Opinion of the Economic and Social Committee on the 'Proposal for a Council Regulation (EC) amending Council Regulation (EEC) No 2299/89 on a Code of Conduct for Computerized Reservation Systems (CRSs)'
Date: 1998-01-28
Institutions: European Economic and Social Committee
Subjects: air transport, code of conduct, computer system, consumer information, reservation

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railway undertakings. The former type of agreements
should not, in the view of the Committee, fall under the
prohibition of Article 85 (1) of the EC Treaty. As to
cooperation between railway undertakings, the situation

is different with regard to competition. Whether or not
this type of cooperation will prevent, restrict or distort
competition within the common market has to be
decided on the basis of a case-by-case assessment.

Brussels, 28 January 1998.

The President

of the Economic and Social Committee

Tom JENKINS

Opinion of the Economic and Social Committee on the ‘Proposal for a Council Regulation
(EC) amending Council Regulation (EEC) No 2299/89 on a Code of Conduct for Com-
puterized Reservation Systems (CRSs)’ (1)

(98/C 95/07)

On 5 August 1997 the Council decided to consult the Economic and Social Committee, under
Article 75 of the Treaty establishing the European Community, on the above-mentioned
proposal.

The Section for Transport and Communications, which was responsible for preparing the
Committee’s work on the subject, adopted its opinion on 19 January 1998. The rapporteur
was Mr Moreland.

At its 351st plenary session of 28 and 29 January 1998 (meeting of 28 January 1998), the
Economic and Social Committee adopted the following opinion by 112 votes for, 2 votes
against and 3 abstentions.

1.

Introduction

1.1.
Airline computer reservation systems (CRSs) are
extremely powerful marketing tools. They enable travel
agents to access the schedules, fares, etc. of the vast
majority of scheduled airlines throughout the world.
Bookings, even for obscure routings, can be confirmed
instantaneously and tickets priced and issued. CRSs
have undoubtedly brought major benefits for airlines,
travel agents and consumers.

1.2. However, they are also open to abuse. Modern
CRSs were developed initially in the United States by
individual airlines. They were invariably biased in
favour of the owning carrier. Because of the impact of
such bias on fair competition the US government

(1) OJ C 267, 3.9.1997, p. 67.

introduced regulations governing the use of CRSs in
1984. The EU followed with its own, more detailed rules
in 1989 (2), which were revised in 1993 (3).

1.3.
Regulation of CRSs has been a success. The
original bias, which caused so much concern, especially
for smaller airlines, has been removed. Many major
airlines no longer see any benefit in owning part of a
CRS and have sold all or part of their shareholdings.

(2) Council Regulation (EEC) No 2299/89 of 24 July 1989 on
a code of conduct for computerized reservation systems
(OJ L 220, 29.7.1989, p. 1); ESC opinion: OJ C 56, 6.3.1989,
p. 32.

(3) Council Regulation (EEC) No 3089/93 of 29 October 1993
amending Regulation (EEC) No 2299/89 on a code of
conduct for computerized reservation systems (OJ L 278,
11.11.1993, p. 1); ESC opinion: OJ C 108, 19.4.1993, p. 16.

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There has been substantial concentration among the
CRSs themselves. All are now global systems operating
in many parts of the world.

1.4.
It was always recognized that with so much at
stake, and with technology developing so rapidly, the
CRS Code of Conduct would require frequent updating.
As already noted, the current proposal is the second
revision to the original regulation.

1.5.
The Commission’s proposal to revise the CRS
regulation is in two parts: a report on the operation of
the current regulation; and a new regulation containing
detailed amendments. Below we examine each of these
parts in turn.

2. Report on the Application of the Code of Conduct

2.1.
The report details the waivers granted, the
complaints received and the requests made for guidance
on the interpretation of the code, as well as covering
various technical issues. The general impression given
is that while there have been numerous problems
associated with the code, they have been settled to
everyone’s satisfaction. It is evident, however, that not
everyone involved shares the Commission’s general
satisfaction. In particular, there have been many com-
plaints from airlines.

2.2. One particular cause for concern highlighted in
the Commission’s report involves the display by CRSs
of code share flights. The current code requires CRSs to
ensure that no flight option should be displayed more
than once unless there is a joint venture or other
contractual arrangement (such as a code share) requiring
two or more carriers to assume separate responsibility
for the offer and sale of air transport products, in which
case each carrier, up to a maximum of two, can have a
separate display.

