Airline Ticketing: Impact of Changes in the Airline Ticket Distribution Industry
Published: 2003-07-31T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In 2002, when major U.S. airlines posted net operating losses of almost $10 billion, they paid over $7 billion to distribute tickets to consumers. Of these total distribution expenses, airlines paid hundreds of millions of dollars in booking fees to global distribution systems--the companies who package airline flight schedule and fare information so that travel agents can query it to "book" (i.e., reserve and purchase) flights for consumers. Each time a consumer purchases an airline ticket through a travel agent, the global distribution system used by the travel agent charges the airline a set booking fee. Concerns have been raised that the global distribution systems may exercise market power over the airlines because most carriers are still largely dependent on each of the global distribution systems for distributing tickets to different travel agents and consumers and therefore must subscribe and pay fees to each. Market power would allow global distribution systems to charge high, noncompetitive fees to airlines, costs that may be passed on to consumers. GAO was asked to examine changes in the airline ticket distribution industry since the late 1990s and the effects on airlines, the impact of these changes on travel agents and consumers, and what the relationship between global distribution systems' booking fees and related costs suggest about the use of market power.
section_title: What GAO Found
paragraphs: Since the mid-1990s, two major changes occurred in the airline ticket distribution industry, and these have produced cost savings for some major U.S. airlines. First, airlines developed less expensive Internet ticketing sites that bypass global distribution systems and their fees and encouraged passengers to book via Internet sites. Between 1999 and 2002, on average, the percentage of tickets booked on-line, including airline-owned Websites and on-line travel agencies, grew from 7 percent to 30 percent. Second, in a related effort to trim costs, airlines cut the commissions they traditionally paid to travel agencies. However, these changes have not eliminated airline dependence on global distribution systems. These changes have had mixed effects on travel agents and consumers. Very large travel agencies (those with more than $50 million in annual air travel sales revenue) appear to have benefited from volume-based incentive payments from airlines and global distribution systems, while smaller travel agencies have closed or lost business, especially to on-line travel Websites. Consumers who use the Internet have benefited from lower internet-only fares. Travelers who do not buy airline tickets on line may be at a disadvantage in not having access to these fares. Because we lacked access to proprietary company information, we could not determine the precise relationship between global distribution system booking fees and related costs, and thus could reach no conclusions about potential exercise of market power by global distribution systems in the airline ticket distribution industry. Since 1996, booking fees and some costs related to the booking function--computing costs and travel agent incentive payments--both increased. However, we could not obtain data on all expenses related to the booking function, and thus could not accurately compare these costs to booking fees. DOT provided us with technical comments, which we incorporated as appropriate.

section_title: Letter
paragraphs: In 2002, when major U.S. airlines posted net operating losses of almost $10  billion, they paid approximately $7.3 billion to distribute tickets to  consumers. Of these total distribution expenses, airlines paid hundreds of  millions of dollars in booking fees to global distribution systems (GDS)— the companies whose computer systems display airline flight schedule and  fare information so that travel agents can query it to “book” (i.e., reserve  and purchase) flights for consumers. Although distribution costs represent  relatively small amounts of an airline’s total costs (labor and fuel represent  nearly half an airline’s expenses), ensuring a competitive distribution  system is important to the industry because it represents the link between  airlines and the traveling public. In the United States, three domestic global  distribution systems dominate the industry. Traditionally, each time a  consumer purchases an airline ticket through a travel agent, the global  distribution system used by the travel agent charges the airline a set  booking fee. Concerns have been raised that the global distribution  systems may exercise market power over the airlines because most major  carriers are still largely dependent on each of the global distribution  systems for distributing tickets to different travel agencies and consumers.  Market power, which can arise where competition is lacking, may result in  high, noncompetitive fees charged for services or goods. In this case,  market power may be indicated by booking fees that bear little relation to  booking costs.
The precursors to global distribution systems, called computer reservation  systems (CRS), were owned by the airlines. Since 1984, rules enforced by  the Department of Transportation (DOT) have regulated the conduct of  these systems to prevent airline owners of computer reservation systems  from using their influence to benefit themselves by reducing competition  from other airlines, which could ultimately harm consumers. DOT  regulations, commonly referred to as the “CRS rules,” were developed to  prevent airlines that owned a computer reservation system from biasing  the information on flights and fares that consumers received in order to  impede competition. Effectively, the rules, which apply to computer  reservation systems and global distribution systems, ended bias in the  computer screen display of information that was used by travel agents to  book tickets and now require major U.S. airlines to "participate" equally in  each global distribution system. They also require computer reservation  systems to charge airlines similar booking fees for similar levels of service,  which limited airlines’ ability to negotiate over booking fees. As of July  2003, when most airlines have sold off their shares in global distribution  systems and the global distribution systems have become independent  entities, DOT was reviewing the CRS Rules to determine if and how they  should be revised. Many parties provided comments with differing opinions  to DOT. Department of Justice officials stated that the global distribution  systems have had and continue to have market power over the airlines.
In light of the airlines’ dependence on the global distribution systems  during this time of unprecedented financial losses, and in the context of the  ongoing debate on the CRS rules, you asked us to examine issues related to  the airline ticket distribution industry. As agreed with your office, this  report focuses on the following questions:  What have been major changes in the airline ticket distribution industry  since the late 1990s, and how did these changes affect airlines?
How have these changes in the airline ticket distribution industry  affected travel agents and consumers?
What does the relationship between global distribution systems’  booking fees and booking-related costs suggest about the presence and  use of market power?
To determine how the airline ticket distribution industry has changed and  the effects on airlines since the late 1990s, we analyzed aggregated  proprietary industry booking trend and cost data; examined DOT  documents; and interviewed officials with the global distribution systems,  several major airlines, and other industry experts. To describe how changes  in the airline ticket distribution industry have affected travel agents and  consumers, we analyzed travel agent and consumer ticketing fee data;  reviewed major airline and various travel agency consumer fee policies;  and interviewed travel agents, industry group representatives, and DOT  officials. To determine what the relationship between global distribution  systems’ booking fees and related costs indicated about the presence and  use of market power, we analyzed and compared data on global  distribution system operating cost data, certain booking-related costs, and  booking fees. To protect the confidential proprietary nature of individual  global distribution system and airline information, we reported all costs  and fees in terms of averages calculated from the companies that provided  data. We limited the scope of this review to the three major U.S. global  distribution systems--Galileo, Sabre, and Worldspan. These three systems  handle 92 percent of the U.S. bookings. We were limited in our review  because we did not have full access to proprietary airline, global  distribution system, and travel agent data. However, we reviewed the  comments submitted to DOT as part of its CRS rulemaking, including those  of the Department of Justice’s (DOJ) Antitrust Division --government  antitrust experts who conducted a market structure analysis of the ticket  distribution system. We also discussed those comments with officials from  the Antitrust Division. Because of a lack of historical data, we limited our  review to the 4 years covering the period 1999 through 2002. Appendix I  contains additional information on the objectives, scope, and methodology  of this review.
