• Sabre, Amadeus under EC investigation

The European Commission has opened an investigation into whether agreements between Amadeus and Sabre and airlines and travel agents breached EU antitrust rules.

Both Amadeus and Sabre said that they would work with the Commission and that their agreements encouraged, rather than discouraged, competition.

Commissioner Margrethe Vestager, in charge of competition policy said: “The liberalisation of the EU aviation market more than 25 years ago has brought significant benefits to EU citizens, including more choice and lower ticket prices. Our investigation into Amadeus and Sabre focuses on possible restrictions in competition in the market for airline ticket distribution services. We are concerned that such restrictions could create barriers to innovation and raise ticket distribution costs, ultimately raising ticket prices for travellers.”

The Commission will investigate whether certain terms in Amadeus’s and Sabre’s agreements with airlines and travel agents restrict the ability of airlines and travel agents to use alternative suppliers of ticket distribution services. This, the Commission said, would make it harder for suppliers of new ticket distribution services to enter the market, as well as increase distribution costs for airlines, which were ultimately passed on in the ticket prices paid by consumers.

In a statement, Sabre said that it believed “full content, or parity clauses, are in the best interest of consumers and serve to provide them with comparability and transparency, enabling consumers to easily and efficiently shop and book the best flights that meet their needs. We also recognise that the airline industry is a highly competitive marketplace and many airlines today are looking for ways to differentiate themselves and create brand loyalty.

“Our travel agency agreements, in turn, enable travel agencies to have very cost-efficient access to our superior technology and thus enable those travel agencies to best serve the needs of consumers.”

Amadeus also said it would cooperate, noting that “the process will confirm that Amadeus’ business practices are fully aligned with legal and regulatory requirements”.

It added: “It is well documented that the neutral marketplace provided by the GDS is facilitating comparison and choice, thus providing European citizens with competition among airlines resulting in lower ticket prices.

“Airlines are always free to decide which products and services they make available to consumers through travel agents using the Amadeus GDS, and travel agents are free to choose to work with one or more GDS or aggregator in the market, thus taking advantage of the fierce competition between them.

“Airline distribution is affected by many inter-dependent factors, including the commercial behaviour of airlines and airline groups. The review of any one factor must take into account its dependence and impact on all other factors to avoid undermining the neutral marketplace and thereby harming consumers.”

A competition lawyer who declined to be identified told Hotel Analyst: “I understand that the Commission may be looking for unlawful exclusivity provisions which effectively make it very hard for any rival entities to break into the market.  It could lead to Sabre and Amazon having to change their terms of business. If they fight the allegations it could take a few years to get to a formal decision.”

News of the investigation came as Lufthansa Group said that it would further limit the fares available on the GDS, as it looked to drive bookings direct and through IATA’s New Distribution Capability.

Economy Light fares will no longer be available in GDS from this date, but can instead be accessed via Lufthansa Group airlines’ direct NDC API, online platform SPRK, austrian.com, lufthansa.com, swiss.com and lhgroup-agent.com.

The airline has a history of battling against the GDS. In 2015 it added a EUR16 charge to bookings made through indirect booking channels rather than through its direct routes, sparking a lawsuit with Sabre and general opprobrium from the agents. The airline protested that its strategy included “a clear cost differentiation in the various booking channels”. The group said that, in total, the yearly GDS costs came to “a three-digit million euro amount” for the Lufthansa Group.

It was followed by British Airways and Iberia, which announced a GBP8 fee on bookings through the GDS last year, which was increased in September this year.

Travelport, which was not named by the Commission in its investigation, used its recent earnings call to point to falling GDS commissions, with the European GDS market contracting by 4%, which it blamed in part on the summer heatwave.

HA Perspective [by Katherine Doggrell]: As our unnamed lawyer points out, the EC has no taste for exclusivity provisions and neither should it. We await the results of the investigation to hear more. In the meantime, in an echo of past rummages into the business of hotel distribution, those accused were quick to protest that other routes to market were available and Lufthansa has been king of loudly proclaiming that direct is where it is at.

The book direct message is one which the consumer is well versed in, particularly with the airlines, with the market now fully commoditised.

But for the likes of Sabre, Amadeus (and Travelport), while the actions of the EC may prove an irritant, their eyes are no longer on the prize of Europe, but looking east to Asia, where the pickings are rich enough to impede the thickest of sunglasses.

And then, of course, there is blockchain.

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