Credibility

Why the airline industry is its own worst enemy, case study No. 422.

We have before us today an acknowledgement from ARC that its monthly report of sales and settlement statistics doesn't really convey the information that reasonable people might assume from looking at it. This goes back years.

We have no doubt that when ARC reports its monthly "total sales" as $X billion, it really is $X billion. But beyond that, ARC's credibility is strained by the disclosure that the line items it chooses to break out are labeled in ways that obscure their content, or not labeled at all.

As of last week, the online version of the ARC report clearly stated that the system processed $8.2 billion in "taxes" during the first six months of 2012 and that this was a 25% increase over the same month of 2011.

But it's not true.

The $8 billion represents, in addition to U.S. and foreign government taxes and fees, an unknown amount of airline revenue in the form of fuel surcharges and other add-ons. Yet this pile of money is labeled "taxes."

It's little comfort that ARC labels this sum in some variations of its report as "taxes and fees." For a period of time some years ago, ARC even included a footnote that this line included "all taxes, fees and charges (e.g., passenger facility charges)," but that doesn't tell the whole story either, for it failed to state clearly that this line contained airline revenue as well as government revenue.

It would seem to be a simple matter, if one is going to the bother of sharing this information with the rest of the travel industry, to indicate what it is.

But ARC has chosen not to.

Equally perplexing was ARC's decision, beginning in 2007, to include in "total sales" a growing airline revenue stream from cancellation penalties and change fees.

Prior to that year, these amounts were not included at all. Over the ensuing five years, this stream has grown from $750 million to more than $1 billion per year.

ARC chose to add it to "total sales" in 2007 without disclosing the addition of this revenue stream. ARC even calculated and published the percentage increase in "total sales" between 2006 and 2007 without bothering to mention that one year was an apple and the other was an orange.

We take ARC CEO Mike Premo at his word when he states that ARC and its airline owners are not trying to hide anything, but it is even more apparent that ARC is not going out of its way to be particularly transparent or even informative.

This is an especially strange demonstration of inattention and inertia, given that ARC has invested so much in recent years to boost its reputation as a cutting-edge provider of data services to the industry at large.

ARC is under no legal obligation to publish any operational statistics, but as long as it chooses to do so, it would seem to us that it has an obligation to be clear about what it produces.

We don't believe it has met that standard, and we earnestly hope that ARC finds the resources to produce and label these data in a more useful fashion -- soon.

In the meantime, this publication will continue to report the published announcements for "Total Sales" as they become available, but we will refrain from reporting the breakouts and subtotals until we are certain that we can make sense of them.

Interested readers can find ARC's sales and document statistics at http://arccorp.com/news/sales-document-statistics-archive.jsp.
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