oversight

Domestic Aviation: Effects of Changes in How Airline Tickets Are Sold

Published by the Government Accountability Office on 1999-07-28.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                  United States General Accounting Office

GAO               Report to the Honorable
                  Michael P. Forbes,
                  House of Representatives


July 1999
                  DOMESTIC AVIATION
                  Effects of Changes in
                  How Airline Tickets
                  Are Sold




GAO/RCED-99-221
                   United States
GAO                General Accounting Office
                   Washington, D.C. 20548

                   Resources, Community, and
                   Economic Development Division

                   B-281616

                   July 28, 1999

                   The Honorable Michael P. Forbes
                   House of Representatives

                   Dear Mr. Forbes:

                   The U.S. airline industry has gone from record losses during the early part
                   of the decade to record profits in more recent years. Airline cost-cutting
                   initiatives and sustained growth in traffic have contributed to this dramatic
                   turnaround. Travel agencies, the primary channel for selling airline tickets,
                   have not been immune from airlines’ cost-cutting efforts. Commissions
                   paid to travel agencies represent airlines’ fourth largest expense, after
                   labor, fuel, and the cost of airplanes. To decrease their costs, airlines have
                   reduced these commissions and established Internet sites to sell more
                   tickets themselves. Such actions have led some travel agency
                   representatives and consumer groups to question whether airlines are
                   attempting to drive travel agencies out of business, thereby depriving
                   consumers of an important source of comparative price and schedule
                   information.

                   To examine these issues, you asked us to determine the following: (1) How
                   have changes in the way airlines sell tickets affected travel agencies and
                   consumers? (2) What are airlines’ policies and practices for the sale and
                   use of airline tickets sold by travel agencies compared with the sale and
                   use of tickets sold directly by airlines? (3) What are airlines’ policies and
                   practices for making their airfares, particularly discount fares, accessible
                   to travel agencies and consumers? and (4) What are airlines’ policies and
                   practices regarding the use of data on travel agency sales?


                   Changes in the way the airline industry sells tickets have had mixed effects
Results in Brief   on travel agencies and consumers. Since 1995, airlines have saved as much
                   as $4.3 billion by reducing commissions paid to travel agencies. Through
                   the use of new technology such as the Internet and electronic ticketing,
                   airlines have found new ways to lower the cost of selling their tickets.
                   Doing so has reduced airlines’ reliance on travel agencies, and the number
                   of travel agencies is declining. Nevertheless, industry surveys indicate that
                   total travel agency revenues are rising, as the remaining travel agencies
                   diversify their products and services to other types of travel-related sales.
                   About 40 percent of travel agencies have also instituted service fees for
                   ticket processing, ranging from $10 to $50, to offset lower commissions.




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The effect on consumers is difficult to measure. Some portion of airlines’
cost savings from reduced commission rates has likely been passed on to
consumers, especially leisure travelers, through lower airfares, but the
extent is unknown because fares are also affected by many other factors,
such as lower airline fuel prices. Furthermore, any fare savings may be
offset by travel agencies’ service fees. Direct ticket sales, especially via the
Internet, appeal to some consumers, though travel agencies continue to
play an important role in providing comparative information for
consumers who are less interested in or adept at getting this information
on their own.

Airlines generally apply the same ticketing policies to themselves and to
travel agencies. Airlines’ policies are contained in rules that govern the
sale and use of all airline tickets—rules, for example, that require a
Saturday night stayover to obtain a discounted fare. The travel agency
industry alleges that airlines apply their rules more strictly to travel
agencies than to themselves, with the intention of luring customers away
from travel agencies. While admitting some unintentional lapses in the
past, airlines argue that they have a strong financial incentive to enforce
their rules—if they did not do so, business passengers would buy the
lower-priced tickets intended for leisure travelers. Furthermore, airline
representatives say, even if they did not have this financial incentive, they
are not precluded from imposing different rules on travel agencies.

U.S. and some foreign airlines offer special discount fares that are only
available through their Internet websites. Airlines have developed these
websites to lower the cost of selling their tickets, increase sales, and better
manage their inventory of airline seats. While the travel agency industry
and consumer groups assert that airlines should make all their fares
available through all sales channels, including travel agencies, airlines are
not required to do so.

Airlines obtain data on travel agency sales from a variety of sources and
combine them to develop complete sales information, by agency, for each
airline market. According to the airline industry, the data are needed to
manage their travel agency incentive programs, including the payment of
additional commissions—called overrides—to travel agencies that exceed
sales targets. GAO and the Department of Transportation’s Inspector
General have criticized override programs as anticompetitive and harmful
to consumers because they increase the likelihood that the information
provided to consumers will be biased. The travel agency industry contends
that the sales data used to calculate overrides are proprietary. While



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             presently under review, current Department of Transportation regulations
             require that the providers of computer reservation systems used by travel
             agencies make their ticket sales data available to all interested airlines.
             The Department of Justice and an independent mediation panel examined
             this issue in 1984 and 1991, respectively, and did not find airlines’ access to
             travel agencies’ sales data to be unlawful.


             Consumers have many ways to buy airline tickets. Travel agencies sold
Background   about 75 percent of all airline tickets in 1996, down from 85 percent in
             1993, according to Air Transport Association estimates. Airlines pay the
             travel agencies a standard commission based on a percentage of the value
             of each ticket. Airlines sell the other 25 percent of tickets directly by
             telephone, at airline counters, and, increasingly, through airline websites.
             The approximately 33,000 travel agencies in the United States range from
             small firms, many with less than $1 million in total revenues, to large
             multifaceted corporations like American Express, with billions of dollars
             in revenues and thousands of employees. In the last few years,
             independent electronic agencies, such as Microsoft’s Expedia and Preview
             Travel, have also begun selling airline tickets through the Internet. Travel
             agencies, regardless of their size or form, offer three basic services for
             consumers: (1) price comparison, (2) ticket processing, and
             (3) information and expertise.

             Airlines’ relationships with travel agencies have changed considerably
             over the last two decades. At the time of airline deregulation in 1978,
             airlines and travel agencies sold about the same number of tickets, and
             travel agencies’ commissions averaged about 8-percent of the value of
             tickets sold. Following deregulation, airlines sought to lower the cost of
             selling their tickets and shifted more of their ticket sales to travel
             agencies. Airline competition for travel agency sales led to higher
             commission rates and the payment of additional commissions, called
             overrides, to agencies exceeding certain sales targets. Commission
             payments allowed travel agencies to offer free services, such as trip
             planning and ticket processing, to their customers.

