Rue Dautzenberg 36

, B

– 1050 Bruxelles, Belgique, Tel: +32 2 644.34.50, Fax: +32 2 644.24.21

E

- mails: secretariat @ ectaa. eu / gebta @ gebta. eu , Websites: www.ectaa. eu / www.gebta. eu 

### 1 Ref: SL 13

- 030 /94162

US Department of Transportation 1200 New Jersey Avenue SE Washington DC 20590

30 April 2013

For the United States Department of Transportation

DOT

– OST

IATA Application of Resolution 787 on Enhanced Airline Distribution

Join t submission by the European Travel Agents’ and Tour Operators’ Associations (ECTAA) and the Guild of European Business Travel Agents (GEBTA)

Table of Contents

I. Introduction

................................ ................................ ................................ ........................ 1
II. About ECTAA / GEBTA

................................ ................................ ................................ ..... 2 III. Key concerns

................................ ................................ ................................ .................... 2

1. NDC’s negative impact on price tra nsparency

................................ ............................ 2

2. Lack of agent representation on PDG and the ability to influence the strategy

............ 3

3. Passenger Name Records (PNR)

................................ ................................ ............... 4 IV. Incompatibility with the EU legal framework

................................ ................................ ..... 4

1. Data Protection

................................ ................................ ................................ ........... 4

2. EU Competition rules prohibiting anti

- competitive agreements

................................ ... 6

3. EU Regulation 80/2009 on a Code of Conduct for CRSs

................................ ............ 7

4. Regulation 1008/2008 on Air Services

................................ ................................ ........ 8

5. Regulation 1107/2006 o n persons with reduced mobility travelling by air

.................... 8

6. Directive on Package Travel

................................ ................................ ....................... 9 V. Open questions

................................ ................................ ................................ ................. 9

VI. Conclusion

................................ ................................ ................................ ...................... 10

I. Introduction

ECTAA and GEBTA hereby respond to the International Air Transport Association’s (IATA) application to the U.S. Department of Transportation (DOT) fo r approval of Resolution 787, submitted on March 11, 2013.

Based upon ECTAA / GEBTA’s analysis of IATA documents and presentations as well as direct meetings and bilateral correspondence with IATA, ECTAA/GEBTA urge DOT to reject Resolution 787, and the inc luded New Distribution Capability (NDC), as crucial questions for

the travel distribution sector remain unclear. ECTAA /GEBTA believe that the most efficient way forward is to launch an open and transparent dialogue between all travel industryRue Dautzenberg 36

, B

– 1050 Bruxelles, Belgique, Tel: +32 2 644.34.50, Fax: +32 2 644.24.21

E

- mails: secretariat @ ectaa. eu / gebta @ gebta. eu , Websites: www.ectaa. eu / www.gebta. eu 

### 2 stakeholder s in order to develop solutions that take into account the concerns of all players

involved

In this submission, ECTAA/GEBTA outline their key concerns regarding the New Distribution Capability.

II. About ECTAA / GEBTA

ECTAA regroups the national associations of travel agents and tour operators of 29 European countries, representing some 70 000 companies with more than 500 000 direct employees in the travel business.

The Guild of European Business Travel Agents, GEBTA , was founded in 1990 to champion

the inte rests of the European business travel sector. Through its M e m b e rs it represents more than 160 TMCs (Travel Management Companies) across Europe.

III. Key concerns

ECTAA/GEBTA believe in free competition and the liberty of companies to endeavour to pioneer c hanges to the business model of an industry. However, NDC is an initiative agreed by 240 horizontal airline competitors behind closed doors (The Passenger Service Conference) of their trade association without consultation with other travel distribution

s takeholders or passengers. Agreeing on a binding new distribution model for the entire industry thus raises serious concerns.

IATA is arguing that the single NDC standard will promote efficiency, better service and
transparency with more complete offers th rough all channels.

However, resolution 787 adopted by IATA airlines does not ensure that more products will be distributed in all channels; the resolution provides indeed that content distribution across all

channels is “ subject to the terms and conditio ns determined by the airline distributing the

content ” (see § 1.2.6 of the IATA resolution 787). The commercial policy of each airline will prevail. Any airline will be able to determine that it will not distribute certain fares and ancillary services thr ough certain indirect channels, as airlines currently do to favour distribution through their own websites, and could further do to favour direct connections with travel agents (without a CRS).

