Study: U.S. Consumers Face Additional $6.7 Billion In Costs Due To Loss Of Airfare Transparency
TravelTech on May 19, 2015
Economic study authored by former DOJ official and current Yale professor outlines the value of independent distribution and reveals the impact of restrictions to airfare transparency
WASHINGTON, D.C. – An economic impact study released today by the Travel Technology Association (Travel Tech) and a coalition of travel industry stakeholders outlines the value of independent distribution and the price American consumers could pay because of restrictions being placed on airfare information transparency by some airlines.
Benefits of Preserving Consumers’ Ability to Compare Airline Fares was authored by Dr. Fiona Scott Morton, a former Deputy Assistant Attorney General for Economic Analysis for the Antitrust Division at the U.S. Department of Justice and current Professor of Economics at the Yale University School of Management.
Preserving the competitive benefits of consumers’ ability to access comparative and transparent information on prices and schedules of major U.S. airlines is more important than ever,” writes Professor Scott Morton in her study. “At a time when independent, transparent comparison shopping is most needed, some airlines are attempting to restrict access to their fare and schedule information, reduce the ability of consumers to easily compare prices, and drive travelers to their own websites, which do not offer price comparisons with other airlines.”
The study examines the value that online travel agencies (OTAs) and metasearch sites bring to the travel marketplace. These independent distribution leaders make it possible for consumers to search, compare and book travel easily and efficiently. Most importantly, by enabling consumers to easily comparison shop for flights, these sites encourage airlines to compete to offer the best prices for the traveling public.
The study also takes an in-depth look at the impact of efforts by some major airlines to selectively restrict access to airfare and schedule information through the independent distribution channel. Specific findings in the new report include:
TICKET PRICE INCREASES: Airline restrictions on access to flight information would result in ticket prices rising by more than 11 percent for leisure and unmanaged business travelers, equivalent to $30 more on average per ticket or an increase of about $120 for a family of four making a trip.
HIGH COST OF LACK OF TRANSPARENCY: The lack of access to transparent, comparable airfare information would be costly: 223 million American leisure and unmanaged business travelers would pay $6.7 billion more in airfares, and it may result in up to 41 million passengers annually choosing not to fly because of higher ticket prices.
REDUCED COMPETITION: Airlines want consumers to book directly through their own websites and forgo comparison-shopping rather than comparing their airfares more competitively and freely against other providers.
HIGHER BARRIER TO NEW AND SMALLER AIRLINES: Comparison-shopping allows smaller airlines and new entrants to compete on a level playing field. Offering low prices can attract consumer attention and sales even when consumers would otherwise have a hard time finding the smaller airline.
We strongly believe in transparency and that consumers should have the choice to comparison shop for travel because it saves them time and money,” says Stephen Kaufer, president and CEO of TripAdvisor. “However, airlines are now restricting the availability of fare and schedule information, which will lead to higher costs, hitting travelers in the wallet in the long term. We hope the DOT will consider the serious implications of this study and take swift and appropriate action on behalf of American consumers.”
The lack of access to transparent, comparable airfare and schedule information would be a lose-lose outcome for everyone as consumers will see higher costs, airlines would lose $11.1 billion in revenue from travelers who choose not to fly, and the entire air travel market would suffer a $600 million loss due to new market inefficiency.
Millions of travelers use price comparison tools each month to easily find the best flights and to understand the true cost of flying,” said Chris Loughlin, CEO of Travelzoo. “The airlines’ moves to restrict their fares from price comparison sites is an attempt to roll back the clock to a far more aggravating time, when the marketplace was less transparent and when searching for fares required visiting each travel site. When airlines succeed in restricting fares, consumers end up spending not only more money but also valuable time.”
The report notes that restrictions by airlines of broad access to airline price and schedule information substantially reduce consumer welfare and are likely to lead to higher average airfares, increase consumers’ search costs, make entry into city-pair routes by smaller airlines more difficult and reduce transparency.
Millions of travelers use online travel search sites because they value the ability to easily compare flight options across multiple airlines in one place,” said Steve Shur, President of Travel Tech. “When airlines selectively restrict information that allows travelers to search for flights, everyone who travels faces higher airfares, fewer choices and more time wasted jumping between airline websites looking for the right flight at the best price.
We urge the U.S. Department of Transportation (DOT) to review this study and consider actions that protect the traveling public. At a time when only four airlines control 80 percent of domestic air travel, it’s imperative that the DOT evaluate this practice of preventing the onward distribution of fare and schedule data in order to safeguard consumer access to information,” concluded Shur.
The full study and other materials can be accessed here.
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