As the European Commission moves to eliminate its Code of Conduct for computer reservation systems, Kevin Mitchell, chairman of the US-based Business Travel Coalition (BTC), puts the case for retaining the code, which he believes offers unbiased choice, a level playing field and affordable air fares
The possibility that the European Commission (EC) may quietly eliminate the time-tested computer reservation systems (CRS) Code of Conduct is remarkably misguided, says a group representing corporate travel departments and business travellers. The BTC, which represents the interests of corporate buyers of business travel services, believes the rules assure corporate customers abundant and unbiased choices of airline services; airline competitors a level playing field; and European consumers the affordable air fares that result from effective competition.
The EC Transport Directorate has recently circulated internally a troubling draft proposal to repeal the code. This draft has raised justifiable concerns among other Commission departments about the potential competitive mischief that could arise from full deregulation. A political decision needs to be taken by transport commissioner and EC vice-president Jacques Barrot whether to push ahead with the proposal in its current form or instead introduce a “lighter-touch” regulation that retains the core competitive safeguards against anti-competitive behaviour – for example “mandatory participation”. Whatever forms the EC proposal finally takes, it must go before the scrutiny of the European Parliament and EU member states in the Council of Ministers, a process expected to take several months.
Since 1989, virtually all travel reservations in Europe have been governed by these rules, which were adopted because of the structural incentives and actual anti-competitive and anti-consumer abuses by CRSs (now better known as Global Distribution Systems) and their airline owners. The rules guarantee fair access to reservations in Europe for consumers. A June 2005 conference in Brussels of the BTC concluded that the only beneficiaries of elimination of the rules would be Lufthansa, Air France-KLM, Iberia and, we believe, Amadeus. Participating airlines, travel agents, corporate travel buyers and the independent CRSs backed the retention of mandatory participation for as long as airlines continue to maintain ownership stakes and control in CRSs.
Competing airlines have much to fear, both from blatant and subtle forms of discrimination. An unregulated airline-owned CRS would inevitably bias flights consistently in favour of its airline owners. Such a CRS would also make it more costly, less reliable and more inconvenient for travel agents and consumers to book the flights of competitors.
Among other things, an unregulated airline-owned CRS could load the flights and fares of its owners more quickly – with potentially devastating impact in a brutally competitive industry where delays of minutes and hours during a fare sale matter. Such a CRS could provide special features that consumers demand – such as e-ticketing – only on its owning airlines and not on competitors. These are not remote or fanciful predictions: all these abuses by airline-owned systems occurred before regulations were adopted, and would inevitably happen again if the rules were to be repealed before airlines fully divest themselves of CRS ownership.
Nevertheless, Barrot is shepherding the total deregulation of these proven consumer-protection rules over the strong objections of a broad cross-section of stakeholders including consumer groups, airlines, travel agents, business travellers, travel distribution companies and leading corporations that purchase business travel services.
Mike Perkin, manager of European Middle East and Africa Travel at Cisco Systems’ UK headquarters, says: “The current rules have worked exceptionally well to ensure that corporations have optimal levels of content; adequate competition among CRSs; minimal barriers to entry for low-cost and network new-entrant airlines; and unbiased travel management companies. To abandon these rules would represent a major setback for travel industry competition and buyer and seller efficiencies resulting in greater complexity and cost for all participants.”
Better regulation
Ironically, repeal of the code would seem to run counter to the EC’s stated mission to promote “better regulation”. The Brattle Group, a consultancy hired by the EC in 2003 to evaluate regulatory options for reform of Europe’s CRS regulations, advised retention of the mandatory participation rules. It is understood that the EC itself opted for this approach in its own extended economic impact assessment in February 2004. Contrary to established practice, there has been no new economic impact study produced to justify such a radical and high-risk change. Importantly, and central to stakeholder concerns, is that several major European airlines continue to own a significant stake in Europe’s dominant CRS.
There is support in the travel industry for responsible reform of the CRS Code of Conduct, but not a reckless and precipitous deregulation that will do considerable and irreversible harm to airline competition, consumers and the competitiveness of the European travel industry sector.
We at the Business Travel Coalition call on the EC to subject this proposal to a thorough economic impact analysis as it has pledged to do with all significant regulatory review initiatives. The European Parliament and the consumers it represents deserve nothing less than full transparency of process and highly professional, competent analysis. ■
Source: Airline Business
