e-mails in the case. “Tough talk does not make it a monopoly. It doesn’t make an anti- competitive situation.”

Cosby was disqualified from presiding over the case on Oct. 22, at Sabre’s request.

The company cited the judge’s Oct. 16 disclosure that he had learned a corporate affiliate of American recently donated 500 books to a charter school associated with a charity on whose board he served and for which he was a past president.

Not Aware

No American employee involved in the donations was aware of Cosby’s role with the charity, the carrier said in a court filing opposing the Sabre motion. It also argued that a Sabre attorney too had been associated with the organization.

Presiding Judge Jeff Walker ordered Cosby off the case and he was replaced by Cleveland.

American is seeking money damages and a bar to the future biasing of its data. It also asked for the right to decide what information it provides to different GDS operators.

The two sides agreed to continue their 2006 contract, which was due to expire last year, until 14 days after the jury returns a verdict. Jury selection began on Oct. 9.

The case is American Airlines Inc. v. Sabre Inc., 067-249214-10, Tarrant County, Texas, District Court for the 67th Judicial District.

To contact the reporters on this story: Andrew Harris in Chicago at aharris16@bloomberg.net; Tom Korosec in Fort Worth, Texas, at tkorosec@sbcglobal.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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