Competition in the Airline Computerized Reservation System Industry

T-RCED-88-62: Published: Sep 14, 1988. Publicly Released: Sep 14, 1988.

Additional Materials:

Contact:

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

GAO discussed the Department of Transportation's (DOT) recent report on the potential anticompetitive effects of airline-owned computerized reservation systems. GAO found that: (1) airline deregulation increased the importance of such systems by making it easier for travel agents to find the service best suited to passenger needs; (2) the market share of each system varied from city to city, depending on the location of vendor-airline hubs; (3) vendors received booking fees from airlines for each flight segment and subscription fees from travel agents, while travel agents charged the airlines a commission for each flight booked; (4) vendor airlines could sell more tickets and earn substantial incremental revenues; and (5) most vendors adopted minimum-use and liquidated-damage clauses in their system contracts due to federal regulatory provisions that limited contract terms and barred vendors from prohibiting use of another vendor's system. GAO also found that: (1) airlines continued to generate substantial incremental revenues even after implementation of the federal rules; (2) while the booking fees of the major systems were double their costs, travel agent subscriptions totaled 66 to 85 percent of system costs; (3) booking fees which exceed costs, and incremental revenues cause revenue transfers which give the vendor airlines an artificial competitive advantage, limit competition, and contribute to high profit rates; and (4) some contract provisions discourage travel agents from switching vendors, reduce competition, and perpetuate revenue transfers. GAO believes that DOT needs to: (1) ensure that the anticompetitive effects of airline system ownership do not nullify airline deregulation benefits; and (2) review airline divestiture of systems, establishment of an industry-wide consortium to operate a common system, restrictions on booking fees, and changes in vendor contracts as remedies for the anticompetitive features of the system industry.

Nov 13, 2018

Sep 27, 2018

Aug 2, 2018

Jun 13, 2018

May 24, 2018

May 23, 2018

May 22, 2018

Mar 14, 2018

Jan 30, 2018

Looking for more? Browse all our products here