Is There More Here Than Meets The Eye?
There’s been much positive press about Delta Air Lines’ decision to eliminate fees for purchasing flights through its own ticket agents. There’s no doubt the small percentage of consumers booking through Delta agents will save some money with Delta’s incoming President Glen Hauenstein stating, “It is much simpler for our customers to not have to worry if they will pay a fee for ticketing with Delta.” But is there more going on than just a big customer hug from Delta?
In seeking to answer that question curiosity brought me to think about what the Lufthansa Group’s (LHG) surcharge of 16 Euros for flights customers book through travel agents might have in common with the elimination of Delta’s $25 call center booking fee?
Well, the former penalizes consumers seeking to use the comparison-shopping tools provided by online and traditional travel agencies and the latter removes a fee that will make Delta.com more competitive with the travel agency channel.
In both cases those two airline organizations have introduced distribution strategies with incentives that are purpose-built to drive consumers to the Walled Gardens of airline websites where competitive alternatives are not on offer and where over time consumers will pay more, especially the unsuspecting 80 percent who travel by air infrequently.
THE GOOD NEWS
Rather than as predicted, the travel agency channel did not wither and die due to disruptive technologies and new business models introduced since the 1990s. Instead, they adjusted smartly and today are stronger than ever across the world always putting consumers’ interests first. In fact, it was U.S. travel agents that uncovered and sounded the alarm over the secretly introduced change to multicity airfare rules that are driving up prices by as much as a factor of seven. As a consequence, the U.S. Department of Justice is looking at this development.
The good news is that Delta’s fee elimination and the LHG surcharge are in response to the renewed strength of travel agents and validate the importance of robust competition among travel distribution channels. Consumers need complete and accurate pricing information and strong, independent distributors necessary to keep airlines honest on their websites and in their offerings elsewhere to consumers. Travel agencies and online travel sites uniquely provide consumers with the comparison-shopping tools that keep pricing discipline in the system.
THE NOT SO GOOD NEWS
Since the major network airlines have secured antitrust immunity for their global alliances and consolidated the domestic industry they have launched an assault on price transparency, their regulator, U.S. Open Skies policy and foreign carrier new entry.
Specifically, some airlines have leveraged their new-found dominant market positions to withhold fare and schedule information from online travel companies for the purpose of driving consumers to Airline.com where the comparison-shopping tools pioneered by these firms are not provided. These same airlines have turned to Congress to override U.S. DOT consumer protections and to block foreign carrier new entry into U.S. markets.
As a remedy to these anti-competitive practices, travel agents advise their customers and government regulators accordingly; provide a range of air travel alternatives with expert recommendations; and deliver the visibility U.S. low-fare carriers and foreign carriers need to mount effective competitive rivalry and develop markets.
The not so good news is that while market participants in indirect travel distribution channels have thrived in recent years, they need to be vigilant, as there appears to be a counter-offensive underway to moderate the growing strength and role of travel agencies and their interference with airlines’ goals.