New U.S. Rules Could Bring Unprecedented Change to Booking Flights Online

Buried in a document dump by the White House and U.S. Department of Transportation (DOT) is a potential bombshell that could one day upend how airlines sell flights to consumers online.

A new request for information from the DOT outlines the friction that exists between airlines, online booking sites, and the consumers who often struggle to make effective flight booking decisions. It also raises the specter of potential regulation that could change how airlines are able to restrict the selling of air travel products.

On the heels of an executive order from the Obama administration this April pushing for greater competition and transparency in consumer marketplaces, the DOT is looking at concerns raised by consumer advocates and online booking sites about how airline tactics affect competition in online travel.

“Specifically, concerns were raised about practices by some airlines to restrict the distribution and/or display of flight information by certain online travel agencies (OTAs), metasearch entities that operate flight search tools, and other stakeholders involved in the distribution of flight information and sale of air transportation,” states the document. “Airlines state that it is important for them to maintain control over the display and distribution of airline flight information while OTAs and metasearch entities that operate flight search tools state that actions taken by airlines to restrict the distribution or display of flight information are anticompetitive and harming consumers.”

The DOT will investigate whether information on flight scheduling, pricing, and availability should be treated, essentially, as public information instead of proprietary property of individual airlines, therefore removing the ability of airlines to restrict the online booking sites and metasearch partners they work with.

Flight Data: Public or Proprietary?

Despite online booking sites and metasearch sites aggregating flight info from a variety of sources, the question still remains whether airlines are being transparent enough with flight information when it comes to both consumer shopping and competition in aviation at large.

“Some industry stakeholders believe that airline schedule, fare, and availability information is not airline property and is instead similar to bus or train schedules that are widely available to the public. Some OTAs and metasearch entities that operate flight search tools have stated that airlines have historically provided airline flight information to the general public and that it is purely factual data; therefore, according to these entities, airline flight information has historically not been, and still should not be, considered the intellectual property of airlines,” reads the report.

“On the other hand, airlines state that despite the fact that airline flight information has historically been disseminated and available to the general public, airlines have invested significant money in developing methods to set schedules and fares, to effectively market air transportation, and ultimately to fill as many seats as possible on the flights an airline operates. Further, unlike bus or train fares and schedules that change infrequently, airline fares, schedules, and availability can change many times a day in response to a competitive marketplace. According to many airlines, as a result of the investment that airlines have made in developing flight prices, schedules, and availability, the flight information that they produce and distribute to the air transportation industry is proprietary information.”

This, of course, brings up the question of how a potential ruling could affect companies like Southwest Airlines, which receives the majority of its bookings directly on its website. It also directly concerns how airlines at large sell ancillary products like seat upgrades. Is it anticompetitive for airlines to restrict the channels through which they sell ancillaries, even if those channels have poor platforms?

Furthermore, is it unfair and deceptive of airlines to limit publicly available information on flights and flight products, or simply an important business strategy in an extremely competitive market? With four carriers controlling about 80 percent of the U.S. domestic air market, could better competition mean lower prices for consumers and allow for a better flight experience?

Lasting ramifications

Changes could affect almost every player in the online travel ecosystem, and many in the industry are applauding the DOT for taking a look at the effects of consolidation on the space.

“In an environment where four carriers control over 80 percent of domestic air capacity, it is critical that the DOT promote policies that foster transparency of information and competition on price and service offerings,” said Travel Technology Association president Steve Shur. “Ensuring that flight information is readily available in comparative search and shopping environments would be a welcome first step in protecting consumers.”

A study conducted by TravelTech last year found that the lack of airline transportation transparency could result in an extra $6.7 billion in airfare spending each year for U.S. flyers. The study, of course, should be considered knowing that TravelTech is the trade group representing online booking sites and global distribution systems.

The airlines, naturally, say any changes would only empower online intermediaries.

“It would be difficult to find an industry that is more transparent than the airline industry; customers always know exactly what they are paying for before they buy,” said Airlines4America CEO Nicholas Calio. “Further, the fact that a record number of people are flying underscores that customers are benefiting every day from affordable fares and the ability to choose among carriers, amenities and service options that best meet their needs. Dictating to the airline industry distribution and commercial practices would only benefit those third parties who distribute tickets, not the flying public.”

Things for online booking sites and metasearch services, however, will become more complicated as well. In another document detailing new rules set to debut in 2018, sites will now be compelled to inform users of bias in how flights are listed.

The goal is to better inform flyers of why exactly a specific flight is displayed in a prominent position on a search page and reduce the leverage that the big four U.S. carriers have in negotiating display deals with travel partners.

“After reviewing and carefully considering the comments, the Department has decided to prohibit any undisclosed bias in electronic displays that include combinations of multiple carriers’ schedules, fares, or availability information, if the display is marketed to U.S. consumers or to ticket agents that market to U.S. consumers,” states the commentary on the rule. “In response to comments regarding the alleged overly prescriptive nature of the proposed rule and potential unintended consequences of adopting the rule as proposed, the Department has revised the rule text to clarify that entities still have flexibility to provide the type of routings consumers are interested in when purchasing air transportation. The rule only applies to undisclosed display bias by ticket agents or carriers, not bias requested by the users of the system.”

Online booking sites won’t be required to disclose that not all airlines are available on their site, in a small win for the companies, since the DOT believes consumers are smart enough to understand that online booking sites and metasearch services aren’t completely comprehensive.

You can read the full request for information, which contains a useful primer on the dynamics of the online travel marketplace, below.

Download (PDF, 172KB)