             Airlines set their own fares and commission rates, but the listing of fares
             and the settlement of ticket payments and commissions are generally
             handled by jointly held airline companies. Over 550 airlines provide their
             fare information to the Airline Tariff Publishing Company, which is owned
             by 24 domestic and international airlines. This company distributes the




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                         fare information to computer reservation systems.1 These systems provide
                         computer terminals that the travel agencies use to search airfares and
                         schedules and book airline tickets. Payment for travel agencies’ ticket
                         sales is handled through the Airlines Reporting Corporation (ARC),2 an
                         airline-owned company that remits travel agency payments (less the
                         commissions) to airlines.


                         Changes in the way airlines sell tickets have contributed to airline profits
Effects on Travel        while they have had mixed effects on travel agencies and consumers.
Agencies and             Airlines have cut the commission rates paid to travel agencies and,
Consumers From           through the use of new technology such as the Internet, have found ways
                         to increase the percentage of tickets they sell directly to consumers. These
Changes in the Way       actions have reduced travel agencies’ revenues. The effect on consumers
Airlines Sell Tickets    is mixed. Consumers now have new ways to buy tickets while retaining
                         access to agencies for other travel needs. The extent to which airlines
                         have passed their savings on commission costs along to consumers
                         through fare reductions is difficult to measure given the variety of other
                         factors that also affect ticket prices; however, leisure passengers have
                         likely benefited more than business passengers. Moreover, any fare
                         savings may be offset to some degree by many travel agencies’ imposition
                         of service fees.


Lower Commission Costs   Airline profits have risen dramatically since record losses earlier this
and Other Factors        decade. As figure 1 shows, operating profits for U.S. airlines topped
Contribute to Airline    $8.6 billion in 1997, following a loss of nearly $2.5 billion in 1992,
                         according to Air Transport Association data. Both airline operating profits
Profits                  and net profits have increased every year since then.3




                         1
                           The computer reservation systems are Sabre, 82.8 percent of which is owned by the parent company
                         of American Airlines (AMR); Apollo USA (operated by Galileo International), owned by United
                         (15.2 percent), British Airways (6.7 percent) and Swissair (6.7 percent); WORLDSPAN, owned by Delta
                         (40 percent), Northwest (34 percent), and TWA (26 percent); and Amedeus (formerly Systems One),
                         owned by Air France (29.2 percent), Iberia (29.2 percent), Lufthansa (29.2 percent), and Continental
                         (12.4 percent).
                         2
                          ARC is owned by 14 airline shareholders, although more than 140 domestic and international carriers
                         participate in ARC’s settlement program.
                         3
                          Operating profit (or loss) is the difference between operating revenues (passenger, charter, freight,
                         and mail revenues) and operating expenses (labor, fuel, promotion and sales, and other costs,
                         including depreciation). Net profit (or loss) is the result of operating profit after taxes, interest on
                         debt, and other items.


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Figure 1: Airlines’ Operating and Net
Profit, 1978-97                         $10   Profit



                                          5



                                          0



                                         -5



                                        -10
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                                                         Operating profit

                                                         Net profit




                                        1997 dollars in billions

                                        Note: To measure real change in airline profitability, annual amounts have been restated in 1997
                                        dollars using the chain-type price index for gross domestic product.

                                        Source: Air Transport Association and U.S. scheduled airlines.


                                        Growth in passenger demand and lower costs have contributed to airlines’
                                        turnaround. Passenger traffic grew 26 percent between 1992 and 1997. A
                                        decline in airlines’ costs, notably fuel and commission costs, also
                                        contributed to improved profits, according to Air Transport Association
                                        data. Commission costs, generally airlines’ fourth largest expense after
                                        labor, aircraft, and fuel, rose faster than overall costs until 1993, when
                                        commission costs amounted to 10.9 percent of airlines’ total operating
                                        costs. Since then, airlines’ commission costs have fallen to 6.5 percent of
                                        their total operating costs. As figure 2 shows, commission costs have
                                        nearly returned to their 1982 levels and have helped stabilize airlines’ total
                                        costs.




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Figure 2: Airlines’ Cost Indices, 1978-98

250   Cost index, 1982=100



200



150



100



50



 0
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                    80




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             79




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                                                          Commission cost index

                                                          Total cost index


                                                 Note: A cost index is an aggregate measure of the relative change in related costs. Airlines’ total
                                                 costs include labor, fuel, aircraft, landing fees, maintenance, financing and insurance, and
                                                 commissions and other costs of sales. For example, the total cost index for 1998 is 134.1, which
                                                 means that total costs have increased by 34.1 percent since 1982 when the index equaled 100.

                                                 Source: Air Transport Association and U.S. major and national airlines.




Commission Cuts Have                             Airlines’ commission reductions have reduced travel agencies’ revenues.
Cost Travel Agencies as                          In 1995, the major airlines capped commission payments on domestic
Much as $4.3 Billion in                          fares at $50 per round-trip ticket—effectively reducing the commissions
                                                 airlines paid to travel agencies for tickets costing more than $500, given
Revenues                                         the 10-percent commission rate in effect at that time. In 1997, all the major
                                                 airlines—except Southwest Airlines—reduced their commission rates for
                                                 domestic ticket sales to 8 percent.4 In 1998, major U.S. airlines also set
                                                 commissions on international tickets at 8 percent and capped total
                                                 commissions at $100 per round trip ticket. Furthermore, most airlines have
                                                 set commissions for tickets purchased on-line from Internet travel
                                                 agencies at 5 percent, with a $10 maximum commission per transaction.
                                                 Accordingly, commission rates for domestic fares peaked in 1994 at
                                                 10.05 percent, and, 1 year later, commission rates for international fares


                                                 4
                                                  Southwest Airlines maintained a 10-percent commission with no cap.



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                             peaked at 16.24 percent.5 Commission rates have steadily declined since
                             then. Through April 1999, average domestic and international commission
                             rates were 6.57 and 12.88 percent, respectively.


Figure 3: Travel Agencies’
Commission Rates, 1989-98    17%        Commission rate

                                 15

                                 13

                                 11

                                 9

                                 7

                                 5

                                      1989    1990        1991   1992      1993      1994       1995      1996       1997     1998

                                                International
                                                Total
                                                Domestic



                             Note: Data excludes override payments.

                             Source: Airlines Reporting Corporation.