subsections: section_title: Background
paragraphs: An airline “booking” occurs when a passenger reserves and purchases a  seat for a trip. In 2002 in the United States, an estimated 255 million  passengers flew more than 611 million flight segments (e.g., a traveler who  flew between Baltimore, Maryland, and Portland, Oregon, who connected  over Chicago both outbound and inbound represents a single passenger  that flew four flight segments). Information included in the booking  consists of the traveler’s name; an address; price and billing information;  the full itinerary origins, destinations, and possible connecting airport with  flight numbers and times; and perhaps other information as well, such as  loyalty program (i.e., frequent flyer) information, including program status  or seat and meal preferences. When a booking is entered in a computer  system by a traditional travel agent, it is created in a GDS. The GDS- generated booking is then sent to the airline’s internal reservation system.
The GDS charges an airline a “booking fee” based on the total number of  flight segments in the traveler’s itinerary. For example, if a booking fee is  $4 per segment and a passenger reserves and purchases an itinerary that  consists of four flight segments (an outbound flight that connects over an  airline’s hub to the ultimate destination and two similar return flights), the  airline will be charged approximately $16 in booking fees. Changes made to  the booking may cost extra for the airline. For example, if a passenger  changes the day of his return flight, the airline may be refunded all but a  fraction of its booking fees for those segments, and charged again for the  booking of the new segments.
Sometimes, a passenger may book an itinerary with an airline through a  traditional travel agent, but may choose not to pay for the ticket pending a  final decision on the trip. Such cases are called “speculative” or “passive  bookings.” In an effort to maintain the booking as a service to the potential  customer, a travel agent may continue to cancel and re-book the itinerary.  Each cancellation and re-booking costs the airline (sometimes  cancellations and re-bookings result in “churn”). The final cost to the  airline is called a “net booking fee.”
The precursors to GDSs, CRSs, first automated the selling of airline seats  and the tracking of flight and schedule information for use by airline  employees in the late 1960s. Beginning in the mid-1970s, these systems  were offered to travel agencies. These CRSs were owned by (i.e., vertically  integrated with) the airlines. American Airlines and IBM jointly developed a  system called Sabre (Semi-Automatic Business Research Environment) to  automate American’s bookings. United Airlines and TWA followed with  Apollo and PARS, respectively. Delta and Eastern followed with DATAS II  and System One, respectively. These CRSs replaced manual booking  systems, and thus allowed the airlines to quickly and reliably process a  large number of transactions. By extending use of the systems to travel  agencies, airlines were able to reduce expensive telephone calls from travel  agencies to airline reservation offices and were able to offer real time  access to fares and inventory to its agency partners, improving the  marketability of their services.
Under airline ownership, certain CRS practices created competitive  disadvantages for some carriers and often did not expose consumers to all  available carrier options and prices. Before the industry was deregulated in  1978, interline travel-–a practice in which passengers fly on more than one  airline to reach a destination--was common. To serve passenger needs,  travel agencies also needed CRSs to provide information and booking  capabilities on all airlines. However, CRSs did not treat every airline  equally.
An airline with its own CRS (“owner airline”) did not pay fees for  booking passengers through that CRS, and it displayed schedule  information in a way that favored its own flights at the expense of these  other airlines—even if other airlines offered more direct service  between two cities at less cost to the traveler. Typically, an owner airline  would market its CRS to travel agencies in cities where it flew a  significant number of flights.
In the early 1980s, to expand CRS-travel agent market share in cities  where they provided limited air service, owner-airlines developed “co- host” programs with other airlines that had a significant presence in  targeted cities. In exchange for discounts on fees for bookings made on  that CRS and for more prominent display of its flight information on the  CRS computer screen, the co-host airline would market the owner  airline’s CRS to its local travel agencies.
Other airlines that were not co-hosts (“subscriber airlines”) would pay  higher fees for any booking made on that CRS and continued to be  disadvantaged by a bias in the display of their available flights.
In essence, airline owners of CRSs used them to gain an unfair advantage in  the marketplace, and struck deals with certain airlines giving them  competitive advantages over other airlines. Figure 1 illustrates the typical  financial transactions that took place among airlines, CRSs, travel  agencies, and consumers prior to the enactment of the CRS rules.
Owner airlines had an incentive to service as many travel agencies as  possible in order to gain greater booking share. This, in part, is because  CRSs benefit from economies of scale: CRS profits increase as passenger  traffic and bookings increase, and both of those depend on access to more  travel agents. While CRS market positions tend to be strongest in specific  geographic areas consistent with their airline owners’ markets (and any  markets they were able to negotiate from nonowner, or co-host, airlines),  each U.S. GDS has developed a national, and subsequently, global footprint.  In addition, owner airlines also recognized that travel agents’ familiarity  and comfort with their CRSs produced something of a halo effect that gave  owner airlines a greater share of bookings. While airlines paid commissions  to travel agencies based on the value of the purchased tickets, carriers also  encouraged travel agents to make additional passenger bookings by paying  commission “overrides” to travel agencies for surpassing set sales goals.
Though three domestic CRSs existed, an individual travel agent office  typically relied on only one system. This was due in part to the multiyear,  often exclusive, contracts under which they historically operated with  CRSs. Using more than one system was also inefficient from the standpoint  of most travel agents.
These structural relationships produced two major effects:  Because airlines—dependent on the systems—paid the booking fees,  rather than the other users of the systems (travel agents and, ultimately,  consumers), there was no competitive pressure constraining CRS  booking costs.
Airlines had little choice except to participate in each CRS, and CRSs  did not have to compete for airline participants. As DOJ stated in  comments submitted to DOT in 1989, each CRS constituted a separate  market for air carriers because of the near-exclusive relationship with  separate groups of travel agencies, and each is a monopolist with  market power over carriers that want to sell tickets in areas where the  CRS has a significant number of travel agencies. Thus, unless an airline  was willing to forego access to those travel agencies and the consumers  they served, it needed to participate in every CRS.
