The European Commission is attempting to hobble its own revision of its code of conduct governing global distribution systems, travel industry organizations have alleged. They claim the Commission's Directorate-General for Transport and Energy is preparing to redefine what constitutes airline ownership of a GDS, so that Amadeus effectively no longer would be considered to have any parent carriers.
This change of status for Amadeus is crucial because it could render moot the Commission's expected announcement in the next few months that it will deregulate most of its 18-year-old Computer Reservation System Code of Conduct, but retain curbs on GDSs with parent carriers to prevent what is known as double dominance. Double dominance exists in a country where the dominant carrier has ownership of the market-leading GDS. This is the case in France, Germany and Spain because Air France/KLM, Lufthansa and Iberia own stakes of 23.6 percent, 11.5 percent and 11.7 percent, respectively, in Amadeus. The fear is that a dominant carrier could withhold some or all of its fares from a GDS in which it does not have a stake, or lean on travel agencies to choose the GDS in which it has ownership if special corporate fares are to be made available to their clients.
Radnor, Pa.-based buyer advocacy group Business Travel Coalition—along with the International Airline Passengers Association, the Belgium Association of Travel Management, Advantage Focus Partnership and the Travel Management Alliance— was critical with the Directorate-General. BTC chairman Kevin Mitchell claimed he emerged from a meeting with the Directorate-General last month understanding the groups' aims of deregulation outside of GDSs with parent carriers had been met
(BTN, June 11).Mitchell said no mention was made of a review of the definition of parent carriers at the 90-minute meeting or in a strategic consultation the Directorate-General launched with the travel industry in April. BTC described the redefinition as "the mother of all work-arounds."
Sources said the Directorate-General next month will carry out inter-service consultations on the code revision, including a redefinition of "parent carriers." An inter-service consultation, the first formal process in EU lawmaking, is an internal review of proposed legislation by other departments in the Commission. It is unusual to perform such an exercise in August, when most Commission employees are on vacation, a well-informed Brussels source told BTN. BTC and others said the Commission should consult widely if it wishes to change its definition of a parent carrier.
Few, if any, industry players other than Amadeus and its three airline stakeholders have supported total deregulation. IAPA director for consumer and industry affairs Nancy McKinley said, "What is especially mystifying is this secret decision that would undermine completely the effectiveness of the Code is being considered as a Commission public consultation is being held that overwhelmingly confirmed these basic protections are needed and should apply to all carriers with CRS ownership shares. Consumer interests, which officials of the Commission's Directorate-General for Transport and Energy solemnly promised would be paramount in these proceedings, are now moments from being sacrificed under cover of darkness."
"This secret attempt by some regulators to favor a few large airlines at the expense of consumers throughout Europe," BTC's Mitchell said, "will be universally condemned and challenged by consumer groups and travel industry stakeholders. The feeling was, we got duped in our meeting. The Transport and Energy officials never mentioned the parent carrier issue. Europe would effectively go back to 1989 when there were no rules. Lufthansa would be able to tell an agent in Stuttgart that to participate in its corporate distribution program it had to use Amadeus, or it could withhold small amounts of content to make competing GDSs look inadequate."
BTC has close links with C-Fare, an advocacy group whose members include Sabre and Galileo, but organizations that have lobbied on this issue independently of BTC and C-Fare also are sounding alarm bells over the parent carrier issue. "The concern we have is that there are some indications which make us believe the Commission could water down parent carrier obligations to the extent they would become meaningless," said Michel de Blust, secretary general for the European travel agents' and tour operators' association ECTAA. "If so, we have concerns about what would happen in Spain, France and Germany, where there is double dominance for Amadeus. We want the rules governing mandatory participation in the CRSs by carriers to stay in a meaningful way."
At present, the code deems an airline a parent carrier if it "owns or effectively controls" a GDS. Campaigners fear this definition will be amended to "owns and effectively controls." Amadeus has a complex ownership structure, including private equity investment, and could see the redefinition leave it immune from compliance with strictures on parent carriers.
Amadeus has considered itself not to have parent carriers for two years. "We have always said since our leveraged buyout in 2005 that airlines have a minority stake in Amadeus," a spokeswoman said. "They do not operate as a single voting bloc. Amadeus is owned by all sorts of carriers with different interests."
Ironically, Amadeus argued in a 1999 submission to a U.S. Department of Transportation enquiry into United Airlines' stake in Galileo that ownership by an airline of more than 5 percent in a GDS creates an opportunity for distorting competition.
The Commission launched its Code of Conduct review in 2002 and has vacillated several times since on whether to deregulate or not. In 2005, the code came close to being ditched as part of a package of deregulation the Commission considered redundant legislation. That move was blocked after a travel industry outcry. BTC called it a deliberate attempt to bury the code without adequate consultation.