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www.interactivetravel.org Interactive Travel Services Association Our companies are your gateway to the world . . .

Presentation to

The Advisory Committee for Aviation Consumer Protection,

June 28, 2012

Joseph Rubin, President2

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www.interactivetravel.org Chairman Madigan and Members of the Advisory Committee for
Aviation Consumer Protection:

My name is Joseph Rubin, and I am the President of the Interactive Travel Services Association (ITSA).

Thank you for the opportunity to appear before you today.

We believe that the Consumer Protectio n division of the Department of Transportation does a very good job carrying out the mandate of their office, but we welcome the entry of another outlet for consumer voices to help the Department establish timely
and effective rules to fulfill their consum er protection mission.

I plan to make a few points this afternoon:

What the Independent Travel Distribution system is, and why it is an important component to the aviation system, and indeed to all travel in this country;

How the independent travel distribution system plays an important role in consumer protection, and how our interests are aligned with consumer interests; and

Why the initial focus of this Committee should be on the transparency and transactibility of airline ancillary fees, and

how that could protect consumers from deception, and save them significant time and money.

Who We Are:3

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www.interactivetravel.org Members of ITSA are independent travel distributors

- that is, we are not controlled by travel providers.

In the travel space, that is an important dis tinction

– it means that our search results, our rankings and our consumer information is not biased by interested parties.

We are 3 rd party travel distributors: one of our roles is to help airlines sell and distribute their seats, and to help consumers find, compare and purchase the flights and other travel services that best fit their needs. That is, we foster competition and lower

pr ices among airlines, and provide them with a valuable service.

ITSA members are technology companies. The sophisticated, innovative and technologically savvy companies that make up

ITSA ’ s membership are some of the most cutting

- edge, award winning and adv anced technology companies in the world.

You are no doubt familiar with ITSA ’ s Online Travel Company (OTC) members

– the OTCs were one of the first industries to recognize and take advantage of the power of the internet to provide consumers with unbiased search results, the ability to research and comparison shop, and purchase any travel service they need from the comfort of their home, or increasingly from
their mobile devices. In fact, about one

- third of the world ’ s travel is booked on line, and about o ne third of all U.S. e

- commerce is

travel related.

You may be less familiar with ITSA ’ s Global Distribution System (GDS) members. These companies power the world

- wide airline market, consolidating schedule and fare information for more than

500 airlines world

- wide, analyzing billions of flight possibilities,4

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www.interactivetravel.org and delivering accurate, relevant and organized flight results thousands of times every second.

GDS companies are the backbone of flight distribution, selling approximately 50% of all airline tickets in the U.S. They invest billions of dollars in technology and jobs, developing innovative ways to bring products to market, and working with their airline partners, travel agents and others to develop and run technology and reservations services and provi de other technology requirements.

ITSA and consumer traveler interests are aligned:

With that background, let me explain why independent travel distribution plays an important role in consumer protection.

Among other things, both consumers and the companies that ITSA represents seek to maximize and improve the consumer air travel experience , including:

Easy and efficient purchasing of air transportation Maximum information, transparency and transactibility Competitive airfares Minimal travel hassle and no surprises; and vigilance against unfairness and deception.

ITSA members and consumers thrive on openness and transparency ITSA supports DOT rules to increase transparency and

disclosure, and we filed a n amicus brief in support of DOT ’ s

“ Full Fare Advertising ” Rule against a challenge brought by

some US airlines.5

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www.interactivetravel.org ITSA ’ s Recommended Consumer Protection Agenda: the transparency and transactibility of airline ancillary fees

With that as background, let me turn to one area in particular where we see problems with the market, where the need for additional consumer protection is strong, where specific action would protect consumers from unfairness and deception, and where the stage has already set by the Depa rtment of Transportation:

We recommend that the initial focus of this Committee should be on the transparency and transactibility of airline ancillary fees.

Airline ancillary fees: see it, compare it, and buy it

Consumers want and deserve the right to c ompare the “ all

- in ” cost of airfare across carriers, and to purchase the core services they need, such as pre

- assigned seats, advance boarding, and checked bag fees, in the same manner that they buy their tickets

- what I have referred to as "transactibili ty."

However, since “ unbundling ” began in earnest a few years ago, many airlines will not disclose these core ancillary fees to ITSA

members and other 3 rd parties to enable such comparison shopping and purchase, even though these fees may add 20% or

more to the overall cost of air travel.

