Travelers hoping that the federal government would settle the battle between the airlines and the third-party sites that distribute their fares will have to wait a little longer.
The Department of Transportation announced Monday that it was delaying action on addressing the issue of how and where à la carte fees must be displayed from January to May 2013.
The announcement is the latest delay in a process that has now been pushed back at least 16 months even as the two sides involved ramp up efforts to push their cases and sway public opinion.
“DOT received valuable information from the airline and ticket agent industries, among other aviation stakeholders, that has been helpful in preparing the proposed rule and analysis,” said DOT spokesman Bill Mosley. “DOT is reviewing this information and working to finalize the proposal.”
Not surprisingly, the news didn’t sit well with consumer activists. “I knew it was going to be delayed but I thought it would be a delay of maybe a month,” said Charlie Leocha, director of the Consumer Travel Alliance. “I was stunned to see it was delayed until May.”
The DOT decision is merely the latest development in the ongoing clash between the airlines and the Global Distribution Systems (GDSs), such as Sabre and Travelport, that distribute their tickets to travel agents, corporate travel managers and third-party websites. Waged on multiple fronts, it’s a mostly behind-the-scenes skirmish that could, in time, change how and where travelers book their tickets.
“This is the plumbing inside the airline industry,” said Douglas Quinby, senior director, research, for PhoCusWright, “and it’s one big, hot mess.”
The mess in question is the result of evolving technology, the rise of à la carte airfares and the love-hate relationship between the airlines and GDSs. Amid the claims and counterclaims, it boils down to three basic issues:
- Economics: Providing fare and schedule information to travel agents, online travel agencies (OTAs) and corporate travel programs, the GDSs account for roughly 60 percent of ticket sales. The airlines pay a “segment fee” for every transaction made through the systems, fees that add up to approximately $7 billion per year on a global basis.
- Comparison shopping: By providing data from multiple airlines, GDSs make comparison shopping possible. Airlines like the access to the millions of travelers who use Expedia, Kayak, Priceline, etc., but they chafe at the fact that the process turns seats into interchangeable commodities separated only by price.
- “Owning the passenger”: The airlines complain that they don’t know who their GDS-delivered passengers are until the reservation is made, which makes it harder to market individual services — more legroom, priority boarding, etc. — based on passengers’ preferences and loyalty-plan status.
“It’s a Catch-22 for the airlines,” said Quinby. “They want to own the customer experience and drive loyalty and yield but, at the same time, they also know that the GDSs provide access to enormous and important markets.”
All of which takes on added significance at a time when airlines have adopted a model in which every service or amenity comes at a price that’s not included in the base fare.
“The airlines have divorced the fare from the physical seat,” said consultant Brian Clark of Hudson Crossing. “You’ll get a seat but the price you pay comes with different levels of service or merchandising offers.”
The challenge is incorporating all those different factors — personal preferences, loyalty-plan status and hundreds of à la carte fees and ancillary services — into systems that can be accessed by all distribution channels.
The good news is that there’s been progress in doing so. Last month, US Airways’ front-of-the-cabin ChoiceSeats became available through Sabre while Delta is currently working on making its Economy Comfort seats available through Travelport.
The bad news is that such efforts are few and far between. “It’s a very small amount of inventory on a very small amount of ancillary-fee inventory,” said Kevin Mitchell, chairman of the Business Travel Coalition, which advocates for full fee disclosure across all channels.
“It’s positive but it’s not going to get us anywhere in the next 10 years at this rate,” he told NBC News.
In fact, for every “hands across the aisle” effort, there’s another new ancillary offering that promises to rekindle the arguments. On Wednesday, American Airlines rolled out new fare levels that allow passengers to bundle additional services, such as baggage and priority boarding, for an extra $68–$88 per roundtrip.
The new “Choice” options are only available on the carrier’s website.
Little wonder, then, that the two sides continue to squabble. Last month, Mitchell filed a petition on the White House’s “We the People” website, reiterating calls for the Department of Transportation (DOT) to require the airlines to make all fees available through all sales channels. (As of Wednesday, the petition had garnered 2,584 of the 25,000 responses required to receive a White House response.)
The airlines argue that such a rule is inappropriate. “Sabre and Travelport control about 92 percent of the U.S. GDS market,” said Perry Flint, spokesman for the International Air Transport Association (IATA). “A rule that would force airlines to distribute everything through these systems would stifle innovation and would protect what is effectively a duopoly in the market.”
At the same time, the industry is launching its own campaigns to bolster its case. On the public-relations front, IATA’s domestic counterpart, Airlines for America, recently unveiled a proposal calling for a National Airline Policy that would, among other things, “reform regulations that add unnecessary costs and do not improve safety or the customer experience.”
Meanwhile, on the technology front, IATA is working on a platform designed to make ancillary fee information available across all distribution channels. According to Flint, the New Distribution Capability (NDC) will combine price-comparison features and increased customization for travelers who provide their personal preferences and other information.
“That’s about as toxic as it gets,” counters Mitchell. “Instead of viewing all offerings in the marketplace, you’d be comparison shopping between the three or four carriers that decided to return results that they want to offer.”
Put it all together and Quinby’s “big, hot mess” promises to get bigger, hotter and messier. The airlines and GDSs need each other but don’t necessarily like each other; consumers find booking flights a tedious and frustrating process, and the prospect of more fees showing up in more places could be a bit of a mixed blessing.
A $25 bag fee here, a $50 priority-access fee there and, pretty soon, driving starts to look like a better deal.
Rob Lovitt is a longtime travel writer who still believes the journey is as important as the destination. Follow him at Twitter.