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Delta’s plan to block third-party sites is more than a game of chicken

In Strategy 101, competition is pretty straightforward. You go to market with your best combinations of price, features, and other attributes, your competitor does the same, and may the best company win. This simple picture, however, gets a bit more nuanced when competitive moves are aimed not so much at beating the competition as tilting the playing field.

I was reminded of this today when reading about the changing nature of power dynamics in the airline business.

Delta Air Lines (DAL), notably, is now refusing to allow many third-party sites such as TripAdvisor (TRIP) or European online travel agencies to access their information or book flights. Lufthansa is taking things even further, actually charging customers extra for booking on a third-party site rather than on their own.

The goal of these decisions is to take back some of the power that a more competitive industry had given up. When online sites first dis-intermediated travel agents, the lure of buying your own tickets on the Internet was that you could conveniently compare prices online, pushing airlines to compete aggressively for the customer dollar and making flying pretty much a commodity experience.

For the airlines, this was a bad deal. Competing on price and losing access to your customers because distributors are closing the sales is not fun. As the industry has consolidated, however, the airlines are less dependent on those third parties, driving customers to their own sites instead, which allows them to not only capture customer information, but to offer extras and perks (for sale, of course).

Which brings me back to what a competitive move is really intended to accomplish. Sometimes, a move is intended as a trial balloon or as in chess, a gambit. You may not be sure the move will work, but it gives the player information.

Gambits allow a company to make a sacrifice in order to test the waters for an unconventional move in its strategy or to signal to other players in the industry that customers might be willing to make tradeoffs that are in the industry’s favor.

The airlines offer an illustrative setting. When customers didn’t openly rebel at the 2008 introduction of a first-checked-bag fee by a major carrier (American Airlines), this sent a signal to the others. While some customers stopped checking baggage altogether, the rest tolerated the fees, creating a significant new revenue stream for the airlines, which led to the unbundling of the air travel experience.

Gambits don’t always work. Around the same time that airlines were finding that customers would actually pony up for checked bag fees, US Airways (AAL) instituted charges for soft drinks and water. The public backlash was severe, and no other airline followed. After a few months, US Air backed down citing nasty reputational effects as the only airline to charge for a soda. It was a symbolic disaster that to customers represented everything else they hated about US Airways.

In the latest round of industry power-rebalancing, the airlines haven’t given up on third-party distributors altogether. Information is still available on some of the big aggregators such as Expedia (EXPE) and Kayak (PCLN), which have a fair amount of market power as they themselves have been consolidating.

But the model is starting to fragment, and for many end customers the pain of shopping on multiple, fragmented sites is considerable. This gambit looks like a win for airlines like Delta.