01 December 2007

BTC Appeals to stop abusive EU CRS regs

This is attached as a direct copy from the email sent by BTC- Business Travel Coalition:

Parliament Must Close the Dangerous Parent Carrier Loophole
By Kevin Mitchell
Two stories, just days apart, from Brussels this November are leaving industry observers scratching their heads, wondering whether a thoughtful and coordinated travel distribution policy is beyond the European Commission’s grasp and resolved that Parliament must act decisively to close a deliberately-created loophole in the Commission’s recently proposed computer reservation system rules. This dangerous loophole is threatening to harm European travelers.
On the one hand, the Consumer Protection Commissioner announced stinging survey results, concluding that more than half of Europe’s travel web sites, including those run by some of Europe’s leading airlines, are engaged in misleading advertising and other unfair practices. The offending web sites are being given four months to get their acts together or face forced closure. Here the Commission is taking strong and decisive measures on behalf of abused consumers.
On the other hand, the Commission announced a curious new Computer Reservations System (CRS) Code of Conduct, which was supposed to ensure that consumers continue to get comprehensive and accurate fare and related information via their online or offline travel agency equipped with a CRS. Instead of achieving this goal, however, the Commission has deliberately opened a giant loophole in the coverage of these rules, so that the all-important “parent carrier” provisions will not apply to the three airline owners of Amadeus, Europe’s largest CRS. Here the Commission is taking weak and deceptive measures on behalf of abusive owner airlines and leaving consumers standing under a worthless CRS rules umbrella.
So as one part of the Commission gives a red light to airline web site abuse, the other gives a green light to airline CRS abuse. And to make the irony complete, the Transportation Commissioner justified liberalizing the CRS code because of the rise of Internet web sites as a competitive force! Perhaps the Consumer Protection and Transportation commissioners ought to meet for lunch.
As the Commission’s CRS rules review progressed during 2007, the abandonment of consumer interests accelerated. At a conference panel discussion that I moderated in London last winter, a senior EC transportation official stated that listening to consumer views would be the most important factor in deciding how to reform the rules. When groups representing millions of consumers weighed in forcefully that protections had to be retained to deal with the real-world threat of airline ownership, the Commission responded by closing its ears and cynically devising a loophole that would undermine their interests. In justifying that loophole, the Commission suggested that the rules were simply a matter of business-to-business concern -- marginalizing the consumer stake in this important policy matter.
Any casual follower of air travel distribution knows the checkered history of CRS regulation and how consumers have been negatively impacted by abusive airline practices. In the movie version of this business, the villains are dominant airlines that have predictably used their ownership of reservation systems to engage in exclusionary activities that undermine comparison shopping and the free flow of critical data. The heroes, when they show up for work, are regulators who on behalf of consumers lay down respected and enforced codes of conduct that demand marketplace fairness in the presence of airline ownership. That’s why strong CRS rules that address current industry conditions have been worth fighting for in Europe and why the regulator’s misguided attempts to play games with them on behalf of other industry participants have been vigorously opposed by independent airlines, corporate travel buyers, travel agencies, CRSs, consume r groups, travel industry associations, even the United Nations! The Consumer Protection Commissioner’s warning shots fired over the websites in November are important, but they only address the small part of the iceberg poking above the water. Lurking right below the surface is the rest of an enormous problem -- one in which consumers are at the mercy of airlines with the means and the incentive to restrict full content to the system they own and to manipulate data and functionality in ways that cement their market dominance. The stakes in the CRS debate are about much more than being misled by a couple of euros in a website bait-and-switch; they’re about hundreds of euros lost to consumers every time low-priced options are deliberately suppressed and about the airlines’ use of the reservation system they own to squeeze the breath out of anyone who would dare to compete with them.
The parent carrier rules were designed to stop these abuses from happening and over many years they’ve generally done a remarkably good job of keeping the market in balance without creating unnecessary burdens on marketplace participants. Undermining these rules by creating a loophole exempting Air France, Iberia and Lufthansa -- the owners of Amadeus, Europe’s largest CRS -- makes no sense at all. Airlines and distribution systems have always been a toxic combination, and unless regulators are willing to take the more intrusive step of banning ownership outright, a regulatory regime -- with teeth -- is required.
The results of a CRS Customer Referendum were recently released by the International Airline Passengers’ Association, Advantage Focus Partnership, Belgium Association of Travel Management, Business Travel Coalition, Finnish Business Travel Association, Institute of Travel Management, Scottish Passenger Agents’ Association and Travel Management Alliance. These organizations are experts in the travel industry and represent thousands of corporations and millions of customers of the air and rail transportation systems in Europe.
This group, articulating the consumer voice, proposed solutions to close the loophole. For example, it has proposed that a 5 percent airline ownership stake in a CRS should be established for determining parent carrier status. Alternatively, they would ask for confirmation that Air France, Iberia and Lufthansa are presently parent carriers of Amadeus and an affirmation that the status of these airlines as parent carriers should be subjected to written and oral industry consultation prior to any future proposed change. These are fair, sensible approaches that would go far toward eliminating the needless consumer anxiety the Commission has injected into the process.
The shame of it is that the Commission’s proposed CRS rules are on their face an example of near-perfect “better regulation” -- it’s the undermining the Commission is doing behind its back that makes these rules a near-complete disaster. Instead of getting high praise, the Commission is getting harsh criticism -- and from virtually all corners of Europe. If the parent carrier loophole were fixed by making it unambiguously clear that Amadeus' three airline owners were covered, then the text of the proposed rules would actually be deemed to be responsive to consumer needs.
The European Parliament will next have the opportunity to review and amend the proposal. Deference should not be given to the Commission on the parent carrier issue; deference should be given to consumers whose important interests have been subordinated. Parliament has an excellent opportunity to correct the fatal flaw by taking these proposed rules out of the museum and putting them into practice where they are needed. If Parliament closes the loophole, five years of industry and government work could be brought to a powerful and successful conclusion, with grateful European consumers reaping the benefits of more choice and lower airfares.

Founded in 1994, the mission of the Business Travel Coalition is to bring transparency to industry and government policies and practices so that customers can influence issues of strategic importance to them. Mitchell is founder and chairman.

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