Decisions by the largest U.S. airlines to restrict or eliminate airfare listings on online travel agencies, metasearch engines and other Internet channels could boost air ticket prices by more than 10%, according to a report released last week by a trade group representing OTAs.

The 63-page study was commissioned by the Travel Technology Association (TTA) and authored by Yale University professor Fiona Scott Morton, a former deputy assistant attorney general at the U.S. Department of Justice. It concluded that the airlines’ restrictions on online vendors could cost travelers an additional $6.7 billion a year and cause about one in six potential independent passengers to decide not to fly.

In response, some consumer advocates immediately called for stricter regulation of airlines, while industry analysts defended the practice as a free-market prerogative.

Travel Tech’s report predicted that removing airfares from third-party online sites will result in less pricing transparency and will boost average U.S. airline ticket prices by 11%, to about $300, forcing about 41 million of the 264 million leisure and unmanaged business passengers to opt not to fly.

The remaining 223 million independent air passengers would pay, on average, an additional $30 a ticket, accounting for the report’s $6.7 billion figure. The study also estimated that the loss of those 41 million annual passengers would have little impact on airline profits because low-end purchases generate the lowest margins.

Spurring the report was the decision by some carriers to narrow the number of intermediaries allowed to list their fares. Specifically, Travel Tech singled out Delta Air Lines, which in late 2010 removed fares from CheapOAir and Last year, Delta removed its fares from TripAdvisor, and Hipmunk.

Low-cost leader Southwest Airlines has had a longstanding policy of making its online fares available only on its website, but the report was more sanguine about Southwest maintaining its policy.

Travel Tech’s report concluded: “At a time when independent, transparent comparison shopping is most needed, some airlines are attempting to restrict access to their fare and schedule information, reduce the ability of consumers to easily compare prices, and drive travelers to their own websites, which do not offer price comparisons with other airlines. The airlines’ strategy of cutting off distribution through smaller OTAs and metasearch sites appears designed to avoid serving lower-margin leisure travelers and focusing on filling their capacity with time-sensitive, high-margin business customers.”

Delta spokesman Anthony Black said, “Delta will continue partnering with a limited, but responsive and adaptable group of online retailers who we believe effectively support our efforts to provide a robust shopping experience. Delta reserves the right to determine who it does business with and where and how its content is displayed.”

Airline representatives disputed the report’s implications.

“Consumers in other sectors of our nation’s economy simply do not have the variety of and details about the services that they are interested in that airline customers have access to,” said Victoria Day, a spokeswoman for the trade group Airlines for America (A4A). “The notion that the U.S. airline industry, which enplanes over 700 million passengers a year, is going to allow the various distribution channels that facilitate those customers’ purchases of its services to dry up is nonsensical.”

At the focus of the study is a U.S. airline industry that is projected to reach record profits of about $25 billion this year on a combination of increasing overall consumer and business spending, a continued climb in ancillary-services revenue and relatively low fuel prices.

This year, Americans will boost airline-ticket spending by about 5%, to $147.3 million, while online airline-ticket spending will advance about 6%, to $81.5 billion, according to Phocuswright.

And while the OTAs’ percentage of online hotel room revenue has increased 2 percentage points, to 48%, during the past three years, OTAs’ share of online airline-ticket revenue is down 2 percentage points during the same period, to just 25%.

In addition to spurring the study, airline policies restricting fare listings have attracted the attention of such groups as ASTA and the Business Travel Coalition (BTC).

Eben Peck, ASTA’s senior vice president of government and industry affairs, said, “We are concerned about airline efforts to restrict access to airline pricing and services and supportive of government efforts to maintain and expand consumer access to such services.”

At the BTC, founder Kevin Mitchell argued that “strong, independent distributors are necessary to keep the airlines honest on their own websites and in their offerings elsewhere to consumers. OTAs and metasearch sites uniquely provide consumers with the comparison-shopping tools that keep pricing discipline in the system.”

Even so, aviation analyst Bob Mann said that as the airline industry consolidates — the study estimates that the four largest U.S. carriers account for about 80% of U.S. airline-ticket sales — and travel spending continues to rise, online travel sales channels might be forced to pay more for access to those listings.

“No airline needs help selling lowest-fare seats,” Mann said. “Only those OTAs that have a business-travel selling unit are likely to survive on present terms. Others may end up paying the carrier a negotiated ‘access fee,’ or be shut out.”

Meanwhile, some industry players, including A4A, took issue with the study, arguing that just as airlines began pushing listings into the nascent OTA industry in the wake of the 9/11 terrorist attacks in order to boost business, it’s the airlines’ prerogative to do the reverse as business surges.

“Airlines are one of the most transparent industries when it comes to disclosing pricing and inventory availability,” said travel industry analyst Henry Harteveldt. “The report dramatically overstates the problem. No airline should be forced to list its fares or sell its products through any third-party organization that doesn’t meet the carrier’s business requirements.”

Travel Tech appeared to take more of an issue with Delta for changing its online listing strategy than with Southwest for maintaining its longstanding policy.

“While Southwest has never shared its content with third-party intermediaries, they also haven’t taken action to stop the display of schedule information,” said Travel Tech spokesman Philip Minardi. He added that the study’s implication was that Southwest’s policy did help boost its ticket prices.

What the industry does with its listing policies going forward is unclear, as Phocuswright projects airline revenue growth to slow from about 7% in both 2013 and 2014 to 5% by next year. Also unclear is how further adjustments to airlines’ fare-listing policies will impact both prices and passenger numbers, according to Phocuswright senior technology analyst Bob Offutt.

Travel Tech, Offutt said, “tried to simplify something that’s much more complex.”

He added that the number of itinerary permutations between two destinations, coupled with the airlines’ yield-management efforts, make it nearly impossible to gauge the pricing impact of a particular fare-listing strategy.


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