Airline reservations set to stay under regulator’s grip

By Anna McLauchlin

Date: 09/02/06

The European Commission is backing away from total deregulation of airline booking systems after protests from rivals of the dominant market player.

The Commission floated the idea of scrapping the existing rules as part of its drive to cut red tape for businesses.

But officials following the dossier admit that proposals for simplification are now more likely than deregulation.

Computerised Reservation Systems (CRS) are the automated 'travel agents' used to search for fares and timetables on a computer. A travel agent searching for flights uses CRS to pull up details of the best available fares.

An EU Code of Conduct forces all airlines to distribute all their information fairly between the four biggest competing CRS operators: Europe's Amadeus, and US- based Galileo, Sabre and Worldspan.

In October, EU Enterprise Commissioner Günter Verheugen included the code in his list of EU legislation to be scrapped or simplified. A proposal to repeal the code was then prepared by the Commission's transport and energy department (DG Tren) in December.

But officials admit that preliminary discussions have uncovered deep divisions.

DG Tren has called a consultation meeting with other Commission departments next Tuesday (14 February) to decide how to proceed.

The travel industry has been lobbying Verheugen's enterprise department to object to deregulation. European airlines are also divided. The Spanish airline Iberia, Germany's Lufthansa and Air France together have a near 50% stake in Amadeus, which is the dominant CRS operator in Europe. Its competitors argue that scrapping the code of conduct would harm competition because the best fares for Lufthansa, Air France and Iberia would be found only by using Amadeus.

Marius Nasta, vice-president for Europe of travel service Cendant, which employs 7,000 people in its European travel distribution business, said changes had already been seen.

"We began to notice already last year that companies started to delay certain information flow to other CRS systems," he said. "I'm sure a lot of the problems were caused by the noise of the repeal, with companies anticipating that they will ultimately have a free rein."

Italian Liberal MEP Paolo Costa, chairman of the Parliament's transport committee, has written a letter to the Commission on behalf of his colleagues, asking for a deeper assessment of the Commission's assertion that the risk of market abuse no longer applies.

He wrote: "Checks should be made that the CRS market can now regulate itself without limited market failure...under the sole application of general competition rules without adversely affecting airline competition and purchase terms for consumers."

The Commission's transport spokesman said that the Code of Conduct needed to be modernised to take account of internet developments and insisted that "all options still remain open at this point".

The European Commission is reported to be reconsidering plans to deregulate airline booking systems. The proposals were put forward as part of the Commission's drive to cut business red tape but have run up against opposition from rivals of Amadeus, the dominant Computerised Reservation Systems operator in Europe.