EU Commission To Scrap Airline Computer-Reservation Rules

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Source: Dow-Jones

EU Commission To Scrap Airline Computer-Reservation Rules

11-21-05

BRUSSELS -(Dow Jones)- The European Commission is planning to scrap regulations governing airline computer-reservation systems in a bid to spur competition in the market for ticket distribution.

The growing use of the Internet as an alternative distribution channel has led the commission to believe special rules -on content, booking fees and displays - for computer-reservation systems are no longer needed. Vendors in the U.S., Latin America and Asia, are free from similar constraints. Most airlines pay computer-reservation systems to manage flight reservations, while travel agents rely on these databases to provide comprehensive flight data for corporate clients.

But computer-reservation systems Sabre Holdings Inc. (TSG) and Galileo International, part of Cendant Corp.(CD), as well as airlines and travel agencies are alarmed at Europe's plans to fully deregulate, saying there should be a relaxation of the rules.

The Coalition for Fair Access to Reservations in Europe, or C-Fare, an industry-lobby group, has sent letters to European Commission President Jose Manuel Barroso and Industry Commissioner Guenther Verheugen urging them to put the brakes on the commission's plans. C-Fare is alarmed because Amadeus Global Distribution SA, the largest computer-reservation system in Europe, remains partly owned by major airlines: Air France (3112.FR), Germany's Lufthansa ( LHA.XE) and Spain's Iberia (IBLA.MC).

"No nation with CRS rules has ever before jettisoned them at a time when the CRSs were owned by airlines, directly or indirectly," C-Fare says in its letter to Verheugen. Rival airlines and travel agents could be placed at competitive disadvantage and consumer choices could be limited, it says.

Despite airline ownership of around 47%, Amadeus says it has around 150 airline customers that use its system for their reservations and that it acts in all of their interests. It's Amadeus' view that allowing market forces to operate would create price competition, promote efficiency and lead to lower distribution costs.

The EU's antitrust laws are sophisticated enough to guard against competitive abuse or discriminatory practices, according to Amadeus.

Computer-reservation systems are an outgrowth of the internal-reservation systems some airlines developed in the 1960s. Several of the systems were made commercially available to help travel agents cope with the surge in the number of air fares sparked by deregulation.

Computer-reservation systems quickly gained leverage over airlines because most travel agents only subscribed to one system, meaning airlines had to participate in every system to reach potential customers. The airlines that owned the systems started to use them to promote their flights over rivals by arranging the way the information was displayed on travel-agents screens in favor of their own flights. They also charged rival carriers higher booking fees.

For these reasons, the European Union put in place codes of conduct. Computer- reservations systems are required to provide at least one unbiased display, give all airlines equal access to their systems and charge the same booking fees to all carriers. In addition, airlines that own computer-reservations systems must give all rival systems the same flight information and booking opportunities.

Growing ticket sales through carrier-owned corporate Web sites and independent travel Web sites has led the commission to conclude special controls on computer-reservation systems are obsolete.

Lifting the controls could have dire implications for the travel industry, Sabre and Galileo contend. To serve customers effectively, computer-reservations systems need to supply travel agents with comprehensive content, they argue. Without the code, there would be nothing to stop Amadeus's airline owners from withholding content from rivals systems. Because the three airlines are the dominant carriers in France, Germany and Spain, travel agents based in these countries would be forced to subscribe to Amadeus or risk putting themselves at a significant competitive disadvantage, Sabre and Galileo say.

-By Victoria Knight, Dow Jones Newswires; 322-741-1488; victoria.knight@ dowjones.com

(END) Dow Jones Newswires

11-21-050015ET


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