Big Three argue right to restrict pay

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GET MORE: The DOT filings referenced in the article below are available in their entirety on Crossroads.

WASHINGTON -- American, Delta and United separately argued that they have the right to set restrictions on travel agent commission levels, as they asked the Transportation Department to dismiss charges by the U.S. Travel Agent Registry that they engaged in unfair competition by imposing international commission caps.

United accused Ustar, a not-for-profit business cooperative of agents attempting to create a computerized reservations system independent of the airlines, of filing the complaint to promote its own interests.

Ustar had argued that the caps show the carriers intend to "unfairly compete in the sale of international air transportation by driving travel agency income down to such low levels that travel agents in North America will no longer be able to sustain the cost of operating a travel agency business." Ustar also told the DOT that "consumers will suffer higher travel costs" as more agents charge fees, and the caps give airline-owned SatoTravel an advantage over other travel management firms.

American responded that Ustar has no basis for the anti-competition charge because American changed its commission structure to remain competitive with other carriers. American denied the cut was an attempt to "disintermediate" agents from its distribution chain. American also noted that it has an addendum to the standard Airlines Reporting Corp. agreement for its appointed agencies, in which it "reserves the right to modify its commission schedule from time to time and at any time."

The carrier said Ustar's complaint "makes no allegation nor even suggests that American's decision to modify its commission schedule is in violation of American's agreements." American said Ustar's request to "bar" the carriers from capping commissions is beyond the DOT's purview, because the Airline Deregulation Act states the department "has no jurisdiction to dictate the market structure."

Similarly, Delta said it has the right to "specify the rates and conditions under which its agents are authorized to sell Delta's products." Delta went on to argue that Ustar's charge of unfair competition was "nothing more than unsubstantiated assertions without a scintilla of evidence."

Delta noted that in a different case, the DOT dismissed a travel agency's complaint alleging unfair competition against American, ruling that the airline's agents are "obligated to obey all [of the carrier's] reasonable directions."

United accused Ustar of trying to get the DOT "to intervene in the marketplace to protect the financial interest" of agents rather than the traveling public. United said its cap was a response to an "uncertain economy and a competitive marketplace," adding that despite direct consumer sales, it "relies on travel agents to sell the vast majority of its tickets."

United also accused Ustar of exaggerating its claims that the caps will force many agents to shut down. The carrier said agents made similar claims after commission cuts on domestic tickets but "data released by the Airlines Reporting Corp. six months after...[show] an increase in the number of travel agency locations during that period."

As for SatoTravel, the Big Three each told the DOT that SatoTravel is a not-for-profit corporation that withholds a percentage of each ticket it sells to cover its costs, and returns any excess amount to its airline owners. Therefore, as American contended, SatoTravel "will never be at a competitive advantage for profits."

DOT filings
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  • Ustar complaint vs. Delta
  • Ustar complaint vs. United
  • Ustar complaint vs. American
  • American rebuttal
  • Delta rebuttal
  • United rebuttal
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