Online airfare: A biased best buy?

Do Web sites that sell plane tickets favor some airlines over others? Should we even care?

Topics: Travel,

I couldn’t go to sleep last night because I kept picturing a trio of seminaked, big-bellied sumo wrestlers grappling with each other in a steaming, muddy morass.

That’s what I get for plunging too far into the latest battle in the ongoing online airfare wars.

It started early this month, when Consumer Reports Travel Letter, a respected watchdog publication, stated in its cover story that the four main online air booking sites are guilty of shoddy service. “The Internet is an exciting new tool, but it’s no more likely to garner you the best airfare than a low-tech telephone … Travel sites don’t easily, fairly and thoroughly deliver” the lowest available fares and the full range of flight options, wrote CRTL.

Before reaching these conclusions, the publication compared the performance of the four main online booking sites — Travelocity, Expedia, Lowestfare and Cheap Tickets — with Apollo Galileo, one of the four standard computer reservation systems that virtually all travel agents use to get their flight information and to book their flights.

The editors found the online sites deficient in a number of areas. Each site manifested at least two of four problems: lack of sensible itineraries, reordering of flight information, difficult-to-navigate features and unavailability of flight listings. The comparison also turned up “disturbing evidence” that Web agencies bias their listings toward carriers with which they have special financial relationships, according to CRTL’s editors.

Orbitz — a controversial new online agency that has been created by five airlines — crowed when the Consumer Reports article came out. For good reason: When you’ve been bashed on the head for months, it feels good to watch the club hit somebody else instead. Almost from the moment it was announced in November, Orbitz has been fighting allegations that it will lead to anti-competitiveness in the airfare marketplace. Critics suggest that a site owned by five airlines — United, Northwest, Delta, Continental and American — is not going to be able to resist the temptation to offer special fares that other agencies, online or offline, will not have access to; in a highly competitive environment, competitors and consumer advocates worry, Orbitz will naturally resort to behind-the-scenes, behind-the-screens deals and fares.

Not so, Orbitz says. In an interview last week, Carol Jouzaitis, the company’s vice president of corporate communications, and Cornish Hitchcock, a lawyer and longtime consumer advocate whom the company has hired to build a consumer advisory panel, flatly rejected the notion that Orbitz will be anti-competitive. In addition to the five owner airlines, or “equity partners,” Orbitz has signed up some 30 airlines as “charter associates” — meaning their fares will be displayed and sold on the Orbitz site, and that they promise to give Orbitz access to their lowest public fares. In return, the company has gone out of its way to legally guarantee neutrality in its listings. “We turned all our contractual materials over to the Justice Department because we knew we had nothing to hide,” Jouzaitis said. “We’re the only travel Web site that has contracts with airlines that say we must be unbiased. We must display information in a neutral manner; we’re contractually bound to do so.”

It’s the Expedias and Travelocitys of the world that need to worry about bias, the Orbitz spokespeople say, brandishing the Consumer Reports article. “There are 275 or so Web sites out there now. And Travelocity and Expedia are No. 1 and No. 2. Travelocity has six of the eight major portals. And our research shows that through those portal arrangements, Travelocity is actually reaching 85 percent of Internet households on an unduplicated basis. That’s a lot of eyeballs. So what are most first-time users seeing? Travelocity! And they say we’re the ones who are going to be anti-competitive and lock up market share?”

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And that’s why I keep seeing sumo wrestlers slogging it out in the mud. And then I wonder, do I really want to get this dirty? Because even if the allegations of bias are true, savvy Web users should be able to avoid falling for the anti-competitive ploys of any one Web site. That, ultimately, is what the Web is really good for.

To understand the whole morass, you have to understand the history of air ticket bookings — specifically, the evolution of the computer reservation systems, or CRSs. The CRSs began in the 1960s when airlines realized they needed distribution systems for their flight routes and tickets. Four main CRSs were created — WorldSpan, with principal participation by Northwest, Delta and TWA; Apollo by United; SystemOne by Continental (later subsumed into Amadeus, which is owned by Lufthansa, Air France and Iberia Airlines); and Sabre by American. These airlines signed up other airlines to use their systems, and the other airlines paid a service fee. Naturally, as time went by, the CRSs began to tilt in favor of their parent airlines; if you were looking for competitive fares on Sabre, for example, American Airlines flights would tend to appear at the top of the list, and since travel agents were busy and didn’t want to scroll through numerous screens or down long lists, often those top-listed flights were the ones that got booked.

In the 1980s, the Department of Transportation stepped in to regulate the CRSs, saying that they couldn’t bias the listings by carrier. Of course, there are other, more subtle ways to bias the listings — by type of aircraft, for example, or by connection airport — and there are ways for CRSs to give travel agents incentive to work with their particular brand, but by and large, the CRSs cleaned up their acts. With all the airlines watchdogging one another, the system seemed to be working relatively well.