                             Although commission rates have been declining for several years, travel
                             agencies’ revenues from commissions did not begin to decline until 1998.
                             Revenues did not decline as quickly as commission rates because the total
                             value of tickets sold by travel agencies has increased. However, travel
                             agencies would have earned up to $4.3 billion more between 1995 and
                             1998, as depicted in figure 4, had domestic and international commission
                             rates remained at their peak levels.6 The majority of these lower revenues,
                             about $3.45 billion, were due to reductions in domestic commission rates,



                             5
                              All average commission rates and amounts paid are based on commissions paid by all airlines
                             exclusive of any override payments, as provided by ARC.
                             6
                              To estimate an upper bound for travel agencies’ reduced revenues, we assumed that declining
                             commission costs did not result in a change in ticket prices. To the extent that airline commission cost
                             savings led to reduced ticket prices, the quantity of tickets sold would have increased and, therefore,
                             the loss in commission revenue would have been less than $4.3 billion.



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                               which began in 1995. Declines in commission rates for international
                               tickets cost U.S. travel agencies another $858 million in revenues.


Figure 4: Actual and Reduced
Commission Revenue, 1994-98    $8.5    Commission revenue

                                8.0

                                7.5
                                                                                                  $4.307 billion
                                7.0

                                6.5

                                6.0

                                5.5

                                5.0

                                      1994                  1995                1996                  1997              1998

                                                Reduced commissions

                                                Actual commissions




                               Dollars in billions

                               Source: GAO’s analysis of Airlines Reporting Corporation data.


                               In addition to reduced commission costs, airlines have lowered their
                               ticketing costs in other ways. Electronic or “e-ticketing,” whereby an
                               airline issues a confirmation number and receipt to a passenger instead of
                               a ticket, is cheaper and easier to process than a paper ticket since there is
                               no need to print a ticket. Introduced in 1995, e-ticketing now accounts for
                               an estimated 30 percent to 60 percent of all tickets sold. In addition,
                               airlines have increased the percentage of tickets sold through new
                               distribution channels, especially the Internet. The percentage of tickets
                               sold by travel agencies peaked in 1993 at 85 percent, according to the Air
                               Transport Association, slipping to 75 percent in 1996, the most recent year
                               analyzed.




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                           Changes in airline ticketing practices have strained relationships between
                           the travel agency and airline industries. A complaint registered with the
                           Department of Transportation by the United States Travel Agent Registry
                           in 1998, an organization that represents travel agency interests, is
                           illustrative of this strained relationship. In the complaint and subsequent
                           rebuttal to the airlines’ response, the Travel Agent Registry asserted that
                           U.S. airlines are attempting to remove travel agencies from the business of
                           selling airline tickets, in violation of federal statutes.7 By way of example,
                           the Travel Agent Registry cites commission cuts, special fares and
                           incentives, and other inducements available only to customers who buy
                           directly from airlines. Airline officials countered that airlines’ actions are
                           intended only to reduce their ticketing costs. Moreover, airline officials
                           said that travel agencies, as agents of the airline, are not competitors in the
                           sale of airline tickets. The Department of Transportation has yet to rule on
                           this complaint.


The Travel Agency          The number of travel agencies peaked in 1996, when industry data showed
Industry Is Adapting to    a total of 33,715 agencies (see fig. 5). By 1998, the number stood at about
Airline Industry Changes   the same level as in 1994—32,694, a decline of 1,021 agencies over the
                           2-year period.




                           7
                            The complaint cites 49 U.S.C. 41712, “Unfair and deceptive practices and unfair methods of
                           competition in air transportation or the sale of air transportation;” United States Travel Agent Registry
                           v. Delta (OST-98-4776), v. United (OST-98-4785), v. American (OST-98-4786), Nov. 18, 1998; and v.
                           Continental (OST-98-4836), Dec. 1, 1998. See app. I for a summary of this and other complaints.



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Figure 5: Number of Travel Agencies, New Agencies, Closed Agencies, and Total Agencies, 1990-98

                                                                                                          Total agencies 34,000
3,000   New and closed agencies


2,500                                                                                                                    33,500



2,000                                                                                                                    33,000


1,500                                                                                                                    32,500


1,000                                                                                                                    32,000



 500                                                                                                                     31,500


   0                                                                                                                     31,000

            1990          1991    1992       1993               1994         1995   1996          1997        1998


                                                 New agencies

                                                   Closures

                                                 Total agencies


                                         Source: Airlines Reporting Corporation.




                                         Faced with declining commissions from airline ticket sales, many travel
                                         agencies have cut their costs and begun charging fees for their services.
                                         According to a 1998 travel agency industry survey, 77 percent of travel
                                         agencies have reduced their operating costs since the commission cuts
                                         took place. This includes reducing staff or compensation and making
                                         greater use of automation. Between 1995 and 1997, the percentage of
                                         agencies charging service fees for processing airline tickets increased
                                         from 19 percent to 42 percent for leisure travel and from 10 percent to
                                         38 percent for business travel. In a 1998 survey of 500 agency members of
                                         the American Society of Travel Agents, 64 percent indicated that they
                                         charge service fees compared with 2.6 percent before the reduction in
                                         commission rates.

                                         Travel agencies have adapted in other ways as well, becoming larger, more
                                         diverse, and somewhat less reliant on airline ticket commissions than they



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                           were just a few years ago. For example, with the advent of reduced airline
                           commissions, the financial relationship between travel agencies and their
                           government and corporate clients has substantially changed. Rebating
                           commissions to customers, popular before commission reductions, is
                           quickly being replaced with management or transaction fees. Agencies are
                           also consolidating, in part because larger agencies have proven to be more
                           profitable. In 1997, for example, 92 percent of travel agencies with more
                           than $5 million in sales made a profit, compared with 62 percent of
                           agencies with less than $1 million in sales, according to a 1998 survey of
                           travel agencies.8 Moreover, many travel agencies have increased their
                           business in areas that are more profitable than airline tickets, such as the
                           sale of cruise packages. In 1997, the most recent year for which data were
                           available, travel agencies’ revenues totaled $126 billion, a 25-percent
                           increase over 1995. Airline ticket sales accounted for 56 percent of this
                           revenue, down from 61 percent 2 years earlier, according to the same
                           survey.


