Expedia grounds Northwest over contract

Northwest Airlines has been pulled from Expedia's search engine after talks between the airline and the travel site broke down, Northwest confirmed Wednesday.

In a letter sent to Expedia, Northwest executives complained that Expedia was not willing to provide the airline with pricing commensurate with rival Orbitz. Northwest said it couldn't accept Expedia's proposal "in these very difficult financial times for our industry and for our airline."

The offer Expedia proposed would make it "not only Northwest's highest-cost Internet outlet, but its highest-cost outlet for any form of distribution," the letter states.

Expedia spokeswoman Andrea Riggs confirmed that the company had removed Northwest on Tuesday. She would not comment on the contract dispute, but said that "we are working with Northwest to resolve the situation."

Northwest was one of the airlines that helped found Orbitz back in 2000. Northwest also owns an undisclosed share in Hotwire, along with America West, American Airlines, Continental Airlines, United Airlines and US Airways.

Critics have complained that Orbitz' ties to the airlines could allow it to offer lower fares than other sites or agencies can, giving it an unfair advantage. Orbitz recently launched a program that allows it to tap directly into airlines' reservation systems, bypassing central ticketing systems. It claims the program will save airlines as much as 77 percent on booking costs for every ticket generated through the system.

Northwest has run into problems with airlines before. In June, it temporarily stopped submitting discounted tickets to Priceline.com, saying it was concerned about changes in Priceline's model.

Last year, Northwest, along with KLM Royal Dutch Airlines, said it would stop paying commissions to online travel agencies, prompting Travelocity to charge extra fees for Northwest flights. An agreement was eventually reached, although financial terms were not disclosed.