An article in the WSJ describes an escalating conflict between American Airlines and intermediaries selling tickets to consumers:

In a retaliatory move against American Airlines, Sabre Holdings Corp., a middleman for many carriers’ seats, said it is raising the fees it charges American to distribute its fare information and sell its seats through thousands of travel agents….The jab follows efforts by American, the third-largest U.S. airline by traffic, to sell more of its tickets directly to consumers, a strategy designed to cut costs and give the airline more opportunities to court customers.

Getting rid of middlemen can increase surplus and efficiency.  Getting rid of realtors or car salesmen eliminates the surplus they capture and hence increases the surplus left for buyer and sellers for houses and increases trade.   This is the famous “double marginalization” problem as both the realtor/carsalesman and the seller charge a margin and eliminating the middleman eliminates one margin and one negative externality and increases trade.  And who cries for the middleman if he loses out?

But the airline story has a different dimension: Expedia, Orbitz etc. allow easy comparison shopping.  With consumers comparing prices, in a fragmented airline market, one firm or the other will undercut its competitors to make sales. This kind of thing will ensure prices are close to costs.  But now, consumers will have to go to the AA website to see the prices and will find it harder to comparison shop. With positive search costs, prices can rise.  The Diamond paradox is an extreme example of this.  So, I guess I agree with Expedia:

Expedia lashed out at American last weekend for trying to replace the distribution model with the direct-connect network that American has developed in recent years to hook up directly with travel agencies. It called American’s push “anti-consumer” and “anti-choice,” arguing costs would jump for travel agents and there would be less pricing transparency for consumers.

If this is right, consumers will lose in the war between Expedia and AA if other airlines follow suit and ditch the intermediaries.