Net Effects on Consumers   The effects of airline and travel industry changes on consumers are mixed
Are Mixed                  and less apparent than the effect on travel agencies. Some portion of the
                           airlines’ $4.3 billion cost savings from reduced commission rates has likely
                           been passed on to consumers through lower airfares. We could not
                           quantify the extent to which cost savings have been passed on because
                           many other factors also affect ticket prices, including changes in other
                           airline costs, airline competition, and consumers’ varying demand for air
                           travel. However, to maximize their profits, airlines segment their
                           passenger markets and are more likely to pass cost savings along through
                           fare cuts to leisure travelers than to business travelers. This is because the
                           demand for leisure travel is more sensitive to price change, and, as a
                           result, the percentage increase in leisure travel resulting from a given fare
                           reduction will be greater than the percentage increase in business travel.
                           Therefore, cutting fares for leisure travel is more likely to increase airlines’
                           profits than cutting fares for business travelers.9

                           The differences in business and leisure airfares over the last several years
                           demonstrate airlines’ ability to segment leisure and business travelers. The
                           typical one-way business fare (lowest published fare free of onerous
                           restrictions) in 1998 was $454, compared with $121 for the lowest

                           8
                             Travel Weekly, Aug. 27, 1998 (Vol. 57, No. 68) biennial survey of travel agencies conducted by Louis
                           Harris and Associates, last published in 1998 based on 1997 industry results.
                           9
                            For additional information on the price sensitivity of business and leisure travelers, see app. I to
                           Passenger Facility Charges: Program Implementation and the Potential Effects of Proposed Changes
                           (GAO/RCED-99-138, May 19, 1999).



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                                      published discount (leisure) fare. Furthermore, in recent years, business
                                      fares have increased more quickly than have discounted leisure fares.
                                      Since 1992, the typical business fare has increased 61 percent, while the
                                      average lowest published discount fare has increased only 3 percent (less
                                      than the rate of inflation during this period). While many factors can
                                      contribute to this difference, these trends are consistent with airlines
                                      being more likely to have passed on savings from commission reductions
                                      to leisure rather than business travelers. Figure 6 depicts annual average
                                      business and discount fares in each of the last 7 years.


Figure 6: Average Published One-Way
Airfares, 1992-98                     $500 Fare


                                       400


                                       300


                                       200


                                       100


                                         0

                                             1992         1993              1994        1995           1996          1997           1998

                                                         Typical business

                                                         Lowest discount



                                      Note: This figure reflects one-way fares in 215 domestic city pair routes. Fares shown are those
                                      published by the airline with the most service on each route. Routes were selected on the basis of
                                      the number of passengers or on the basis of geographic representation. The typical business fare
                                      is based on the lowest published fare that was free of onerous restrictions. The lowest discount
                                      fare represents the absolute lowest fare available and, given fare restrictions, is generally not
                                      useful for business travelers.

                                      Source: American Express Domestic Airfare Index.




                                      The introduction of service fees by many travel agencies offsets to some
                                      extent the benefit of any fare cuts for consumers that use those agencies.
                                      Between 40 percent and 60 percent of travel agencies now charge service
                                      fees for at least some types of transactions, typically ranging from $10 to
                                      $50 for their ticketing and other services. For example, American Express



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                         estimated that the 1998 reductions in international commissions would
                         cost consumers $500 million in additional service fees.

                         Changes in the travel industry allow consumers to benefit from the
                         emergence of new ways to buy tickets. The growth in Internet sales, for
                         example, demonstrates that some consumers prefer this way of
                         purchasing tickets. According to Jupiter Communications, a technology
                         and consulting firm, Internet sales of airline tickets have already grown to
                         $3 billion in 1999, or 4 percent of total sales. In another study by Forrester
                         Research, an estimated 8.2 million leisure trips were booked on-line in
                         1998. By 2003, the company estimates that on-line sales will grow to
                         65.5 million leisure trips worth $29.5 billion. Some consumers are also
                         benefiting from deeply discounted last-minute fares offered on airline
                         websites that previously may not have been offered for sale.

                         At the same time, some consumer and travel agency groups argue that the
                         continued viability of travel agencies is important to consumers. Travel
                         agencies provide important price comparison and information services for
                         some consumers. The complexity of airline ticket pricing—many different
                         fares, itineraries, and restrictions; continuous fare changes; and airline
                         linkages, such as frequent flyer and code-sharing arrangements—increases
                         uninformed consumers’ difficulty in completing their travel plans.
                         Regarding price, for example, there is some evidence that a travel agency
                         can find lower fares than can a consumer acting alone. In 1997, the U.S.
                         Public Interest Research Group compared 2,160 price quotes for 73 airline
                         routes and found that the lowest fares were more often obtained from
                         travel agencies than from airlines.


                         Airlines generally apply the same ticketing policies to themselves and to
Airline Policies         travel agencies. The travel agency industry has alleged that airlines apply
Generally Apply to All   their policies more strictly to travel agencies than to themselves, intending
Ticket Sales             to lure customers away from travel agencies. While admitting some
                         unintentional lapses in the past, airlines argue that they have a strong
                         financial incentive to enforce their rules—if they did not do so, business
                         passengers would buy the lower-priced tickets intended for leisure
                         travelers. Furthermore, airline representatives say, even if airlines did not
                         have this financial incentive, airlines are not precluded from having
                         different rules for travel agencies and for themselves.




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Controversy Centers on       The travel agency industry contends that airlines enforce their rules more
Airline Ticketing            strictly for tickets sold by travel agencies than for tickets sold directly by
Restrictions                 airlines. The industry’s complaints center on three practices prohibited by
                             airlines:

                         •   Issuing “back-to-back” tickets. Back-to-back ticketing involves the
                             purchase of multiple discounted round-trip tickets and the use of the
                             tickets out of sequence. This practice is intended to circumvent the fare
                             conditions normally applicable to discount fares, such as the requirement
                             to stay over a Saturday night or to fly on a particular day of the week. For
                             example, a traveler may attempt to buy two discounted overlapping
                             round-trip tickets between Dallas and Miami—one ticket originating from
                             Dallas on May 4 and returning on May 28, 1999, the other originating from
                             Miami and departing on May 7 and returning on May 25, 1999. Using the
                             tickets out of sequence, the traveler could create two round trips between
                             Dallas and Miami for May 4-7 and May 25-28 and avoid (1) staying over on
                             Saturday nights or (2) paying for the more expensive unrestricted business
                             class tickets. In a complaint filed in September 1997, before the
                             Department of Transportation,10 the Association of Retail Travel Agents
                             alleged that airlines allow their reservation agents to issue back-to-back
                             tickets while at the same time penalizing travel agencies that do so.11
                         •   Issuing “hidden city” tickets. Hidden-city ticketing involves the purchase
                             of a less expensive ticket that is beyond the traveler’s actual destination.
                             For example, a traveler flying from Atlanta, Georgia, to Chicago, Illinois,
                             may attempt to purchase a less expensive ticket for a flight that stops or
                             connects in Chicago. Having obtained the ticket, the traveler would depart
                             the plane in Chicago, and throw away the remaining portion of the ticket.
                             Airlines prohibit travel agencies from booking hidden-city tickets, but
                             according to travel agency representatives, airlines will issue these tickets
                             to customers who call the airline directly.
                         •   Refunding nonrefundable tickets. Airlines sell discounted nonrefundable
                             tickets as another way to segment their market and to manage their seat
                             inventory. The travel agency industry contends that airlines refuse to allow
                             a travel agency to refund nonrefundable tickets, yet when contacted
                             directly, refund the tickets themselves and bill the agency for any
                             commission paid.



