C-FARE Urges Care in Review

C-FARE, the newly formed Coalition for Fair Access to
Reservations in Europe, today cautioned European regulators to exercise care in
their current review of European legislation governing the European computer
reservation systems (CRS) industry.The members of C-FARE urged the European Commission not to remove existing rules
that protect consumers, travel agents, airlines and independent CRS companies
against anti-competitive abuse by airline-owned CRS companies. C-FARE’s members
include AERTICKET, the Business Travel Coalition, ebookers, Galileo International,
Navigant, Sabre Holdings, Travel Overland and Tui4U.com.

In an open letter to Commissioners Jacques Barrot (Transport), Neelie Kroes
(Competition) and Markos Kyprianou (Consumer Protection), C-FARE reminded European
regulators that total deregulation of the computer-reservations system industry in
Europe would be bad news for European travellers as long as Amadeus, Europe’s
largest CRS, is owned by airlines.

 

“Europe’s not ready to abandon some basic, time-honoured consumer safeguards in the
travel reservation business, and won’t be as long as major airlines continue to own
or control key travel reservation services,” said Brandon Mitchener, Executive
Director of C-FARE.

 

ADVERTISEMENT

Several commentators have incorrectly described the pending sale of Amadeus as a
divestiture by its primary airline owners. In reality, the deal has done little more
than slightly reduce the combined ownership of Air France-KLM, Iberia and Lufthansa
by less than one percent, from 46.69% at present to 45.76%. The most recent data
available indicates Air France-KLM would have a 22.88% stake under the new
structure, Iberia 11.44% and Lufthansa 11.44%.  This represents a continuing level
of influence and unhealthy economic incentives for Amadeus to favour its parent
carriers and vice-versa. It does not in any way lessen historical concerns about the
potentially damaging results of such vertically integrated airline-CRS relationships
for consumers and competition. 

 

This distinction is important and deserves careful consideration by the Commission
as it considers whether to deregulate the European CRS industry. CRSs are
information aggregators that collect pricing and availability information from
airlines, hotels and rental car companies, among other suppliers, and make the
information available to travel agents and travel websites.

 

The CRS industry in Europe is currently subject to regulations that require airlines
which own CRSs to make their flights and fares available in other CRSs. This is
called “Mandatory Participation” and it ensures that travel agencies have choices
among CRS providers and that these agencies remain free to provide consumers all
available airline offerings.

 

Because of the dangers inherent in airline ownership and control of CRSs, the same
regulations also require CRSs to provide equal access to all airlines. This supports
new entrants in the air travel market, increased overall choice among airlines and,
consequently, lower airfares for consumers. In total, these regulations encourage
competition, efficiency and innovation in the travel information industry.

 

In the United States, the world’s largest air travel market, deregulation of the CRS
industry last year occurred only after the complete divestiture of CRSs by U.S.
airline owners. On this basis, the continuing airline ownership of Amadeus clearly
suggests that full deregulation in Europe would be premature and anti-competitive.

 

The rules in place in Europe today are the result of decades of abuse by airlines
that own CRSs both in Europe and in the U.S.  History teaches that airlines that own
CRSs have the means and the incentive to engage in anticompetitive behaviour, for
example by steering travellers towards more expensive flights and denying content
from the reservations systems that travel agencies and consumers prefer.

 

“The European Union recently adopted new rules granting European travellers greater
rights regarding airline flight delays and over-booking,” Mr. Mitchener said. “It
would be most unfortunate if the EU at the same time were to reduce Europeans’
historic right to choose the reservation services that best serve their needs.”
——-