IATA Begins Breaking Down Pan-Euro Barriers
The International Air Transport Association has begun dismantling the numerous barriers it maintains against true pan-European travel management. Change is being accelerated under pressure from the European Commission, which has surprised IATA by announcing that its immunity from prosecution for acting as a cartel is likely to end next May.
Among the changes being ushered in are the start of talks on pan-European accreditation for international travel agencies, the scrapping of restrictions on the issuing and settlement of tickets issued via international satellite ticket printers, the removal of all restrictions on storing ticket stock on corporate client premises and commitment to introduce a single bank settlement plan (the equivalent of ARC) for the euro-zone within four years. The STP rule changes and a pan-European BSP actually were agreed upon back in July but have received little or no publicity. Details on the new STP rules were being sent to agents as BTN went to press.
Corporate client and travel agency critics of IATA have greeted the changes as welcome first steps. However, they want to see much more movement before they will be satisfied that IATA is committed fully to removing all obstacles to a single European market for the buying and management of air travel. They also pointed out that most of the initiatives flagged by IATA management have yet to be ratified by its member airlines and claim that only the threat of losing "negative clearance"—the term used for IATA's antitrust immunity—has produced a belated appetite for reform. Furthermore, there is a dispute over whether some of the proposed changes are as useful as IATA claims.
"This is a very positive start, but I don't think the story is anywhere near over yet," said Ian Nurdin, deputy chairman of the Institute of Travel Management of the U.K. & Ireland, the lead association for the Paragon alliance of travel management associations on the IATA question.
The latest developments stem from the EC reacting favorably to sustained lobbying by a formidable alliance of international corporate client and agency organizations. These include Paragon—whose members include the National Business Travel Association—the Association of Corporate Travel Executives, European travel agent association ECTAA and the Guild of European Business Travel Agents. The Commission has responded by writing to IATA, saying it wants to see swift movement in particular on pan-European agency accreditation, a pan-European BSP and the removal of restrictions on pan-European satellite ticket printing.
The stick it is using to beat IATA is the ending of immunity against prosecution for operating as a cartel to fix published fares. Although this principle has been established for antitrust arrangements across all sectors for more than one year (raising intriguing questions about the future of airline alliances), the Commission has shocked IATA by setting a date of next May, much sooner than anticipated. When asked whether it would bring prosecution, American Express would not comment. ITM also is understood to have deliberated over whether one of its members should take legal action.
The unprecedented cooperation between corporations and agents on the IATA question reflects the profound changes brought about by the end of airline commission. With all agency costs now being passed on to the corporation, corporations are taking a keen interest in anything they perceive as keeping their agent's costs unnecessarily high. "An issue like pan-European IATA accreditation will help travel agents, which means they can bear in mind the savings they have made when looking at the fees they charge corporates," Nurdin said.
Corporations also are keen to see change because although there are some success stories of managing their travel through a single European center, many have held off. They have been deterred by the barriers created by IATA's existing structure, dating, in some cases, to 1945, which treats Europe as individual national markets rather than a unified entity.
IATA's first response to the united front of EC, corporations and agents will come this week when it hopes to open talks with agents on pan-European accreditation. The initial target is to provide a full report on the issue in February. A final decision also will be taken in February on scrapping the complex security rules that make it difficult for paper ticket stock to be stored on client premises.
Next will come a complex series of rule changes on ticketing that take effect Jan. 1, especially in relation to STPs. Introduced in the late 1990s, European Union STPs originally were thought to herald a breakthrough in pan-European travel management. However, clients have found them restrictive in the types of journeys for which they could be used, and confusion has reigned particularly over whether they can issue tickets for journeys originating in other countries. One travel manager who uses an E.U. STP told BTN that it had been usable for as few as 30 percent of the trips his travelers booked.
From Jan. 1, there will be no restrictions on the itineraries that can be ticketed on an STP. For instance, a flight from Malmo (Sweden) to Geneva can be fulfilled by an agency in Paris and issued on an STP in Copenhagen. Furthermore, said Chris Gilbey, director of distribution policy for IATA, such a ticket could be settled in France in euros, in Denmark in Danish kroner or in Sweden in Swedish kroner. Gilbey added that there are no restrictions whatsoever on the issue of electronic tickets, which now account for around 50 percent of tickets in the European Union.
However, Gilbey's interpretation of the new rules is disputed by Bernard Harrop, director for industry affairs at Amex. "IATA has removed the geographical distributions on receipt of tickets, but you will still have to use fares applicable where the ticket is being fulfilled and the ticket will have to be settled where it is fulfilled," Harrop claimed. "Our interpretation is that, fundamentally, nothing has changed, and the European Commission is looking at this."
What certainly has not changed is that promotional fares, as opposed to published IATA fares, must continue to be bought only in their local market. For instance, if British Airways markets a London-Geneva fare for sale in the United Kingdom only, it cannot be bought in Switzerland. Another example of breaching the rules would be buying a Milan-London-New York-London-Milan fare—usually a fraction of the price of a straight London-New York return—and removing the first and last coupons.
"I know agents want access to the same fares, but we exert no rules on that," Gilbey said. "They would like us to interfere, but we have no influence on that whatsoever."
France Pierret, legal adviser to ECTAA, views the matter differently. "It is true that IATA does not set up the fares, but airlines use IATA rules to partition them and set up conditions that agents have to comply with under their IATA agreements," she said. Pierret said the other concessions, such as over STPs, were "a step in the right direction" but that there is "still a long way to go. Our members are not satisfied because we are not being involved enough in the decision-making process."
She, Nurdin and Harrop all were pleased to learn of plans for a single BSP for countries that have adopted the euro but disappointed that it would take until 2007 to introduce. There also was some skepticism because IATA has invalidated the idea without following through. Gilbey said implementation cannot take place until 2007 because IATA has to honor existing contracts up to that date.
Nurdin summed up the general, ambivalent response to IATA's initiatives by saying: "A cynical person would say they may lose their immunity next May so they have to do something, but this is still welcome." Harrop wants to see more, calling for a true single European market and greater consultation with agents. "We should be able to book, fulfill and settle anywhere within Europe," he said. "That is where the major savings are. If the IATA agreement is to continue to have immunity, it needs to be fair and equitable."
Other issues on which IATA is in dispute with agents and corporations include agency debit memos, which allow airlines to debit agents' bank accounts without consultation months or even years after a ticket purchase. ECTAA wants this mechanism to be replaced by normal commercial procedures for settling disputed charges. As a first step, Paragon wants agency debit memos to be scrapped where the amount being debited is less than the cost of the process to administer it.