Report: Transportation Department probing whether airlines discriminate against online travel services
October 20, 1998
Web posted at: 12:04 p.m. EDT (1204 GMT)
(CNN) -- The U.S. Transportation Department is investigating whether airlines are discriminating against online travel services, the Wall Street Journal reported Tuesday.
Online companies complain that they get lower commissions than traditional travel agents. The Transportation Department also is looking into claims that online companies aren't allowed to offer the same services as traditional travel agents.
The airlines argue that online companies don't qualify as travel agents and should not get equal benefits.
"Our commitment was to the travel-agent community," a Southwest Airlines spokesman told the paper. He added that online services are "not a traditional travel-agent product, and quite frankly, we have a competing product."
The Internet travel companies' biggest complaint is about the commission structure used by the airlines. Commissions paid to travel agents have been falling for years as the airlines try to cut costs. The large airlines began paying travel agents 8 percent commissions, with a cap of $50, last year. For online travel services, the rate is often 5 percent with a $10 cap.
"It's very disconcerting. How can we compete?" said Richard Barton, general manager of Microsoft's Expedia travel service.
Airlines: Lower costs equal lower commissions
The airlines argue that online services have lower costs than traditional travel agents.
Online travel companies also say the airlines are trying to harm services that compete against their own Web sites and that they cut costs unfairly at the online firms' expense.
In addition, the Air Transport Association, the industry group representing airlines, has proposed that Internet travel companies track customers with an identifier number and give the information to airlines on request. The online companies fear that information could be used to take away their customers, the Journal reported.
Major online travel companies include Expedia, Internet Travel Network (which powers CNN Interactive's Reservation Desk system), Preview Travel and Travelocity.
Although the Transportation Department generally stays out of travel-agent commission concerns, it has long had rules that require equal treatment and fair displays on reservation systems, many of which are owned in part by airlines. A department spokesman said it is investigating the concerns of online travel services as part of a larger review of federal policies that govern computer-reservation systems.