Mark Pestronk
Q: It seems as if every single airline decision affecting smaller agencies has hurt us since the first commission cuts in 1995. The most recent example is American's decision to deny frequent flyer benefits to all of our leisure customers starting in late April. We are not currently a "preferred" American agency, and even if we were, we would dread having to shift to NDC reservations because of the limited functionality available. I have been extremely upset at all of this. Does American have the legal right to discriminate against our agency in this way? If I join a host agency, does American have the right to tell the host agency not to let us ticket on American?
A: Every airline has the legal right to set every agency's conditions for the sale of the airline's services. Every airline also has the legal right to discriminate by providing benefits to some agencies and not to others or by providing more benefits for direct bookings than bookings through agencies.
Airlines' rights were affirmed in the well-known 1989 U.S. Court of Appeals decision in Illinois Corporate Travel Inc. dba McTravel v. American, where the court held that, because travel agencies were true agents of their airline principals, the airlines could prohibit rebating by agencies and, by implication, otherwise dictate all the conditions for the sale of their tickets.
Unless two or more airlines conspire to dictate a practice or a consumer can prove that the practice furthers an airline's local monopoly and thereby hurts consumers, there is nothing your agency can do on its own to stop practices that harm your business, even if you had the wherewithal to file a lawsuit. Only consumers can challenge airline monopolists.
If a traveler or group of travelers sued American, they might be able to prove that American was abusing its monopoly in major hub cities such as Dallas. However, antitrust cases such as these take years, and frequent flyer rules would probably have changed by the time the case got to trial.
If you are an ASTA member, you can be proud that the Society is asking the DOT to protect consumers by stopping American's premature NDC rollout. ASTA should add the latest anti-consumer practices to its list, if it hasn't done so already.
One result of the frequent flyer decision is to force large numbers of agencies to join a host that is a preferred agency in order to ticket on American. As you probably can guess based on the McTravel case, American would have the legal right to prohibit the host from allowing such ticketing if that carrier wanted to do so.
Many agencies no longer offer airline tickets, and American's decision tends to reinforce the wisdom of their choice. However, some highly profitable agencies with good commission deals issue tickets in high volume and cannot realistically do so through a host. Those agencies will be forced to become preferred and shift more and more to NDC reservations, which is precisely American's goal.