Travel agents will take center stage now that US Airways has filed a federal civil antitrust lawsuit in the Southern District of New York against Sabre Holdings Corp. to halt allegedly anticompetitive and anti-consumer practices, as well as recover monetary damages.
According to the complaint, US Airways contends that Sabre, which is a dominant distributor of airline fares and content to travel agents, has engaged in a pattern of exclusionary conduct.
“US Airways contends that Sabre has wielded its significant market power and control through exclusionary commitments from travel agents and other Global Distribution Systems (GDSs), as well as through anticompetitive requirements placed on US Airways and other airlines in order to sell their tickets. All of these actions by Sabre hurt consumers through higher prices, reduced innovation and fewer choices,” US Airways said in a statement.
Sabre is the largest GDS in the U.S. and it exercises enormous market power over airlines, including US Airways. More than 35 percent of US Airways’ revenue is booked through Sabre and Sabre-affiliated travel agents. Sabre structures the distribution model so that travel agents, whether they are a traditional travel agency or one of the large online travel agencies that many consumers use directly on the Internet, are typically forced to rely on a single GDS to book airline tickets on behalf of their customers.
According to the complaint, Sabre imposes significant economic penalties on travel agents relating to bookings not made using Sabre. If Sabre excluded US Airways from its offerings to its travel agents, those agents could no longer book US Airways tickets through Sabre. US Airways would not be able to survive the subsequent loss of revenue. Given this disproportionate market control, US Airways is forced to accept Sabre’s monopolistic practices.
Today’s lawsuit follows the recent execution of a new distribution agreement between Sabre and US Airways, which was reached in late February 2011. During negotiations with Sabre, US Airways said that it made it clear to Sabre that it sought a new contract without exclusionary restrictions that protect Sabre from competition. According to the complaint, US Airways was forced to acquiesce to Sabre’s demands as a part of any new deal. The complaint also alleges that Sabre has been aggressive in suppressing the ability of travel agents to book tickets directly with airlines using so-called “direct connections.”
US Airways fully expects that its lawsuit will not disrupt the display or distribution of US Airways tickets on Sabre during the litigation. US Airways pays Sabre so that Sabre-affiliated travel agents can book tickets on US Airways.
“Lower-cost, more technologically advanced alternatives and innovative fare products are being shut out by Sabre’s actions,” said US Airways President Scott Kirby.
US Airways alleges that Sabre’s full content requirements have eliminated US Airways’ ability to offer lower-cost types of fares and resulted in increased ticket prices for consumers. The airline also contends that Sabre’s conduct and technological limitations have delayed the introduction of products such as US Airways’ Choice Seats program on Sabre.