To illustrate, consider Sabre’s relationship with American Airlines, and  Galileo’s relationship with United Airlines. Because American has  significant operations in the Dallas/Ft. Worth area, many travel agencies in  Texas historically subscribed to Sabre, while United has similarly  significant operations in Chicago and many travel agencies there likely  were Galileo users. However, because American wanted to be available to  travel agencies located in United’s traditional territory that subscribe to  Galileo, it had to use Galileo as a CRS, as with other GDSs. Similarly, United  wanted to be available to travel agencies in what was historically  dominated by American in Texas and therefore had to be available on  Sabre. Figure 2 illustrates the exclusive relationships that CRSs had with  travel agencies, and the airlines’ dependence on each CRS to reach the  most number of travel agencies.
Prior to the enactment of the CRS rules, consumers only paid airfare,  regardless of the complexity of the itinerary. Presumably, those airfares  reflected the airlines’ total costs, including overhead expenses associated  with ticket distribution.
In 1984, the Civil Aeronautics Board (CAB), in one of its last official acts,  adopted CRS rules to protect consumers and help ensure fair competition  among airlines. The goal of these rules was to dissipate or constrain the  power of the airlines and their CRSs to manipulate the competition for  passenger traffic. DOT inherited the CAB’s duties, and in 1992 found that  the rules were still necessary. DOT concluded that without them, CRS  owners could use their control of the systems to prejudice airline  competition, and the systems could bias their displays of airline services.  Three main requirements in the CRS rules attempt to ensure that each  owner airline and its CRS would treat other airlines equitably:   Screens displaying flight information are not to favor one airline over  another (“unbiased screens”);  For the same level of service, prices for bookings must be the same for  all airlines, including owner airlines, eliminating differences such as co- host or subscriber airlines (“price nondiscrimination”); and  The “mandatory participation” rule requires airlines with a 5 percent  ownership interest or more in a CRS (“owner airlines”) to participate in  competing systems at the same level at which it participates in its own  system.
Figure 3 illustrates how the airline ticket distribution industry changed  after the implementation of the CRS rules.
DOT’s 1992 revisions to the CRS rules included a sunset date of December  31, 1997, which DOT subsequently extended to January 2004. DOT is  currently reviewing additional possible revisions to the CRS rules.
As CRSs evolved as corporate entities, they added other lines of business to  the original airline ticket booking function. They currently book not only  airline reservations, but also hotel, rental car, train, tour, and cruise  reservations. CRSs also sell other professional services to airlines, such as  software and Information Technology services for personnel and aircraft  scheduling, and for baggage handling. CRSs provide outsourced internal  reservation systems for airlines, as well. In the expansion of their activities  they became known as GDSs, reflective of the increasingly international  and diverse nature of travel they encompassed.
Since the mid-1990s, U.S. airline owners have sold their shares in their GDS  businesses. Three domestic GDSs have evolved to dominate the U.S. travel  agent market: Sabre, Galileo, and Worldspan. Sabre became a separate  legal entity of AMR Corp. (American Airlines’ parent company) in July of  1996, followed by an initial public offering of Sabre in October 1996; it has  since been fully divested by AMR Corp. In 1997, Galileo International  became a publicly traded company, and in 2001 became a subsidiary of  Cendant Corp. Worldspan was sold in June 2003 to private investors. These  changes ended the vertical integration of these airlines and GDSs. Figure 4  illustrates the GDS shares for all U.S. domestic bookings that relied on a  GDS in 2002.
section_title: Major Changes Occurred in the Use of the Internet and Travel Agent Compensation in the Airline Ticket Distribution Industry
paragraphs: Since the airlines began selling their shares in the GDSs in the mid-1990s,  the ticket distribution system has undergone two major changes. These  changes have helped airlines, faced with generally high operating expenses,  cut distribution costs. First, airlines and others have increasingly sold and  processed tickets through Internet-based applications (e.g., airline  Websites, on-line travel sites), some of which bypass GDSs. These  distribution methods are less expensive to the airlines than traditional  travel agencies. Second, airlines have reduced commission payments to  travel agents. At the same time, in response to overtures by large travel  agencies, GDSs partially offset that reduction in airline commission  payments by significantly increasing incentive payments to travel agents,  on whom they depend to reach a large number of consumers. In part,  these changes have enabled major airlines to reduce their total distribution  costs by 25.8 percent from an average $732.9 million in 1999 to $543.6  million in 2002, or 43.6 percent on a per booking basis. However, these  changes have not eliminated the airlines’ dependence on the GDSs for the  selling of air tickets. Airlines continue to need to subscribe to each GDS to  reach the universe of travel agents and potential consumers.
subsections: section_title: Internet Sites That Cost Airlines Less Are Increasingly Used to Book Tickets, Some without the Use of Global Distribution Systems
paragraphs: Airlines have developed new Internet-based ticket booking processes that  bypass GDSs and their associated booking fees. Others have developed  Internet-based travel agencies that use GDSs to book tickets but whose  bookings still cost airlines less than tickets booked through traditional  travel agents. An increasing percentage of tickets are booked through the  Internet, and an increasing percentage of bookings are made without the  use of GDSs.
subsections: section_title: Airlines are Using New Processes to Bypass the GDSs and their Fees
paragraphs: The airlines have used the Internet to change the way bookings are  processed by creating ways to work around the GDSs and their booking  fees. Airlines have developed two basic ways to use the Internet to avoid  the cost burden associated with standard GDS booking fees.
First, airlines have developed their own Websites (e.g.,  www.continental.com) that allow consumers to reserve and book seats  directly with airlines. Bookings made through these sites do not use a GDS  booking function, and therefore do not incur booking fees. Rather, airlines  maintain pricing, flight, and seat availability in their own internal  reservation systems. For example, a booking made through Continental’s  Website is processed by a data vendor that is not a GDS. Bookings made  when a consumer telephones an airline’s “call center” (e.g., via a toll-free  number such as Continental’s 1-800-523-FARE) are also routed through that  same vendor. But, unlike call centers that rely on personnel to process  bookings, airline proprietary on-line site bookings are processed  electronically and therefore incur lower labor costs.
Second, five major U.S. airlines collectively underwrote the development of  a travel technology company called Orbitz. Because consumers can go to  the Orbitz Website (www.orbitz.com) to query fare and schedule  information for most major airlines as well as to book and purchase tickets,  it performs similar functions as a travel agent. Orbitz now has two methods  by which it books tickets, one of which uses a GDS and one of which  bypasses GDSs and their associated booking fees.