We do not begrudge the airlines the opportunity to charge for these services as they attempt to remain profitable, as we all have a shared interest in that, but we are concerned about the way in which they are sold.6

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www.interactivetravel.org At the present time, the only opportunity for consumers to directly compare all

- in airfare costs is to click back

- and

- forth between various sites, such as between an online travel company to get
the base fare and then the airline website to determine the f ees for ancillary services. And the only way to purchase these services is through the airlines directly, adding unfairness, cost,

time and inconvenience to consumers ’ travel planning.

ITSA members have proposed and supported a simple, inexpensive and te chnologically feasible solution that does not impose price or other controls on airlines, and that dovetails with some of the Rulemaking Proposals that the Department has already announced that it is exploring.

ITSA ’ s proposed solution:

Preserve and Enhance Comparison Shopping and Transactability
for Consumers

ITSA recommends that the Commission work with the Department on the proposed Consumer Protection Rule III to ensure that it is released as expeditiously as possible, and that it c ontains limited and timely intervention by the Department of Transportation to require disclosure and transactibility of core ancillary airline
services and fees to those distribution channels that the airlines are already doing business with.

The Depart ment already appears headed down this path, but we would urge this Committee to nudge them in that direction and support those efforts.7

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www.interactivetravel.org The fact is, the technology, processes and data already exist to make the transparency and transactibility of airline ancillary fees for consumers a reality, and at a minimal cost.

This solves the problem for consumers, and does so with as little regulatory intervention as necessary.

This is not a fight between airlines and their distributors; it is a fight against unfa irness in airline pricing mechanisms, with a simple, feasible solution.

Unfortunately, there is an economic disincentive for the airlines to
release this data to ITSA members and other distribution channels, in that the airline that goes “ first ” is li kely to display higher costs, and thus show up lower in search results, making them appear more expensive than their competitors. The only solution in this situation, therefore, is to have DOT break this logjam through a disclosure requirement that impos es a minimal disclosure burden on all airlines concurrently.

Airline arguments that you may hear:

Unfortunately, you may hear the airlines oppose this simple disclosure, or claim to be supportive, but then throw roadblocks in the way. Allow me to addres s some of the arguments they have raised in the past:

We ’ d like to do it, but the distribution mechanisms, and particularly the GDS members of ITSA, do not have the technology or capability to do so.8

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www.interactivetravel.org Response: The response to this claim is simple and straightforward: yes we can. The GDSs are some of the most innovative, advanced and award

- winning technology companies in the world, and they actually run the booking systems and websites that many of the airlines u se for their own booking purposes. This argument simply rings hollow.

The GDSs have “ monopoly power ” , and such a rule would force the airlines to give up one of their bargaining chips against this monopoly power.

Response: This claim, too, has no merit . First, the GDSs sell

about half of all airline tickets, which on its face appears to lack monopoly power, and the GDS companies compete vigorously between themselves for that slice of the pie. Not only that, but
that share of the market is lower today than it was a few years ago. Additionally, distribution costs are dropping , not rising. Lower market share and lower prices appears to belie the claim that the GDSs are monopolists.

The information is already available on the airline websites,
so no fur ther action is needed.

Response: The information that is available on the airline web sites, which, by the way, is required by DOT, otherwise it might not have been made available at all, is a static list that does not enable consumers to accurately compa re all

- in airfares across carriers. For example, the airlines may present consumers with ranges of costs, rather than the real costs that consumers are going to have to pay for their seat reservations and baggage costs. This is a step in the right directi on over not displaying9

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www.interactivetravel.org those fees at all, but is not nearly enough to overcome the concern about unfairness and deception.

Other Consumer Protection Proposals in CPIII

The Department ’ s CPIII inquiry also contained a number of
questions regarding other po ssible consumer protection activities that the Department may be considering, such as disclosure of
travel agent “ incentives ” and prohibiting “ display bias. ”

ITSA believes first of all that these secondary or even trivial issues should not delay or detract from what should be the overriding consumer protection goal of transparency and transactibility of core ancillary services, and that these other questions are already generally addressed through DOT ’ s current

non

- bias display requirements.

Conclusion:

I ndependent travel distribution companies play a vital role in protecting consumer interests and enhancing competition among travel providers. This Committee ’ s recommendations should urge DOT to ensure that the consumer benefits of independent, third party travel distribution are not degraded by airline efforts to restrict their fee content in unfair or deceptive ways. A timely rulemaking that requires transparency and transactibility of core ancillary fees is the solution we are seeking.

Thank you, and I look forward to answering any questions.