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Business Travel Coalition

Airline Industry Public Policy Survey Analysis

U.S. DOT Rulemaking Regarding Ancillary Service Fees

Monday, October 7, 2013

 

I. INTRODUCTION

Business Travel Coalition (BTC) on October 4, 2013 initiated a survey of travel industry participants from around the world with respect to the highly anticipated U.S. Department of Transportation (DOT) rulemaking regarding the disclosure of airline ancillary fees. The survey will remain open until DOT publishes its rulemaking with final survey results filed in the docket. Preliminary results are reported in this analysis.

II. BACKGROUND

Since major U.S. airlines in 2008 began unbundling their products and charging for services previously included in the price of a ticket they have refused to provide ancillary fee data to travel agencies in the U.S. and around the world so that customers, including corporates using online booking tools, could see, compare and buy such services in the same transaction as the ticket purchase. Airlines for 5 years have ignored their very best corporate customers’ demands for this information and for the restoration of efficient comparison-shopping.

DOT will soon publish a rulemaking for public and industry comment that will likely address this issue. BTC is seeking, through this ongoing survey, to update its public-policy analysis of travel industry sentiment toward a potential rule that would require an airline to provide ancillary fee information to distribution channels where it sells its base fares for the purpose of reducing unfair and deceptive marketing practices and restoring true comparison-shopping.

III. METHODOLOGY

BTC randomly chose 20,000 members from its electronic community of 38,554 travel industry participants from around the world to include in its survey. The survey will remain open until the DOT rulemaking is published. Edition 1 of these survey results includes the participation of 127 industry participants from 14 countries – Canada, U.S., UK, India, France, Denmark, Finland, Iceland, Norway, Sweden, Germany, Italy, Spain and Belgium.

Some 45.9% of survey participants are corporate, university and government travel managers; 24.5% are travel management company (TMC) executives; and 29.6% are in other industry roles such as payment solutions executives, aviation analysts, business travel consultants, airline associations and travel technology providers. Survey results in this analysis are also filtered to isolate responses by (a) all survey participants, (b) travel managers only, (c) TMCs and (d) participants in other travel industry roles.   

IV. SUMMARY ANALYSIS

A small percentage of survey participants think DOT should not interfere with the workings of the marketplace and that individual as well as travel manager-consumers should instead respond to this ancillary fee problem by supporting airlines that meet their needs. (Representative comments of this view are included below.)

However, greater than 90% of survey participants believe that the marketplace for commercial air transportation services is failing as evidenced by the fact that in 5 years not a single major U.S. airline has responded to its best customers’ demands for ancillary fee information. These travel professionals strongly believe that DOT should exercise its authority to police unfair and deceptive marketing practices.

These survey participants are of the view that DOT should require that ancillary fee information be shared with channels where airlines sell their base fares and in a format that allows the purchase of such services in the same transaction as the ticket purchase. The point that the U.S. airline industry has radically consolidated and there are not always options to support other airlines underscores this view. 

What’s more, in the current case of ancillary services, in refusing to provide fee information, airlines are in competitive lockstep with each other – a central concern of the U.S. Department of Justice in its lawsuit to block the proposed merger of US Airways and American Airlines.

V. TOP-LINE RESULTS

- 93.9% of all survey participants think that airlines should proactively provide ancillary fee information to channels where they sell their base fares.

- 92.9% of all survey participants think that, as the marketplace after 5 years has not fixed this problem, the U.S. DOT should issue a rule requiring airlines to provide this information to channels where they sell their base fares.

- Of survey participants who think DOT should issue a rule requiring airlines to provide this information 91.5% also believe that DOT should require the ancillary fee information to be shared in a format that enables the purchase of such services in the same transaction as the ticket purchase.

VI. SURVEY DETAILED RESULTS

1 - Do you think airlines should proactively provide ancillary fee information to channels where they sell their base fares?

ALL SURVEY RESPONDENTS

     Yes: 93.9%

     No: 6.1%

     Uncertain: 0.0%

TRAVEL MANAGER RESPONDENTS

     Yes: 97.8%

     No: 2.2%

     Uncertain: 0.0%

TMC RESPONDENTS

     Yes: 95.8%   

     No: 4.2%  

     Uncertain: 0.0%

OTHER RESPONDENTS

     Yes: 86.2%  

     No: 13.8%  

     Uncertain: 0.0%


SURVEY PARTICIPANTS’ COMMENTS FOR QUESTION 1

- Online Travel Agents' (OTAs) objective is to provide transparency to consumers by comparing full prices offered by carriers on the same route. Currently this is not the case due to lack of information on ancillaries, and consumers are forced to go to airline websites to know the prices and also to complete bookings with all needed services, which is reducing choice and competition.