Originally, and in many cases still, Orbitz uses the Worldspan GDS to obtain  airline availability data and to place the booking, and airlines pay booking  fees to Worldspan for tickets booked in this manner. Orbitz receives  volume-based rebates from Worldspan, flat transaction fees  (approximately $5.34 charter associate fee or $10 per ticket from  noncharter associates) from airlines, and it charges fees to consumers ($6  per ticket).
Through Orbitz, however, some airlines can generate significant cost  savings relative to traditional and on-line travel agent booking methods.  “Charter airlines” have negotiated special arrangements with Orbitz, under  which they receive rebates on a portion of the booking fee. According to  Orbitz officials, these rebates generally save charter airlines about $3 of the  approximate $16 paid in booking fees per ticket compared to bookings  made through traditional travel agencies. Airlines that are not charter  members of Orbitz pay the full Worldspan booking fee. These arrangements  contrast with the CRS rules requirement of price nondiscrimination and  mandatory participation, which have limited carriers’ ability to negotiate  reduced booking fees with GDSs. Airlines are allowed to negotiate special  arrangements with Orbitz because DOT has not defined Orbitz as a CRS,  and thus did not extend the application of the CRS rules to cover Orbitz.
Recently, Orbitz, with airline cooperation, has also developed technology  that enables it to book tickets by directly accessing each participating  airlines’ internal reservation system, bypassing the GDS and its booking  fees. This technology, which (unlike the technology used to access an  airline’s internal reservation system) can query and get information from  multiple airlines, functions similarly to the technology used by GDSs.  According to Orbitz officials, its new technology, which is called “Supplier  Link,” could result in participating airlines saving about $12 of the typical  $16 paid in booking fees per ticket. Since its implementation in 2002, 11  major airlines have signed up to participate in Supplier Link. As of July  2003, four airlines—America West, American, Continental, and Northwest-- have begun to use the technology. Currently, these airlines process over 70  percent of their Orbitz bookings through Supplier Link. These airlines’  remaining Orbitz bookings need to go through the Worldspan GDS because  of their complexity. Complex bookings that cannot at this time be handled  by Supplier Link might include bookings with itineraries that involve trips  flown by interlining airlines (i.e., two or more airlines that collectively  transport a passenger from origin to destination) or international  destinations.
In light of its new Supplier Link technology, Orbitz may be the first entity in  the U.S. to perform functions similar to GDSs since finalization of the CRS  rules in 1984. Furthermore, some believe that Orbitz represents a new  entrant into the GDS market. However, Orbitz is a creation of the major  airlines—as were the CRSs—and questions have been raised about  whether Orbitz charter member airlines could use Orbitz to gain a  competitive advantage over other airlines. DOT and DOJ have been  involved in examining this issue. In its June 27, 2002, report to Congress,  DOT found that Orbitz is not anticompetitive and more specifically, has  shown no evidence of biased presentation of airline services. However,  DOJ has not yet commented on the topic. As of July 2003, DOJ was  continuing its review of Orbitz.
section_title: Internet-Based Travel Agencies That Use GDSs Also Book Tickets at a Lesser Cost to Airlines than Traditional Travel Agents
paragraphs: Other participants in the airline ticket distribution industry have also  developed Internet sites that, like traditional travel agencies, book tickets  through a GDS. Sabre entered the Internet market by creating Travelocity,  which is a web-based booking engine that uses the Sabre GDS to query and  book tickets. In general, Travelocity functions as an on-line travel agent:  airlines make payments to Travelocity as well as pay booking fees to Sabre.  As with other travel agencies, consumers pay it ticketing fees. For  accounting purposes, Sabre pays Travelocity incentive payments, but the  payments stay within the parent company.
Independent on-line travel sites have also emerged to sell airline tickets to  consumers. One notable example is Expedia.com. In general, the  relationships and flow of payments among Expedia.com, its GDS  (Worldspan), airlines, and consumers resemble those of traditional travel  agencies. Major independent on-line travel agencies continue to subscribe  to a GDS and pay a subscription fee if they do not meet the high volume  requirements for fee waivers. In turn, the GDS pays the on-line agency  incentive payments for bookings, while charging airlines booking fees. In  addition, some airlines make payments to these independent on-line travel  agencies. Consumers also typically pay a $5-$10 fee to the new on-line sites  for each ticket. In Expedia’s case, since it is Worldspan’s largest subscriber,  it does not pay GDS subscription fees. Furthermore, since it books in such  high volumes, it receives negotiated payments from its GDS and certain  airlines.
Other independent on-line travel agencies, sometimes referred to as  “opaque” travel distributors, have also entered the airline ticket  distribution industry, typically offering low-cost tickets to consumers in  exchange for less flexibility or choice. Opaque travel distributors book  through GDSs to sell what the industry refers to as “distressed inventory.”  Analogous to a deep discount store or an outlet store, opaque distributors,  such as Priceline.com, take bids from consumers for airline tickets.  However, the consumer will know neither the carrier nor the exact  departure times for his itinerary until after an airline accepts the  consumer’s bid, and the ticket is bought and paid for.
Despite the fact that airlines pay commissions and overrides as well as GDS  fees for these on-line travel agency bookings, these bookings cost airlines  less than bookings made through traditional travel agencies. This is in part  because on-line consumers generally must purchase the ticket at the time  of reservation, reducing “churn” that airlines claim is costly, by not  allowing repeated bookings, cancellations, and rebookings prior to  purchase. A traditional travel agent has the capacity to make changes to a  consumer’s itinerary; however, for any changes to a reservation, additional  GDS processing is required. GDSs charge the airlines a small amount for  each cancellation and rebooking, so each such change adds to total airline  distribution costs.
In 1999, on average, each ticket booked via a traditional travel agent cost an  airline a total of $45.93, compared to $23.40 and $25.12 for airline Website  and on-line travel agency sites, respectively. Although costs associated  with each of these distribution methods have decreased, bookings made  through traditional travel agencies continue to cost much more than those  made on line. From 1999 through 2002, the average cost to an airline for a  booking made through a traditional travel agency decreased by 33 percent  to $30.66, while the average cost to an airline for a booking on its own  Website decreased by 50 percent to $11.75. Over the same period, the  average cost to airlines for bookings made through on-line travel agencies  decreased 23 percent to $19.43. Figure 5 illustrates the change in average  airline distribution costs by the different distribution methods.