                             10
                              Association of Retail Travel Agents v. American, Delta, Northwest, and United, OST-97-2908-1. The
                             Department has not ruled on this complaint.
                             11
                               We did not evaluate the extent to which airlines comply with their various ticketing policies. Such an
                             evaluation, even if permitted by airlines, would require more time and resources than were available
                             for this review.



                             Page 14                                                   GAO/RCED-99-221 Sale of Airline Tickets
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Airlines Have a Financial   Six of the seven largest U.S. airlines have policies that expressly disallow
Incentive to Apply Their    back-to-back ticketing, hidden-city ticketing, and refunding nonrefundable
Ticketing Policies          tickets.12 Representatives of the six airlines said their policies apply both
                            to travel agencies, as part of their agreements with airlines, and to airlines’
Uniformly                   reservation agents. For example, one airline official said that an airline
                            reservation agent would be disciplined—and possibly terminated—for not
                            complying with the airline’s policies.

                            Airline officials acknowledged that in some cases their reservation agents
                            have unknowingly issued back-to-back and hidden-city tickets. For
                            example, a customer could buy back-to-back tickets through different
                            airline reservationists or even through different airlines. However, airlines
                            have a strong economic incentive to enforce their ticketing policies. This
                            incentive revolves around airlines’ approach to yield management—that is,
                            maximizing the revenues from each seat on every airplane. To do this,
                            airlines attempt to segment their passenger market between business and
                            leisure travelers. For example, for leisure travelers, who tend to be more
                            discretionary about their travel and, consequently, more sensitive to
                            price—airlines offer some seats at lower prices. In return, airlines place
                            requirements and restrictions, such as the need for advance purchase,
                            restrictions on refunding tickets, and a requirement for Saturday night
                            stayover for leisure fares. Conversely, business passengers tend to have
                            less discretion in their travel and require greater flexibility to purchase
                            tickets at the last minute or to change their flight times and therefore are
                            willing to pay more for a ticket with no restrictions.


Airlines Can Apply          While airlines’ ticketing rules apply to all ticket sales, an airline is free to
Different Ticketing Rules   apply different rules to and among travel agencies than it applies to itself.
to Travel Agencies          Airlines have historically carried out different ticketing practices among
                            travel agencies—for example, offering special fares, booking privileges,
                            and incentive payments to some favored agencies and not others. In
                            addition, the courts and the Department of Transportation have upheld an
                            airline’s right to apply different rules on a travel agency than it applies to
                            itself. In 1989, a federal court ruled that an airline, as the “principal” party




                            12
                             The six airlines are American, Continental, Delta, Northwest, United, and US Airways. The
                            seventh—Southwest Airlines—permits back-to-back and hidden-city tickets because Southwest does
                            not attempt to segment its customer base between business and leisure travelers. Collectively, these
                            seven airlines accounted for 85 percent of all domestic airline traffic in January 1999.



                            Page 15                                                 GAO/RCED-99-221 Sale of Airline Tickets
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to the relationship, could impose different rules on its “agents.”13 The
Department of Transportation ruled in 1995 that an airline could require
travel agencies to pay for discounted tickets within 24 hours of sale, even
though the airline does not impose the same requirement on its
customers.14

In keeping with their right to impose different ticketing requirements,
airlines apply rules for Internet-based electronic ticket agencies that are
different from those that they apply to other travel agencies and to
themselves. For example, airlines impose more stringent rules on the
number of passengers and flight segments that electronic agencies can
book as well as the length of time that they can hold a reservation. Airlines
also require electronic agencies to provide more passenger and payment
information than traditional agencies are required to provide. Electronic
travel agencies also receive a lower commission—5 percent, capped at $10
per transaction—than do traditional travel agencies. Electronic agencies,
and traditional agencies that would like to sell electronically, contend that
these differential policies and the lower commissions limit the growth of
electronic agency sales while providing airlines with an advantage in
selling tickets through their own websites. Airlines argue that more
stringent requirements are necessary for electronic agencies to protect the
airlines’ inventory of seats from abuse and to prevent fraud that could
harm airlines or undermine consumers’ confidence in booking on-line; the
lower commissions, they say, are due to cheaper processing costs for
electronic agencies.15 In April 1999, the American Society of Travel Agents
asked the Department of Justice to take action against alleged antitrust
violations by airlines; the allegation of antitrust violations is based in part
on the lower commissions paid to online agencies. Justice is reviewing the
complaint.




13
  In 1989, a federal court found that travel agencies are “agents” of the airline they represent and that
the restrictions placed on the operations of travel agencies by an airline are lawful under antitrust
laws, just as when restrictions are placed on one’s own employees. Illinois Corporate Travel, Inc.
(“McTravel”) v. American Airlines, 889 F.2d 751 (7th Cir. 1989).
14
 Pacific Travel International, Inc. v. American Airlines. Department of Transportation Order 95-1-2,
docket 49808, Jan. 4, 1995.
15
  These ticket agencies are like traditional travel agencies in that they provide comparative fare
information and allow travelers to make reservations and purchase tickets. However, because their
business is conducted electronically, they typically have lower costs than traditional “brick and
mortar” travel agencies.


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                          B-281616




                          U.S. and some foreign airlines offer special discount fares that are
Airlines Restrict         available only through their Internet websites. Airlines have developed
Access to Deeply          these websites to lower their costs, increase sales, and better manage their
Discounted Fares          inventory of airline seats, according to airline officials. Travel agency
                          representatives assert that airlines have developed these sites to drive
                          travel agencies from Internet sales. Travel agencies and Consumers Union,
                          a consumer advocacy group, contend that airlines should make all their
                          fares equally available through all ticketing channels. Currently, airlines
                          are not required to make their fares equally available.


