As Business Travel Coalition (BTC) has consistently described, airlines refuse to share fee data with the travel agency sales channel where more than 50% of consumers and virtually all managed travel programmes purchase their airline tickets.

Published: 25 Apr 2011

As Business Travel Coalition (BTC) has consistently described, airlines refuse to share fee data with the travel agency sales channel where more than 50% of consumers and virtually all managed travel programmes purchase their airline tickets.

This severely impacts consumer transparency, a consumer protection responsibility solely in the hands of the U.S. Department of Transportation (DOT). There are many potential reasons for this marketplace breakdown, ranging from a push for leverage as airlines try to reshape who pays for distribution, a lack of competitiveness or competition in some airline segments, and a desire to obfuscate price. DOT has the unique ability to address this through rulemaking, and we are continuing to encourage that action.

Problem

Airlines refuse to share fee data with the travel agency sales channel where more than 50% of consumers and virtually all managed travel programs purchase their airline tickets.

Effects

Section 41712 of the Federal Aviation Act prohibits “an unfair or deceptive practice or an unfair method of competition in air transportation or the sale of air transportation” by airlines and TMCs (Travel Management Companies). In BTC’s opinion, the continuing failure of airlines to share information about their ancillary fees with TMCs violates that rule by making it impossible for managed travel programs and other consumers to efficiently compare air transportation costs among competing providers. Consumers often do not see extra fees until well into the shopping process, or after the purchase, and sometimes not even until they arrive at the airport. In this situation, the marketplace winner is not the airline offering the best value, but the one that does the best job of concealing its true all-in prices.

Causes

1. Desire For Leverage Over GDSs. It is no secret that some airlines are withholding fee information (i.e. content) to increase leverage vis-à-vis global distribution systems ahead of contract negotiations.
2. Need To Better Compete With LCCs. Some major network carriers no doubt find advantage in displaying a fare that matches low-cost carriers’ all-in fare offerings in travel agency displays, but surprising consumers with hefty fees after tickets have been purchased.
3. Push For Control Of The Customer. In this current iteration in the battle for control, all-in fare comparison-shopping is virtually abolished; fare and fee content is fragmented throughout sales channels; and channel discrimination is deployed to effectively drive unsuspecting consumers to airline.com where “personalized offers” can be a euphemism for “we the airline are going to show you only what we want you to see.”
4. Need To Preserve Peer Pricing Position. There is little industry argument that the first network airline to provide all its fee data to the agency channel would suffer competitively, as it would immediately look 20% to 40% higher than its competitors in TMC displays.
5. Desire To Flip The Economic Model. A couple of airlines have been very public with a desire that agencies compensate airlines for the right to merchandise and sell carriers’ products and services. Such costs would be passed on to corporate clients and produce all manner of inefficiencies and runaway costs that travel managers would have no control over.

Solution

DOT needs to promulgate a rule requiring airlines to disclose ancillary fee information (e.g., checked baggage charges, at airport ticketing fees, etc.) in the same electronic and transactable formats used to publish airfares themselves. Static lists of fees on airline websites are unworkable. Since there are hundreds of thousands of possible fare and fee combinations, routings and competitors for any given trip, it is completely impractical for any purchaser to use such static lists to construct side-by-side actual cost comparisons. The only way for consumers to know what a given trip is going to cost is to use the power of computers to construct, from among competitive alternatives, comparative actual travel costs.

Importantly, ATPCO (Airline Tariff Publishing Company) has developed and successfully tested with some 26 airlines and 3 distribution companies a low-cost transmission system for the dissemination of fees. Airlines are refusing to participate in ATPCO’s system for the reasons enumerated above in “Causes.” Regrettably, a dysfunctional marketplace has incentivized airlines to withhold, rather than provide, electronic information about the roughly $10 billion in ancillary fees they now collect annually in the U.S.

For two and one-half years, despite major corporations’ substantial collective purchasing power and their continuing calls for fee transparency, airlines have refused to provide TMCs with this vital information. This only adds to evidence of a market failure. What’s more, because of U.S. federal preemption in the aviation sector, consumers have virtually no access to protections afforded by state consumer protection laws.

The marketplace and state consumer protection laws cannot resolve this problem. As such, DOT is the last bastion of consumer protection and has existing authority to require full disclosure of fee data, as it has historically done by requiring airline code sharing and change of gauge information be shared through the global distribution systems and on to consumers.

(By Kevin Mitchell, chairman, Business Travel Coalition)