T he NDC model however has very far reaching implications, whi ch can be detrimental to consumers and other stakeholders, without any evidence that this model is necessary to reach the stated objectives of distributing more content through all channels. In particular, we have concerns that it could further jeopardise air ticket price transparency.

1. NDC’s negative impact on price transparency

a. The end of pre

- filed fares, which currently enable full spectrum comparison shopping in CRS neutral display; Instead, consumers and distributors could only compare on

the basis o f case

- by

- case personalised offers.

Considering that airlines would provide under NDC personalised offers depending on the passenger, travel agents and passengers would have no possibility to check if the price proposed by an airline in answer to a specif ic request is the lowest available price. Differently, the current model enables such sear ch among all pre

- filed fares. EU regulation 80/2009 on CRSs even refers to the possibility of choosing in the CRS a display ranking by price.Rue Dautzenberg 36

, B

– 1050 Bruxelles, Belgique, Tel: +32 2 644.34.50, Fax: +32 2 644.24.21

E

- mails: secretariat @ ectaa. eu / gebta @ gebta. eu , Websites: www.ectaa. eu / www.gebta. eu 

### 3 IATA acknowledges that NDC is a move away from commodity based prices and a way for airlines to shelter from commodity

- based price competition. Tony Tyler, IATA CEO, expressly stated in a speech on NDC on 16 October 2012 (see the speech enclosed):

“For the 60% of air travel th at is sold indirectly via travel agents using Global Distribution Systems (GDSs), [

the current ] model is focused only on finding the lowest ticket price. This has resulted in the commoditization of air travel. Airlines are trying to escape the

commoditizat

ion trap through differentiation, and merchandizing, such as offering a low, mid and high price point for every offer”...[ With NDC ], we will move from the mass commoditization of air travel to what one analyst called “mass customization”.

Moreover, despite the IATA resolution 787 stating that NDC will facilitate a transparent display of products and enable comparison among different products (§ 1.2.5.4), there are serious doubts that this is compatible with the main objective of NDC to support

differentiatio n between airline products. If each airline unbundles air services in its own manner and each airline proposes different ancillary services, we believe that it will be impossible to compare apples to apples.

The impossibility to check the lowest price o n the market and the difficulty to compare offers between them will make the market less transparent for consumers and will pave the way for air service price increase. Besides, so

- called personalisation of airline offers could in practice

be discriminatio n between passengers, as we will explain below.

The end of pre

- filed air fares may also seriously impede inter

- modality and journey planning possibilities.

b. No regard to compatibility with the current model

NDC has no constraints for backwards compatib ility (see § 1.2.4 of the IATA resolution 787).

However NDC would co

- exist with the current model, considering that NDC would only apply to airlines that distribute enhanced content through multiple channels. This is confirmed in §1.2.9 of IATA resolution 787, which provides that “ any cost attributable to the new business model will not be incumbent on IATA airlines who do not wish to adopt it .”

We foresee numerous issues to make the current model and NDC co

- exist, especially if NDC is not driven by compat ibility with the current model:

 Difficulties to distribute code

- share or interlining tickets involving an airline participating in NDC and an airline not participating in NDC. We have raised the question with IATA, which answered that this is not yet addre ssed and may not be fully addressed by the NDC standard in the end.

 Difficulties to ensure neutral display in CRSs according to EC Regulation 80/2009, of offers under the current model compared to new enhanced offers.

 Complexity and costs of developing new tools and processes in travel agents mid and back office systems.

An NDC standard with no regard to compatibility entails the risk that the level of service available to consumers decreases, notably with regard to interlining and code

- share possibilitie s.

2. Lack of agent representation on PDG and the ability to influence the strategyRue Dautzenberg 36

, B

– 1050 Bruxelles, Belgique, Tel: +32 2 644.34.50, Fax: +32 2 644.24.21

E

- mails: secretariat @ ectaa. eu / gebta @ gebta. eu , Websites: www.ectaa. eu / www.gebta. eu 

### 4 As noted above, the NDC project has been prepared among a small group of airlines, without any agent representation. Agents are represented only in the DDX WG that deals wit h the practical implementation of decisions already taken at the PDG.