Airlines have taken steps to encourage travelers to book tickets through  less expensive, on-line distribution methods. Some airlines have instituted  a fee for travelers who receive a paper ticket through a traditional travel  agent. For example, Northwest charges a $50 fee for a paper ticket as  opposed to electronic tickets. Airlines may also reward on-line bookers  with loyalty incentives (i.e., frequent flyer program bonuses). For instance,  travelers booking on line with American may earn up to 1,000  AAdvantage® Bonus miles. Airlines—both directly and through on-line  travel agencies—have also offered special “Webfares” and last minute  Internet-only deals to encourage consumers to book tickets on the Internet.
While airlines continue to sell a significant proportion of their tickets  through traditional travel agencies, the number of tickets sold through  on-line distribution methods, including airline Websites and on-line travel  agencies, has increased rapidly since the late 1990s. Between 1999 and  2002, on average, the percentage of tickets that consumers booked through  traditional travel agents fell from 67 percent to 46 percent. By comparison,  the percentage of tickets booked on line (using both on-line travel agencies  and airlines’ own Websites) increased from 7 percent to 30 percent from  1999 to 2002. Throughout that same time period, airlines sold the remainder  (roughly 25 percent) directly to consumers via their call centers (1-800  numbers). Figure 6 illustrates the change in distribution methods between  1999 and 2002.
While business travelers generally continue to rely on traditional travel  agents, trends suggest that leisure travelers are adopting the Internet as an  alternative to traditional travel agents. The National Commission to Ensure  Consumer Information and Choice in the Airline Industry (NCECIC)  reported in 2002 that business travel—usually the highest yield traffic for  airlines—is often contracted out to travel agencies to manage. As a result,  airlines report that traditional travel agencies (and therefore GDSs) will  continue to play a vital role in the distribution of airline tickets. On the  other hand, an increasing percentage of leisure travel is now booked via the  Internet.
Bookings continue to be predominantly processed by GDSs, but since the  late 1990s the percentage of on-line booking processed through airline  internal reservation systems and Orbitz Supplier Link technology has  increased. However, the sales through traditional travel agents continue to  account for the majority of airline revenue, in large part because higher- priced business travel continues to be managed through traditional travel  agencies. Figure 7 illustrates how the number of major U.S. airlines  bookings processed through GDSs and GDS bypasses has changed from  1999 to 2002.
section_title: Airlines Reduced Travel Agent Payments, While GDSs’ Payments to Travel Agents Increased
paragraphs: Travel agent reimbursement patterns have shifted significantly since the  late 1990s. Much of the shift was caused by the airlines, which by 1998  reduced or ultimately ended the traditional practice of offering a flat  published “base” commission (traditionally a percentage of each ticket  price, which later was a flat fee for each ticket) to all travel agents as a  means of reducing distribution costs. Partly the CRS rules do not govern  airlines’ relationships with travel agencies, airlines were free to change  their payments to travel agents in a way they were not free to do with  GDSs, and now use a system of privately negotiated commission  arrangements with individual travel agencies. Not all travel agencies are  able to negotiate such individual commission arrangements, and the terms  of such agreements vary among travel agencies and among airlines. From  1999 to 2002, average annual payments by airlines to travel agencies  decreased by 57 percent, from $370 million to $159 million, as airlines  provided override commissions predominantly to those travel agencies  with high ticket sales.
Figure 8 illustrates the decline in average commission payments by airlines  to travel agencies in relation to total distribution costs. From 1999 to 2002,  on average, major airlines reduced their total distribution costs by 25.8  percent, from $732.9 million to $543.6 million, or 43.6 percent on a per  booking basis. Most of that reduction occurred in the payments by airlines  to travel agencies, which decreased by 57 percent, from $370 million to  $159 million. Despite a decrease of 8.5 percent in passenger traffic between  2000 and 2002, remaining distribution costs--which include rising GDS fees,  as well as overhead, personnel, advertising, and credit card fees--were  essentially unchanged over the period.
The largest travel agencies—those with total annual revenues in excess of  $50 million—represent less than 1 percent of travel agencies, but book  almost 60 percent of total travel agent sales. By definition, because of their  large volumes of sales, these large travel agencies are most likely to receive  the majority of the airlines’ override commissions.
As airlines cut traditional travel agent ticket commissions, GDSs began  increasing incentive payments to travel agencies. According to an official  of a domestic GDS, since airlines (and, subsequently, other travel suppliers)  reduced travel agent commissions, travel agencies sought out replacement  sources of revenue, and GDSs responded with incentive payment  increases. Large travel agencies were able to use their position in the  industry between the GDSs and large segments of the traveling public to  convince the GDSs to provide some form of incentive payment. At the same  time, GDSs use incentive payments to compete for travel agent market  share and to incentivize travel agents to book on their particular GDS.  Generally, as with airlines’ override commissions, a GDS pays incentives to  those travel agencies with high booking volumes, as each booking results  in the GDS receiving a fee from the airline. Between 1995 and 2002, on  average, each GDS paid travel agencies an increasing amount of incentive  payments, from $22.3 million to $233.4 million (over 900 percent). Figure 9  illustrates the average change in each GDS’s payments to U.S. travel agents  since 1995.
Shifts in travel agent payments have also occurred between travel agents  and consumers. After airlines ended automatic base commissions, many  travel agencies began to charge consumers service fees for booking  tickets—previously included in the ticket price in the form of a commission  that was invisible to the consumer. Figure 10 illustrates the current flow of  payments among the four participants in the airline ticket distribution  industry. Compared to figure 3, it illustrates some changes that have taken  place in the airline ticket distribution industry since the late 1990s— particularly the advent of various Internet booking methods, airline-  initiated sites that bypass GDSs, the new flow of payments to travel  agencies, and new service fees imposed on consumers.
section_title: Airlines Continue to Be Dependent Upon the GDSs
paragraphs: While each change—increased use of the Internet to process and sell  tickets and reductions in airline payments to travel agencies—has  contributed to the lowering of overall airline distribution costs, neither has  reduced the effective requirement that nearly every major airline  participate in and pay booking fees to each GDS. As previously stated,  airlines continue to process over 60 percent of their tickets—mostly high  yield business traffic—through the GDSs. Furthermore, airlines continue to  need to subscribe to each GDS in order to reach all consumers. As DOJ  described it in comments submitted to DOT during a 1997 review of the  CRS rules, from an airline’s perspective, because each CRS provides access  to a large, discrete group of travel agencies, each CRS constitutes a  separate market. And unless the airline is willing to forego access to those  travel agencies and the consumers they serve, it must participate in every  CRS.
section_title: Changes in the Airline Ticket Distribution Industry Appear to Have Benefited Very Large Travel Agencies and Consumers Who Use the Internet
paragraphs: Large travel agencies and consumers who use the Internet appear to have  benefited most from recent changes in the airline ticket distribution  industry. Small travel agencies and the consumers who patronize them  appear to have benefited least, if not been disadvantaged. Since the late  1990s, the number of very large travel agencies (i.e., those with total annual  sales in excess of $50 million) has stayed approximately the same, but their  total annual air travel sales have almost doubled. Because the largest  travel agencies sell more air travel than any other category of travel agency,  by definition they would likely qualify for both GDS incentive payments  and airline override commissions. During this same period, the number of  small travel agencies has steadily declined, as have their total annual air  sales. Figure 11 illustrates changes in the number of different sized travel  agencies and their sales of air travel over time.