Some Internet Fares Are   The travel agency industry, particularly electronic agencies, are concerned
Available Only Through    that they do not have access to all airline fares, especially heavily
Airline Websites          discounted fares. According to industry representatives, airlines are acting
                          anticompetitively in reserving these special fares exclusively for their
                          direct sales. Consumers Union has also voiced concern that only people
                          with access to a computer can obtain the discounted fares since they are
                          typically available only through airlines’ websites.

                          So far, the special fares on airlines’ websites have generally applied to
                          heavily discounted weekend fares on near-term flights that airlines believe
                          are unlikely to sell out—a small percentage of all fares. These fares are
                          announced via e-mail to consumers who subscribe to the announcements
                          and can be obtained by booking on-line through an airline’s website (and
                          in some cases by calling the airline, but typically with an additional
                          surcharge). Previously, many of these seats were likely to have gone
                          unsold. Airline officials stated that because these tickets are so deeply
                          discounted and short-term, it is not cost-effective to pay (1) computer
                          reservation systems to list these fares or (2) travel agency commissions.
                          As a result, many airlines choose to sell their deeply discounted,
                          last-minute seats exclusively through their websites—airlines’ least
                          expensive method for selling tickets. According to a 1999 Merrill Lynch
                          study, on average, it costs America West $6 to process a ticket through its
                          website compared with $13 through the airline’s own reservation agents,
                          $20 through independent electronic agencies, and $23 through a traditional
                          travel agency.16

                          Airlines’ website sales account for a small percentage of all airline ticket
                          sales but are expected to grow dramatically. Merrill Lynch estimates that
                          airlines’ Internet sales account for only 1 to 2 percent of total airline
                          revenues, though some low-fare carriers may derive as much as 8 percent

                          16
                            “e-Commerce: Virtually Here,” Merrill Lynch, Apr. 8, 1999.



                          Page 17                                                   GAO/RCED-99-221 Sale of Airline Tickets
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                              of their revenue from Internet sales. As Internet sales have grown, the
                              market share of independent electronic agencies has declined because of
                              faster growth in airlines’ website sales. Electronic agencies’ market share
                              has fallen from 80 percent to about half of Internet-based sales in the last
                              several years.


Airlines Can Choose Their     The Department of Transportation has supported airlines’ efforts to
Methods for Selling Tickets   establish new ticket sales channels, provided they do not unreasonably
                              discriminate and are not deceptive. For example, in September 1996, the
                              Assistant Secretary for Aviation and International Affairs, in responding to
                              travel agencies’ complaints about Microsoft’s Internet sales of airline
                              tickets, stated that the Department is unwilling to interfere with airline
                              ticketing methods as long as they do not harm the public. Furthermore, he
                              noted that airlines’ development of more efficient sales methods should
                              promote airline competition. Moreover, in April 1999, the Department of
                              Transportation dismissed a 1996 complaint by the Association of Retail
                              Travel Agents against several foreign airlines.17 The complaint alleged
                              deceptive practices, unfair methods of competition, and antitrust
                              violations against the International Air Transport Association (an
                              international rates-setting body) and three foreign airlines for the sale of
                              tickets below international rates through the Internet. In dismissing the
                              complaint, the Department’s Office of Aviation Enforcement stated that its
                              policy is to allow airlines the same freedoms to choose their terms and
                              sales methods that firms in unregulated industries have.

                              The Department is also considering a petition for rulemaking—filed by a
                              lone petitioner—regarding airlines’ disclosure of their special discount
                              fares.18 The petition alleges that airlines do not reveal Internet fares to
                              customers seeking the lowest fares through computer reservation systems
                              or airline reservation agents and, as a result, that airlines discriminate
                              against customers without Internet access.19



                              17
                                Order 99-4-19, Docket OST-96-1995-6, issued Apr. 29, 1999. Association of Retail Travel Agents v.
                              International Air Transport Association, Cathay Pacific, Aer Lingus, and Icelandair, OST-96-1995-1,
                              Dec. 2, 1996.
                              18
                                Donald Pevsner’s Petition for Rulemaking, OST-97-2061-1, Jan. 13, 1997.
                              19
                                14 C.F.R. 255.7(b) requires that any airline with significant ownership of a computer reservation
                              system that chooses to list its commonly available fares on its computer reservation system must also
                              list those fares on all the other systems in which it participates. The major airlines—most of which
                              have an ownership interest in one of the four main systems—choose to list the majority of their
                              available fares. Airlines that do not have an ownership interest in a computer reservation system are
                              not required to list, or post, their fares on computer reservation systems used by travel agencies.



                              Page 18                                                  GAO/RCED-99-221 Sale of Airline Tickets
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                           Airlines’ sale of tickets via the Internet is not unique. For example,
                           AMTRAK offers discount fares exclusively through its website. The fares
                           must be purchased online and are not available for sale at AMTRAK ticket
                           locations or reservation counters, on board trains, or through travel
                           agencies. Car rental agencies, hotels, and cruise lines also sell discount
                           products exclusively through the Internet. Manufacturers and suppliers of
                           other products, from clothing to automobiles, are also beginning to sell
                           their products through the Internet, in some cases reserving some
                           products for sale only through the Internet—a practice that has angered
                           traditional retailers.


                           U.S. airlines obtain data on travel agency sales from computer reservation
Airlines’ Use of Travel    systems and other sources and use the data to determine their market
Agency Sales Data Is       share and the shares of other airlines. Airline officials told us that the
Permitted by Current       airlines also use this information to manage their incentive programs for
                           travel agencies. Airlines’ incentive payments to travel agencies, called
Regulations                commission overrides, are a controversial practice in the airline industry
                           because they could encourage travel agencies to steer travelers toward
                           more expensive fares. The travel agency industry contends that these data
                           are proprietary. Airline representatives, however, state that sharing travel
                           agencies’ sales data is permitted.


