WASHINGTON D.C. å- (June 12, 2002) å- In testimony given this afternoon during the first hearings of the recently-created National Commission to Ensure Consumer Information and Choice in the Airline Industry in Washington D.C., Al Lenza, Northwest Airlineså’ vice president of Distribution and E-Commerce, called on government regulators to let competitive forces in the burgeoning online travel market continue to serve consumers and lower costs.
“Northwest is insistent that our distributors - both traditional and Internet - present and sell Northwest’s product fairly and in an unbiased manner,” Lenza said in his testimony. “We are also pulling all stops to harness the fastest growing distribution expense for Northwest - GDS booking fees, which have grown to account for nearly $14 per ticket and continue to increase at a rate of approximately 7% per year.”
Lenza, a 25-year veteran of the travel, airline and global distribution system/computer reservation system (GDS/CRS) industries, explained to the commission that Northwest’s strategy is to sell its products from as many different distribution channels as possible at the lowest possible cost. “The concept of Orbitz is that it would be neutral to all airlines, not just the owners, place competitive pressures on the duopoly of Expedia and Travelocity, and offer the advantage of access to an unbiased site that always displays the lowest available fares on all airlines.”
The other driving force behind the creation of Orbitz was to harness the fastest growing distribution expense for Northwest, GDS/CRS booking fees. With current technology, airlines are forced to pay GDS/CRS providers a fee for every flight segment they book. “Northwest will spend more than $200 million in GDS fees this year, despite reduced traffic levels,” said Lenza. “Northwest has saved nearly $2 million in GDS fees in less than one year and is poised to save substantially more in the next few years after implementing a direct link between Orbitz and Northwest’s internal reservations system.”
In his testimony, Lenza cited the positive effect that Orbitz’s presence has had in curbing careening distribution fees. “For the first time since I have been in the industry, the GDS’s are actually coming to airlines offering reduced booking fees in return for extending the broad distribution of so-called ‘Web fares.’”
Backing up his display bias claim, Lenza shared an experience Northwest recently had that prohibited bargain fares from either being viewed or promoted to consumers visiting larger, rival sites. “Just last month, the two leading competitors of Orbitz refused to load or feature a number of Northwest’s low fares to Europe because they conflicted with preferred agreements they each have with two of Northwest’s international competitors,” Lenza said.
Lenza stated that consumers have benefited from the lower cost of the Internet through access to Web fares, and if the carrier was required to sell those fares through all distribution channels, consumers would be hurt as it may no longer be economical for the airline to offer special Internet fares. “There is a view among some that all prices should be available in all channels at all times,” Lenza said. “It is our view that if such a regulation or process were to become a requirement, airlines would lose their incentive to offer low fares in cost-friendly distribution sites or channels and lose any leverage over GDS fees.”
In closing, Lenza called on the commission to let competition pull Orbitz and other sites up to their full potential, saying “Rather than interfere with the competitive landscape through special rules or regulations, Northwest encourages the commission to allow market forces to continue to drive the direction of travel distribution, and not recommend measures that artificially protect or promote certain interests whose ultimate goals are to protect their businesses from competition.”
A complete copy of Mr. Lenza’s prepared testimony is available through Northwest’s Media Relations department at (612) 726-2331.
Northwest Airlines is the world`s fourth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam and more than 1,700 daily departures. With its travel partners, Northwest serves nearly 750 cities in almost 120 countries on six continents.
For more information pertaining to Northwest, media inquiries can be directed to Northwest Media Relations at (612) 726-2331 or to Northwest’s Web site at www.nwa.com.