28 November 2007 - The European Commission this month adopted its proposal to "to simplify and modernize the two-decade-old rules" that form the Computerised Reservations Systems Code of Conduct. EC said the new rules covering the systems on which travel agencies rely to serve corporate customers would foster competition among travel distributors, lower airline distribution costs and slow content fragmentation. Critics said the new rules leave open the possibility of anti-competitive behavior by Air France, Iberia and Lufthansa, all indirect partial owners of Amadeus. The revised code must be reviewed by European Parliament before taking effect.
EC said the code needs updating given changes in airline distribution, notably the surge in ticket sales via Internet channels. "The higher-than-necessary booking fees [charged by CRSs] induced airlines to develop their sales via their less costly Internet Web sites," according to an EC statement. "Therefore, travel agents were not assured to have access to all the fares of an airline. By reinforcing competition between the CRS providers, the revised Code of Conduct will create the market conditions in which CRSs will provide high-quality services at better prices. This will induce airlines to provide more content via the CRSs."
EC pointed to the United States, where deregulation of CRSs (also called global distribution systems, or GDSs) has been followed by heightened participation in those systems by such airlines as JetBlue Airways and Southwest Airlines.
The revised code would bring "pricing freedom" to the European market by allowing CRSs and airlines to negotiate fees, as well as the types of information and content provided. It also would require airfares to be displayed "inclusive of all applicable taxes, charges and fees," and "ensures that rail services are given a non-discriminatory treatment." EC concluded that these new rules would enable CRSs and travel agents to "better compete in the airline distribution market."
EC also said the revised code would ensure "unbiased" fare displays, protect personal data and prevent "abuse or discrimination."
But controversy centers around the definition of "parent carrier," which EC described as "any carrier that owns or effectively controls a CRS." In its interpretation, EC said Air France, Iberia and Lufthansa--which together indirectly own 46 percent of Amadeus, a Spanish technology firm that operates Europe's largest CRS--would not be considered parents because they do not exercise effective control.
Disagreeing with that interpretation, the Coalition for Fair Access to Reservations in Europe wants transport ministers and European Parliament "to close a giant loophole." Amadeus' GDS rivals Galileo and Sabre are C-FARE members.
"By failing to clarify the definition of 'parent carriers,' the European Commission has adopted a decision that may not actually apply to anyone, thereby depriving European consumers of the protection that the code was created to provide," said C-FARE executive director Brandon Mitchener. "Amadeus, Europe's biggest CRS, and its three airline owners, which dominate both the air travel and travel distribution markets in many European markets including Germany, France and Spain, have been given a regulatory green light to consolidate their existing dominant positions, restrict access to critical information on their services and engage in other unfair competitive practices to the detriment of consumers and other market participants."
Mitchener suggested that those airlines "could provide more timely fare and seat availability information to Amadeus than to competing systems. Likewise, Amadeus would be free to provide Lufthansa, Air France-KLM and Iberia superior fare loading processes and privileged access to technology for the display and sale of their transportation."
After suggesting that EC ignored a "customer referendum" requesting stronger rules regarding parent carriers, Business Travel Coalition chairman Kevin Mitchell said European Parliament "will be able to find an equitable solution ... For example, either a 5 percent ownership threshold [by an airline in a CRS for the purpose of establishing the status of parent carrier] or a requirement that should the Commission want to change the parent carrier status of any airline that owns a CRS, that such a decision would be subject to full public consultation and stakeholder participation."
In addition to BTC, referendum signatories included the Advantage Focus Partnership, the Belgium Association of Travel Management, the Finnish Business Travel Association, the International Airline Passengers' Association, the Institute of Travel Management, the Scottish Passenger Agents' Association and the Travel Management Alliance.
The referendum stated that Air France, Iberia and Lufthansa "have both the means and the incentive to abuse this ownership position in both the aviation and the distribution markets in the absence of core protections."
Last spring,
BTC, C-FARE and scores of corporate travel managers implored EC to retain certain consumer protections in the revised code--should any airlines continue to own a CRS--after EC opened a public consultation period.
Should the code be amended, it would mark the third revision since it took effect in 1989.