Commission Overrides Are   Each airline combines data from several sources to develop the
Controversial              information it needs to manage its commission override program. One
                           source is the computer reservation systems, which provide airlines’ sales
                           data to interested airlines, as authorized by federal regulations. The data
                           provide transaction details on each reservation, including the travel
                           agency that booked the ticket. According to Department of Transportation
                           officials, the Department will consider whether its rules should be
                           amended to bar systems from making travel agencies’ booking data
                           available to all airlines in its pending rulemaking on computer reservation
                           systems.20 Another source is the data airlines receive on their travel
                           agency sales from the Airlines Reporting Corporation.21 When airlines
                           combine these two sources of data, they can determine the market share
                           for each travel agency. Typically, an agency will earn a commission


                           20
                            The Department of Transportation is currently revising computer reservation system rules under a
                           rulemaking filed Sept. 10, 1997, 62 Federal Register 47606.
                           21
                             Under the ARC agency agreement, travel agencies must report their sales on a weekly basis. ARC, in
                           turn, transmits the sales data to the respective airlines. An airline is not provided with sales data for
                           competing airlines.



                           Page 19                                                    GAO/RCED-99-221 Sale of Airline Tickets
                            B-281616




                            override payment if an airline’s share of an agency’s sales exceeds the
                            airline’s share of all travel agency bookings in that area.

                            The payment of commission overrides is a controversial practice in the
                            airline industry. Such payments are intended to reward travel agencies
                            that sell a particular airline’s tickets. In 1996, we criticized the practice of
                            paying overrides as anticompetitive.22 In a survey of 9 of the top 10 travel
                            agencies, accounting for one-third of all ticket sales, we found that
                            commission overrides are an important consideration by travel agencies in
                            selecting an airline, especially when all other things are equal. According
                            to the 1998 Travel Weekly survey, 52 percent of agencies received override
                            payments in 1997. Two-thirds of the agencies receiving these payments
                            said they usually or sometimes book a particular airline in order to receive
                            them. In March 1999, the Department of Transportation’s Inspector
                            General reported that these overrides change the relationship between
                            passengers, travel agencies, and airlines.23 Specifically, the Inspector
                            General concluded that overrides transform the role of travel agencies
                            from a neutral seller of airline tickets to a direct distribution agent for a
                            particular airline. While the Inspector General found no direct evidence of
                            travel agencies misleading their clients, he was concerned that travel
                            agencies do not disclose their override agreements and therefore
                            recommended that travel agencies disclose the existence and nature of
                            these agreements.


Rulings Support Airlines’   While the travel agency industry has long complained about airlines’
Use of Travel Agencies’     access to travel agencies’ sales data, the Department of Justice and an
Sales Data                  independent mediation panel reviewed the practice and did not find it to
                            be unlawful. In 1984, the Department of Justice reviewed ARC’s formation,
                            including the travel agency reporting requirements, and concluded that the
                            efficiency benefits of a common ticket clearing system outweighed the
                            potential for the restraint of trade. Specifically, Justice found that the ARC
                            agreement, including the requirement for travel agencies to submit weekly
                            sales reports, is related to maintaining airlines’ financial integrity and
                            administrative efficiency. In 1990, the Association of Retail Travel Agents
                            requested that ARC stop sharing data on travel agencies’ sales. ARC
                            declined, and the Association and the American Society of Travel Agents

                            22
                             Airline Deregulation: Barriers to Entry Continue to Limit Competition in Several Key Domestic
                            Markets (GAO/RCED-97-4, Oct. 18, 1996). See also, Airline Competition: DOT’s Implementation of
                            Airline Regulatory Authority (GAO/RCED-89-93, Jun. 28, 1989) and Airline Competition: Industry
                            Operating and Marketing Practices Limit Market Entry (GAO/RCED-90-147, Aug. 29, 1990).
                            23
                             Office of Inspector General Audit Report, “Report on Travel Agent Commission Overrides,”
                            CE-1999-060, Mar. 2, 1999.



                            Page 20                                                GAO/RCED-99-221 Sale of Airline Tickets
                  B-281616




                  appealed to an independent arbitration panel.24 In 1991, the arbitration
                  panel denied the appeal, determining that the alleged misuses of the data
                  had not been demonstrated.


                  We provided a draft of this report to the Departments of Transportation
Agency Comments   and Justice for their review and comment. The Department of
                  Transportation provided editorial and technical comments, which we
                  incorporated as appropriate. Justice had no comments on the draft report.
                  We also provided relevant sections of the report to the Air Transport
                  Association, the American Society of Travel Agents, the Association of
                  Retail Travel Agents, and the Airlines Reporting Corporation. Each of
                  these organizations provided technical comments, which we incorporated
                  as appropriate.


                  To assess how changes in the way airlines sell tickets have affected travel
Scope and         agencies and consumers, we met with airline and travel agency
Methodology       representatives, consumer groups, and officials from the Departments of
                  Transportation and Justice. We also collected and analyzed financial and
                  other information on airlines and travel agencies. To estimate the amounts
                  of travel agencies’ reduced commission revenues, we obtained and
                  analyzed historical data on commissions and fares and projected
                  commission revenues, assuming those commission rates would have
                  remained at their historical highs with no change in ticket prices.
                  Furthermore, we evaluated studies on the role of travel agencies in serving
                  consumers, including finding the best fares. Finally, we reviewed relevant
                  complaints before, and rulemakings and orders by, the Departments of
                  Transportation and Justice.

                  To compare airlines’ policies and practices for the sale and use of airline
                  tickets sold by travel agents with those sold directly by airlines, we
                  reviewed complaints before the Department of Transportation and other
                  relevant case law and spoke with airline and travel agency representatives.
                  We contacted the seven largest domestic carriers, which account for about
                  80 percent of passenger traffic, to obtain their ticketing policies.25 We did
                  not audit airlines’ actual adherence to their policies.



                  24
                    The arbitration panel had been established as part of a settlement agreement arising from an antitrust
                  lawsuit brought by the Association of Retail Travel Agents against the Air Transport Association and
                  ARC.
                  25
                    The seven airlines are American, Continental, Delta, Northwest, Southwest, United, and USAirways.



                  Page 21                                                  GAO/RCED-99-221 Sale of Airline Tickets
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To determine airlines’ policies and practices for making their airfares,
particularly their discounted fares, accessible to travel agencies and
consumers, we met with airline, travel agency, and consumer group
representatives; obtained airlines’ policies; examined practices in other
industries; and reviewed relevant legal materials. We also obtained
information from the seven major domestic airlines on how airfares are
made available to the public and travel agencies, especially discounted
fares and fares available on airlines’ websites. Moreover, we met with
consumer groups and travel agent organizations to discuss their concerns
about access to airfares. Finally, we contacted representatives of
organizations that publish airfares and operate computerized reservation
systems.

