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Q&A on the revised rules for computerised airline ticket reservation systems
Commission Européenne - MEMO/07/463 15/11/2007
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Brussels, 15th November 2007
1. What is a computerised reservation system?
Computerised Reservation Systems (CRSs) act as technical intermediaries between the airlines and the travel agents. The CRSs provide their subscribers with instantaneous information about the availability of air transport services and the fares for such services. They permit travel agents, whether brick-and-mortar or on-line, to make immediate confirmed reservations on behalf of the consumer.
Not consumers, but travel agents use a CRS as they require a subscription and a specific training. They are not to be confused with on-line travel websites that offer travel choices of several airlines to the consumer. These online agents usually use a CRS in the same way as their brick-and-mortar counterparts.
No CRS intervenes when a consumer makes a booking on an airline's Internet website or via an airline's call centre. In these cases, the airlines and the consumers are in direct contact, without any intermediary.
There are currently three major CRS providers active on the European market: the European company Amadeus and the American companies Sabre and Travelport. They handle about 60% of all airline bookings in the EU.
2. What are the present rules with regard to CRSs?
Regulation 2299/89 establishes a Code of Conduct for CRSs that offer their services in the European Union. It imposes a set of rules on the CRSs, the airlines and the travel agents, such as:
3. Why do we need to revise these rules?
The Code of Conduct for CRS was designed in 1989 in a different market context from today: at that time, the vast majority of airline bookings were made through CRSs. For air travel, consumers could practically only rely on one single information and distribution channel, the one constituted by CRSs and travel agents. This single channel was very vulnerable to competitive abuse, especially in the case of vertical integration between CRSs and airlines.
Since then, CRS technology and economics have changed a lot: thanks to the development of alternative distribution channels, such as the airlines' Internet websites or their call centres, consumers have nowadays access to a multiplicity of information and booking channels for air transport services. About 40% of all airline tickets in the EU are booked via alternative channels and about 60% via travel agents and CRSs.
The Code of Conduct is increasingly ill-adapted to the changed market conditions:
The rapid development of the alternative booking channels may reduce the need for these rules in the future. The proposal foresees a report by the Commission within five years of the application of the revised Code in order to assess the need for the maintenance, the revision or the abolition of the Code of Conduct.
4. What are the objectives of the revision?
The objective is two-fold:
More precisely, the revision will allow to:
5. How does the Code of Conduct protect consumers' interests?
As seen above, the revision of the Code of Conduct reinforces competition in the airline distribution sector and thereby reduces overall distribution costs – which are part of the final price paid by the consumer. Furthermore:
6. Will travel agents be able to provide neutral information to consumers?
The proposal recognizes that under the current Code of Conduct, there was an increasing risk of content fragmentation: this is one of the reasons for the revision. The higher than necessary booking fees induced airlines to develop their sales via their less costly Internet websites. Therefore, travel agents were not assured to have access to all the fares of an airline. Some low-cost airlines do not offer their services at all on the CRS displays.
By reinforcing competition between the CRS providers, the revised Code of Conduct will create the market conditions in which CRSs will provide high-quality services at better prices. This will induce airlines to provide more content via the CRSs. The US experience with price freedom has shown that more airlines provide 'full' content to the CRSs and even some low-cost airlines – like Southwest Airlines or JetBlue – started to use the services of the CRSs.
7. What are there special provisions in case of vertical integration between CRSs and airlines?
What are parent carriers?
A parent carrier is any carrier that owns or effectively controls a CRS.
The provision on effective control means that the ownership condition may not be circumvented by other means, such as for example contractual relations between the airline and the CRS which would provide effective control of the airline over the CRS. This control may be individual or jointly conferred to the carrier with others.
The proposed revision does not change the definition of a parent carrier. But it does clarify that the specific rules for parent carriers also apply to rail undertakings that would control a CRS (see below).
What specific rules are imposed on parent carriers?
Are the specific rules imposed on parent carriers still necessary in the present market context?
Yes. Travel agents are still very dependent on CRSs and certain categories of air travellers are still dependent upon the services provided by travel agents, e.g. corporate travellers (mainly because of the need of a centralised travel management). The competition from the alternative distribution channels has not yet developed sufficiently to ensure that, in the absence of regulation, there is no risk of competitive abuse of the CRSs.
8. How does the revision promote rail services and intermodal transport?
The Code of Conduct already applies to rail services that are integrated into an air transport CRS (it does not apply to 'rail only' systems). It ensures that rail services are given a non-discriminatory treatment in the CRS. The provisions with regard to parent carriers and display neutrality apply to rail services, too.
However, today's provisions with regard to non-discriminatory pricing lead to a de facto discrimination of rail services as they are charged the same fees as the airlines for each booking although the average value of the rail tickets is smaller. By establishing pricing freedom with regard to booking fees, the proposal allows rail companies to negotiate booking fees which are better adapted to the value of their tickets and hence creates an incentive for rail companies to offer their services on the CRS systems, too. This way, travel agents and their customers can more easily compare and combine rail and air services for travel over shorter distances, especially in the presence of high-speed rail services.
 Also known as Global Distribution Systems (GDS).
 Galileo and Worldspan are being merged into Travelport GDS.