Web Fares Scrutinized at Final NCECIC Hearing

Contending that it’s time to “level the playing field and provide equitable ticket pricing to all channels of distribution,” Rosenbluth International president/CEO Alex Wasilov called on the National Commission to Ensure Consumer Information and Choice in the Airlines Industry to “apply its influence” to “simplify pricing structures and establish fairness and equity for all participants” in the industry.

By: Jerry Chandler

Contending that it’s time to “level the playing field and provide equitable ticket pricing to all channels of distribution,” Rosenbluth International president/CEO Alex Wasilov called on the National Commission to Ensure Consumer Information and Choice in the Airlines Industry to “apply its influence” to “simplify pricing structures and establish fairness and equity for all participants” in the industry.

In prepared testimony before the NCECIC in Washington, D.C., July 31, Wasilov said the airline industry could accomplish that by instituting transaction fees to cover their internal costs of distribution. This would help justify the existence of transaction fees across all distribution channels, allowing the airlines’ lowest cost distribution channel travel agents “to coexist and prosper.”

The commission, of course, can’t legislate. It can only report to Congress. Other voices at NCECIC’s final hearing said government should not intervene, but rather let market forces sort the quick from the dead.

While acknowledging that “competition from the Internet threatens all agencies,” John Caldwell, president of the consulting firm Caldwell Associates, told commissioners, “It would be a mistake, in my view, to recommend or have government intervention/regulation resulting in controls over pricing or costs of distribution.”

Caldwell said that, even though Orbitz is “owned and controlled by a powerful group of competing carriers” and thus “deserves scrutiny in terms of risks of anticompetitive conduct,” thus far, “nothing pernicious has been proved.”

If the hard-nosed consultants such as Caldwell argue against government intervention, so do some academicians.

“In my view, there must be extraordinary reasons for improving the conditions of travel agents, especially smaller travel agents,” said Kenneth Button, professor of Public Policy at George Mason University. He said Congress should avoid “tinkering with particular links in the long vertical supply chain of air transportation to support a particular group.”

That chain, of course, is composed of human beings who can take action on their own. In its report, “Travel Market Analysis 2002-2004,” PhoCusWright’s Lorraine Sileo suggested that travel agents:

" Continue levying service fees. The rationale: “The travel agency is now positioned as the advocate of the buyer rather than a distributor of the supplier.” This legitimizes those fees. PhoCusWright cautions, however, that “it is imperative for travel agencies, particularly smaller ones, to educate their customers” on the value of their services.

" Shift product mix. “With approximately 10% of all adults having ever taken a cruise and suppliers paying 15% to 20% commission, there is tremendous opportunity to profit,” concluded the paper’s authors, Sileo and Susan Steinbrink.

" Sell value. While travel agents have heard this litany before, PhoCusWright puts considerable credence in the proposition: “Travel agencies must sell the value of their services and expertise over price to sustain long-term relationships with customers and be profitable.”

No one knows what the commission will eventually report to Congress. Still, if this fourth and final hearing emphasized anything, it’s that travel agents can take at least some matters into their own hands regardless of how Washington responds.

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