3. Passenger Name Records (PNR)

A central part of the agenda is to move PNR ownership as well as ticketing to the individual

airlines.

Currently the PNRs are owned by the CRSs (from a s ystemic point of view), and the airlines want to move this ownership to themselves under the NDC regime.

Owning the PNR will enable the airlines to control availability and pricing in one process. As it is at the moment, availability and fares are distri buted through different channels. And the two are combined by the travel agent at the time of ticketing. This leaves space for errors as well as fraud, and necessitates auditing. IATA’s argument is that if the airline controls the

PNR when it comes to avai lability as well as pricing, there will be no room for “mistakes”, the airline will not have to do any auditing, and the agents will live in an ADM

- free world.

However, customers who choose to purchase tickets through an agent may not want to have

their P NR with the airline, or to have interaction with the airline. As an example, a passenger encountering a flight delay may wish to change airline to have the next flight and may wish against being locked into the system of one airline. IATA considers that it will be up to airlines to make passengers and agents trust the NDC system.

IV. Inco mpatibility with the EU legal framework

ECTAA/GEBTA would respectfully like to draw the DoT’s attention to the importance of ensuring compatibility of global travel distribution models with the applica b le legal framework

across markets.

For this reason, ECTAA/GEBTA outline below key concerns regarding the compatibility of

NDC with the EU legal framework.

1. Data Protection

It is highly questionable whether the collection of personal data foreseen in NDC is adequate, relevant and not excessive for airlines to make an air ticket offers, in accordance with Article

6 of EU Directive 95/46 on Personal Data Protection

.

The categories of personal data listed in the IATA Resolution 787 seem to have little relevance at the stage of making an offer for an air transport service, notably the name, marital status, contact de tails, nationality and shopping history.

Moreover in the NDC model, the passenger’s personal data will be transferred to many airlines, among which a few will make offers to the passenger and only one will conclude an air transport contract with the passe nger.

If each participating airlines receives extensive personal data on each passenger making a request for an air ticket, this could enable each airline to build huge personal data databasesRue Dautzenberg 36

, B

– 1050 Bruxelles, Belgique, Tel: +32 2 644.34.50, Fax: +32 2 644.24.21

E

- mails: secretariat @ ectaa. eu / gebta @ gebta. eu , Websites: www.ectaa. eu / www.gebta. eu 

### 5 on millions of passengers. In order to have an idea of the ord er of magnitude, IATA Members carried 1.8 billion passengers in 2010, of which 750 million were international 1

.

a) Legitimacy of the data processing

ECTAA has concerns about the compliance of the NDC model with Article 7 of the EU Directive 95/46 providing the criteria for making data processing legitimate. The IATA resolution 787 does not contain any provision on the passenger’s unambiguous consent to the data processing.

Besides, the collection of personal data foreseen in NDC can hardly be considered as necessary to make air ticket offers, considering that airlines currently make offers without collecting personal data on the passenger (instead, airlines publish their fares in various distribution channels, including computerised reservations systems( CRS s) regulated by EU legislation).

As concerns the legitimacy of the purpose for data processing in the NDC model, IATA and airlines are asserting that NDC will promote the personalisation of offers and the distribution of more complete offers through all c hannels. However, we see no principle in IATA Resolution 787 ensuring that more products will be distributed in all channels. Furthermore, the benefits of systematic personalisation of offers are questionable.

The NDC model will cause the end of pre

- file d fares, which currently enable full spectrum comparison shopping in CRS neutral display. Instead, consumers and distributors will only be able to compare on the basis of case

- by

- case personalised offers. Considering that airlines would provide under NDC p ersonalised offers depending on the passenger, travel agents and passengers would have no possibility to check if the price proposed by an airline in answer to a specific request is the lowest available price. Differently, the current model

enables such se arch among all pre

- filed fares. EC regulation 80/2009 on CRSs even refers to the possibility of choosing in the CRS a display ranking by price. The impossibility to check the lowest price on the market and difficulties to compare offers between them will m ake the market less transparent for consumers and will pave the way for air service price increase. Furthermore, so

- called personalisation of airline offers could in practice favour discrimination between passengers. For instance, a person with reduce d mobility would have no possibility to check if an airline is not responding to a request for a flight despite availability because the passenger is a PRM, or to check if the price is higher than for a non

- PRM (practices prohibited by EC Regulation 1107/2 006 on persons with reduced mobility travelling by air, Articles 3 and 10). Similarly, passengers would have no possibility to check that the personalised offer they receive from an airline is not discriminating them on the basis of their nationality, pla ce of residence or the travel agent’s place of establishment (practices prohibited by EC Regulation 1008/2008 Article 23(2)).