To determine airlines’ policies and practices regarding the use of data on
travel agency sales, we spoke with officials representing airlines,
computer reservation systems, ARC, travel agencies, and the Departments
of Transportation and Justice to obtain relevant information and
documentation. Finally, we reviewed prior GAO and Department of
Transportation reports, relevant court cases, complaints, and legal
opinions.

We performed our review from December 1998 through July 1999 in
accordance with generally accepted government auditing standards.


We are also sending copies of this report to appropriate congressional
committees; the Honorable Rodney Slater, Secretary of Transportation;
the Honorable Janet Reno, Attorney General; the Honorable Jacob Lew,
Director, Office of Management and Budget; and other interested parties.
We will send copies to others upon request.




Page 22                                   GAO/RCED-99-221 Sale of Airline Tickets
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If you or your staff have any questions about this report, please call me at
(202) 512-2834. Other contacts and acknowledgements are listed in
appendix II.

Sincerely yours,




John H. Anderson, Jr.
Director, Transportation Issues




Page 23                                    GAO/RCED-99-221 Sale of Airline Tickets
Contents



Letter                                                                                         1


Appendix I                                                                                    26

Summary of the
Department of
Transportation’s
Dockets
Appendix II                                                                                   28

GAO Contacts and
Staff
Acknowledgments
Table              Table I.1: Department of Transportation’s Dockets on Various               26
                    Aspects of Airline Ticket Sales

Figures            Figure 1: Airlines’ Operating and Net Profit, 1978-97                       5
                   Figure 2: Airlines’ Cost Indices, 1978-98                                   6
                   Figure 3: Travel Agencies’ Commission Rates, 1989-98                        7
                   Figure 4: Actual and Reduced Commission Revenue, 1994-98                    8
                   Figure 5: Number of Travel Agencies, New Agencies, Closed                  10
                     Agencies, and Total Agencies, 1990-98
                   Figure 6: Average Published One-way Airfares, 1992-98                      12




                   Abbreviations

                   ARC       Airlines Reporting Corporation
                   GAO       General Accounting Office


                   Page 24                                GAO/RCED-99-221 Sale of Airline Tickets
Page 25   GAO/RCED-99-221 Sale of Airline Tickets
Appendix I

Summary of the Department of
Transportation’s Dockets

                                            Table I.1 lists requests, petitions, and notices of rulemakings filed before
                                            the Department of Transportation relating to various aspects of airline
                                            ticket sales. The Department has completed its review and issued orders
                                            on two of these requests, while seven others are still pending.


Table I.1: Department of Transportation’s Dockets on Various Aspects of Airline Ticket Sales
Docket number                Date Parties                       Nature of complaint                     Departmental status
OST-49808                 10/3/94 Pacific Travel International,     Request for restraining order       Order 95-1-2, Jan. 4, 1995,
                                  Inc. v. American Airlines, Inc.   against American Airlines for       dismissed.
                                                                    engaging in unfair business
                                                                    practices against complainant
                                                                    (requiring 24-hour payment for
                                                                    discounted tickets).
OST-1996-1995-1           12/2/96 Association of Retail Travel      Request for enforcement             Order 99-4-19, Apr. 29, 1999,
                                  Agents v. International Air       proceedings with respect to         dismissed.
                                  Transport Association, Cathay     Internet offers of international
                                  Pacific, Aer Lingus and           passenger air transportation
                                  Icelandair                        below tariff rates.
OST-1997-2061-1           1/13/97 Donald Pevsner                    Petition for a rulemaking to        Pending.
                                                                    prohibit carriers from
                                                                    discriminating against
                                                                    non-Internet users.
OST-1997-2622-1           6/16/97 Consumers Union                   Petition for a rulemaking to        Pending.
                                                                    require commercial passenger
                                                                    carriers to disclose directly to
                                                                    consumers, and make available
                                                                    to computer reservation system
                                                                    vendors, the most recently
                                                                    available average airfare and
                                                                    lowest fare charged by the
                                                                    carrier for the route and class
                                                                    quoted to the inquiring party.
OST-1997-2881-1           9/10/97 Advance notice of proposed        Advance notice of proposed        Pending.
                                  rulemaking                        rulemaking to solicit comments
62 Federal                                                          on whether the Department of
Register                                                            Transportation should continue
47606                                                               or modify its existing rules
                                                                    governing airline computer
                                                                    reservation systems. Unless
                                                                    extended, the existing rules will
                                                                    expire Mar. 31, 2000 (64 Federal
                                                                    Register 15127, Mar. 30, 1999).
OST-1997-2908-1           9/16/97 Association of Retail Travel      Request for an enforcement          Pending.
                                  Agents v. American Airlines,      proceeding and petition for
                                  Delta Airlines, Northwest         rulemaking, with respect to
                                  Airlines, and United Airlines     alleged unfair and
                                                                    anticompetitive practices, that
                                                                    is, “back-to-back” ticketing.
                                                                                                                           (continued)




                                            Page 26                                             GAO/RCED-99-221 Sale of Airline Tickets
                                     Appendix I
                                     Summary of the Department of
                                     Transportation’s Dockets




Docket number        Date Parties                          Nature of complaint               Departmental status
OST-1998-3713-1     4/8/98 Request for comments by the     Request for comments on the       Pending.
                           Department of Transportation    Department’s enforcement
                                                           policy regarding unfair
                                                           exclusionary conduct in the air
                                                           transportation industry.
OST-1998-4775-1   11/18/98 Association of Retail Travel    Emergency request for a           Pending.
                           Agents                          rulemaking to establish travel
                                                           agency rights to renegotiate or
                                                           arbitrate computer reservation
                                                           system contracts when airlines
                                                           reduce commissions.
OST-1998-4776-1   11/18/98   United States Travel Agent    Request for the Department to     Pending.
4785-1            11/18/98   Registry v. Delta, United,    rescind commission reductions
4786-1            11/18/98   American, and Continental     on international airfares.
4836-1            12/01/98   Airlines




                                     Page 27                                         GAO/RCED-99-221 Sale of Airline Tickets
Appendix II

GAO Contacts and Staff Acknowledgments


                  Kathleen Turner, (202) 512-2834
GAO Contacts      Paul Aussendorf, (206) 287-4800


                  In addition to those named above, David Bryant, Jr.; Jay Cherlow; David
Acknowledgments   Hooper; Joseph Kile; and Stan Stenersen made key contributions to this
                  report.




(348141)          Page 28                                  GAO/RCED-99-221 Sale of Airline Tickets
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