**CONSUMER RIGHTS AND TRANSPARENCY IN THE TRAVEL MARKETPLACE** PREPARED FOR**Advisory Committee for Aviation Consumer Protection**August 7, 2012**Chris Kroeger**Senior Vice President, Sabre Travel Network**David Schwarte**Special CounselFormerly Executive Vice President and General Counsel**Shelly Terry**Senior Director, Sabre Travel Network**Advisory Committee for Aviation Consumer Protection (ACACP)** Presented on behalf of Sabre Holdings, August 7, 2012What’s at Stake? Consumer rights—transparency and total travel costsThe Role of the GDS—a marketplace delivering value to buyers and sellersof travelEnabling Transparency in an Efficient Travel Marketplace—enhancedtoAGENDAOur discussion todayEnabling Transparency in an Efficient Travel Marketplace—enhancedtoenable new airline merchandising initiativesIATA Claims and New Distribution Capability Proposal—the realityand impact to consumersCall to Action—consumer protections are needed2Presented on behalf of Sabre Holdings, August 7, 2012What’s atstake? Consumer Rights.Transparency and total travel costs3Presented on behalf of Sabre Holdings, August 7, 2012**CONSUMER**CONSUMER SHOPPING and BOOKING OPTIONSPrice transparency should be a consumer right in all channels through which an airline choosesto sell its ticketsAbout half of air ticketpurchases in the US—estimated at 52 %—arevia a travel agency (eitherbrick and mortar or online).The remainder—estimatedSHOPPING and BOOKING OPTIONSLEISURETRAVELERairline.comCALL THEAIRLINEAIRLINESYSTEMThe remainder—estimatedat 48 %—are purchaseddirectly from the airline.CORPORATETRAVELERCORPORATEBOOKINGTOOLOFFLINEAGENCYONLINEAGENCYMETASEARCHe.g, Kayak, GoogleMULTI-AIRLINESHOPPINGENGINE4Presented on behalf of Sabre Holdings, August 7, 2012BaseAir FaresCONSUMER RIGHTSPutting the pieces in placeDOT regulations have played an important rolein airline fare transparency.5Presented on behalf of Sabre Holdings, August 7, 2012**Base Air Fares** **Government Taxes and Fees** **Airline Fuel Surcharges** **CONSUMER RIGHTS Putting the pieces in place** **DOT regulations have played an important role in airline fare transparency.** 6Presented on behalf of Sabre Holdings, August 7, 2012**Base Air Fares** **Government Taxes and Fees** **Airline Fuel Surcharges** **Airline Baggage Fee Disclosure** **CONSUMER RIGHTS Putting the pieces in place** **DOT regulations have played an important role in airline fare transparency.** 7Presented on behalf of Sabre Holdings, August 7, 2012**Base Air Fares** **Government Taxes and Fees** **Airline Fuel Surcharges** **Airline Baggage Fee Disclosure** **CONSUMER RIGHTS Putting the pieces in place** **DOT regulations have played an important role in airline fare transparency.** **But a piece of the regulatory puzzle is missing.**8Presented on behalf of Sabre Holdings, August 7, 2012THE ISSUE and WHAT’S AT STAKEConsumer protections are needed to ensure travelerscan both compare the full costof air travel and buy essential services wherever airlines choose to sell their ticketsAncillary fees paid by consumers in 2011 were $22Band continue to growShrouding of ancillary fees hides the full cost ofair travelFederal preemption of state consumer protection laws requires thatconsumersrely on theDepartment ofTransportation forprotectionsDOT should protect consumers by ensuring transparency of the total priceof air transportation through all channels where airlines sell their ticketsREGULATION IS NEEDEDTO PROTECT CONSUMER RIGHTS9Presented on behalf of Sabre Holdings, August 7, 2012The Role of the GDSA marketplace delivering value to buyers and sellers of travel10Presented on behalf of Sabre Holdings, August 7, 2012Access to BuyersProduct PlacementMARKETPLACESELLERSBUYERSComparison ShoppingChoiceMARKETPLACES BRING BUYERS AND SELLERS TOGETHERSabre operates an electronic travel marketplaceEXAMPLESNYSEE*TradeeBayAmazonApple App StoreSabre Travel NetworkProduct PlacementGeographic ReachChoiceConvenience11Presented on behalf of Sabre Holdings, August 7, 2012AIRLINEHOTELCARTRAVEL SELLERSTRAVEL BUYERSSOLUTIONS BUILT AROUND A MARKETPLACECONNECTING BUYERS AND SELLERS