SCHUMER REVEALS: IN MOVE THAT COULD COST TRAVELERS $6 BILLION MORE A YEAR, AIRLINES ARE WORKING TO PREVENT CONSUMERS FROM SHOPPING AROUND FOR BEST FLIGHT PRICE BY REFUSING TO SHARE FLIGHT INFO WITH WEBSITES LIKE EXPEDIA, ORBITZ, TRIPADVISOR & OTHERS; SENATOR PUSHES FEDS TO INVESTIGATE NEW AIRLINE POLICY—ON TOP OF CURRENT COLLUSION INVESTIGATION
At Least 2 Airlines Now Withholding Price & Flight Data From Third Party Price Comparison Websites Or Charging Fees For Their Use; Sites Concerned This Could Expand; Change Restricts Where Consumers Can Buy Tickets & Could Cost Them As Much As $6B More In Airfares
Amidst Current DOJ Airline Probe Schumer Helped To Spur, Senator Wants Feds, Including DOT, To Include Comparison Freeze Out Into Investigation
Schumer: Making It Harder To Get A Bargain By Freezing Out Websites That Save Travelers On Airfare Is Just Plain Wrong
Following the recent announcement that the Justice Department will launch an investigation into possible collusion among airlines, an investigation he helped to spur, U.S. Senator Charles E. Schumer today urged the Department of Justice (DOJ) and Department of Transportation (DOT) to go one step further by investigating a new practice among some airlines that blocks consumers from shopping around for the best airfares. Specifically, some air carriers have withheld critical price and flight data from popular third-party price comparison websites, like Expedia, TripAdvisor, Kayak, Orbitz and others that often help travelers save hundreds of dollars on airplane tickets. According to the Travel Technology Association, such restrictions could cost passengers more than $6 billion a year and discourage more than 40 million passengers from flying because of more expensive prices. Right now, approximately 44 percent of travelers book tickets through online travel sources to compare prices before purchasing from the airline’s website. Schumer explained that at least two major airlines have instituted the price freeze-out practice by preventing online comparison sites from obtaining and displaying flight schedule and price information. Schumer also noted that this practice could limit competition among airlines and possibly lead to even higher airfare prices down the road.
Online retailers have said this new move by some airlines to prevent comparison price shopping on travel websites could cost consumers dearly, increasing the overall cost of airfare. Schumer noted that sites are worried the number of airlines implementing this practice could expand. In December, Schumer called on the DOJ and DOT to investigate why airfares have been extremely high, despite record profits for the airlines and rapidly declining fuel costs. Earlier this month, DOJ announced that it will be investigating potential unlawful actions related to capacity coordination between airlines. DOJ has already issued subpoenas to a number of major airlines as part of the investigation. Schumer said that he is hopeful the feds will heed this call on this issue as well by ramping up the investigation to include a closer look into the price freeze-out practice some airlines have pursued.
Schumer is also urging the U.S. Department of Transportation (DOT) to investigate this new practice. Schumer went on to say that comparison sites must be fair to consumers as well.
“With high ticket prices, additional fees and limited carriers, we must ensure airlines aren’t taking further steps to prevent consumers from comparison shopping. That’s why, in light of the recent Justice Department probe into possible airline collusion, I am urging the feds to step up their efforts and do a full investigation into this new deceiving practice that limits access to cheaper, more affordable airfares for consumers. So many consumers rely on bargain hunting when purchasing flights and this practice makes it almost impossible by restricting transparency and limiting competition among airlines,” said Senator Schumer. “Freezing out websites that save travelers money on airfare is just plain wrong and the feds should include this practice in their investigation immediately.”
