<B> OP-ED: Settlement Coupons Revisited</B>
By Les Baker
<i>Les Baker is vice president of PRISM Group Inc., a consulting and systems company specializing in travel distribution headquartered in Albuquerque, N.M. </i>
Remember the Airline Antitrust Litigation Coupons? What an enormous waste of time and work! These coupons were issued in 1994 and good until 2001 following a lawsuit the airlines settled, without trial, over hub pricing issues. Over 4.2 million
claims were filed for the coupons in 1994, and travel agents were inundated with requests from corporate and leisure clients for their past records with eight qualifying carriers in order to do so. This was an enormous cost for agencies, who typically do not store records that long, and spent considerable time to determine qualifying records.
The settlement created an infrastructure for this one-time Olympian task. Records were verified and coupons were then distributed. But did the consumer or corporation really benefit? Consider the following points.
Tickets were difficult to use. Discounts applied to most domestic airlines. With the exception of Northwest, the discount was limited to 10 percent off coach fare. However, 90 percent of all fares are already discounted, usually more than 10 percent. In addition, there were 16 extensive restrictions--involving such things as holiday travel, reissue and transferability--that severely limited their use.
Tickets were hard to issue. The scrip took additional time for the agency, resulting in service fees that diminished the value of the coupons. Ticket issuance instructions were a full page of miniscule print.
Distribution did not benefit the consumer. Coupons from Northwest Airline, which settled independently, were worth 2.5 times that of coupons from the seven other carriers. Consequently, so many people requested Northwest coupons that demand exceeded supply. Requests were randomly filled, so corporations in cities like Detroit received only a handful of Northwest coupons.
Coverage in the mainstream press forced corporate response. Travel managers, accustomed to discounts greater then 10 percent, still submitted claims because senior management had read about the settlement through the general press.
Lawyers were the true winners. Of the $40 million in consumer coupon "benefits," combined legal fees were $24 million, later reduced to $16 million.
Because of the difficulty in using the coupons, I have found few corporations or consumers who have yet used a single one. Mine remain unused, as my airfares have discounts in excess of 10 percent.
The result of this exercise was wasted time and effort for very little benefit. Assuming the average claim took two hours to research, 960 years were wasted in applying for the discount.
The following, therefore, are suggestions for improving any future program involving airline rebates to customers.
<ul><li> Simplify redemption. Use of electronic data capture tools and transfer would ease the volume of paper work.
<li> Support infrastructure improvements. Rather than provide consumers with a discount, a novel approach would be to support overall infrastructure and air safety improvements.
<li> Limit legal fees. $16 million in fees for marginal consumer benefit is excessive, especially in the low-margin travel industry.
<li> Make discounts meaningful. Applying the coupon discount to already discounted and negotiated fares, as well as holiday travel, would enable corporations and consumers to benefit. </ul>
In my opinion, the Airline Antitrust Settlement was a waste of time and work.