OF TRAVELEfficiently enabling comparison shopping and buyingof travelSabreTRAVELOFFLINE AGENCY350,000 + Global Points-of-Sale,in 135 countriesCORPORATETens of millions of Corporate travelersusing Self-Booking ToolsONLINE AGENCYCARCRUISERAILTOURTRAVELMARKETPLACEONLINE AGENCYHundreds of millions ofOnline ConsumersGOVERNMENT and PUBLIC SECTORGovernment Travel PortalsAT-HOME and INDEPENDENTAGENTSTens of thousands of At-Homeand Independent Agents12Presented on behalf of Sabre Holdings, August 7, 2012AIRLINEHOTELCARTRAVEL SELLERSTRAVEL BUYERSPROVIDES VALUE FOR ALL CONSTITUENTSSabreTRAVELOFFLINE AGENCY350,000 + Global Points-of-Sale,in 135 countriesCORPORATETens of millions of Corporate travelersusing Self-Booking ToolsONLINE AGENCYCONSUMERTransparencyEnhanced Customer ServiceTime SavingsSELLERGlobal ReachProduct DifferentiationCARCRUISERAILTOURTRAVELMARKETPLACEONLINE AGENCYHundreds of millions ofOnline ConsumersGOVERNMENTGovernment Travel PortalsAT-HOME and INDEPENDENTAGENTSTens of thousands of At-Homeand Independent AgentsCORPORATIONand GOVERNMENTTransparency and Cost ControlService, End-to-EndTraveler SecurityOFFLINE and ONLINE AGENCYComparison shoppingAbility to Service the Entire TripProcess efficiencyPremium RevenueData and Business Insight13Presented on behalf of Sabre Holdings, August 7, 2012Enabling TransparencyinanEfficient Travel MarketplaceEnhanced to enable new airline merchandising initiatives14Presented on behalf of Sabre Holdings, August 7, 2012BASE FARESPublic | Private | FareRulesINVENTORYSabre TRAVEL MARKETPLACEEnabling transparency in an efficient travel marketplace—simplifying complexityCORPORATEBOOKING TOOLSAGENCY/TMCSabreTRAVELMARKETPLACESHOPPINGOTAsSCHEDULESOnline | Interline | CodesharePublic | Private | FareRules(ATPCO or Direct Filed)META SEARCHMOBILEXML WEBSERVICES(ARC, Global BSPs or Direct)SHOPBOOKPRICEFULFILLSETTLESERVICESHOPPINGENGINEHUNDREDSof AirlinesMILLIONSof FaresBILLIONSof Combinations15Presented on behalf of Sabre Holdings, August 7, 2012SETTLEMENTTickets | Miscellaneous Charges(Vendors or Direct)BASE FARESPublic | Private | Fare RulesANCILLARIESPublic | Private | Fare RulesINVENTORYANCILLARIESSabre TRAVEL MARKETPLACEEnabling transparency in an efficient travel marketplace—simplifying complexityCORPORATEBOOKING TOOLSAGENCY/TMCSabreTRAVELMARKETPLACESHOPPINGOTAsSCHEDULESOnline | Interline | CodesharePublic | Private | Fare RulesTransactional (Or Not)Frequent Flyer Tier Level(ATPCO or Direct Filed)META SEARCHMOBILEXML WEBSERVICES(ARC & Global BSPs or Direct)SHOPBOOKPRICEFULFILLSETTLESERVICESHOPPINGENGINEHUNDREDSof AirlinesMILLIONSof FaresBILLIONSof Combinations16Presented on behalf of Sabre Holdings, August 7, 2012SETTLEMENTTickets | Miscellaneous ChargesANCILLARIESElectronic Miscellaneous Document(Vendors or Direct)IATA’s Claimsand New Distribution Capability ProposalThe reality and impact to consumers17Presented on behalf of Sabre Holdings, August 7, 2012FALSE CLAIMS USED AS DIVERSIONARY TACTICSPropagated by IATA and some airlinesAbout GDSs:Old Technology / High PriceCannot Handle AncillariesAbout Airlines:Airline Websites HaveTransparencyNew Distribution CapabilitySolves the IssueAbout DOT:No Need to Regulate Ancillaries18Presented on behalf of Sabre Holdings, August 7, 2012IT’S NOT ABOUT COSTS—IN THEIR OWN WORDSAirlines publicly confirmed in their analyst callsin 2006 Sabre contracts are good deals“We do have savings—we will havesavings from that agreement. It’s anagreement that we are happy with.We think it’s good for our customers.We think it’s good for us financially,and it secures a distribution channelthat a lot of our best customerswant“Reducing our distribution costis another important initiative thisyear. And I’m pleased to report that inthe third quarter we successfullyrenegotiated our agreements withGalileo and Sabre.I won’t get into the details, but thoseagreements provide the opportunitythat a lot of our best customerswantto use ...”Scott KirbyExecutive Vice President, Sales and MarketingUS Airwaysagreements provide the opportunityfor us to realize significantdistribution costs savings ...”Gerard