The European Commission has indicated to ECTAA that the issue is surely of interest to the national data protection supervisory a uthorities which are competent on the basis of Article

28 of EU Directive 95/46 to monitor the application within their territory of the provisions adopted by the respective Member State pursuant to that Directive.

Therefore, the Commission has submitt ed the Resolution to the Article 29 Working Party, the independent advisory body to the Commission on data protection issues.

b) Transfers of personal data to third countries with no adequate data protection

1 Source IATA : http://www.ia ta.org/pressroom/facts_figures/fact_sheets/Pages/iata.aspxRue Dautzenberg 36

, B

– 1050 Bruxelles, Belgique, Tel: +32 2 644.34.50, Fax: +32 2 644.24.21

E

- mails: secretariat @ ectaa. eu / gebta @ gebta. eu , Websites: www.ectaa. eu / www.gebta. eu 

### 6 The NDC model entails the transfer of the passeng er’s personal data to all airlines potentially providing the requested air service, including many airlines established in third countries ensuring various level of data protection. The model therefore includes personal data

transfers to third countries wh ich do not ensure an adequate level of data protection in

accordance with Article 25 of the Directive 95/46.

Concerning derogations under Article 26 of Directive 95/46, the concerns about the data subject’s consent and the necessity of the data processing , as explained above, arise again.

2. EU Competition rules prohibiting anti

- competitive agreements

Airlines are collectively determining a new distribution model under a single standard. A single standard automatically limits competition. Airlines are argui ng that the single standard will promote efficiency, better service and transparency with more complete offers through all channels.

The stated objective to make more airline products and more complex airline products (notably ancillary services) availabl e in indirect channels, is rather pro

- competitive, even though consumers are not asking for fare unbundling, which has led to the current situation. The resolution adopted by IATA airlines does not ensure that more products will be

distributed in all chann els; the Resolution provides indeed that content distribution across all channels is subject to the terms and conditions determined by the airline distribution the content. Thus, the commercial policy of each airline will prevail concerning distribution of content through various channels.

Moreover, the NDC model, of which the main lines were determined by airlines only, without consulting other stakeholders, has very far reaching implications which can be detrimental to other stakeholders and consumers, a nd without any evidence that this model is necessary to reach the stated objectives. In particular:

 The end of public fares, which currently enable full spectrum comparison shopping; Instead, consumers and distributors could only compare on the basis

of c ase

- by

- case personalised offers.

As the level of price transparency will decrease (shelter from commodity price comparison), this may entail a risk of price increase.

Tony Tyler, IATA CEO, expressly stated in a speech on 16 October 2012:

“For the 60% of air travel that is sold indirectly via travel agents using Global Distribution Systems (GDSs), the model is different... this model is focused only on finding the lowest ticket price. This has resulted in the commoditization of air travel. Airlines are tryi

ng to escape the commoditization trap through differentiation, and merchandizing, such as offering a low, mid and high price point for every offer. They are developing products and services, such as special meals, expedited boarding, roomier

seats and acce ss to airport lounges. But at the end of the day, the travel agent sees only

codes

— F, J, Y and their various derivatives. There is no way to tell if your “J” product is a flat bed or an economy class seat with an empty seat beside it.“

 The use of Direct C onnect seems tied into the principles of the standard (see § 1.2.3 of the Resolution) Airlines may therefore use a collective dominant position to cut out data aggregators and make comparison shopping more difficult.

 Airline’s ownership of the content an d PNR, as well as airlines building information on customers, may be tied into the standard.Rue Dautzenberg 36

, B

– 1050 Bruxelles, Belgique, Tel: +32 2 644.34.50, Fax: +32 2 644.24.21

E

- mails: secretariat @ ectaa. eu / gebta @ gebta. eu , Websites: www.ectaa. eu / www.gebta. eu 

### 7 Airlines may therefore use a collective dominant position to gain competitive advantages for their direct distribution to customers and to make travel agents less competitive.

