What is the position of
the major U.S. carriers on the Department of Transportation's
proposal to outlaw productivity pricing and the bonuses associated
with it?
A: Nine U.S. airlines filed comments in the
DOT's GDS rules case. Not one supports productivity pricing. Most
fall for the same fallacy: The airlines are forced to pay such high
booking fees due to the generous bonuses the GDS vendors pay travel
agencies. Ergo, stamping out bonuses would lower booking fees.
American's comments illustrate the faulty line of reasoning: "As
long as productivity payments remain an accepted GDS practice, no
GDS will adopt a low-cost strategy, and competitive systems [i.e.,
Orbitz and
airline Web sites] will face an artificial but significant barrier
to entry. ... Accordingly, ... these types of payments should be
prohibited."
Continental hates all GDS bonuses, not only because "airlines
suffer from productivity pricing" but also because bonuses pay for
travel agencies' equipment, which "reinforces a subscriber's
dependence on its primary system."
Delta sees greedy vendors and agencies that have arranged a
"direct pass-through of booking fees from the airlines to their
agents."
Alaska Airlines wants the GDS rules phased out entirely in three
years. However, Alaska cannot resist a swipe at travel agencies, as
it supports a ban on productivity pricing, even if it lasts only
for three years.
America West claims that without productivity pricing, "agents
would likely seek more comprehensive information and provide
customers with more accurate advice."
This insult is like saying that if America West charged higher
fares, it could afford to spend more money on safety and "would
likely" be a safer airline. The author of such a comment would have
no more idea of what he was talking about than the author of
America West's comments.
Likewise, Midwest believes that "such pricing plans run up
carrier costs without justification."
Do the airlines really believe that vendors would lower booking
fees if there were no bonuses? Probably not. They just want the DOT
to do their dirty work.
Rather than induce agencies not to use the GDSs -- like normal,
rational businesses would -- the airlines would use the government
as their hit man to bump off more agencies.
Mark Pestronk is a Fairfax, Va.-based attorney specializing
in travel law. He answers your questions in the TravelWeekly.com
Legal Ease forum. To contact Mark directly, e-mail him at [email protected].