TripAdvisor, a comparison site that has experienced flight information freeze-out firsthand applauded Schumer’s push, saying, “We strongly believe in transparency and the freedom of information for all consumers,” said Bryan Saltzburg, general manager of TripAdvisor Flights. “The availability of airfare and schedule information is critical for travelers to be able to find the lowest airfares and make informed booking decisions. Sites like TripAdvisor have enabled travelers to quickly and easily comparison shop for years. However, the recent actions of some airlines to restrict this vital public information threatens consumers’ ability to get the full picture, which will lead to consumers paying higher prices. We believe it is crucial for the government to act now to ensure that consumers’ ability to comparison shop is protected. We support Senator Schumer’s efforts to shine a spotlight on this important issue and defend a fair and transparent travel marketplace for consumers.”
The Travel Technology Association, the association that represents Expedia, Orbitz, TripAdvisor and others agreed, saying, ““With less competition in air travel due to carrier consolidation, it is more important than ever that consumers retain the ability to effectively comparison shop across travel suppliers,” said Steve Shur, president of The Travel Technology Association. “We applaud Senator Schumer for his interest in protecting transparency and consumer welfare in the travel marketplace.”
The four largest U.S. airlines account for approximately 80 percent of total domestic passenger flights. Recent reports have indicated that airlines are now making record profits. According to the International Air Transport Association, airlines’ collective global net profit in 2014 is expected to be $19.9 billion and in 2015, is expected to be $25.0 billion. Airfares have increased 10.7 percent over the past five years, after adjusting for inflation, according to an Associated Press analysis of data from the Airlines Reporting Corp., which processes ticket transactions for airlines and more than 9,400 travel agencies, including websites such as Expedia and Orbitz. Per passenger, airlines are expected to make a net profit of $7.08 in 2015; this is up from the $6.02 profit per passenger in 2014 and $3.38 profit per passenger in 2013. Schumer said that given the fact that airlines are expected to experience a $25 billion profit margin next year, it is deeply concerning that some airlines are restricting consumer access to more affordable airplane tickets.
While pushing to protect consumers’ ability to shop on third party sites, Schumer also condemned recent federal legislation that would allow some third party sites the ability to strip away certain consumer protections. Specifically, Schumer pointed to a rider included in the Senate Transportation, Housing and Urban Development (THUD) Appropriations Bill that would exempt certain online retailers from USDOT Consumer protection rules that require retailers to provide prompt refunds, disclosure of cancellation policies, notification of the customer in the event of itinerary changes, and responsiveness to customer complaints. Schumer said he would oppose this provision of the THUD Appropriations Bill and while urging airlines to continue to provide information to third party sites, he also urged those sites to continue to provide robust and required consumer protections.
A recent study titled, “Benefits of Preserving Consumers’ Ability to Compare Airline Fares,” and conducted by the Travel Technology Association and overseen by a Yale professor, looked at restrictions by airlines to limit certain airline information, including prices and schedules. Comparison shopping online involves Global Distribution Systems (“GDS”), a computerized reservation system in which travel agencies subscribe. The GDS can access all of the flight schedules and prices being offered by all airlines that subscribe to GDS. The GDS can search for available flights, seats, prices, and fare restrictions. In the 2000s, metasearch sites came online; these sites obtain price and schedule information and enable comparison shopping across competing airlines. Research suggests that price information, transparency and comparability have tended to reduce prices.
Major airlines have recently been taking actions to prevent metasearch sites from obtaining booking information. Specifically, airlines have prohibited metasearch sites from displaying price information of the airline. Southwest, for example, has always prevented online retailers from selling their flights and recently Lufthansa added a fee for customers looking to book flights through a third party site. Since 2010, other US based airlines have removed their fares from a number of travel and metasearch sites, including TripAdvisor, and have instituted policies that prevent redistribution of price and schedule information. Their goal is to direct consumers to the airlines’ websites. Schumer explained that ultimately, this practice limits transparency and competition among airlines.
Schumer today asked that DOJ and DOT immediately investigate the airlines’ price freeze-out practice on behalf of American fliers. Schumer said that this examination should be folded into the current, ongoing investigation regarding potential unlawful coordination among airlines. Schumer voiced his concern that this deceiving practice may result in less competition, higher prices for consumers and could possibly backfire by discouraging millions of Americans from flying in the future.