Washington, DC--Debate will significantly increase with news that the International Air Transport Association (IATA) has now filed with the U.S. Department of Transportation (DOT) for approval of Resolution 787, or the New Distribution Capability (NDC). There is zero doubt that airline CEOs, who have signed onto NDC, will hear from their most valued corporate customers, distribution partners, antitrust enforcers and data-privacy regulators from around the world. NDC is nothing less than an ill-considered public and government-relations nightmare.
There is now a DOT docket open for public comment, which I suspect will draw a substantial number of negative travel industry and consumer comments. DOT of course can approve the IATA filing outright, approve it with conditions or reject it. However, because of the potentially far reaching and unprecedented harm to competition, consumers and personal data-privacy rights, NDC will make the years-long ancillary fee debate look like a preparation for a high school competition. IATA is overreaching in the extreme.
The problem the airline industry has decried publicly, and seeks to solve, in its own words is the “commoditization of airline services” caused by the current system of publicly available and transparent fares. As stated in an interview with Flight Global in July 2012, Tony Tyler, Director General of the International Air Transport Association (IATA), quite remarkably, gave voice to this problem and hinted at the expressly-coordinated solution among airline competitors:
“We’ve done a great job of improving efficiency and bringing down costs, but we’ve handed that benefit straight to our customers,” Tyler says. “As soon as someone’s got a cost advantage, instead of charging the same price and making a bit of profit, they use it to undercut their competitors and hand the value straight to passengers or cargo shippers – and you’ve got to ask why? I think one of the reasons is that the way we sell our product forces us to commoditize ourselves.”
To solve this problem the most powerful global airlines and alliances have expressly agreed, facilitated by IATA’s offices, on a brazen new worldwide business model for how to price and sell tickets. The goal for NDC is to terminate, by agreement among horizontal competitors, the current transparent model for the pricing of tickets, where fares are published and publicly available for comparison-shopping and purchase - by all consumers on a non-discriminatory basis. To accomplish this goal, airlines would demand consumers’ personal data and put their privacy, security and mobility at risk.
NDC would require consumers to give up substantial personal information - before being provided offers by airlines. The personal information includes – but is expressly said not to be limited to -- 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. This information can be used to extract higher prices from less price-sensitive consumers - such as business travelers.
Given its anti-competitive effects and the unprecedented invasion of privacy: (1) DOT should reject IATA’s application unconditionally; (2) DOJ and the EU’s DG Justice should serve IATA, and its members who have been spearheading the NDC scheme, with an investigative demand to discover documentation and compel testimony regarding the purpose and objectives of NDC and the process by which horizontal competitors reached a binding agreement on how they would price and sell tickets; and (3) U.S. State Attorneys General should investigate NDC.
Airline CEOs, who may not have been fully informed of the nature and extent of NDC's antitrust, data-privacy, corporate customer and public relations complications, may want to investigate their organizations’ due diligence and involvement with this reckless scheme and reconsider the irrevocable negative consequences that would surely rain down on their firms should this initiative continue to be pursued by their trade group.