OP-ED: Legislate Corporate Air Travel Consumer Protection

<B> OP-ED: Legislate Corporate Air Travel Consumer Protection</B>

By Bob Lichtman

<hr><i>Bob Lichtman is the global travel manager for 3Com Corp. and serves on the Board of Directors of the National Business Travel Association.</i><hr>

In the late 1970s, I had been in the travel industry for just a few years and the notion of deregulation of the U.S. airlines concerned me greatly. I wrote a letter to Alfred Kahn, the last chairman of the Civil Aeronautics Board, expressing my concerns about the vast changes that inevitably were going to transpire in the industry. He was kind enough to respond that he too felt many of the changes fell into the realm of the unknown and that this uncertainty concerned him as well.

Over the past two decades, Dr. Kahn, along with the airline industry, have defended the government's decision to deregulate the industry. The defenders of deregulation have often cited that air- fares have increased far less than the average consumer price index over the past 20 years, and that tens of millions of more travelers have had the opportunity to travel by air due to increased competition brought about by deregulation.

I agree that deregulation has increased the numbers of air travelers and that leisure-based fares have not increased at the same pace as the CPI. However, it behooves us all to look at the entire industry and all of its customers, not just the leisure segment.

The government allowing the airline industry to service the public in a free and competitive environment has created three mega carriers with awesome power, along with a handful of secondary carriers who hang on to their own key markets. These mega carriers have shown, most recently, that they have the power to control or eliminate competition in their key hubs, the power to change their entire distribution system, the power to reduce service levels, and the power to increase airfares to the business community in an environment where their fixed costs have been declining, their profits have been soaring and their load factors have been higher than the altitude at which they fly.

One does not have to be a student of economics to realize that when a company or group of companies in any industry has the power to control the competitive environment, that company or group of companies will take advantage, and the results will be reduced competition, increased costs and lower service levels for the consumer, and higher and higher profits for the company or companies that control the marketplace. Mr. Webster's definition of a monopoly is, "exclusive control of a commodity or a service in a given market."

While there have been many benefits of deregulation to the leisure segment, the business community has been the most negatively affected by the monopolization of the industry. It is Corporate America that purchases the unrestricted coach, business and first class airfares. The leisure fares were designed to exclude the business traveler from taking advantage of more competitive prices, unless travelers were able to book weeks in advance and give up their weekends. Our organizations were most affected by the airlines' changes to their distribution system, which included capping and subsequently reducing commissions paid to the travel agencies for the most expensive air tickets purchased, as these caps and reductions had little affect on the commissions paid on leisure fares. The entire business community would have been financially affected if one of the mega airline's recent unilateral requirement to purchase all air tickets through its Internet site or pay more for working through a travel agency had taken hold.

Twenty years after airline deregulation, it's incumbent upon legislators to examine the impact it has had on the two critical segments of the industry, leisure travel and corporate travel. When examined in this segmented manner, it should become quite evident that legislative action is required to protect the corporate air travel consumer.