2.3.
The Commission notes that the selection of the
two flights to be displayed is technically complex and
cannot be carried out by the CRS in isolation. In
particular airlines need to cooperate with CRS compa-
nies. As a first step, airline agreement on an industry-wide
standard is desirable. It is evident that such an agreement
has been difficult to achieve and that while some progress
has now been made, the implementation of this aspect
of the code still leaves much to be desired.

¨

2.4.
Restrictions on the display of code share flights
have been key elements in the CRS code from the
beginning. (The 1993 revision to the code actually
relaxed the restrictions somewhat). It is a pity that the
rules have still not been fully implemented. It is not
obvious that the Commission has pursued this issue as
thoroughly as it might, nor given it the priority that it
deserves.

2.5. Recommendation

The Committee welcomes the fact that the Commission
has produced a report on the operation of the CRS Code
of Conduct, which of necessity involves complex and
technical issues, but which nevertheless is of critical
importance for consumers and competition in the air
transport industry. It recommends that similar reports
are produced periodically, for example every three years,
even when amendments to the regulation are not being
proposed.

3. Proposed amendments to the code

The Commission proposes numerous amendments to
the current CRS code. These are outlined below.

3.1. Subscriber obligations (proposed Article 9a and

Annex II)

3.1.1.
The current rules require information provided
by CRSs to be accurate and comprehensive. However,
this is rendered ineffective if the same information is not
passed on to the customer by the travel agent, who may
be in receipt of additional commission payments to
favour certain airlines. The current rules do place certain
obligations on travel agents, but it has long been
recognized that enforcement is very difficult.

3.1.2.
The revised code provides that in the absence
of a specific request from a customer, a travel agent is
required to use a neutral display. Furthermore, the travel
agent should not manipulate the information provided
by a CRS in a manner that would lead to inaccurate,
misleading or discriminatory presentation of infor-
mation to the customer, who should also be provided
with full information on a number of key features of the
flight. Finally, the customer should be provided, on
request, with a print-out of the CRS display so that
he/she has access to the same information available to
the travel agent. Most of these provisions are contained
in the current code, but are given more prominence in
the revised regulation.

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3.1.3. R e c o m m e n d a t i o n

The Committee welcomes these changes, which it
believes represent a move in the right direction. However,
it is concerned about the enforcement of these important
provisions. The Commission should provide further
information about how it intends to ensure that travel
agents meet the requirements of the code in order to
safeguard the interests of consumers.

Travel agents have also been criticised for
3.1.4.
making unnecessary bookings, for example in order to
achieve certain productivity targets, which result in
airlines paying higher reservation fees. To remove this
problem the new code requires a travel agent to make
reservations and issue tickets in conformity with the
information contained in the CRS used and, where
possible, carry out reservation and ticketing operations
in the same CRS. Duplicate bookings for the same
journey are banned.

3.1.5. R e c o m m e n d a t i o n

This is a highly technical subject. The proposed amend-
ments to the code, contained especially in Annex II,
again appear to be a move in the right direction, but
only time will tell whether they are sufficient to solve
the problems. The Commission should be required to
monitor the effectiveness of the new rules with airline
and travel agency representatives.

3.2.

Inclusion of rail services (proposed Articles 2(r),
2(s), 2(t) and 21b)

3.2.1.
Increasingly shorter air services are in direct
competition with high speed rail services. The Com-
mission recognizes the consumer benefits of displaying
such air and rail options together on a CRS screen. It
therefore proposes that for the purposes of the code rail
services should be treated in the same way as air services
if they are included in the CRS display.

is a prescription for argument and delay.
proposal
Clearly any additional costs should be kept
to a
minimum, should be borne by those responsible for them
and should not lead to higher charges for passengers.

In particular, the Commission proposal discriminates
against rail as it makes no distinction between airline
stops and rail stops although rail stops are usually much
shorter. The ESC proposes that the distinction of
non-stop services and services with intermediate stops
be removed in the case of stops totalling less than 10
minutes.

