Hit and miss
In baseball, we expect hitters to fail about two-thirds of the time. We would like to hold the federal government to a slightly higher standard, but, alas, the Transportation Department is not making it easy.
This page is protected by Copyright laws. Do Not Copy. Purchase Reprint
In its latest two trips to the plate, the DOT hit a home run and then hit a weak blooper that's still up in the air.
The DOT delivered the home run when it signaled its intention to approve IATA's Resolution 787, an agreement to develop new XML messaging standards for third-party channels that could pave the way for what could be promising new ways of doing business, what IATA calls a New Distribution Capability.
The blooper came in the form of a rulemaking notice that proposes several new consumer protection rules for airlines and travel agents -- many of which, in our view, are of questionable merit. This ball will remain in the air for a 90-day comment period and then some, so we're not sure where it's going to land. But we don't like the looks of it.
With respect to IATA, the DOT concluded -- correctly in our view -- that today's air travelers are not always looking for just the lowest fare. Some fares include free checked baggage or seat selection, some don't. Some airlines offer the option to purchase extra leg-room or WiFi, some don't. In short, making apples-to-apples comparisons in the GDS channel is no longer the snap it once was.
The DOT agreed with IATA that a distribution system founded on XML technologies could bring more sophisticated tools to travel marketers and benefit consumers with more relevant offers while also giving travel agents "a wider product range."
Despite the initial reaction, or even over-reaction, by some in the distribution community, we think the DOT got it right.
The consumer protection rules are another matter.
We'll have more to say on the particulars in a future edition, but our first impression of this effort is that it's a bundle of solutions looking for a problem.
Tellingly, the DOT's own cost-benefit analysis found the costs of these regulations would outweigh the benefits. And the DOT offered scant evidence that the rules are even needed to correct abuses.
In support of one proposal, for example, the DOT admitted that "we are not aware of whether there is a widespread problem," which simply means "we don't know." It went on to propose a solution anyway.
On another topic, the document proposed a rule partly because "the Department sees no reason not to."
These are hardly compelling, fact-based justifications for regulatory intervention.
One especially odd aspect of the rule is the arbitrary dividing line between travel agents and "large" travel agents, defined vaguely as those with annual revenue of $100 million or more.
The DOT document did not explain whether this means gross sales or agency revenue derived from commission and fees, nor was it clear about whether the $100 million is to be based on air sales or overall travel sales. Also a mystery is how the DOT intends to monitor an intermediary's books to determine whether it's over the threshold.
One requirement for large agencies would be that they inform clients of itinerary changes in a timely manner. The DOT offered no evidence that this is a problem for agency clients, nor any reason why the clients of large agencies are entitled to this protection, while others are not.
In our book, that's a foul.