ArpeyFormer Chief Executive OfficerAMR (American Airlines)19Presented on behalf of Sabre Holdings, August 7, 2012FALSE CLAIMS USED AS DIVERSIONARY TACTICSPropagated by IATA and some airlinesAbout GDSs:Old Technology / High PriceCannot Handle AncillariesAbout Airlines:Airline Websites HaveTransparencyNew Distribution CapabilitySolves the IssueAbout DOT:No Need to Regulate Ancillaries20Presented on behalf of Sabre Holdings, August 7, 2012Call to ActionConsumer protections are needed to ensuretravelerscan both compare the full cost of air travel and buy essentialservices wherever airlines sell their tickets21Presented on behalf of Sabre Holdings, August 7, 2012CONSUMERS ARE DEMANDING THEIR RIGHT TO TRANSPARENCYWherever airlines choose to sell their tickets“No matter what channel you choose tobook your flight, you should haveimmediate access to ALL fees, so you cancalculate the total bottom-line cost ofyour fare... Whether you book yourflight online, over the phone, through atravel agency, or at a ticket counter, youhave a right to know what the final tally“... GBTA fully supports the free-marketright of businesses to create and followtheir own chosen business models,including charging ancillary fees. Buttravel professionals must be presentedwith an accurate view of the full cost ofproducts. To that end, it is imperativethat there is full transparency to buyerson fares and fees.This also applies tohave a right to know what the final tallywill be.”Bill McGee, long-time consumeradvocate and contributing editor forConsumer Reports, in an article onairlines’ added fees inUSA Today, July25, 2012on fares and fees.This also applies tobooking, ticketing, billing, and fulfillingthose services. Above all, GBTA is seekinga solution for its members. And thatsolution must be guided by the principlethatairlines should provide completedata anywhere they plan to distributetheir product.”Michael McCormick, Head of the GlobalBusiness Travel Association, theorganization that represents the interestsof corporate purchasers worldwide, July23, 2012Presented on behalf of Sabre Holdings, August 7, 201222CONSUMERS ARE DEMANDING THEIR RIGHT TO TRANSPARENCYWherever airlines choose to sell their tickets“... we urge you to use your ongoing Notice of Proposed RuleMaking (NPRM) process to require airlines tomake all of theirancillary fee information easily accessible not onlyon their ownwebsites but also through online and offline travel agenciesvia themajor reservations systems that power those ticketing systems.”60,000 concerned citizens in a petition to DOT decrying the lack ofancillary fee transparency, September 2010Presented on behalf of Sabre Holdings, August 7, 201223WHERE CONSUMER PROTECTIONS ARE NEEDED & NOT NEEDEDConsumer rights and competitive marketplace dynamicsCompetitive marketplace dynamics—regulation not warrantedGDS participationCommercial terms for distributionTechnology solution for shoppingConsumer rights—regulation warrantedTransparency of total price includingessential ancillariesCompare and buy wherever airlinessell ticketsNon-essential ancillariesDOT regulatory nudges have proven to protect and benefit consumers24Tarmac DelaysBaggage FeesTaxes and FeesFuel SurchargesPresented on behalf of Sabre Holdings, August 7, 2012BENEFITS OF MAKING ANCILLARIES AVAILABLEWHEREVER AIRLINES SELL TICKETSA win-win-win for consumers, agencies, and airlinesAIRLINEHOTELCARTRAVEL SELLERSTRAVEL BUYERSSabreTRAVELOFFLINE AGENCY350,000 + Global Points-of-Sale,in 135 countriesCORPORATETens of millions of Corporate travelersusing Self-Booking ToolsONLINE AGENCYConsumers havetransparency intothe total cost of traveland can make informedAirlines generatemore ancillaryrevenue bybroadly andrapidlyCARCRUISERAILTOURTRAVELMARKETPLACEONLINE AGENCYHundreds of millions ofOnline ConsumersGOVERNMENTGovernment Travel PortalsAT-HOME and INDEPENDENTAGENTSTens of thousands of At-Homeand Independent Agentsand can make informedpurchase decisionsAgencies can efficientlyserve travelers onbehalf of airlinesbroadly andrapidlydeploying ancillaries25Presented on behalf of Sabre Holdings, August 7, 2012