Should airlines be forced to disclose equal pricing and fees in all channels?
After the display of theatre in Washington last week at the hearings on airline fees we have the usual players all lined up on either side of the equation.
The esteemed members of the panel seemed to want nothing but political points and really didn’t have anything valid to add to the process.
The GDSs and the “consumer side” as represented by BTC all wanted full and equal disclosure but via the GDS.
I also note that the GAO noted the tax issue – finally someone was listening to something I felt needing addressing out a long time ago.
In this matter it would seem that Washington, in the form of the IRS, has made a huge U-turn on the issue of taxation of ancillary fees/revenue items.
Normally, when the US government issues tax guidelines, most practitioners regard that as the interpretation of the law and act accordingly.
In this case the IRS has gone so far as to actually issue a disclaimer (which I am sure was not on the pages originally but I cannot verify that).
This disclaimer makes it clear that these instructions are guidelines only. If ever there was a hint that the US Federal Government finally sees the error of its ways and now wants to tax ancillaries – then this was it.
However, I want to focus on the bigger issue of whether or not the Airlines should be forced to disclose all of its pricing options equally in all channels.
While this may not seem to be the issue in debate, it most decidedly is an underlying one.
Let me be unequivocal. In my view the answer is NO.
The reason is that it creates a dangerous precedent for any supplier who then has to adopt a uniform approach to the market.
Channel-based pricing is as old as the hills. If you can buy soap powder in any channel does the price have to be the same?
Does the information about how to sell it have to be transparent?
If I buy a book online at Amazon vs buying a book at a Barnes and Noble store – do I have to know all the pricing options? What about cars?
And while we are at it how about local taxation – should not the same logic apply to taxation so that the local tax authorities should put a detailed tax guide against every tax charged when the media being used for promotion crosses boundary lines?
To me this is re-regulation of a deregulated industry.
I do not think that it is in anyone’s interest to force display of fees via a particular channel.
To be clear – yes, the airline has an obligation to disclose its pricing on its own channel. This is primarily today its own website.
And this is something that must be done. But it does not mean that the same obligation applies to all channels equally.
Further I believe that any supplier or intermediary should have the right to create its own pricing and not have any external party – government or distribution player – force it into certain behaviors.
The only caveat I suggest is that the actual seller is responsible for disclosing the appropriate fees at the point of sale.
As far as I can tell everyone is in compliance with this requirement.
The US government and its elective branch has its own agenda here. It sees that it made a big mistake in not evaluating the tax implication of unbundled services and fees.
Thus they further compounded their mistake by considering that the unbundling of the airline fees should not be taxable at the federal level. Talk about egg all over one’s face.
Why the government would at a time of revenue short fall would have allowed such a thing is just beyond belief. But they did do this.
In doing so, as some have pointed out, they made airline ancillary fees possibly open to local taxation – something several states had their eyes on.
That would have been a terrible mess. It would have made the issue of hotel taxes (that the OTAs are fighting for pre-paid stays) look like a walk in the part.
The internet has created an environment of transparency that is wonderful. You can run but you cannot hide on the wild wide web.
Many players have emerged to promote this transparency and harness it for the consumer.
Such a proposed process of forcing the airlines to display their full feels in a specific channel such as the GDS would harm innovation not just today but for the future.
We can be sure that as we speak there are many players – existing chaps and some brain working in his back room – coming up with solutions as to how to display fees.
Even Sabre has a web page devoted to the subject that is open to all to see. http://www.exploreflightfees.com/
I don’t want to sound like an apologist for the suppliers. I clearly am not.
They, like any seller, must be required to provide full information to the consumer. Some intermediaries have imposed some very restrictive covenants in the so called full content contracts between GDSs and Airlines.
These clauses require an airline to provide not just full content but also restrict how the content may be administered.
Perhaps the esteemed members of the US Congress should investigate some of these practices, the GDSs have created some incredibly complicated contracts with lots of restrictions for the supply side and equally for the selling side.
Fortunately the consumer is both smart to these issues and not fooled. He can be lazy too. But if he wants to find something he will. And woe betide anyone who gets in his way.
For the petitioners in this matter – namely those who want to see GDS fee disclosure – I believe that everything should be open and transparent but that should be via the web and not exclusively or in a preferred way via the GDSs.
Of course there is an easy way to solve the problem. Let the airlines charge the GDSs for access to the data. That will soon put things in a whole different light.
Timothy O'Neil-Dunne is the managing partner for venture firm VaultPAD Ventures– an accelerator devoted exclusively to Aviation Travel and Tourism.
VaultPAD also is the parent company for consulting firm, T2Impact. Timothy has been with TNooz since the beginning, writing in particular aviation, technology, startups and innovation.
One of the first companies to emerge from the accelerator is Air Black Box. a cloud-based software company providing airline connectivity solutions and in production with airlines in Asia Pacific.
Timothy was a founding management team member of the Expedia team, where he headed the international and ground transportation portfolios. He also spent time with Worldspan as the international head of technology, where he managed technology services from infrastructure to product.
He is also a permanent advisor to the World Economic Forum and writes as Professor Sabena. He sits on a number of advisory and executive boards