The increase in on-line bookings appears to have had a more negative  effect on smaller travel agencies than on large travel agencies because of  general differences in the nature of their clientele. Leisure travelers  increasingly book on line—usually well in advance with simple itineraries.  According to the DOJ, leisure travelers with relatively simple itineraries are  best suited to using the Internet. On-line travel agencies sell most tickets to  price-sensitive leisure passengers. In contrast, business consumers, who  often use large travel agencies, are not likely to book on line because of  restrictive corporate policies and complex business itineraries that are  often subject to short notice changes. Those travel agencies also may  provide reporting and record keeping services for large business  customers.
According to officials from the NCECIC and the American Society of Travel  Agents, small travel agencies are confronting financial pressure from both  airlines and GDSs. First, small travel agencies may have difficulty securing  airline override commissions or GDS incentive payments because of sales  volume requirements. In addition, small travel agencies often must pay for  GDS service and equipment, while these fees are frequently waived for  agencies with high sales volumes. To survive, many smaller travel agencies  have become focused on niche travel markets–for example, regional travel,  hiking/biking travel, and cruise line travel–and charge service fees to  clients.
The availability of Internet distribution methods appears to have positively  affected Internet users. These methods provide fare and schedule  information to consumers, and provide consumers with a number of  Websites on which they can compare fare and schedule options. Moreover,  consumers who use the Internet have access to less expensive webfares  offered by the airlines. Airlines use such fares to encourage consumers to  use Internet travel sites, as they are less expensive to the airlines. For  instance, the results of a 2001 Forrester Research survey of Internet users,  which the NCECIC included in their 2002 report to Congress and the  President, found that people who booked on line preferred doing so  because they can readily compare various on-line travel sites, as well as  access more diverse fares (i.e., webfares) than they can through a  traditional travel agent. Furthermore, on-line customers may also avoid the  higher ticketing fee that some travel agencies now charge (up to $50),  although many on-line travel agencies may charge their own smaller  ticketing fees ($5-$10). Finally, the public perceives that booking on line is  less expensive than booking through a traditional travel agent. Conversely,  consumers purchasing tickets on airline Websites may not have complete  and unbiased information when booking flights, which is important in a  competitive industry. For example, Orbitz.com does not include schedule  and fare information for certain low fare airlines, such as Southwest and  JetBlue because these airlines have chosen not to participate.
Travelers who choose not to buy airline tickets on line, or who do not have  Internet access, may be at a relative price disadvantage. Travelers using a  traditional travel agent may pay a service charge of up to $50. In addition,  travelers who do not choose to use the now standard “electronic ticket”  may be charged an extra fee by the airline for a paper ticket. And as noted  before, a travel agent may not have access to special webfares. But  travelers who do use traditional travel agents may benefit from the added  flexibility of being able to change their reservation. An on-line travel  agency booking is often difficult to change, especially if it is a low fare that  is nonrefundable or subject to other restrictions. On the other hand, with  the power to change a booking through the GDS, travel agents say they act  as the consumer’s advocate with an airline, with consumers benefiting from  the detailed knowledge and personal interaction that a travel agent can  provide.
Business travelers are continuing to use traditional travel agencies to  manage their travel because of corporate travel policies, including  negotiated “private fares.” According to the National Business Travel  Association, less than 10 percent of corporate travel is booked through the  Internet and many corporations forbid their employees from booking travel  on the Internet, even if employees find a lower fare through that  distribution method. Corporate travel policies can limit the employees’  ability to use the Internet in booking travel because they often require  employees to use a contracted travel agency, through which they are  booked on corporate contract carriers.
section_title: Sufficient Data Were Not Available to Determine the Relationship between Booking Fees and Costs and the Presence and Use of Market Power
paragraphs: Because we lacked access to proprietary company data on costs and  revenues, we could not develop the sort of evidence that would allow us to  determine whether GDSs exert market power in the airline ticket  distribution industry. Booking fees charged by GDSs to airlines have risen  over the past several years. From 1996 to 2001, the typical booking fee paid  by a major airline has increased by 30.9 percent, from $3.27 in 1996 to $4.28  in 2001, a change greater than the overall inflation rate (as measured by the  Gross Domestic Product chain-type price index) of 9.4 percent during this  same time period. According to GDS officials, during this time period, the  services and products offered by GDSs were enhanced and deliver  substantial benefits to airlines (e.g., e-ticketing). Furthermore, one GDS  official estimates that about 40 percent of its self-reported software  development costs are meeting supplier (e.g., airlines) needs.
Because much financial information is proprietary, we were therefore  unable to obtain a full breakdown of GDSs’ costs in order to isolate the  specific costs directly associated with the booking function (“transaction  costs”). However, two GDS-reported costs associated with the booking  function for which we were able to get data both rose between 1996 and  2002: GDS computing costs (i.e., total data center operating costs) and  travel agent incentive payments.
Computing costs have increased but because of inconsistent data  reported by the GDSs, we were unable to determine the precise  increase. However, the GDS computing cost increase is in contrast to  general industry computing cost trends, which decreased by over 60  percent since the mid-1990s. According to officials with the GDSs, their  computing costs per booking rose relative to commercial sector  computing costs because (1) bookings have become more complex,  requiring more processing to complete and (2) the volume of  transactions shopping for low fares that do not result in a booking has  risen, especially for on-line travel agencies used by consumers. They  stated that the additional processing required offset any general  decrease in computing costs. For example, airlines have offered more  types of fares to consumers (e.g., “private fares” available to large  corporate clients, government fares, and conference specials). Many of  these fares are stated as a percentage of the full coach fare, which  airlines can change several times daily. GDSs must quickly match the  correct fare with each customer for each specific flight. Moreover, GDS  officials also stated that airlines are keeping more detailed Passenger  Name Records with all reservations. The amounts of data that the GDSs  track with these records have also increased over time, as airlines have  made efforts to better serve passengers (e.g., frequent flyer accounts  and seating preferences). It is unclear how much of this increasing GDS  functionality, the costs of which are presumably passed on to the  airlines through increases in booking fees, adds value for the airlines.  Some airlines have complained that they do not need certain elements  of the increased functionality (e.g., seat maps) and are paying for  something they do not want at a time when they are struggling  financially.
As discussed above, GDSs’ incentive payments to travel agencies have  increased. GDSs provide incentive payments to travel agencies to  reward them for using their system. The largest travel agencies were  able to use their position in the industry between the GDSs and large  segments of the traveling public to convince the GDSs to provide  increased incentive payments. On average, incentive payments from  GDSs to travel agencies increased by over 500 percent from 1996 to  2002, rising from $34.9 million to $233.4 million.
Computing costs and travel agent incentive payments do not encompass all  airline ticket booking-related costs, and we were unable to get financial  data on other costs (e.g., booking-related hardware costs) related to GDSs’  airline ticket booking function, which might have allowed us to determine a  relationship between booking fees and related costs and to consider what  the relationship indicated about the presence and possible exercise of  market power by the GDSs.
To identify other information about the possible existence and use of  market power, we reviewed the comments submitted to DOT since its  November 2002 Notice of Proposed Rulemaking of the CRS rules. GDSs  stated that they do not have market power. However, some airlines contend  that they do operate under GDS market power. For example, America West  contends that each CRS exercises monopoly power over it. In its June 9,  2003, comments to DOT, DOJ concluded based on its market structure  analysis that despite the recent growth of Internet distribution, GDSs  continue to have market power over airlines. DOJ found no evidence that  existing regulations designed to erode that power had succeeded in the  past or are likely to improve the situation in the future. Rather, they  concluded that many of the existing regulations have been ineffective in  reducing GDS market power, which derives from the inability of most  airlines to withdraw from any GDS. DOJ noted that while the CRS rules  have been effective in eliminating discriminatory pricing (charging  different fees to target specific airline competitors), it has not prevented  GDSs from charging fees above competitive levels. Nevertheless, DOJ  concluded that recent changes in the industry have eliminated the need or  utility for most of the CRS rules and that anticompetitive practices be  enforced through case-by-case antitrust investigations.
section_title: Concluding Observations
paragraphs: A competitive airline ticket distribution industry, which includes the  airline, GDSs, and travel agent industries, continues to be important  because noncompetitive practices may adversely affect airlines and  consumers. Originally, the CRS rules were focused on reducing the market  power of airline-owned CRSs to prevent owner airlines from using the  CRSs to gain a competitive advantage over nonowner airlines. With the  GDSs now independent from the airlines, questions have been raised  regarding the GDSs’ exercise of market power over all airlines. Among  other things, because GDSs do not compete with each other for airline  business, airlines and consumers may be subject to prices that are higher  than in more competitive markets. While our limited ability to get complete  booking cost and fee data from the GDSs did not allow us to independently  evaluate whether GDSs currently exercise market power, the market  position of large travel agencies or the overall performance of the industry,  evidence that we developed in this review provides suggestions of both a  functioning market and competitive flaws.
On the one hand, our review provides some indications of a market that is  functioning and adaptive. For example, the use of the Internet has grown  significantly, and overall prices for airlines for each form of distribution  have fallen. In addition, the development and evolution of Orbitz and  expansion of direct airline Internet booking reflects that at least some  lower-cost substitutes for GDSs have emerged. Airlines and other  participants in the ticket distribution system have developed an ability to  use Internet innovations to limit distribution expenses. Similarly, the  Internet’s ability to provide consumers with access to a wide variety of,  often low cost fares (i.e., transparency) has arguably benefited them.
On the other hand, our review also highlights issues that suggest the  continued possibility of GDS market power as well as the growing power of  large travel agencies. The structure of the industry, in which airlines are  dependent upon the GDSs to obtain ultimate access to large portions of  travel agents and potential passengers (especially high yield business  traffic), perpetuates the potential for the existence and exercise of market  power by GDSs. Although Orbitz may offer a technological substitute that  mitigates the market power of GDSs for some airlines, Orbitz’ relationship  with major airlines has raised different concerns about the potential for  owner airlines once again using their ownership position to distort airline  competition. Our review also indicates that the largest travel agencies,  upon whom both airlines and GDSs depend to reach a large percentage of  the higher-paying business travelers, currently have considerable leverage  in the industry. This leverage is reflected by their ability to obtain rising  incentive payments from GDSs as well as commission and override  payments from airlines.
The innovation that has occurred in the airline ticket distribution industry-- particularly the growth of the Internet—is noteworthy. These innovations  occurred under the framework of federal regulations, which DOT is  currently reviewing. DOJ stated that some of these rules have failed to  accomplish their goals and therefore need to be removed. At the same time,  DOJ’s antitrust review of Orbitz continues. Thus, the federal interaction  with the industry continues on both an industry-wide and case-by-case  basis. At the same time, it will be important to continue monitoring how  developments in the industry affect competition and consumers.
section_title: Agency Comments
paragraphs: We provided a draft of this report to DOT for review and comment. DOT  provided us with technical comments, which we incorporated where  applicable. We also provided relevant sections of this report to DOJ, the  three major U.S. GDSs, Orbitz, and most major U.S. airlines for review.  These organizations provided technical corrections, which we  incorporated as appropriate.
We will send copies of this report to the Honorable Norman Mineta,  Secretary, Department of Transportation. We will make copies available to  others on request. In addition, the report will be available at no charge on  our Website at www.gao.gov.
If you or your staff have any questions about this report, please call me at  (202) 512-2834. I can also be reached at HeckerJ@gao.gov, or Steve Martin  at MartinS@gao.gov. Appendix III lists key contacts and key contributors to  this report.
section_title: Objectives, Scope, and Methodology
paragraphs: This report examines three questions:  What have been major changes in the airline ticket distribution industry  since the late 1990s, and how did these changes affect airlines?
How have these changes in the airline ticket distribution industry  affected travel agents and consumers?
What does the relationship between global distribution system’s  booking fees and booking-related costs suggest about the presence and  use of market power?
