20 May 2008

Alternative EC GDS Proposal supported by Consumer Groups

Several groups representing users' interests are throwing their weight behind the so called Kirkhope Amendment.

For the uninitiated or newcomers to this blog here are some of the background to the issue.

The European Commission (EC) is proposing to change its current CRS rules. The current regulation: Council Regulation (EEC) No 2299/89 of 24 July 1989 on a code of conduct for computerized reservation systems [Official Journal L 220 of 29.07.1989 can be found at the following URL: http://europa.eu/scadplus/leg/en/lvb/l24080.htm

The EU doesn't like the term GDS Global Distribution System and prefers CRS - Computer Reservation System. The old rules in essence were a different approach to fairness in displays on a travel agency terminal to those taken in the USA. ( For the US regs go here: http://www.dot.gov/affairs/Computer%20Reservations%20System.htm) Over time the importance of the GDS screen has lessened and issues of bias and control have taken on new forms as a result of the growth of the Internet and the global airline Alliances.

The new regulations are somewhat convoluted. But there has been a big issue raised over the definition of control. Essentially the EC has been under pressure from one of the GDS companies to eliminate the requirement for equal representation in all GDS if one of the players has an owner who is an airline. The only player to whom this effectively applies in Europe is Amadeus. Who just happens to be the dominant player in GDS across Europe. They currently have an ownership structure which is approx 44% airline owners (AF-22%, LH-11% and IB 11%) the balance is from two private equity firms. The debate is over the possible control.

Rightly or wrongly it would be a stretch of anyone's imagination to assume that these airlines do NOT exert a significant amount of influence on Amadeus to the benefit of the company. That said - some of the recent behavior demonstrates otherwise.

I fall firmly on the side of the level of ownership indicates a level of control. Consequently the airlines should play fair across the board and the regulations should reflect that. This so called proposed amendment seems to be a reasonable way of addressing the issue. I highly recommend that our readers go and review the current regs and the proposed changes. Get involved in the debate.

You be the judge!

Here is the text of the PR release issued today on the subject.

Travel Groups Support Kirkhope Amendments on CRS Reform
Rejects others that fail to close the Parent Carrier loophole
London, England, 20 May 2008--London, England, 19 May 2008--Ahead of political group meetings in Strasbourg this week to formulate positions within the European Parliament Committee on Transport and Tourism (TRAN) on the Kirkhope report on the CRS Code of Conduct, and in anticipation of a TRAN vote in late May on the report, the International Airline Passengers Association (IAPA), the Institute of Travel Management (ITM) and the Business Travel Coalition (BTC) late last week provided their initial reactions to the key amendments tabled. The letter as transmitted to the MEPs follows.
15 May 2008
Re: Consumer Organisations Voice Strong Support for Kirkhope Amendments and Urge Rejection of Amendments 44, 46 and 47
Dear Transport Committee Members:
Ahead of the Transport Committee vote on Mr. Kirkhope’s report on the CRS Code of Conduct, the International Airline Passengers Association (IAPA), the Institute of Travel Management (ITM) and the Business Travel Coalition (BTC) (the “Consumer Organisations”) would like to provide their initial reactions to the key amendments tabled. A more complete amendment endorser will follow once full translations have been released.
First and foremost, the Consumer Organisations would like to express their strong endorsement of Mr. Kirkhope’s proposed amendments to the Commission proposal. Of major significance is his solution to address the dangerous legislative loophole exposed in the Commission’s draft under the definition of ‘Parent Carrier’ (Article 2 (g)), by establishing CRS ownership as a fully independent criterion when assessing parent carrier status. The introduction of this test takes into account the incentives for abuse which exist for airlines meaningfully participating in the capital and governance of a CRS and limits the discretion of the Commission which had previously declared its intention to designate parent carriers on a case-by-case basis using ‘effective control’ as the only critical criterion . Mr. Kirkhope has the consumer’s best interests at heart and we heartily commend his approach.
A number of constructive amendments have been submitted calling for full divestiture by airlines with stakes in system vendors over time. Whilst airline divestiture would ultimately be the best solution for the Consumer Organisations, since it would completely eliminate the airline ownership problem that necessitates CRS rules, in the near term Parliament’s priority must be to ensure that any ambiguities are eliminated with respect to the existing Code of Conduct.
Mr. Kirkhope’s amendments in our view represent a significant and workable compromise in this respect. Failure to apply strict ex-ante rules to airline-owners of CRSs immediately will result in the reinforcement and creation of dangerous monopolies in a number of European countries. In our letter to Parliament (with additional signatories) of 3 April 2008 we wrote that since the Commission’s declaration of last November, which made it clear that the CRS Code of Conduct applies to no-one, airline owners have been free to discriminate in favour of the CRSs they own and CRSs have been free to discriminate in favour of their owning airlines. Travellers all across the EU and beyond are, as a result, at risk of being subjected to higher fares, less choice and poorer service.
Given the market conditions described above, we have grave concerns in relation to amendments 46 and 47, which provide the Commission with the continued competence to confer parent carrier status on the basis of ‘effective control’ alone. In a similar vein, amendment 44 eliminates the ownership test entirely, leading us directly back to the status quo and the same flaws exposed within the Commission proposal. These amendments are absolutely the wrong approach, since they disregard the consumer’s voice in order to give a regulatory free hand to a handful of national airlines which are free to abuse their CRS ownership positions. The notion advanced that the CRS rules should be harmonized with the effective control standards in the merger setting misses the point. In the interest of millions of dispersed European travellers, we strongly urge you and members of your group to reject these three amendments.
Our representatives remain at your disposal ahead of Parliamentary deliberations on the report.
Jonathan French, Industry Affairs Spokesman, International Airline Passengers Association
Paul Tilstone, Executive Director, Institute of Travel Management
Kevin Mitchell, Chairman, Business Travel Coalition
CONTACT IAPA || Jonathan French | +44 (0)208 253 5052 | jonathan.french@iapa.co.uk
CONTACT BTC || Kevin Mitchell | 610-341-1850 | mitchell@BusinessTravelCoalition.com
About IAPA
The International Airline Passengers Association has been representing the interests for frequent travellers for more than 45 years. With offices in Dallas, London and Hong Kong, IAPA speaks for 400,000 travellers throughout the world.
About BTC
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.

When the Commission Proposal was released on 15 November 2007, a DG TREN spokesperson explained that an airline with an ownership stake in a CRS in their view was not a parent carrier unless it also effectively controls that CRS

No comments: