By Jerome Greer Chandler
As the European Commission considers deregulation of the continent's Computer Reservations Systems (CRSs) - reshaping the way airline tickets are sold to a considerable slice of the planet's population - consider the differences between the European structure, and that of the United States. The former is regimented, perhaps even over-regulated. The latter deregulated and free-flowing.
What they both have in common, however, is the primacy of consumer protection.
In the US, rules governing the CRS industry went away in 2004, rendering a truly deregulated marketplace. But before that happened, airlines that once owned CRSs such as Sabre, Galileo, and Worldspan had to divest themselves of the last vestiges of those firms - irrevocably severing the ties that bind.
The result was a free market, but a free market devoid of the kind of free-for-all, consumer-crunching excesses so often associated with the term. Now, US airlines are free to strike deals with whomsoever they please. And pacts are in place among CRSs and the major carriers - giving those systems access to a full range of flight and fare information over the next five years. The quid pro quo? Steep discounts in the booking fees the CRSs charge the carriers.
Early on, it appears as if the newly-deregulated environment works in the United States - to the benefit of CRSs, carriers, and, most importantly, consumers.
Now, it is Europe's turn. Regulators have twice changed the EC's CRS Code of Conduct - a rulebook that has governed the European travel distribution environment for the past 18 years. Now, the Commission is poised to re-write that book, essentially deregulating the continent's travel distribution industry.
There's nothing wrong with that. To the contrary, it's admirable - as long as those making the decisions keep in mind that deregulation is a tool, not an end unto itself.
The twin pillars upon which EU CRS rules rest today are mandatory participation and non-biased display of flight and fare information to travel agencies and corporate travel managers.
Here's why those rules are important. Albeit indirectly, Lufthansa, Air France, and Iberia still own a considerable stake in Amadeus, the powerful European-based CRS. But the Code of Conduct mandates that those carriers must provide the same flight and fare information - at the same time and in an unbiased fashion - to competing CRSs. That means Sabre, Galileo and Worldspan get the same data, with the same degree of diligence as does Amadeus.
That way, competing CRSs are not effectively shut out of markets such as Germany, where Lufthansa owns a share of Amadeus. The playing field is level, the rules fair.
The same principle applies to prohibiting bias in display of fares and flights. Distribution systems win and so do consumers. Corporate travel managers and travel agents who want to find information or book a flight can do it quickly and efficiently. They don't have to surf a dozen Web sites to find the lowest fare or the best flight.
There's a sane, time-tested structure that gives them shelter from the worst excesses of an un-fettered marketplace, the kind of marketplace that existed, at least for a while, in the United States during its initial experience with the commerce of unbridled ticket distribution. That experience was both revealing and troubling. It led to regulation designed to protect consumers. Only after the airlines removed themselves from the ownership equation could regulation reasonably cease.
As things stand in Europe, the CRS Code of Conduct compels CRSs to aggregate information factually and efficiently on one screen. Data can neither be severed nor skewed. Everyone has the same information. That forces airlines to compete on the basis of price - not technical advantage, or ownership of a computer reservations system.
These two rules: mandatory participation and fair display are critical. They should be the sine qua non of the Commission's ultimate calculus. Eliminate them - absent European airline divestiture in Amadeus - and the game is fundamentally changed. Consumers lose.
This does not mean some rules, some regulations aren't ripe for the regulators' axe.
The EC's CRS Code of Conduct could be shrunk considerably, without constricting competition. Currently, there isn't a lot of pricing freedom in the EU. There's room for far more. The rules dealing with this need to be addressed - to the mutual advantage of airlines, CRSs and consumers alike.
CRS deregulation per se makes considerable sense. It's worked in the United States; it can work in Europe. What's important is to remember the reason for deregulation - to foster a marketplace that is at once fluid and fair, dynamic and non-discriminatory.
It's essential that airlines either give up their stake in CRSs, or continue to be constrained in the way they exercise that ownership stake.
While the EUs CRS Code of Conduct may be complex, the aim, the ultimate goal, is not. It is to render a process which produces the greatest good for the greatest number of people - in this instance the traveling public, corporate and leisure. Excess regulation is absolutely out of date in AD 2007.
But, fundamental concepts of fairness never will be.