Still, the fundamental truth didn’t change: There were two ways to buy an airline ticket — directly from an airline or through one of the CRSs. And over time, the Big Four CRSs themselves developed into a kind of oligopoly, cooperating to charge airlines more and more for their services. A 1996 report by the U.S. Department of Justice stated that “the booking fees that CRSs charge are widely believed to be at supra-competitive levels and appear to have little relation to costs. While the costs of computing power have dropped dramatically over the last decade, the price of CRS services has risen substantially. Indeed, the price has now risen to the point that even airlines that own CRSs have publicly complained about the level of the fees.”

Orbitz executives fulminate against this situation, saying in essence that the CRSs are holding airlines, agents and consumers hostage, and vowing that eventually the company will circumvent these charges by working directly with the airlines; there’s a kind of “liberation at midnight” passion to these claims.

But this is where it starts to get really tedious.

Basically, there seem to be two main questions being bashed around in that mud pit. One is, Are the online sites biased? For example, do Travelocity’s flight listings favor airlines that advertise on its site (as the Consumer Reports article claims)?

The other is, Will Orbitz be unfair in some way? Will its arrival on the scene give travel agents online and offline even less accessibility to low fares than before? Will it fundamentally upset the integrity of airfare competition?

This second issue is all conjecture now and will be until Orbitz actually launches its full-service site, scheduled to officially begin operating June 1. (A beta launch is scheduled for February.)

As to the other question, about their bias, both Expedia and Travelocity say, “No, no, no!”

Here’s Suzi LeVine, marketing director for Expedia: “We like that Consumer Reports pointed out that consumers have different preferences — price, time, duration, carrier … But Consumer Reports didn’t say that differences in CRSs will produce different results. For example, we did an identical search on WorldSpan, Sabre and Apollo and we got different results … Each CRS has developed different algorithms to answer the question … The differences Consumer Reports found basically reflected differences between Apollo, which they used, and WorldSpan, which Expedia uses.

After the Consumer Reports article appeared, Travelocity said in an official statement: “As an online travel agent, Travelocity.com has a system access agreement with Sabre, its CRS. Travelocity.com republishes the data it receives from Sabre in a manner that is easily understood by and accessible to its base of 22 million members. Travelocity.com does not use carrier identity or any form of bias in republishing those displays.”

When it comes to the anti-competition threats posed by Orbitz, Travelocity and Expedia seem to be hurling from the same side of the pit, but when it comes to the larger implications of the bias issue, they start slogging at each other.

“Reordering flight information to preference certain airlines is bad for consumers, and it hurts our reputation as an industry if there is a perception of bias,” Travelocity president and chief executive officer Terrell Jones says.

Richard Barton, president and CEO of Expedia, says, “The inspiration for [regulating CRSs] was that the airlines owned the CRSs. We run a retail business. Should a government body decide where Wal-Mart should place Chee-tos on the shelf?”

And this is what I say: Who cares? OK, it’s a serious issue. If a booking site is masquerading as an unbiased, absolutely neutral fare-finding service and in fact is loading the algorithms so that a money-paying partner is getting preferential treatment, that’s not fair and it should be regulated and stopped.

But in terms of what the consumer gets, it doesn’t really matter. Any smart consumer knows better than to trust one site, anyway. A recent survey by Gomez found that more than 60 percent of vacation travelers visited at least two sites before booking their travel itineraries, and nearly 45 percent visited four or more sites.

So the alarms that we hear are a good example of applying 20th century thinking to a 21st century situation. In the 1980s, when the CRSs were regulated, consumers relied on travel agents to research and purchase their tickets. Today, more and more consumers — an estimated 52 million American travelers, according to a recent report in USA Today — use the Internet to research their trips.

If they’re smart and thorough, they check out Travelocity and Expedia, and they check out the airlines’ own Web sites and consolidator sites and newspaper ads — and next summer, they’ll check out Orbitz too. (Actually, they can check out right now a beta version of the software Orbitz will be using; it’s at ITAsoftware, and I found it excellent in some quick surfing over the past few days.) And as more and more sites come online in the months to come — Hotwire, Qixo and FareChase are three more recent entries to try — they will have even more opportunities to find the ticket that suits them best.

So who really cares about bias? The Consumer Reports article flashes a big red neon sign that says caveat emptor — but it seems to me that the emptor is already caveating. In an ironic way, the very unreliabilities of the Internet are leading us all to become more savvy consumers. Isn’t that what progress is all about?

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Now it’s your turn: Do you agree that the bias issue is basically much ado about nothing? Do you think Orbitz will undermine the whole air travel industry? Tell me what you think.

Don George is the editor of Salon Travel.

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