Costs outweigh benefits: Opposing view
The Department of Transportation last week proposed a rule that, while labeled "consumer protection," supports a duopoly in the U.S. travel industry: the Global Distribution Systems (GDSs), which function as travel middlemen.
Under the proposal, airlines would be required to give additional information to the GDSs, including the cost (if any) of a first and second checked bag, seat assignment and carry-on baggage.
The two dominant GDSs in the U.S. — Sabre and Travelport — would then sell these optional services through travel agents or travel websites to customers while taking a portion of the sale for themselves.
The proposal is government interference at its worst. The government does not tell Apple or Dell that it has to make its products available at every Best Buy for aisle-by-aisle comparison. Nor should it do so for airlines. The proposal would treat all travel options the same: Consumers won't see enhanced information about the product, such as a picture of the seat they're buying.
Instead of the Amazon.com-like, customized packages airlines want to offer based on a consumer's buying habits, consumers would see only a list of options. It's a look-back approach, counter to deregulation, that is indifferent to or ignorant of the dynamics and potential of the marketplace.
It's ironic that while the Transportation Department is calling for added transparency on optional services, it is content to bury federal taxes within the base price of a ticket.
Airlines support transparency, and customers always know what they are buying before they click to pay. Airlines pay GDSs $7 billion annually, or about $12 per ticket.
The Transportation Department admits its rule would further increase airline costs, which risks higher fares or reduced levels of air service. And the department's cost-benefit analysis of this new proposed rule shows that the costs outweigh the benefits. So who is the department really helping?
The marketplace is already working, as several airlines have reached agreements with GDSs. Consumers deserve a rule that puts them first and lets the marketplace work, rather than distorts it and potentially has the unintended consequence of increasing fares and losing service.
David Berg is senior vice president and general counsel of Airlines for America, the trade association for major U.S. carriers.