The DOT slaps some hands
The Department of Transportation has slapped the hands of the global distribution systems, warning them against biasing fare displays. The irony of this reprimand is that during the current battles over the future of airline distribution, the GDSs have sought to position themselves as airline consumers’ best friend, saying that they provide the beset and most transparent marketplace where consumers can comparison shop and find the airfares and pricing that work for them.
But now, the DOT, which is the official aviation consumer advocate, has shaken a regulatory finger at the GDSs and the online travel agencies (OTAs).
In the letter the DOT said that at least one online travel agency may have “intentionally biased or distorted the airfare and schedule information of at least one airline that is displayed to consumers on the OTA’s website so as not to accurately reflect that information or accurately reflect that information compared with that of other carriers.
Additionally, we understand that certain GDSs may have biased or distorted the information displayed to travel agents in a similar manner.”
The DOT says that it doesn’t tell distributors how they must display airline services or require any OTA or GDS to provide fare and schedule information or sell tickets for all air carriers or any particular air carrier.
However, wrote Samuel Podberesky, assistant general counsel for Aviation Enforcement and Proceedings, the DOT “has the authority to prohibit OTAs and GDSs from presenting their displays in an unfair and deceptive manner, including by biasing their displays.” And, Podberesky said, if OTAs or GDSs do engage in display bias have to conspicuously disclose that fact.
Bias has been around a long time. Originally, back when airlines created the computer res systems that eventually morphed into the GDSs of today, they leveraged the inventory display, giving the parent airline of the CRS preference. You could only get 19 lines on the green screens of those old systems and 60 to 80 percent of fares were sold off that first screen. But by 2002 and 2003 airline distribution world had changed. The airlines had spun off the GDSs into independent companies, the GDSs were deregulated and the old rules against bias were removed, says Bob Offutt, senior technology director with PhoCusWright. But despite getting this regulatory green light, in the end, the GDSs stuck with neutrality.
But a little bias stayed in the system, points out Jim Davidson, president and CEO of Farelogix, the travel technology company that builds direct connections for airlines. Davidson, former president, North America, for the GDS Amadeus, points out. Most people prefer a nonstop to a connecting flight, so fare displays favor those flights. Timing is key, that’s why you’ll see multiple airlines with flights schedule at 8, 8:01, 8:02, to get the benefit of a higher display.
In the latest round of battles over distribution between the GDSs and airlines, which is an unusually public one, Sabre said it would “de-preference” and ultimately pull American from its display. Subsequently, the two companies opted to continue to work together. Expedia made it tougher to find American’s fares and then completely dropped American from its system.
American accused Travelport of bias because of the way Travelport said it would display a booking source premium that American said it was going to charge agents outside the U.S. who booked American in the GDSs Travelport owns. American said that Travelport’s plans to include those fees in the fare price amounted to bias. And certainly, it did mean that in highly competitive markets, a fare just a few dollars higher than the lowest fare would have pushed American off the first screen. And if a fare is not on the first screen, consumers just don’t see it. American has now dropped its plans to charge that fees.
Sabre, one of the recipients of the letter (other recipients were Travelport, Amadeus, Expedia, Orbitz, Travelocity and the Interactive Travel Services Association), said that it welcomed the DOT’s guidance.
“We are in full compliance with all federal regulations, and our recent actions have been well within all boundaries set forth both by DOT in its recent letter. Sabre will continue to work with all stakeholders in the industry to advocate for transparency and fair competition throughout the air travel system,” a spokeswoman for the GDS said.
It’s all a battle over the airlines’ efforts to establish their own direct connections and their desire to shift from a distribution model based on fare and scheduling, to an attribute-based model, one in which airlines market themselves on what they have to offer customers. Southwest Airlines, JetBlue Airways and Virgin America were built on this model. The legacy carriers are investing heavily in making the transition to this model.
But now, the DOT, which is the official aviation consumer advocate, has shaken a regulatory finger at the GDSs and the online travel agencies (OTAs).
In the letter the DOT said that at least one online travel agency may have “intentionally biased or distorted the airfare and schedule information of at least one airline that is displayed to consumers on the OTA’s website so as not to accurately reflect that information or accurately reflect that information compared with that of other carriers.
Additionally, we understand that certain GDSs may have biased or distorted the information displayed to travel agents in a similar manner.”
The DOT says that it doesn’t tell distributors how they must display airline services or require any OTA or GDS to provide fare and schedule information or sell tickets for all air carriers or any particular air carrier.
However, wrote Samuel Podberesky, assistant general counsel for Aviation Enforcement and Proceedings, the DOT “has the authority to prohibit OTAs and GDSs from presenting their displays in an unfair and deceptive manner, including by biasing their displays.” And, Podberesky said, if OTAs or GDSs do engage in display bias have to conspicuously disclose that fact.
Bias has been around a long time. Originally, back when airlines created the computer res systems that eventually morphed into the GDSs of today, they leveraged the inventory display, giving the parent airline of the CRS preference. You could only get 19 lines on the green screens of those old systems and 60 to 80 percent of fares were sold off that first screen. But by 2002 and 2003 airline distribution world had changed. The airlines had spun off the GDSs into independent companies, the GDSs were deregulated and the old rules against bias were removed, says Bob Offutt, senior technology director with PhoCusWright. But despite getting this regulatory green light, in the end, the GDSs stuck with neutrality.
But a little bias stayed in the system, points out Jim Davidson, president and CEO of Farelogix, the travel technology company that builds direct connections for airlines. Davidson, former president, North America, for the GDS Amadeus, points out. Most people prefer a nonstop to a connecting flight, so fare displays favor those flights. Timing is key, that’s why you’ll see multiple airlines with flights schedule at 8, 8:01, 8:02, to get the benefit of a higher display.
In the latest round of battles over distribution between the GDSs and airlines, which is an unusually public one, Sabre said it would “de-preference” and ultimately pull American from its display. Subsequently, the two companies opted to continue to work together. Expedia made it tougher to find American’s fares and then completely dropped American from its system.
American accused Travelport of bias because of the way Travelport said it would display a booking source premium that American said it was going to charge agents outside the U.S. who booked American in the GDSs Travelport owns. American said that Travelport’s plans to include those fees in the fare price amounted to bias. And certainly, it did mean that in highly competitive markets, a fare just a few dollars higher than the lowest fare would have pushed American off the first screen. And if a fare is not on the first screen, consumers just don’t see it. American has now dropped its plans to charge that fees.
Sabre, one of the recipients of the letter (other recipients were Travelport, Amadeus, Expedia, Orbitz, Travelocity and the Interactive Travel Services Association), said that it welcomed the DOT’s guidance.
“We are in full compliance with all federal regulations, and our recent actions have been well within all boundaries set forth both by DOT in its recent letter. Sabre will continue to work with all stakeholders in the industry to advocate for transparency and fair competition throughout the air travel system,” a spokeswoman for the GDS said.
It’s all a battle over the airlines’ efforts to establish their own direct connections and their desire to shift from a distribution model based on fare and scheduling, to an attribute-based model, one in which airlines market themselves on what they have to offer customers. Southwest Airlines, JetBlue Airways and Virgin America were built on this model. The legacy carriers are investing heavily in making the transition to this model.