 The c lear intention that the new distribution model facilitates the distribution by airlines of other services than air services (hotel, car rental, etc.). This is combined with the concern that agents may be prevented from amending a

carrier ’s products on which commercial agreements are made. Airlines may therefore use a collective dominant position to enter/reinforce their position

on the market for the distribution of travel services.

 There is no regard to proportionality between the cost of changes and the

benefits.

3. EU Regulation 80/2009 on a Code of Conduct for CRSs

a) Neutral display

Article 5§1 of the Regulation provides that CRSs “ shall include the data provided by participating carriers in a neutral and comprehensive manner and witho ut discrimination or

bias .” Comment: IATA has confirmed during a meeting that NDC will result in CRSs displaying detailed offers for airlines participating in NDC and basic offers for airlines not participating in NDC. A CRS display can hardly be neutral i f it provides more details and more space to

certain offers. Annex I (6) provides that “ Information on bundled products shall not be featured in the principal display”

. Bundled products are defined in Article 2(14) as prearranged combination of transport w

ith other services not ancillary to transport and offered at an inclusive price

. Comment: This provision limits the possibility for airlines to distribute through CRSs or other NDC aggregators falling under the definition of a CRS, products combining air transport and

other travel services.

b) Data protection (Article 11 of the Regulation)

Article 11(1): Personal data collected in the course of CRS activities for the purpose of making reservations or issuing tickets for transport products shall only be proc essed in a way compatible with these purposes

. Article 11(2): Personal data shall only be processed in so far as processing is necessary for the performance of a contract to which the data subject is party or in order to take steps at the request of the d

ata subject prior to entering into a contract

. Comment: NDC provides for communication and possibly storage of historical data based on previous transactions (see §1.2.5.1 of the IATA Resolution). It is questionable whether historical data is compatible a nd necessary to the purpose of making a reservation or issuing

a ticket.

Article 11(3): Special categories of data under Article 8 of Directive 95/46 2 (notably revealing ethnic or religious, or trade

- union membership) shall only be processed where the dat a subject has given his explicit consent. Comment: it will have to be checked whether data requested by airlines to ask for an offer contain elements revealing ethnic or religious, or trade

- union membership.

Article 11(1): The system vendor shall be consi dered as a data controller

. Comment: airlines should have the responsibility of a data controller, if they are fixing the data to be provided in the request for an offer.

2 Directive 95/46 on Personal data protection available at : http://eur

- lex.europa.eu/LexUriServ/LexU riServ.do?uri=CELEX:31995L0046:EN:NOTRue Dautzenberg 36

, B

– 1050 Bruxelles, Belgique, Tel: +32 2 644.34.50, Fax: +32 2 644.24.21

E

- mails: secretariat @ ectaa. eu / gebta @ gebta. eu , Websites: www.ectaa. eu / www.gebta. eu 

### 8 Article 11(4): Information under the control of the system vendor concerning identi fiable individual bookings shall be destroyed within 3 years and shall only be accessed for billing

dispute reasons. Comment: The NDC project foresees that historical data on previous transactions will be used for commercial purposes to make a personalised offer to the passenger. This goes beyond billing

- dispute reasons.

Article 11(10 ): Where a system vendor operates databases in a different capacity, technical and organisational measures shall be taken to prevent the circumvention of data protection

rules through the interconnection between databases, and to ensure that personal data are only accessible for the specific purpose for which they were collected

. Comment: even if NDC was to be considered a different system than CRSs, it could not be

used to cir cumvent data protection rules.

4. Regulation 1008/2008 on Air Services

a) Optional elements on an opt

- in basis

Article 23(1): “ Optional price supplements shall be communicated in a clear, transparent and unambiguous way at the start of any booking process and their acceptance by the customer

shall be on an ‘opt

- in’ basis ”. Comment: If an airline sends in response to an individual request a personalised offer including price supplements which are not offered in response to another individual request, such price supplements can be considered as optional, but failing to be offered on an opt

- in basis to certain passengers.

b) Discrimination

Article 23(2): access to air fares for flights departing from an EU airport, available to the general Public, shall be granted without any discrimination based on the nationality or the place of residence of the customer or on the place of establishment of the air carrier's agent or other ticket seller within the Community. Comment: considering that airlines will provide personali sed offers depending on the passenger, passengers will have no possibility to check that the personalised offer they receive from an airline is not discriminating on the basis of the passenger’s place of residence or the travel agent’s place of establishme nt.

