UFTAA calls for action over PSAA

Universal Federation of Travel Agents’ Associations (UFTAA) chief executive Birger Bäckman has written the following letter to ‘Competition Authorities Worldwide’ regarding the outcome of the recent IATA Passenger Agency Conference, Miami.

For background information, see our previous stories:
09 Jul 2002: IATA in big trouble Down Under
09 Jul 2002 The TravelMole Interview: Bruce Bishins, Genesis TDS
02 Jul 2002 IATA row threatens industry status-quo

TO: Competition Authorities Worldwide

Unsolicited submission and request for action

An unhealthy relationship between airlines and their agents
The impact on the consumer

We would like to draw your attention to the outcome of the recent IATA Passenger Agency Conference held in Miami, 25-28 June 2002.

The relationship between airlines and travel agents dates back over 50 years and has been established through the IATA Conference Procedures which enjoy the benefit of global anti-trust immunity.

Over the years only minor changes have been made to the basic Passenger Sales Agency Agreement – the last some 20 years ago.

In the new free market environment a need for modernisation has long been recognised and desired, but the IATA Conference rule requiring a unanimous vote on all proposals has effectively enabled destruction of any positive development.

Finally the Passenger Agency Conference formed a task force under a leading distribution specialist, Prof. Frank Go from Erasmus University in Rotterdam, to conduct an in-depth study of the Passenger Program and the global aviation distribution system. The work was finalised and the Passenger Agency Conference in June 2000 agreed to the principles formulated by the task force, and to which both airlines and agents had contributed.

Since then, a Global Consultative Council (GCC) consisting of 8 airline and 8 travel agency representatives under a neutral chairman has worked on the formulation of a new Passenger Sales Agency Agreement. The Group made a sincere effort to carefully draft a new agreement reflecting the principles of equity and fairness, transparency in dealings between business partners, and meaningful consultation between airlines and travel agents.

The package presented by the GCC to the IATA 2002 Passenger Agency Conference included many compromises, made on both sides, and was the fruit of honestly negotiated exchanges between trusting partners. It was thus not lightly arrived at by the GCC. Above all, the package incorporated the basic principles recommended for inclusion by the Task Force, and which were agreed by the Conference two years earlier in 2000.

At a meeting in April 2002 the Global Consultative Council agreed to submit its proposal to the Passenger Agency Conference. The proposal contained, in addition to a new Passenger Sales Agency Agreement, a mediation process for the resolution of disputes, an enhanced role for the Travel Agency Commissioner and some other relevant updates of Passenger Agency Program Resolutions.

The Conference held in Miami from 25 to 28 June 2002, did not accept the joint GCC proposal but rather made several suggested changes, which would have had a more negative effect than the maintenance of the status quo under the present agreement. The Agency representatives could not accept the changes to the draft agreement, particularly as those changes were understood to come from a small minority of large carriers, who for selfish competitive reasons it would appear wish to destabilise the IATA distribution system.

The outdated anti-trust immunity enjoyed by the Conference requires a unanimity vote, which makes it almost impossible to obtain material change to the Passenger Program. The anti-trust immunity was granted at a time when competitive issues were discussed at the Conference. However, over the years the market has changed and there are very few items in the Resolutions which would have a negative impact on consumers.

The anti-trust immunity enjoyed by IATA is already under review by authorities in the European Commission and Australia (ACCC). In the United States the matter is under scrutiny by the Department of Transport (DOT). In its preliminary findings the ACCC has clearly indicated reluctance to allow an unconditional renewal. Delegates from the ACCC attended the Passenger Agency Conference in Miami. Also in Europe hope was placed in an industry solution rather than regulatory, but now the matter will obviously be passed to the Commission in terms of an official complaint.

In a face saving action the Passenger Agency Conference was recessed, which, according to IATA rules can be done for a “short period” only.

We are calling upon Competition Authorities to investigate the airline behaviour in your jurisdiction and immediately implement a review of IATA’s immunity to your anti trust legislation.

Whilst on the surface this may look like a conflict between airlines and travel agents, the background reasons are much more profound and we do not believe are in the best interests of consumers.

It is becoming clear that a few mega carriers – mainly from the USA but also some others – are attempting to destabilise the distribution system for competitive reasons.

The IATA Distribution network through its over 61,000 travel agents, offers a unique channel for all IATA member airlines to offer their product to the travelling consumer. Likewise the large distribution network can sell any of the member airlines tickets anywhere in the world through the use of a single system both for ticketing and payment. This is of great benefit to consumers. In addition, most travel agents are financially bonded, thus protecting the consumer in case of a failure while airlines do not have similar consumer protection. Recent airline bankruptcies have left consumers stranded and sustaining financial loss, and travel agents suffering similar financial loss.
The mega carrier attempt to break down the distribution system will also severely hamper smaller and middle size airlines, which for their worldwide distribution will have to liase with some of the large alliances in order to have market coverage. In this situation, small airlines will lose their freedom to negotiate with the distribution network and become dependent on mega carrier strategies. This tendency is already in evidence and consumers are losing competitive choice on many routes and we see increased prices over monopolistic or oligopolistic networks.

The mega carrier agenda will also drive travel agencies to consolidate resulting in less competition in individual national markets.

Anti-trust immunity in the form enjoyed by IATA today is an anachronism and does not serve the travelling public.

UFTAA is not advocating a total dismantling of the Passenger Program, as there are several elements, which are positive for the end user – the travelling public. However the anti-trust framework under which IATA operates has to be narrowed and changed to allow for input in the decision making process from travel agency representatives, and for joint management of the program by travel agents and airlines.

The unanimity rule should also be amended to that which applies to other IATA conferences, e.g. a two third majority rule, and with a possibility for an absent member to cast a mail vote on certain items if necessary.

For further information on present anti-trust reviews kindly contact:
Australia Competition and Consumer Commission, www.accc.gov.au or European Commission
Direction Générale de la Concurrence, europa.int/comm/dgs/competition

For any further information on the subject do not hesitate to get in touch with the UFTAA Secretariat. UFTAA represents travel agency associations in 98 countries worldwide and work in close co-operation with regional associations on all continents. UFTAA has a long standing (since 1966) working relationship with IATA and it is with great regret we see some of IATA’s mega-members attempt to destroy a basically good system for their own selfish benefit and to the detriment of the consumer.

We encourage an open and transparent dialogue in the interest of the travelling public.

Yours sincerely,

Birger Bäckman, CEO
Tel: +377 92 05 28 29
Fax: +377 92 05 29 87
e-mail: [email protected]
website: www.uftaa.com