- Consumers need to be given all costs at the time of purchase to determine their best choice.

- Our clients want ancillary fee information so that they can better manage their travel program spend.

- It is very important for TMCs to provide cost-control support to clients.

- Airlines are trying to drive customers directly to their own websites.

2 - As the marketplace after 5 years has not fixed this problem, should the U.S. DOT issue a rule requiring airlines to provide this information to channels where they sell their base fares?

ALL SURVEY RESPONDENTS

     Yes: 92.9%

     No: 6.1%

     Uncertain: 1.0%

TRAVEL MANAGER RESPONDENTS

     Yes: 97.8  

     No: 0.0  

     Uncertain: 2.2%

TMC RESPONDENTS

     Yes: 91.7%  

     No: 8.3%  

     Uncertain: 0.0%

OTHER RESPONDENTS

     Yes: 86.2%  

     No: 13.8%  

     Uncertain: 0.0%

SURVEY PARTICIPANTS’ COMMENTS FOR QUESTION 2

- The information is available. Just because it isn't easy to compare offerings and requires a longer shopping process isn't something that should be regulated.

- Absolutely. In Europe higher competition among low cost and traditional carriers has substantially cut prices by half on intra European flights in the last 15 years. A decisive factor on this price reduction has been the technological developments advanced by OTAs to capture airline ancillaries and be able to show to customer prices with all included.

- The US DOT should require airlines to present and offer all services for purchase through all channels where base fares are sold. This simply makes sense for and protects the consumer.

- The airlines will never do this unless forced. There should be total transparency of airline pricing in all distribution channels.

- If they do not provide fee information then we will not be able to provide our clients with the full cost of their purchase.

- It is the only logical customer-centric thing to do.

- What airlines are doing is anticompetitive and an attempt to eliminate travel agents and GDSs.

3 - If yes, should the U.S. DOT require ancillary fee information to be shared in a format that allows the purchase of such services in the same transaction as the ticket purchase?

ALL SURVEY RESPONDENTS

     Yes: 91.5%

     No: 5.3%

     Uncertain: 3.2

TRAVEL MANAGER RESPONDENTS

     Yes: 91.2%  

     No: 4.4%  

     Uncertain: 4.4%

TMC RESPONDENTS

     Yes: 87.0%  

     No: 8.7%  

     Uncertain: 4.3%

OTHER RESPONDENTS

     Yes: 92.6%  

     No: 7.4%  

     Uncertain: 0.0%

SURVEY PARTICIPANTS’ COMMENTS FOR QUESTION 3

- Keep the government out of the market as much as possible. The GDS utility lead to price being the biggest determining factor for purchase decisions. Consumer behavior has driven carriers to find alternate sources for increasing revenue. Carriers have billions of dollars invested in assets. They've earned the right to sell the product as they wish and generate a profit. If you don't like it don't support the carriers that hide ancillary fees.

- Markets, not government, should decide.

- This would also allow TMC's to properly document the 'value' they bring to distribution for the airlines as the amount of the fees is 'tied' to the TMC generated transactions.

SURVEY PARTICIPANTS’ GENERAL COMMENTS 

- Airlines react to market realities. Noise on complaints emanating from product positioning don't elicit response from carriers; industry revenue shares do. Speak out by supporting the carriers that provide what you seek. Other carriers will react. Don't plead for government intervention. There are always unintended consequences of such interference. It's what has created this issue.

- I recognize the U.S. DOT prefers to have the marketplace work this issue out rather than ruling on this issue. Unfortunately this hasn't occurred and I believe if we look out for the consumer this will be good for all parties. Please DOT require airlines to make all services available for sale at time of base fare purchase.

- Transparency is essential!

- There is no problem with unbundling, so long as every ancillary service is clearly flagged up, simple to buy through every channel and the running total of purchased services is easily identifiable so that the customer knows exactly what he is getting.

- It is very frustrating to us and our clients that we are not able to provide this now basic service to our clients while the airlines themselves are able to in their booking channels. This creates an unfair marketplace and is a disservice to our clients.

- Carriers have tried to close out the agency/GDS channel for years and have been unsuccessful. Their hidden tactics need to stop.

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