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Business travel group attacks personalized airline distribution plan

A representative of the Business Travel Coalition, an organization for corporate travel interests, used the occasion of a congressional hearing on the US Airways-American merger to launch an attack on a new scheme for pricing and selling tickets and related airline services.

Kevin Mitchell, chairman of the BTC, told the House Judiciary Committee’s Subcommittee on Regulatory Reform, Commercial and Antitrust Law that American and US Airways “have agreed on a brazen and shocking new worldwide business model for how to price and sell tickets.” He said the new model “is designed to destroy price transparency, which is the very antidote to consolidation needed to ensure a healthy, transparent market.”

Mitchell’s hyperbolic accusations were aimed at a program developed by the International Air Transport Association, a global airline trade organization, that IATA calls the New Distribution Capability (NDC). It envisions a future system in which airlines would collect personal information from customers, including frequent flyer data, trip purpose, prior purchase history and so on, to formulate customized offers to them.

According to Mitchell, “NDC is designed to terminate, by agreement among major airline competitors, the current transparent model for the pricing of tickets, where fares are published and publicly available for comparison shopping and purchase—by all consumers on a non-discriminatory basis.”

The BTC chairman told the panel that by eliminating US Airways—which he said is “a maverick on airline distribution issues”—the proposed US-AA merger would make it “far easier to coordinate, expressly or tacitly, among three network competitors and far easier to impose this anti-consumer, anti-competitive model, especially given the enormous clout that the new American would have as the biggest carrier on the planet.”

Besides Mitchell’s comments, the hearing—at which representatives of the two airlines defended their plan to combine—was fairly routine for a big airline merger. Congressmen worried about the possibility of fare increases with a smaller number of competitors; but mostly they expressed concern about the merger leading to the elimination of existing hubs or routes—especially in their own districts.

The merger is widely expected to win government approval, since there is little overlap between the two carriers’ route systems.

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