Distribution hostilities hot up, and issues of consent and consumer protection come to the fore
THERE HAS BEEN SOME fascinating legal and commercial debate concerning airline distribution involving airlines and the global distribution systems (GDSs) over control of content and talk of 'direct-connect contracts' between airlines and the trade. For those who have been asleep earlier in the year, the original skirmish was between Sabre and American Airlines, with AA complaining that Sabre had biased its displays of flights and lifted up the airline's GDS fees. AA brought legal action in the US against Sabre and Travelport, with Travelport concerned that AA was seeking to drive flight bookings on to its own direct-connect system. AA obtained a restraining order requiring Sabre to stop some of its actions and this was followed by the news that AA had negotiated a direct-connect agreement with Priceline.com.
The positions of AA and Sabre have, therefore, been polarised, with AA seeking to come to arrangements to circumvent the GDS for some bookings. The parties to the US litigation agreed to put matters on hold and Sabre agreed to put AA's displays back to normal while the two sides tried to negotiate a new agreement. Each party has the option of going back to court from June 1, 2011 to take the legal action further if appropriate.
The GDSs are concerned that their business model might have a reduced role if AA and other airlines continue to develop a direct-connect initiative. The airline argument is that they want to be able to manage their own content, and to have some degree of control over distribution. Airlines also wish to remove or pass on GDS fees. It seems that there will soon have to be a solution between airlines and the GDSs, or this conflict between the GDSs and airlines' own systems will rumble on.
For travel management companies (TMCs) and their corporate customers the outcome will be of huge significance, given the development of technology and the possibility of new distribution models. Any change to this technology will be accompanied by detailed contracts which should be carefully examined to understand how any new distribution system might work.
CRUMBLING COOKIES
From May 26, 2011, new laws came into force requiring businesses to obtain the consent of visitors to websites to store or retrieve usage information from user's computers or mobile devices by the use of cookies. Before these changes, the website merely had to advise that they used cookies and to give visitors the possibility of opting out.
The new laws will mean that any website operator now needs to check whether any cookies used are strictly necessary and whether or not they require the visitor's consent. If you continue to use cookies, then visitors should be asked to tick a box to give a positive indication that they understand and agree to this.
For those non-technical folk, cookies are text files inside the website which are placed on the hard disks of visitors and are used for collection of information from the visitor, such as browsing habits and remembering card details. The new rules place cookies in line with the regulations relating to electronic direct marketing, which carry the requirements to allow customers to opt-out, to give consent or to use a concept called 'soft opt-in' when sending unsolicited mailings to existing customers.
E-marketing is an important distribution channel for airlines, TMCs and others in the business travel sector. Distribution and marketing by internet and new social media, such as Facebook and Twitter, is rapidly becoming regulated under EC directives and domestic legislation, and those in this marketplace need to keep up with these new rules.
BLURRED DISTINCTIONS
There is currently a consultation underway and a legislative timetable in place regarding changes to the Air Travel Organisers' Licensing (ATOL), scheme, particularly in the context of package holidays, and following High Court and Court of Appeal decisions which blur the distinction between a pre-arranged package and the sale of single components sold separately to the consumer. The government has outlined a series of changes to ATOL that it aims to implement by the end of 2011, and which extends ATOL protection to 'flight plus' holidays, which include a flight and another travel component purchased together.
The purpose of ATOL is to provide consumer protection to those buying packages and flights, enabling refunds or repatriation where a licence holder fails. Throughout the consultation process, scheduled airlines have escaped the net of any obligation to provide financial protection, but it seems that this might change. In May 2011, the transport minister suggested that ATOL protection could be extended to scheduled airlines from 2013 and that the government was considering introducing new laws requiring airlines to offer passengers the same financial protection as offered to package holidaymakers.
The minister also indicated that the government was looking at a wider reform to the ATOL scheme to see whether scheduled airlines could be brought within the scope of these regulations.
This is a significant change to government policy that, until now, has allowed scheduled airlines to operate without financial protection in place covering the consequences of any financial failure. However, if new legislation is needed to extend financial protection into the scheduled airlines' sector, this will involve the full legislative process, including parliamentary debate, possibly in 2013. It also would require a levy to be raised on all scheduled airline passengers as a means of financing the cost of financial protection. The inevitable increase in ticket cost, along with air passenger duty and fuel surcharges are unlikely to be popular with passengers.
For those involved with scheduled air ticketing this is a new arena encompassing all aspects of business travel, and will inevitably involve compliance and changes to ticket marketing and sales if these new regulations are introduced.