We limited the scope of this review to the three global distribution systems  (GDS) that handle over 90 percent of U.S. airline bookings. These three  GDSs are Galileo, Sabre, and Worldspan. We excluded other GDSs that  operate predominantly in other countries. Those excluded from this review  include Abacus, Amadeus, Axess, Infini, and Topas. In addition, we did not  have access to the individual contracts between the various industry  entities; and therefore, the descriptions of the relationships are  generalizations.
To determine how the airline ticket distribution industry has changed and  the effects on airlines since the late 1990s, we analyzed industry booking  trend and cost data (e.g., airline and GDS payments, annual airline  expenditures per distribution method). These data are proprietary, so we  agreed to aggregate them so that no private company materials or  information would be publicly disclosed in an identifiable form.  Consequently, all data are reported in averages. Furthermore, since these  data are proprietary, we were unable to independently verify them because  we have no authority to require access to the underlying data. However, we  applied logical tests to the data and found no obvious errors of completion  or accuracy. Along with our use of corroborating evidence, we believe that  the data were sufficiently reliable for our use. In addition, we examined  documents from the Department of Transportation (DOT). We interviewed  DOT officials, Department of Justice (DOJ) officials, industry experts, the  three domestically based GDSs, seven major airlines, and four travel  agencies (e.g., a small traditional travel agency, and the three leading  on-line travel sites—Travelocity, Expedia, and Orbitz). We attempted to  interview all of the major travel agencies, but the top three would not agree  to meet with us. In addition, we were unable to obtain any airline or GDS  cost data related specifically to those travel agencies.
To describe how changes in the airline ticket distribution industry have  affected travel agents and consumers, we analyzed travel agent data (e.g.,  sales and revenues). We obtained these data from the National Commission  to Ensure Consumer Information and Choice (NCECIC), a commission  authorized under Section 228 of the Wendell H. Ford Aviation Investment  and Reform Act for the 21st Century (P.L. 106-181, AIR-21) to study two  distinct issues—first, the current state of the travel industry, and the impact  of changes in the industry on consumers; and second, the potential for  impediments to distribution of information to cause injury to agencies and  consumers. We contacted the Airline Reporting Corporation (ARC), the  source of the NCECIC travel agent data, to clarify the nature of the data  and thus we decided the data were reliable for our purposes. Lastly, we  interviewed travel agents, industry group representatives, and officials  from the NCECIC.
To determine the relationship between GDSs booking fees and booking- related costs and what it may suggest about the presence and use of market  power, we analyzed GDS booking fee and cost data (e.g., computing costs  and travel agent incentives). We obtained these data from the three U.S.  GDSs. Since these data are proprietary, we agreed to aggregate them so  that no private company materials or information would be publicly  disclosed by us in an identifiable form. Consequently, all data are reported  in averages. Furthermore, since these data are proprietary, we were unable  to independently verify them because we have no authority to require  access to the data. However, we applied logical tests to the data and found  no obvious errors of completion or accuracy. We believe that the data are  sufficiently reliable for our use. We analyzed specific booking fee-related  costs that were available to us—computing costs and travel agent incentive  payments. Computing costs are based on data center operations costs,  including hardware, software, leases, and personnel costs. We compared  trends in these computing costs with industry computing cost trends using  mainframe data center costs from the Gartner Group, a well-known  research and advisory firm that helps its clients understand technology and  drive business growth.
We were limited in our review because we did not have full access to  proprietary data. One of the GDSs (Worldspan) is privately held and does  not file financial data with the U.S. Securities and Exchange Commission  (SEC). Although Sabre and Galileo are publicly held and file financial data  with the SEC, they are not required to disaggregate cost data. Moreover, it  is difficult to compare even the data that Sabre and Galileo did provide,  since they may report their costs differently, as the Generally Accepted  Accounting Principles allow companies to allocate costs in various ways.  Therefore, we were not able to obtain complete and detailed data from the  GDSs on all costs directly related to booking transactions. However, we did  review the comments that were submitted to DOT regarding its review of  the CRS rules. Prominent among those were the June 9, 2003, DOJ  comments, which were based on DOJ’s expert, market structure analysis.  We also discussed with DOJ the comments they submitted. In addition, we  sought cost and booking data that dated from 1978 to the present. However,  no airline was able to provide data for a time earlier than 1996.  Consequently, we limited our review to the 4 years covering the period 1999  to 2002.
We conducted our review between September 2002 and July 2003 in  accordance with generally accepted government auditing standards.
section_title: Computing Cost Trends at Global Distribution Systems
paragraphs: According to the Gartner Group, overall mainframe data center costs  continued to decrease every year from 1994 through 1998. The Gartner  Group found that on a per-millions-of-instructions-per-second (MIPS) basis  (a common measure of usage), data center costs have decreased during the  same time period. Our analysis of the global distribution systems (GDS) per  MIPS computing cost (cost per MIPS) suggests that GDS per MIPS costs  also decreased from 1995 through 2002. Thus, on a per MIPS basis, the  general trend of computing costs incurred by the GDSs seem to be  consistent with the industry trend reported by Gartner Group for the years  1994 through 1998.
For technology-based companies like GDSs, an important cost measure is  the computing cost per booking. This measure is significant because GDSs  generate revenue largely based on the volume of booking transactions  processed. On an annual basis, we found that the computing cost per  booking increased slightly over the years 1996 and 2001, the years for  which we had relevant data from most of the GDSs. According to the GDSs,  the per-booking computing cost has risen because each booking has  become more complex over time, requiring more processing—more  MIPS—to complete a booking, thereby more than offsetting any decrease  in per MIPS computing costs. One way to explain the increasing complexity  of bookings is through the number of messages that are required to  complete a booking. A message is typically a single command typed by a  travel agent in a GDS reservation system. A message is sent every time a  travel agent types a command and hits the Enter key on the keyboard. For  example, for one GDS, the number of instructions needed to process each  message increased by 58 percent from 1999 to 2002. For that GDS, the  average number of messages required for each booking increased by 118.6  percent from 1993 to 2002. In addition, a message can be very simple (e.g.,  what gate is flight 442 scheduled to arrive at in Dallas today) or very  complex (e.g., what is the cheapest itinerary available to fly roundtrip  between Los Angeles International Airport and any of New York City’s  three major airports, departing next Tuesday morning).
section_title: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Acknowledgments
paragraphs: In addition to those individuals named above, Naba Barkakati, Triana Bash,  Carmen Donohue, Brandon Haller, David Hooper, Joseph Kile, Sara  Moessbauer, and Alwynne Wilbur made key contributions to this report.
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section_title: Public Affairs