5. Regulation 1107/2006 on persons with reduced mobility travelling by air

a) Discrimination

Article 3: An air carrier or its agent or a tour operator shall not refuse, on the grounds of disability or of reduced mobility (a) to accept a reservation for a flight departing from or arriving at an airport to which this Regulation applies ; Article 10: An air carrier shall provide the assistance without additional charge to a disabled

person or person. Comment: considering that airlines will provide personalised offers depending on the passenger, passengers will have no possibility to check if an airline is not responding to a request for a flight because the passenger is a PRM or if the price proposed by an airline is higher than for a non

- PRM.Rue Dautzenberg 36

, B

– 1050 Bruxelles, Belgique, Tel: +32 2 644.34.50, Fax: +32 2 644.24.21

E

- mails: secretariat @ ectaa. eu / gebta @ gebta. eu , Websites: www.ectaa. eu / www.gebta. eu 

### 9 6. Directive on Package Travel

Airlines putting together different travel services through NDC expose themselves to obligations in the EU Package Travel Directive, notably the liability to perform all bundled services, a financial guarantee in case of insolvency and exha ustive information obligations. NDC may also be taken into consideration for the review of the Package Travel Directive.

V. Open questions

As highlighted above, a number of open question s remain, impacting the travel distribution

value chain and the servic e provided to the customer.

Some of these questions are outline below:

1. Is NDC being designed to allow Airlines to circumvent Travel Agents?

2. How will the sales transaction process be designed

– and how does it look vis

- à

- vis the
LCC’s transaction processes?

3. With the NDC distribution set up, will the best fares always be available to the Travel
Agent?

4. In an NDC environment, who “owns” the PNR? The Airline? If so: Why?

5. When travel agents book European railway tickets on the railways own booking system,

agent c an’t always retrieve those bookings at a later stage if they e.g. need to change the
itinerary. Will the same restrictions apply for agents booking a flight on an “NDC airline”?

6. Sales incentives from Farelogix/GDS’ for primarily OTAs and B2B(consolidator) travel
agents: Who will pay the incentives on the sales that today are paid by the “aggregators”
such as Farelogix and Amadeus? And will NDC provide access to the same fare
availability and booking classes via those aggregators, fares that today are availa ble to
the agents via these internediaries?

7. NDC airlines vs. non

- NDC airlines: Will the fare/booking class/seat availability be the
same for all airlines, regardless of whether they are an NDC airline or not?

8. NDC content in GDS’: Will all travel agents hav e identical inventory availability in an NDC
environment or will there be an entry fee to get access to it?

9. What, if anything, must the aggregators do differently in an NDC regime in order to be
able to compare products across several airlines?

10. What will b e the major differences between receiving offers in an NDC

- personalized shopping mode and receiving the same offer in an NDC

- “anonymous customer mode”?
And will there be differences between the two when it comes to availability and ownership
of bookings ma de in the two modes?

11. Will the customer data that is lodged in a booking be available for the airlines in the
booking to use for future reference and possible direct contact with the traveler at a later
stage?

12. Define the handling of the legal issues (e.g. o wnership of the personal data) surrounding
NDC bookings and how they will be solved (it was suggested that an NDC legal issues
group should be established).

13. Will introduction of NDC result in the demise of ADM’s from all airlines that are operating

in an N DC

- environment?

14. How will IATA ensure continuous travel agent participation be in the NDC

- development
process?Rue Dautzenberg 36

, B

– 1050 Bruxelles, Belgique, Tel: +32 2 644.34.50, Fax: +32 2 644.24.21

E

- mails: secretariat @ ectaa. eu / gebta @ gebta. eu , Websites: www.ectaa. eu / www.gebta. eu 

### 10 VI. Conclusion

To correct the current situation, ECTAA /GEBTA respectfully urge DOT to reject Resolution 787, and the included New Distribution Cap ability (NDC), as crucial questions for the travel

distribution sector remain unclear. ECTAA /GEBTA believe that the most efficient way forward

is to start an open and transparent dialogue between all travel industry stakeholder s in order to develop sol utions that take into account the concerns of all players involved.

With kind regards,

Michel de Blust

Secretary General

ECTAA/GEBTA