WASHINGTON -- Let's cut to the chase on the GDS rules -- because
the Transportation Department soon will have to -- and its first
question has to be this: Should the rules exist at all?
The DOT just received its initial round of industry comments on
a plan to revise the GDS regulations, and a blizzard of legal
filings fairly swirl around that question.
United, Delta, Continental, Northwest, Alaska Airlines, Sabre
and Worldspan advocated eliminating the rules entirely. Amadeus did
not favor eliminating the rules, but the GDS majority-owned by Air
France, Iberia and Lufthansa said it "would not oppose"
deregulation.
American Express said it would rather have no rules than bad
rules that produce inequities in the market. Noting that the DOT
brushed off suggestions that it regulate Orbitz, American Express
said "if the Department chooses not to regulate all airline-owned
systems, then it should deregulate travel distribution systems
entirely to allow full and unfettered competition."
In a no-rules scenario, the GDS business would be left to
free-market competition. Abuses -- at least in theory -- would be
held in check by federal enforcement of consumer protection and
antitrust laws.
The increased push for deregulation comes after clear
indications that the White House Office of Management and Budget
has been pushing the DOT in that direction.
In arguing for deregulation, Delta maintained that the
industry's situation today bears "almost no resemblance" to the
conditions that prompted the adoption of the regulations almost 20
years ago.
Worldspan argued that, in a rapidly changing environment, no new
rules could be considered "reasonable or justifiable" when the
"facts" on which they are based are likely to be out of date by the
time the rules are implemented.
There are, however, plenty of opinions to the contrary. The
deregulators are topped, in number -- if not clout -- by
respondents that want to keep and improve upon the rules.
Several foreign airlines weighed in for keeping the rules. So
did some U.S. carriers. For example, both America West and US
Airways oppose deregulation, albeit with different agendas.
America West likes the proposed changes, such as eliminating the
mandatory participation rule and ending the ban on variable booking
fees, that are intended to give the airlines more clout in
negotiations with the GDSs.
US Airways, on the other hand, argues that eliminating those
rules "would have grave anticompetitive consequences for the
nonlarger carriers and all consumers," and it also wants some GDS
rules to cover online travel agencies.
Many retailers also oppose deregulation, as reflected in the
comments submitted by individual agents and by ASTA.
"Because of the regulations adopted for [the GDSs], consumers
and the travel agents who serve them have had access to remarkably
accurate comparative information regarding fares for air travel,"
said Carlson Wagonlit Travel, which, among other things, advocated
extending the mandatory participation rule to include airlines that
market GDSs.
ASTA said the DOT must confront the question of what would
happen if the rules are removed and a GDS engages in behavior that
formerly was banned.
"The history of DOT enforcement practices and the resources
devoted to the subject do not offer encouragement to travel agents
caught in the war between the large airlines, on which the agents
are dependent for most of their business, and the four [GDSs], on
which the agencies are almost totally dependent for reservations
information and booking technology," ASTA said.
Among the GDSs, Galileo stood alone in insisting the regulations
should be retained "until all [the GDSs] have been divested by
their airline owners and all marketing agreements or other similar
affiliations between [the GDSs] and the airlines have been
terminated."
Where is the world's largest airline in all of this? American
said it would be satisfied, for now, if the DOT eliminated
mandatory participation, productivity payments and the ban on
variable pricing.
But American also proposed a three-year sunset date on the new
regulations, and added: "American does not believe the public
interest will be served by extending the regulations beyond three
years in the absence of a compelling showing that regulation
continues to be needed."
The DOT also came under some criticism by agents for some of the
assumptions underlying its proposals.
The DOT long has expressed concerns that the GDS systems
unfairly lock in agents with restrictive contract provisions that
make it difficult for agents to use more than one system.
Thus, several key aspects of the DOT's proposals are designed to
make it easier for agencies to use more than one system.
ASTA said this concern is misplaced because the vast majority of
agents don't want or need to use more than one GDS. Similarly, a
group of 22 large corporate agencies, filing jointly, said the
DOT's belief in the benefits of using multiple systems is a "myth."
The group said the systems are virtually the same in terms of their
functionality for booking air.
"Ironically, the real differences among the systems are in the
nonair suppliers, such as cruise lines, tour operators, and
vacation rentals, but the DOT has no jurisdiction over such
matters," the group said.
The existing rules are set to expire at the end of January.