In a nice big kiss to Orbitz, last week the U.S. Department of
Transportation decided that there is no need to regulate the sale
of airline services over the Internet.
Under the 286-page Notice of Proposed Rulemaking issued Nov. 13,
the first of its kind in 10 years, the U.S. government would
continue to regulate all of the GDSs, including the ones no longer
owned by the airlines, but would not regulate Internet ticket
sales.
“The airlines’ growing use of the Internet for selling tickets
has weakened their dependence on the [GDS] systems and possibly the
need for at least some of the existing rules,” the DOT said.
Reaction in the industry was swift and furious, with many saying
the overall proposal was heavily skewed in the airlines’ favor and
would further destabilize the industry.
Orbitz, meanwhile, issued a statement commending the DOT for its
actions. According to Travel Management Daily, the proposal calls
for the elimination of two aspects of the rules that “may unduly
limit the ability of airlines to bargain for better terms with the
systems.”
One target is the mandatory participation rule, which requires
an airline with ownership interest in a GDS to participate at the
same level in competing GDSs, as long as terms are commercially
reasonable.
The second proposed change would require the GDSs to charge the
same fees to all airlines.
However, the DOT proposal would continue to require that the
systems be organized in an “objective and unbiased manner.”
Travel agents could be affected in several ways.
The DOT, for example, is asking for comment on ways to regulate
productivity pricing so the practice would no longer serve as a “de
facto minimum use” provision.
Also, the proposed rule changes would restrict the
agency-related marketing data that airlines may obtain from
GDSs.
The Notice of Proposed Rulemaking also suggests a change in the
DOT’s policy guidance on agent service fees, a separate but related
issue.
Under certain conditions, agencies initially would be allowed to
exclude the service fee from an airline ticket’s advertised price,
as long as they notify consumers of the fee and the total price
when informing them of any specific itinerary.
There will be a 90-day comment period, beginning with the
proposals’ publication in the Federal Register. Sixty days are for
initial comments; the additional 30 days for replies. Afterwards,
the DOT will review the comments and prepare a final form.
The DOT observed that the growing use of the Internet and other
changes in airline marketing do not yet seem to have ended the GDS
systems’ power. DOT, however, is also requesting comment on whether
the rules could be allowed to expire next year.
Orbitz’s statement lauded the DOT for “taking a bold and
much-needed step” by proposing to end the mandatory participation
rule.
However, Steve Cosgrove of Dynamic Travel and Cruises in
Southlake, Texas (the home of Sabre), said that agents and GDSs
would be hurt if different airlines are in different systems.
“Say United is in Apollo, Delta is in Worldspan and American is
just in Sabre. US Air is in all of them, as are the rest of the
carriers. Which system does an agent in Chicago go with?
“As for letting the airlines see the marketing data, that should
have been shut off a long time ago,” Cosgrove continued. “I’m
hardly surprised the Bush administration would side with big
business,” said Stephen Shields of Shields World Travel in
Pleasanton, Calif.
“But from what we read,” Shields continued, “the Internet is
driving the airlines closer and closer to bankruptcy as they lose
money on every transaction. At least we don’t.”
