The European Commission has shifted some language in its definition of parent carriers in proposed rule changes for global distribution systems operating in the European Union.
The proposal defines "parent carriers" as those "which exercise effective control over a CRS system," as opposed to previous language, defining such carriers as "any air carrier which directly or indirectly, alone or jointly with others, owns or effectively controls a system vendor." Some industry groups this year have raised concerns over the EC's definition of parent carriers
(BTN, July 23).Industry groups, however, said that there is time to make input as the proposal still needs to go through the regulatory process.
Several companies and organizations, including the Business Travel Coalition, the Association of Corporate Travel Executives, British Airways and Sabre, last month met with European transport officials to address concerns.
Some groups are concerned the EC is redefining what constitutes airline ownership of a GDS so that Amadeus would be considered not to have any parent carriers. Air France/KLM, Lufthansa and Iberia own stakes of 23.6 percent, 11.5 percent and 11.7 percent, respectively, in Amadeus.
Amadeus late last month said it holds to its position filed with the EC earlier this year, but stated, "Ultimately, we leave it in the hands of the EU to make their interpretation." Amadeus in a filing with the EC in April said, "The logical interpretation would be to use competition law principles, applicable to EU merger control cases, where effective control is a determining factor. Under these principles, no airline is a parent carrier because none controls Amadeus or any other CRS in Europe. On the contrary, if a 'parent carrier' is any airline that owns shares in a CRS regardless of the size of the interest, then British Airways, through its minority share in Iberia, would be a parent carrier of Amadeus."
As the EC reviews GDS deregulation, such groups as BTC and ITM said Amadeus' status is crucial because its airline owners could gain double dominance in home markets. This raises fears that such airlines could discriminate fare content toward their partially owned channel.
"It is ITM's belief," said Paul Tilstone, executive director of the U.K.'s Institute of Travel Management., "that the 'parent carrier' definition should remain as it presently stands—as indeed all of the existing protections should with one or two minor exceptions—with a view to a full consultation by the European Commission on the whole distribution chain and influencing factors within it. This should incorporate the influence of private equity, the connection to self-booking tools and the airline and TMC relationship."
In a letter to European Commission vice president Jacques Barrot dated Sept. 14, corporate travel buyers, industry associations and travel suppliers, helmed by BTC, outlined "grave concern over recent developments related to the Commission review of the CRS Code of Conduct."
At the heart, the letter notes, is the commission's definition of "parent carrier" and plans for such definitions to be interpreted by authorities on a "case-by-case basis." Furthermore, the signatories said the consultation process employed by the EC in its review has sparked confusion over the definition setting.
"Such a definitional change would strip the Code of the basic consumer protections that have been overwhelmingly endorsed by consumers, business travelers and travel agencies in the stakeholder consultation process," the letter states.
"Because the directorate-general of transport and energy has apparently decided to interpret the definition of parent carrier in an unprecedented and unsupportable way so that—to the total surprise of nearly everyone in the industry—there likely aren't any parent carriers," said Sabre Holdings executive vice president and general counsel David Schwarte in prepared remarks. "In fact, Amadeus now says there haven't been any for years."
Schwarte late last month said global contracts with airlines do not necessarily preclude airline content discrimination. "A global agreement with a carrier does not mean they give you all their content in the United States that you get it in Germany as well, because the technology in place allows an airline to dish out inventory for travel agents located here and travel agents located there," he said. "The short story is we have global agreements, but carriers nonetheless have found ways—despite the agreements and despite rules—to withhold inventory that we needed to compete in the local marketplace. It happened before, it will happen again."