Consumer Advocates Push for Better Airfare Fee Disclosures
Everyone involved in air travel — online travel agents, federal transportation officials, consumer advocates and airlines — claims to want to give passengers more information about prices for options, such as meals and seat assignments, while buying tickets.
But a fight has broken out among them as the Department of Transportation develops a rule that could force airlines to provide all those choices to travel agents so they could make it easier to compare the total price of flights among airlines.
Airlines contend they provide the fees on their own websites and can spread the information more broadly through specific deals such as the one Delta Air Lines has to market seats with extra legroom on its two-class aircraft.
But consumer advocates, travel agents and the companies that provide ticket-price comparisons argue that the government needs to force airlines to provide the data so customers can compare. The difference is between going to specific sites, such as Southwest Airlines , or to comparison sites such as Expedia , Orbitz and Travelocity.
The fight will get a public airing August 7, when a consumer advocate panel — that makes recommendations to the federal transportation department — will look at the department's plans to issue a rule by late November. That ruling could force airlines to provide the computerized information about all their fees to comparison companies.
"Consumers are being denied the ability to compare prices," says Charlie Leocha, director of the Consumer Travel Alliance and a member of the panel called the Advisory Committee for Aviation Consumer Protection. "They can't compare apples to apples easily."
Robert Rivkin, transportation department general counsel, says disclosing prices for more than 100 categories of fees quickly isn't an easy task. "That is something we are looking at very carefully, as you know, but we have to make sure we understand all the unintended and intended consequences of that," Rivkin says.
Fees are an important and growing part of each ticket, and of airlines' bottom lines. Bag fees generated nearly $3.4 billion at the 17 largest airlines last year, and re-booking fees generated nearly $2.4 billion , according to transportation department figures.
Airlines are increasingly pricing their tickets piecemeal, with separate charges for food, seat assignments and seatback entertainment.
While the fees are on each airline's website, they often come up near the end of the process of booking a ticket. Comparing ticket prices with fees included requires visiting each airline's site. Travel agents can't pull up side-by-side comparisons on their computer screens.
"This shouldn't be a guessing game," says Paul Ruden, senior vice president for legal and industry affairs at the American Society of Travel Agents. "They should be able, at the same time as they're looking at the flight times and the price, that these are the options, and you can buy them. That's what the fight is about."
The dispute focuses on organizations called Global Distribution Systems, or GDSs, that allow the easy comparison of ticket prices among participating airlines. Three companies dominate the business worldwide —Sabre Holdings and Travelport in the United States and Amadeus IT Holding in Europe.
The companies provide the information to travel agents, who make comparisons for travelers. The systems are used by 96 percent of corporate agents and 86 percent of leisure agents, according to PhoCusWright, which analyzes the travel industry.
Travel agents range from mom-and-pop shops finding a flight to Cancun, Mexico, to online giants Expedia, Orbitz and Travelocity. Adding confusion: Sabre owns Travelocity, and Travelport owns Orbitz.
Nobody has to participate. Southwest Airlines never joined, and that's why their flights don't show up in comparisons.
But the largest airlines belong and bristle at the costs, which total billions of dollars each year. Delta Air Lines, for example, pays about $300 million a year to participate, company executives revealed in a January 2011 conference call.
Airlines pay an average $3 per leg of each domestic flight and $7 for each leg of a foreign flight, says Norm Rose, president of Travel Technology Consulting in Belmont, Calif.
"It's a matter of consumer choice, but it's also a matter of costs that we would like to try to alleviate," says Sharon Pinkerton, senior vice president for legislative and regulatory policy at the airline industry trade group Airlines for America.
American Airlines, which is embroiled in a lawsuit against Travelport, created a pipeline called Direct Connect that sells 1 million tickets a year through 200 travel agencies worldwide without going through the comparison companies. American on Monday began selling a seat-selection service through Direct Connect at Priceline.com , to demonstrate the possibility of selling extra services on travel-agent sites.
"Direct Connect offers newer and better technology for airlines to distribute content to travel agents, but the entrenched (comparison companies) have engaged in a number of practices that have prevented new technologies from getting a foothold in the marketplace," says Bruce Wark, associate general counsel at American.
Too Hard, Too Expensive
Airlines don't want to be forced into providing information about their fees for two main reasons: cost and complexity.
Airlines complain that the comparison groups raise rates 7 percent a year, while in other industries, the cost of computer technology is falling. The other problem, the airlines say, is that the comparative systems developed with 1980s technology aren't capable of handling the complicated choices available today.
"Right now, the consumer is being short-changed on the amount of information that they are receiving," says Gary Doernhoefer, general counsel for the International Air Transport Association, which represents airlines worldwide.
Airlines say they should be allowed to develop pricing for their extra services on their own websites.
Air Canada's website shows how this works. The airline in 2004 began offering a handful of price choices for each flight, with descriptions of extra benefits such as seat selection and snacks in exchange for higher costs.
Montie Brewer, Air Canada's former CEO, says the carrier created the choices on its website to highlight the choices in bare-bones competition against WestJet, which he compared with Southwest. With minimum prices available to the last seat on each flight, Air Canada found that nearly half its customers bought tickets for more than the minimum.
"We couldn't afford not to have it," he says. "The problem is the historic GDS channels can't handle this kind of diversity of product offering."
Airlines, Comparative Sites Cut Deals
Another promising sign for travelers is that airlines are cutting deals with the comparative sites.
Delta announced a deal in June with Travelport to sell "economy comfort" seats through travel agents that offer three to four inches more legroom with priority boarding. Delta could build on more piecemeal offerings. Wayne Aaron, Delta's vice president for marketing, says the airline is always willing to broaden its distribution network from its own site or through travel agents.
Derek Sharp, Travelport's U.S. president, says the agreement underscores that his company is ready, willing and able to market more ancillary services.
Not Too Hard, Not Too Expensive
Comparison companies say they provide a valuable service steering customers to airlines through travel agents. Chris Kroeger, senior vice president of Sabre Travel Network, says fees total about 1 percent of airline costs, which he says "is a good investment." Kroeger says despite airline skepticism, these companies constantly upgrade their technology and have shown they can provide comparisons of extra services. He says Sabre will upgrade to offer extra services at no extra cost to airlines.
"Ultimately, consumers benefit when they're able to make well-informed decisions," Kroeger says. "We think this is an opportunity for both sides to win."
NerdWallet.com shows how more complicated comparisons work. The site, which isn't partnered with Global Distribution Systems, offers a comparison of bag fees, seat assignments and pet fees among airlines.
Alicia Jao, NerdWallet vice president of travel media, says the personal finance site created the comparisons because "we realized the fees are killing people." She acknowledges comparisons are difficult because the programming needs to be updated. But she says airlines are leery of anything that gums up ticketing.
"They are still using very antiquated ways of tracking or storing the data," Jao says of the comparison systems. "It's just a matter of the massive amount of data that goes into having just one flight calculated properly, booked properly and tracked properly."
Consumer advocates and travel agents, meanwhile, are impatient for airlines to provide more information for comparisons.
"Sooner or later, we're all dead," says Ruden, representing travel agents. "I don't understand why this is so difficult if they really wanted to do this."