A U.S. Department of Transportation proposal that would
require airlines to transmit ancillary fee data for display at the point of
sale through global distribution systems has divided the corporate travel
supply chain—with airlines opposing regulatory interference in their
relationships with distributors, and GDSs, business travel groups and some
travel buyers advocating greater pricing transparency to consumers when they
make air travel purchasing decisions.
With the comment period on the proposed rulemaking closed as
of late last month, DOT said it is evaluating the flood of public comments to
shape its final decision. Though a DOT spokesperson said, "There's no
fixed timeline," DOT expects to issue a final ruling no later than spring
The brief proposal on GDS fee transparency, part of DOT's
most recent drive to bolster air traveler protections, weighs in at just a few
sentences and no more than 200 words, yet has elicited hundreds of public
comments in the docket.
DOT is determining whether to require airlines to submit
ancillary fee data to "global distribution systems in which they
participate in an up-to-date fashion and useful format," the proposal
reads. "This would ensure that the information is readily available to
both Internet and 'brick and mortar' travel agencies and ticket agents so that
it can be passed on to the many consumers who use their services to compare air
transportation offers and make purchases."
The American Society of Travel Agents, the Consumer Travel
Alliance and the Business Travel Coalition, in addition to what they said are
50,000 petition-signing corporate travel buyers, travelers and consumer
advocates, have come out in favor of DOT-imposed rules on the display of
ancillary fees at all points of sale as a means to preserve consumer pricing
transparency, according to comments filed in the docket.
Airlines, meanwhile, have advocated a free-market approach,
not regulatory intervention, as a guiding principle in governing which data
airlines submit to distributors. Al Lenza, former head of distribution for
Northwest Airlines and now CEO of the Lenza Group consulting firm, called the
proposed rulemaking on GDS display a "well-intentioned" but
ultimately flawed proposal that would diminish airline leverage in negotiating
deals with third-party distributors and box them into sales and marketing
strategies determined by the GDSs. If adopted, Lenza argued, "It could
strip the carriers of this bargaining leverage with respect to ancillary
products, resulting in higher distribution costs which must ultimately be borne
Filing comments on behalf of the largest U.S. airlines, the
Air Transport Association similarly argued that if DOT moves forward with its
forced GDS display efforts, it would be handing a victory not to consumers
seeking transparency, but to GDSs seeking new airline deals. "A government
mandate that carriers must provide GDSs with fee schedules would further
strengthen GDS market power, thwart the entry of new competitors in the GDS
market and expose consumers to higher prices necessary to recoup excessive GDS
booking charges," ATA posited in its comments, which called Sabre and
Travelport a GDS "duopoly" that together hold 90 percent of the U.S.
GDS market. ATA made no mention of Amadeus.
ATA claims DOT precedent is on its side. When DOT
deregulated the U.S. GDS market in 2004, ATA quoted the department that "airlines
should have some bargaining power against systems if each airline can choose
which services and fares will be saleable through each system and the level at
which it will participate in each system."
Noting parallels from the web fare debate that similarly
divided the corporate travel supply chain earlier in the decade, ATA
interpreted DOT precedent as meaning that "airlines should be able to use
their control over access to their web fares as a bargaining tool for getting
better terms for computer reservation system participation." That, ATA
said, happened during the last major round of airline-GDS negotiations in which
GDSs reduced their fees to airlines in exchange for full content, which
included web fares. ATA noted that "a similar situation is presented here."
ASTA, however, claimed that the rule would not interfere
with the principles of deregulation, since they "would not require any
airline to do business with any particular GDS."
Using the example of United Airlines selling Economy Plus
seating through Sabre as evidence that some GDSs and airlines already have
entered into commercial agreements to distribute ancillary services, Lenza
said, "Regulations should not impact the competitive dynamics playing out
in the marketplace between the parties in the distribution chain."
According to Lenza, "Airline websites, with links to the various
distribution systems and properly maintained, should be the primary vehicle for
ensuring customer awareness and communication."
Delta Air Lines agreed, noting its website now includes a
link directing consumers to information on its ancillary services and
associated fees. "Delta displays all such services and fees in one
easy-to-access format on Delta.com," the carrier said in comments. "Moreover,
Internet vendors, such as Compare Airline Fees, have made consumer access to
these services and fees on a comparative basis convenient and easy."
Other airlines and airline groups agreed with a DOT proposal
that they post all ancillary fees on their websites, but ASTA argued that
transparency should be replicated in all points of sale—both direct and
indirect. "But the critical issue is not whether the airlines will make
the information 'available' in lists and the like," ASTA said in comments.
"The key issue is whether the airlines will be required to provide the
information to consumers in a form that enables consumers to make 'all-in'
full-price comparisons incorporating the ancillary services that interest them
and most importantly to do so before they have committed to a ticket purchase."
ASTA suggested that "it is commercially absurd to
suggest that travel agents can simply hunt down the ancillary fee information,
transaction by transaction, on airline websites whenever they need to know,"
but Sabre has attempted to automate that very function,
and Delta and US Airways said Sabre's Air Total Pricing offering, launched last
month, served as evidence that the GDSs already have the capability to
aggregate the data they seek, display ancillary fees and include their tally at
the point of sale.
Still, the question goes beyond whether DOT will require
airlines to simply display ancillary fees and their cost at the point of sale
to whether the mandate will force the sale of ancillaries through the GDS. A
DOT spokesperson clarified that the department is considering both.
BTC noted it is advocating that DOT require airlines to
provide a la carte content to GDSs so it can be booked, in addition to requiring airlines to provide ancillary fee information to GDSs so they can
display it at the point of sale (see Editor's Note). "It is critically important that
consumers understand the all-in price of a ticket before a purchase decision is
made and before they arrive at the airport," BTC chairman Kevin Mitchell
said in a filing. "Comparison-shopping, a major consumer benefit in
commercial air transportation, has been severely impaired during the past 24
While airlines argued that forcing them to present ancillary
fee information through the GDS would raise costs for consumers, Mitchell
argued that by taking away transparency and adding ancillary services through
the booking cycle, airlines could be playing a bait-and-switch game, luring
bookers with a low fare, then saddling that fare with add-ons, resulting in
overall higher airline costs.
The National Business Travel Association also advocated for
more point-of-sale openness, noting in comments filed by executive director
Michael McCormick that "NBTA members have wrestled too long with fee
Though NBTA said it supports the right of industry to "create
and follow chosen business models," it considered ancillary fees part of
the fare, and therefore subject to transparent display. "DOT must
establish a framework for transparency so travelers and booking agents can
understand the total cost of travel before booking a ticket. Of course, any
requirements put forward by DOT should not stifle innovation in airline sales
or in the myriad distribution models in the marketplace. To accomplish these
dual goals, DOT should require that airlines provide fee and fare information
such that any platform selling airline inventory can acquire and display the
fee information for those researching and booking travel, without dictating how
the fee data be transmitted or displayed."
This report appeared in the Oct. 11, 2010, edition of Business Travel
Editor's Note: After this report was published, Mitchell
clarified that BTC does advocate a DOT requirement that airlines offer a la
carte content to GDSs. A previous version of this report indicated otherwise.