Signatory Letter To Secretary LaHood (Resolution 787)

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April [xx], 2013

The Honorable Ray LaHood
Secretary
U.S. Department of Transportation
1200 New Jersey Avenue, SE
Washington, Dc 20590

Re: Docket No. OST-2013-0048 – International Air Transport Association Resolution 787


Dear Secretary LaHood:

We the undersigned government, university and corporate travel managers, travel management companies (TMCs), industry associations and other stakeholders from around the world, who represent millions of travelers, urge the U.S. Department of Transportation (DOT) to reject Resolution 787, and the included New Distribution Capability (NDC), as it contravenes the public interest. NDC represents a new, worldwide business model for the pricing and sale of airline tickets that could structurally change the industry in unalterable ways adversely impacting all supply-chain participants. We were excluded from IATA proceedings that led to the creation of Resolution 787, and therefore, rely on the Department to protect our interests.

A single firm, if not dominant, is usually free under national competition laws to endeavor to change an industry’s economic and operational models. It is a horse of a different color, however, when 240 horizontal competitors strategize behind closed doors and agree upon a new business model for the pricing and sale of their products. We firmly believe that horizontal airline competitors (and indeed nearly the entire industry) banding together to jointly adopt such a new business model by express agreement crosses the line. NDC is an agreement that has the purpose and would have the effect of stabilizing or raising prices charged to all consumers because it would end the air fare transparency that, as the airlines themselves have confirmed, has checked their ability to raise prices. It thus likely violates U.S. and other countries’ antitrust laws.

This new business model would also violate privacy rights. Resolution 787 explicitly says that, before fares are quoted, airlines have the right to demand from consumers personal information that “includes but is not limited to” the customer’s name, age, marital status, nationality, contact details, frequent flyer numbers (on all carriers), prior shopping, purchase and travel history and whether the purpose of the trip is business or leisure. There can be no legitimate justification for charging a traveler more or less based on a number of these items of personal information (such as marital status or nationality), and many of them by design can be used to pinpoint and extract higher prices from those travelers who are likely to be less price sensitive, such as business travelers.

Importantly, IATA has been silent on required industry investments to implement NDC, or which participants would be responsible for such costs, i.e. airlines, global distribution systems, travel agencies or organizations with managed-travel programs. However, most observers believe the NDC-associated costs to be substantial and that these costs would be passed on to the customer in the form of higher TMC transaction fees, or surcharges. Process costs and inefficiencies related to NDC complexities would also be externalized to TMCs and their clients.

Given the potential anti-competitive and anti-consumer effects of Resolution 787, the unprecedented invasion of privacy for consumers and the added implementation and ongoing NDC-related costs to the industry and its customers, DOT should deny its approval.

Respectfully submitted,
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Industry Role
General Comments On Resolution 787