3.3. Charging policy (Articles 3a and 10.1)

3.3.1.
The current code states that ‘any fee charged by
a system vendor shall be non-discriminatory, reasonably
structured and reasonably related to the cost of the
service provided and used and shall, in particular, be
the same for the same level of service.’ There has been
a number of complaints from European airlines about
CRS charging policies. Essentially the problem is that
while many airlines regard themselves as captive cus-
tomers of the CRSs, there is intense competition among
CRSs to have their systems installed in travel agency
offices. In some cases travel agents are effectively paid
to use a particular CRS, which increases the booking
fees charged to airlines.

3.3.2.
The Commission, despite an earlier inconclus-
ive consultants’ report, has not supported the airlines’
case. Instead, it accepts the CRSs’ assertion that incen-
tives paid to travel agents can legitimately be regarded
as distribution costs and therefore be included in the
booking fee calculation. This logic is unlikely to satisfy
the airlines.

3.2.2. R e c o m m e n d a t i o n

This would seem to be unobjectionable. However,
because of the practical complexities involved the
Commission does not specify the conditions governing
the inclusion of rail services in CRS displays. This is a
surprising omission, especially since the Commission
financed a consultants’ report on the practicality of the
display of rail products in airline CRSs. The Commission
appears to expect airlines, railways and CRSs to get
together to set standards. It would be better, in the
Committee’s view, if the code itself specified precisely
the obligations of all the parties involved. The present

3.3.3.
The Commission proposes that Article 10.1 of
the existing code relating to fee levels, and quoted
above, should in future apply only to fees charged to
participating carriers. A new, identical article is added
covering fees charged to travel agents for equipment,
etc. Effectively, therefore, there would no longer be any
control over the level of so-called distribution fees paid
to travel agents. Finally, the Commission proposes a
revision to the current code to clarify a possible
ambiguity where an airline which is an owner of a CRS
is required to accept a booking from another airline in
accordance with Article 3.a.1.(a). The clarification is
designed to ensure that excessive fees are not charged
for such a booking.

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3.3.4. R e c o m m e n d a t i o n

The Committee regards the splitting of travel agency
charges between equipment fees and distribution fees as
being artificial. It comes nowhere near to satisfying the
airlines’ complaints, which appear to have some merit.
In 1995, the Commission stated that in order to remove
the incentive to create unnecessary passive bookings,
productivity pricing schemes should be operated on a
‘tickets issued’ rather than a ‘bookings made’ basis. In
other words, only those bookings resulting in the issue
of a ticket should be included in the calculation of an
incentive award. It is not clear why the Commission
decided not to pursue this policy, which had previously
received widespread support.

3.4. Display of Code Share Flights (Annex, para-

graph 10)

3.4.1.
As already explained, CRSs have encountered
difficulties in applying the current rule, which allows up
to two airlines with a code share arrangement to have
separate displays using their own designator codes. Only
one CRS has put in place a satisfactory procedure to
enable carriers to comply with this provision, although
three others have announced their
intention to
implement the rule but have identified several practical
problems.

3.4.2.
The Commission rejects either allowing all
code share options to be displayed or limiting the display
to a single code share option, as required under the
original CRS code. It proposes to keep the current rule,
but where a CRS is unable to apply it because of
inadequate information provided by the airlines, to
permit the CRS to select on a non-discriminatory basis
which code share flights should be displayed.

should state specifically and clearly the display criteria
to be used by CRSs. In addition, the Commission should
consider giving greater prominence in the code to
ensuring that a would-be passenger has full information
about which airline will actually operate a service, what
aircraft will be used, etc.

3.5.

Inclusion of Information Systems (Article 2.1 and
proposed Articles 21 and 21c)

3.5.1.
The Commission points out that at present it
is difficult to assess with any accuracy the developments
that will
take place in the methods of electronic
distribution of air transport products. Already bookings
can be made through the Internet. Currently, however,
the Internet acts only as a sophisticated communications
link between information providers, such as an airline
or a CRS, and their subscribers and does not appear to
fall within the definitions of a system vendor or CRS.

3.5.2.
The Commission proposes to extend Article 21
of the code so that airlines can offer information about
their air transport products via the Internet without
being subject to the provisions of Article 5 and 9(5), just
as airline sales offices are not covered by the code.
However, CRS services that are provided electronically
directly to the user should be covered by the code. The
Commission therefore proposes that the definition of a
subscriber should be amended to ensure that such CRS
services are caught.

