Justice Department Opens Probe of Airline Fare Distributors

The U.S. Justice Department is investigating possible antitrust violations by companies that distribute airline fare and flight data as they spar with carriers over control of the information.

Sabre Holdings Corp., of Southlake, Texas, and Atlanta- based Travelport Ltd. said today they were asked by the agency for information. Delta Air Lines Inc. (DAL), AMR Corp. (AMR)’s American Airlines and US Airways Group Inc. (LCC) also received requests.

The inquiry escalates tensions between airlines led by American and the so-called global distribution systems over the handling of price and schedule data used by most consumers to purchase travel. Sabre and Travelport are the largest U.S.-based GDS operators.

“This has been going on for many, many years and it’s culminated in a situation where the airlines feel they’re being bullied very harshly,” Richard Clarke, director of Travel Technology Research, said in an interview. “The GDSs feel they have the right to exercise their economic influence the way they have. To go to court now, on the basis of antitrust, is kind of the last straw.”

Gina Talamona, a Justice Department spokeswoman, said the agency is investigating possible anticompetitive practices in the global-distribution industry. Sabre and Travelport said they are cooperating.

Market Control

The two closely held companies, along with Amadeus IT Group SA in Europe, handle more than 90 percent of worldwide airline data distribution, AMR said in an earlier legal filing. Sabre and Travelport dominate the U.S. market.

Credit-default swaps on Sabre rose 57 basis points to 738 basis points, according to data provider CMA, the highest since September 2009. The swaps protect against a default on a company’s debt, and typically climb as investor confidence worsens.

American in April sued Travelport and its Orbitz Worldwide Inc. (OWW) unit for alleged antitrust violations, and is in talks with Sabre to settle a separate suit over distribution of data.

The Fort Worth, Texas-based airline wants to use its Direct Connect system to provide data to online and traditional travel agents, cutting distribution costs and letting American sell travel packages tailored for individual fliers. These may include services such as early boarding that would add revenue.

AMR’s View

“We need to raise more money to be successful,” American Chief Executive Officer Gerard Arpey told shareholders on May 18. “More merchandising is part of that, and Direct Connect is a vehicle for it.”

Travelport “is confident that it is in complete compliance with the antitrust laws,” Jill Brenner, a spokeswoman, said in an interview. “Travelport welcomes the GDS industry investigation.”

Sabre was asked for information and is cooperating, Nancy St. Pierre, a spokeswoman, said in an e-mail. The request, she said, included “no allegations.”

Spokesmen for American and Atlanta-based Delta said they were cooperating with the Justice Department, while Tempe, Arizona-based US Airways declined to comment. Spokesmen for Southwest Airlines Co. and United Continental Holdings Inc. (UAL), which together with the other three carriers make up the five biggest in the U.S. industry, also declined to comment.

GDS companies historically have collected fees from the airlines for handling fare and flight data, and have shared a portion with the travel agents who sell the tickets.

US Airways also has sued Sabre for alleged antitrust violations. More than 35 percent, or $3.5 billion, of the Tempe, Arizona-based airline’s annual revenue is booked through Sabre or Sabre-affiliated travel agents.

AMR fell 6 cents to $6.66 at 4:02 p.m. in New York Stock Exchange composite trading. Delta rose 13 cents to $11.51 and US Airways slipped 15 cents to $10.17.

To contact the reporter on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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