Government regulation has impacted travel management in various ways, ranging from taxation on travel services to consumer protections for access to rates and inventory. A farther-reaching set of regulations--the Sarbanes-Oxley Act of 2002--continues to demand vigilance.
Headed into 2009, though, some of the more impactful new travel industry regulations will relate to airlines--the largest travel spend category for most corporate buyers. Always the most regulated travel sector, despite U.S. "deregulation" beginning 30 years ago, global commercial aviation is now at a critical stage. The industry faces new rules surrounding climate change and scrutiny of the three blocs of partner carriers now forming.
As competitive lines of the ultimate global airline picture are drawn, it also may be a crucial moment for corporate negotiators--especially those at larger, globetrotting organizations.
For example, two significant antitrust immunity requests by global airline alliances are pending at the U.S. Department of Transportation (as of late 2008). When granted by regulators, antitrust immunity enables groups of airlines to coordinate schedules, pricing, product development, distribution and other activities. It also allows them to jointly negotiate with travel agencies and corporate clients.
That's what Continental Airlines wants to do with United Airlines and several other Star Alliance members. American Airlines, British Airways and their oneworld alliance partners want flexibility to do the same.
Those airlines that already enjoy antitrust immunity--including Delta Air Lines, Northwest Airlines and four European SkyTeam partners; and United with its fellow Star allies (but without Continental as yet)--point to simplified corporate contracting with harmonized pricing, unified account management, wider recognition of travelers' elite status and other advantages.
In their July 2008 filing to DOT, Continental, United and eight Star members said Continental's inclusion in the immunized group would enable them to "expand the scope of their joint offerings to corporate clients and, in some instances, approach smaller corporate accounts than previously." ( 1) AA, BA and other oneworld partners went a step further in their August 2008 DOT filing, suggesting a lack of antitrust immunity has severely limited their ability to establish joint corporate sales programs." ( 2)
While some corporate buyers during the past decade said they benefited from the regulatory freedoms given to their airline suppliers, others feared diminished competition. Trade associations, independent airlines and other par- ties also have objected to antitrust immunity on similar grounds.
"Forcing travel agents and corporate accounts to negotiate with very large carriers as a block for access to their combined transatlantic route net- works would radically tip the negotiating scales even further in favor of airlines and result in even higher fares" and lower negotiated discounts, according to the American Society of Travel Agents and the Interactive Travel Services Association. ( 3)[PULL_1]
In a 2007 article, James Reitzes and Dorothy Robyn, principals at the Brattle Group, noted that, since 2000, fares in transatlantic markets dominated by alliances--after "a positive trend" previously observed by DOT--had "begun to move in the wrong direction." They argued for "caution" by regulators, suggesting that "at a minimum, any substantial expansion in the scope of antitrust immunity offered to particular alliances should require compelling evidence that there are economic efficiencies that would justify the expanded immunity and that could not be achieved absent the immunity." ( 4)
DOT and the European Commission in March 2008 said they would cooperate on research into the competitive impact of airline alliances. A report is due in mid-2009, a spokesman confirmed.
The development of airline alliances is inexorably tied to the "Open Skies" treaty between the United States and the European Union. Activated in March 2008, the first phase provided airlines more rights to choose which transatlantic routes to fly. For example, Continental, Delta and Air France now operate previously impermissible nonstop flights between the United States and London Heathrow Airport.
Under discussion by regulators on both sides, a second phase would liberalize further the transatlantic air transport market, potentially including a relaxation of foreign ownership restrictions on U.S. carriers and the ability of European airlines to fly paying passengers between two U.S. points. President-elect Barack Obama, however, has signaled opposition to both of those outcomes ( 5), and a top U.S. negotiator last month said that neither relaxed foreign ownership restrictions nor approval for non-U.S. carriers to operate revenue flights within the United States would be accept- ed as part of phase two U.S.-E.U. Open Skies. ( 6)
If they did come to pass, looser foreign ownership laws would likely pave the way to cross-border mergers along alliance lines and could lead to significantly altered domestic U.S. competition. Other potential regulations that could directly affect airlines--and T&E budgets indirectly--relate to greenhouse gas emissions. The airline industry favors voluntary reduction targets, arguing cap-and-trade systems would unfairly burden commercial aviation. Higher airline costs could translate to higher passenger fares.
In Europe, the Emissions Trading Scheme--to include aviation from 2012 under current proposals--would "impose an annual cost to airlines (over and above the cost of jet fuel) of several billion dollars in 2012, tripling by 2020," said James May, president of the U.S. Air Transportation Association. "They would drive some airlines to the wall." ( 7)
In the United States, several states in December 2007 petitioned the Environmental Protection Agency to adopt "global warming regulations for aircraft." Congress and the incoming administration undoubtedly will at least explore such proposals, as well as cap-and-trade systems. Obama campaigned in support of "an economywide" cap and trade, noting that "100 percent auction ensures that all industries pay for every ton of emissions they release." ( 8)