3.5.3. R e c o m m e n d a t i o n

The Commission is right to be cautious about Internet
developments in the provision of airline booking services.
It is very difficult to forecast accurately what will happen
in the future. Nevertheless, this is an area that the
Commission should be watching carefully with a view
to making proposals to avoid abuse.

3.4.3. R e c o m m e n d a t i o n

3.6. Ranking of flights (Annex, paragraph 1)

The Committee recognizes the difficulties faced by CRSs
and airlines in implementing the current rules dealing
with the display of code share flights. However, it
remains concerned that the proposed approach,
in
leaving some discretion in the hands of the CRSs, might
be open to abuse. Early experience with CRSs, especially
in the US, showed that what might appear superficially
to be a non-discriminatory selection process, might in
fact be highly discriminatory. It is recommended that
the option for CRSs to be able to choose which code
share flights to display should be removed. The code

3.6.1.
The major innovation introduced by the Euro-
pean CRS Code of Conduct compared with its US
equivalent was to specify in detail the order in which
flights should be displayed. Reflecting consumer prefer-
ence, all non-stop flights appear first, followed by
through-flights involving an intermediate stop and
finally all flights requiring a change of aircraft en-route.
The Commission asserts that ‘with the increase in the
use of hub and spoke arrangements by carriers, the
service provided by indirect flights can now be of an
equivalent level to that offered on other direct flights
involving stops at intermediate points.’ Consequently it

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is proposed that the display ranking criteria should be
amended so that in future preference would be given
only to non-stop flights. Flights involving a stop but no
change of aircraft would no longer have a priority over
change of aircraft flights.

3.6.2. No evidence is provided by the Commission to
justify this change. There is no suggestion that the
current rule has not worked satisfactorily, nor that there
have been any complaints about it. It is particularly odd
that the Commission should be seeking to change the
display priority now when after many years of resistance
the US is showing signs of moving towards the European
approach.

3.6.3. R e c o m m e n d a t i o n

There is no justification for changing the current rules
in this respect, which have worked well to the benefit of
consumers and airline competition. The Commission
should instead be encouraging others, especially the
United States, to follow Europe’s lead.

3.7. Other changes

A number of other changes to the current code
3.7.1.
are proposed under the headings Scope of Audit,
Ticketing Arrangements for Flights Carrying the Same
Flight Number Operated by the Same Carrier, Security
Package, Right of a Defendant to be Heard, Inclusion
of Information Systems within the Scope of the Code,
Obligations of Third Parties and Billing Information on
Magnetic Media. Essentially these deal with technical
issues and are unlikely to be controversial.

4. Conclusion

The Code of Conduct for airline CRSs has been a
successful European initiative. It has removed a major
problem in airline competition and helped to establish
an effective internal aviation market. The subject can

Brussels, 28 January 1998.

be technically complex and it is not surprising that
problems have arisen. These problems have probably
been exacerbated by the substantial commercial interests
at stake among the parties involved.

On the whole, the Committee welcomes the Com-
mission’s proposed amendments to the code. However,
on a number of detailed, but important points the
Committee believes additional changes are required. In
particular:

— the Commission should produce regular reports on

the operation of the CRS code;

— the development of Internet in relation to booking
services should be watched carefully, with a view to
making proposals to avoid abuse;

— the Commission should provide further information
about how it intends to ensure that travel agents
meet the requirements of the code in order to
safeguard the interests of consumers;

— the Commission should monitor the effectiveness of
the new rules dealing with unnecessary bookings, in
cooperation with airline and travel agency represen-
tatives;

— the code should specify precisely the obligations of
all the parties involved in the display of rail services
in order to avoid argument and delay;

— the Commission should revert to its earlier proposal
that in order to remove the incentive to create
unnecessary passive bookings productivity pricing
schemes should be operated on a ‘tickets issued’
rather than a ‘bookings made’ basis;

— CRSs should have no discretion in how code share

flights are displayed;

— the code should give greater prominence to ensuring
that a would-be passenger has full information about
which airline will actually operate a service, which
aircraft will be used, etc.;

— the current rules specifying the order in which flights

are displayed in CRSs should be maintained.

The President

of the Economic and Social Committee

Tom JENKINS