Questioning the travel industry status quo, one blog post at a time

Archive for the ‘Antitrust’ Category

Early last week I had an Op-ed published in The Beat on the topic of “Full Content” (if you are a subscriber to The Beat, you can see my Op-ed here). I then read, with interest, James Filsinger’s response to my Op-ed. I sincerely appreciate anyone taking the time to enter the conversation. However, James made a few assertions that, as they say in the news business, can be unpacked here.

The first point he makes is that consumers go to online travel agencies and service providers to procure travel and that is certainly correct. However, he asserted that GDSs have access to all content. While the GDSs have a lot of content, and they want the world in which they operate to believe they have all content, this is simply not true and never has been true. In fact, the GDS “full content” provisions came about precisely because they did not have full content, namely the so-called “web fares”.  Similarly, low-cost carrier content has been a major issue for GDSs since the early 1990s.  And of course, ancillary content is the latest gap to hit the GDSs. Not to mention hotel and car rental content which have never been close to being fully available through the GDSs.

You may also recall this research study undertaken jointly by IATA, WTAAA, T2Impact and Atmosphere Research that surveyed travel agencies worldwide. The resulting report concluded, among other things, that “GDSs are no longer the comprehensive ‘department stores’ housing all airline content” and that on average, agencies book 26% of their air outside the GDS.

Over the years, in an attempt to close some of their content gap the GDSs have been forced to accept disparate content from suppliers via APIs, primarily from Low Cost Carriers (LCCs). The difference today is that NDC makes it possible for the GDSs, and any others, to aggregate disparate content in an easier and much more cost effective way than the one-off efforts of years past. I’m certainly not saying the GDSs want or like to do this, but as more and more airlines become the single source of truth for their content and delivery (via NDC APIs), the GDS that reinvents itself into a new world content aggregator (think plug and play NDC connections with new display and selling UIs instead of Green Screens) will clearly win the new GDS market share game.

Let’s move onto Filsinger’s assertion that the GDSs are like Amazon. Sure, in an ideal world, a lot of people would all like to think of the GDSs like Amazon. Similarly, in my ideal world, I’d like everyone to think of me as a 30-year-old, with washboard abs, and flowing locks of gold. Of course, the problem that I share with GDSs is when you meet either of us, you are sadly disappointed. As a big Amazon fan, I really appreciate their intuitive user interface, their one-click selling capability, their smart-learning product suggestion algorithms, and efficient and straight forward product descriptions. Do you see the similarities with the GDSs? Me neither!

And, I’m sorry, but Filsinger is wrong on this point too – a seat is not just a seat. The number one desire for corporate travelers is seats, seats, seats – location, pitch, legroom, comfort – all matter.  And, many of us road-ragged warriors are more than willing and eager to pay for better ones. Just look at the numbers coming in around premium seat sales – it’s simply astonishing.

Lastly, regarding his comment about my broad brushing the GDSs as “anti-competitive evildoers”: in fairness, I don’t believe I ever said evildoers. But anticompetitive? You bet! And this is not just my opinion. A jury in a Federal Court found the Sabre Full Content provisions to be anticompetitive AND harmful to airlines and consumers. This is Sherman Act antitrust stuff, so yes, my broad paint brush works quite well, thank you. The Beat did a great job of covering the trial, so I’d suggest checking out their archives. Or, if you’re interested in prior actions directed at American, Northwest and other airlines, you can read the transcripts of the 2012 American Airlines v. Sabre trial here.

Thanks again for the comments on my Op-ed, and for continuing the conversation.

I am sure most everyone knows by now that just before the holidays a jury in the USAir v Sabre antitrust trial determined that certain provisions found in most GDS/airline distribution agreements were anti-competitive. These provisions – generally grouped together and labeled as “full content provisions” – include a full-content provision, a content-parity provision, a surcharge prohibition provision, and a direct-connect prohibition provision.

While the trial results will certainly take some time to play out in the market, one thing is for sure – airlines should be strategizing how they will use this anti-competitive determination to open up their market and distribution opportunities.  It is certainly going to be a once-in-a-long-lifetime of GDS contract provisions negotiation opportunity.

From my point of view, the trial was quite interesting on multiple fronts. So I thought I would share some observations regarding my first opportunity to testify in a jury trial.

As a non-expert witness, I could not actually attend any of the trial proceedings until after I testified. So my first glimpse into the trial was when I was escorted in through a back door and seated directly in the witness box, snuggled in nicely between the judge and the jurors.  No introductions, no handshakes, and no exchanging of pleasantries before getting down to business. In other words, this was not a business meeting that so many of us are accustomed to.  I was immediately sworn in, and then it was off to the races – pausing only momentarily for a sip of water or to look up a line or two from four large bound books (literally over 1,000 pages) of my previous multiple-year-old depositions. (In case you aren’t aware, I had three previous depositions as the Sabre lawyer attempted to, what is called in the legal business, “impeach me.” Yikes!)

A couple of observations:

  • Being a juror is hard work.  This was a very complex case and from what I could tell, the jurors were extremely engaged, attentive, and taking lots of notes.  At the end of my testimony (and that of others who were called to the witness box) the jurors were allowed to submit follow-up questions to the judge. After I testified, the lawyers and judge disappeared for a while,  after which the judge returned to  ask me five or six questions submitted by the jurors.  The questions were relevant, intelligent, and demonstrated the grasp that the jurors had on this case.  Quite amazing.
  • Look at who did and did not show up. An open court room doesn’t necessarily mean people actually show up to watch. I found this quite interesting. Here we were, at a trial that had significant impact on pretty much every airline in the world that is not happy with their GDS full content, parity provision, surcharge and direct connect prohibitions. Yet, not a single airline representative (other than AA) in the house.  What gives?  Lack of interest?  Didn’t know the trial was happening?  Figured you would read the transcripts?  Anyway, I thought this was quite interesting.

There was however one person that seemed intent on grasping all there was to grasp throughout the long weeks of trial – a GDS lawyer. Wonder what his motivation was?

Guess you’ll just have to Ask the Question!

It’s certainly no secret that while Farelogix doesn’t like to start fights, we seldom back away from a good one, especially one that threatens innovation, competition, or our business. It is also no secret that we have been embroiled in a number of airline/GDS lawsuits, a Department of Justice investigation into the possible antitrust activities of the GDSs, and a few rounds with the DOT. We, like many others, have the scars of ongoing business disruption and legal fees to show for it.

We continue to fight because we believe things are not right in the GDS-dominated indirect distribution channel and consumers, corporations, airlines, tech companies, and, yes, even travel agencies, are paying the price. With all the allegations and investigations going around, I wonder if the old saying is true: Where there is smoke, there’s fire.

In case you missed it, check out United States District Judge Terry R. Means’ Sealed (now unsealed) Order Denying Motions (by Travelport, Sabre, and Orbitz) to Dismiss the antitrust lawsuit filed by American Airlines. Not only may you find it an interesting read, you can judge for yourself whether there really is some fire here.

As always, your comments are welcome.