BTC Fights American Airlines - USAir Merger and IATA Policy

washington dcThe proposed merger of American Airlines and US Airways faced opposition from Kevin Mitchell, chairman, the Business Travel Coalition (BTC), who told a Congressional committee today that the merger was not in the public interest.

In testimony before the U.S. House Committee on the Judiciary, Subcommittee on Regulatory Reform, Commercial and Antitrust Law, Mitchell also opposed the New Distribution Capacity (NDC) under consideration by the International Air Transport Association (IATA), which he believes to be anti-consumer.

Mitchell said he believes approval of the merger would encourage IATA's adoption of the NDC that would be against the interests of agents, consumers and fare transparency.

Mitchell urged that approval of IATA's NDC be denied and urged that the U.S. Department of Justice (DOJ) investigate the NDC for "anticompetitive effects" and the “unprecedented invasion of privacy it would inflict on all consumers."

"DOJ should serve IATA, and the airline members of IATA who have been spearheading the NDC scheme with a civil investigative demand (CID) to discover documentation and compel testimony regarding the purpose and objectives of NDC,” Mitchell said, noting his belief that American has been in a leader in encouraging adoption of NDC.

Mitchell also argued for increased consumer protections.

"In order to address price transparency problems resulting from an imbalance in market power between airlines and consumers, and to address the complete absence of any private right of action for consumers when airlines fail to make clear and timely disclosure of the all-in price of travel, Congress might consider the efficacy of a minimum set of national consumer protections, enforceable at the state level, to protect consumers while avoiding burdening airlines with a patchwork of consumer laws."

Mitchell notes that a Binding Resolution by IATA codifies that airlines have agreed they have the right to demand from consumers, before they would receive a fare quote, personal information including: name, age, nationality, contact details, frequent flyer numbers,  whether the purpose of the trip is business or leisure, prior shopping, purchase and travel history and marital status.

“Airfares would no longer be publicly filed and available on a non-discriminatory basis for consumers to anonymously comparison-shop and then purchase through travel agencies. Instead, each price would be 'unique' depending on the profile of the consumer. This personal information can be used to extract higher prices from less price-sensitive consumers - such as business travelers,” Mitchell said.

“In contrast, today when a consumer wants to travel from A to B she can go to a travel agency that has the fares and schedules. All options in the marketplace are returned so she can easily compare prices without having to divulge personal information. As airlines have publicly confirmed, it is this very price visibility that has checked the power of airlines to raise fares, lest they lose to competitors offering a better deal,” Mitchell said.

Mitchell concluded by saying that Congress needs to keep its guard up and intervene as necessary, before consumers are harmed. “Whether it is fighting DOT rule makings or boldly proposing NDC, there is a full-throated airline assault on price transparency.”

“The past two mega-airline mergers (Delta and United) were justified on the pricing transparency and discipline provided by the online travel agencies and other third party distributors. Now through NDC, airlines are jointly seeking to kill off transparency and comparison-shopping – this at a time when they are needed more than ever as we have gone since 2008 from 6 network carriers to 5, then to 4 and now potentially to 3.” Mitchell said.