An interesting dynamic has emerged in Congress with discussions about airline alliances, The House Transportation and Infrastructure Committee is staunchly against such antitrust immunity and the Senate Commerce Science, & Transportation Committee is strongly in favor of these arrangements.
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Orignial published on Tripso.com

When the Department of Transportation (DOT), over the objections of the Department of Justice (DOJ), approved the Continental/United Airlines antitrust immunity deal this wasn’t included. DOT needs to take another look, now.

These two airlines have announced that they are building a new common IT platform that will serve as the backbone of their joint operations. This is the kind of cooperation that Delta is now implementing with Northwest. But Delta had to merge with Northwest before starting such integration.

Continental and United are attempting to take this merger-like step outside of a merger. They are using the antitrust immunity grant as a merger-in-fact agreement and are beginning to cooperate in ways never envisioned by the luminaries in the DOT alliance offices.

Unless these IT changes and cooperation are limited to international flights, Continental Airlines and United Airlines have a lot of explaining to do. They are simply breaking the law by cooperating intimately on on everyday domestic airline operations.

Domestic collusion is strictly forbidden in the antitrust immunity/airline alliance agreements that DOT allowed to go forward. United is pushing the envelope to see how far they can go before the administration reigns them in. Continental is probably going along since they are with a lame-duck CEO who is also interested in seeing how far airline can push the limits of the law.

Star Alliance, to which both Continental and United will belong, currently uses Amadeus to provide blended international IT services.

This IT cooperation according to Continental and United is only for international endeavors, but that is hard to believe. The algorithms and inside information to create a blended IT system goes far beyond the limited antitrust immunity currently in force.

Plus, the Amadeus platform, based in Europe, and dominate there, can serve any IT needs the airlines require for international interoperability.

DOT should take a close look at what Continental and United are tinkering with under the disguise of international antitrust immunity. This is a step too far.

First published on tripso.com.

United Airlines has relented and agreed to a 60-day waiting period before imposing their new draconian billing directives issued to 28 travel agents less than a month ago. The new requirements limit the agencies to paying all credit card fees and then forwarding fare payments to United by cash transfers.

Naturally, travel agencies and their main trade association, the American Society of Travel Agents (ASTA), are up in arms. Should these changes be accepted by these 28 agencies, there is nothing to stop United Airlines from imposing similar rules on other agencies both small and large or brick and mortar and online. And once United Airlines eliminates their credit card costs, other airlines are sure to follow.

The Consumer Travel Alliance director, noted in today’s ASTA press conference that the biggest consumer problems will not only be increased costs, but the destruction of consumer protection laws that allow customers to withhold payment of credit card charges for unprovided services. When the agent for the airline becomes the agent for acceptance of credit card charges, the airlines are left off the hook.

Travel agencies who do not receive commissions from United Airlines will be forced to pass along all credit card charges in order to even break even, let alone make a profit. Adding to the legal hassles are state laws that in at least 10 states forbid any company from adding on fees for the use of a credit card. With strict enforcement of these state laws, many local travel agencies will be forced out of business.

The break between the customer and the service provider (the airline) will create another major hassle and ruin hard-fought consumer protections built into credit card legislation.

The only recourse for future service problems will be to withhold payments from the travel agents who will then have to sue the airlines for non-performance of services. Even more complicated will be charges and refunds for fees assessed by airlines when changes are made enroute during travels. Then airline charges handled by the carriers will be blended with customer charges made through travel agents and confusion will dramatically increase.

For consumers, there is nothing good in this move by United Airlines to shift the credit card burden to travel agencies or force them to book directly through United’s billing services. Consumers will lose initially by having to pay more fees and will lose their consumer rights by having their charges and protections removed from the institution that is actually providing the services.

The ramifications of this move by United Airlines is profound. The Consumer Travel Alliance will be working with DOT, ASTA and the Business Travel Coalition as well as other travel organizations and Congress to keep consumer protections intact.