Airlines Resist U.S. Role in Feud With Travel Firms on Fee Data

U.S. airlines are trying to prevent the federal government from forcing them to provide data to travel agents about the extra fees being charged to check a bag or pick an aisle seat.

Consumers need those details so they can see all costs of booking a trip, according to companies such as Sabre Holdings Corp. (TSG), which provide fare information to travel agents and websites. AMR Corp. (AAMRQ)’s American Airlines (AMR) and its allies say the U.S. Transportation Department should stay out of the dispute.

The fight is reaching Transportation Secretary Ray LaHood’s desk after raging on Capitol Hill and in courtrooms and private negotiations. Airlines want to supply data directly to travel agents and customers, tailoring their offerings to individual buyers. Distributors’ systems are based on masses of people being able to quickly compare prices across multiple carriers.

“It’s a very complex debate that has been building over the past three or four years, particularly as ancillary services and fees have become increasingly important to an airline’s bottom line,” said Douglas Quinby, senior director at travel researcher PhoCusWright in Sherman, Connecticut.

Airline fees generated $8.69 billion in the 12 months that ended Sept. 30, 10 percent more than a year earlier, according to the U.S. Bureau of Transportation Statistics. The total includes bag and rebooking charges and excludes payments for seat assignments, pillows, blankets and food, according to BTS.

Single Price Displayed

The charges aren’t included in data AMR provides to distributors such as Sabre and Travelport LLC, which sell the information to traditional travel agents and online outlets such as Expedia Inc. (EXPE) Agents are unable to make quick fee calculations in the single price they display for consumers.

“We do not support government regulation that requires us to give content, of any sort, to the global distribution systems,” AMR’s American said in a statement.

Sabre, a former AMR unit, wants the Transportation Department to require carriers to provide “core” fees for seats, bags and priority boarding, Chief Executive Officer Sam Gilliland said in an interview.

The rule may go forward in light of LaHood’s willingness to regulate an airline industry “the consumer isn’t real happy about,” said George Hamlin, president of Hamlin Transportation Consulting in Fairfax, Virginia. “We have sort of creeping reregulation.”

LaHood’s History

LaHood imposed a 2010 rule that fines carriers for failing to let customers off planes stuck on the tarmac for three hours. A second round of rules raised payments for involuntarily bumped passengers, applied tarmac fines to overseas flights and required fare advertisements to include government taxes.

Fee-disclosure requirements are under consideration for the agency’s third round of rulemaking, General Counsel Robert Rivkin said. The proposed rules are due in August.

“Our general principles are that we want consumers to be able to easily determine the full price of their air transportation before they travel,” Rivkin said.

Expedia, the biggest online travel agency by gross bookings, wants the information published alongside fares by the Airline Tariff Publishing Co., or ATPCO, which provides fare data for more than 450 carriers worldwide, said Glenn Wallace, Expedia’s vice president of transport strategy. It doesn’t want the government involved, Wallace said.

‘Need a Spreadsheet’

Fees are so numerous “you need a spreadsheet” to keep track, said Kevin Mitchell, chairman of Radnor, Pennsylvania- based Business Travel Coalition, a trade group for corporate travel managers. Consumers are frustrated not knowing charges, and businesses can’t track costs, he said.

Airlines have urged the Transportation Department in meetings not to force sharing of fee data, and American and US Airways Group Inc. (LCC) brought antitrust lawsuits against distributors in 2011. Southlake, Texas-based Sabre and Travelport denied the charges and some claims later were dismissed. Trials are pending.

“This is essentially a contractual relationship carriers have” with distributors, said Sharon Pinkerton, senior vice president of policy at the Airlines for America trade group, whose members include Fort Worth, Texas-based American, Delta Air Lines Inc. (DAL) and United Continental Holdings Inc. (UAL)

That argument helped persuade senators to keep a fee-data provision out of Federal Aviation Administration legislation earlier this year, she said.

‘Antiquated System’

US Airways is “happy” to have distributors and online agents sell its products, President Scott Kirby said. “The problem is, they don’t want to sell it. They want to keep their antiquated system because it works well for them. We’d love to change it and have them help us change it.”

United Continental declined to comment and Delta referred calls to Washington-based Airlines for America. They are the largest full-service U.S. airlines, followed by American and Tempe, Arizona-based US Airways.

Travel agents would prefer using distributors to get fee data rather than creating separate technology channels with each carrier, said Henry Harteveldt, chief research officer at Atmosphere Research Group LLC in San Francisco.

“The DOT is going to tell the airlines, you may want to be able to withhold these, but they are so critical that someone in the travel agency channel has to have access,” Harteveldt said.

American last year reached an agreement to provide flight and fare data directly to Priceline.com. Even with such arrangements, 58 percent of tickets sold last year were through agents using distributors, according to PhoCusWright.

Former AMR CEO Robert Crandall said that while he opposes government intervention, airlines should provide fees to distributors and “avoid unnecessarily irritating customers.”

Jay Sorensen, a former Midwest Airlines marketing director, suggested that airlines and data distributors may be able to thrash out their differences as the technology to reach consumers evolves and carriers seek new ways to stay profitable.

“It is an industry and a marketplace in transition and that makes for a messy situation,” said Sorensen, who is now president of consultant Ideaworks in Shorewood, Wisconsin. Government should “step out of the way for a while and let this stuff settle.”

To contact the reporters on this story: John Hughes in Washington at jhughes5@bloomberg.net; Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

To contact the editors responsible for this story: Ed Dufner at edufner@bloomberg.net; Bernard Kohn at bkohn2@bloomberg.net

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