Attention All Passengers by William J. McGee Page B

between 1993 and 1999. Then the Transportation Research Board convened a panel of experts—including Alfred Kahn, the Father of Deregulation—to examine this phenomenon and concluded four major airlines were still engaging in practices to drive out new competitors. 3 The research board also defined “predatory pricing” as actions designed to drive out or suppress competition with the intention of later increasing prices. 4
    Back in 1983, Time trumpeted “Dirty Tricks in Dallas,” detailing the Justice Department’s federal suit against American Airlines and a taped conversation in which CEO Bob Crandall spoke to Braniff CEO Howard Putnam about both carriers raising fares. Other allegations, according to Time, included American pilots causing delays on runways to disrupt Braniff flights and American taking its time delivering $9 million for interline ticket agreements. The Harvard case study also cited ticket agents encouraging customers to fly American instead of Braniff and fabricating technical problems with American’s aircraft so Braniff made costly plans by scheduling additional flights to accommodate passengers who never showed.
    Another weapon in the majors’ arsenal is their grandfathered right to operate at overcrowded, high-density airports where they charge higher fares, such as LaGuardia, JFK, O’Hare, and Washington National. Because major airlines control most of the takeoff and landing slots, they can use these rights to their advantage, even swapping them among one another, as Delta and US Airways did in 2011.
    The Dirty Secret of Airfares: Bias
    In the 1980s the computer reservations system Sabre, sister company to American Airlines, was accused of blatantly biasing screens for travel agents so American’s competitors were listed below it. (An earlier study by American found that travel agents overwhelmingly booked the first carrier listed and rarely shopped on a second screen, a practice that still holds today among consumers surfing travel sites.) Former CEO Crandall tried to defend such practices before Congress by saying, “The preferential display of our flights, and the corresponding increase in our market share, is the competitive raison d’être for having created the system in the first place.” But not surprisingly, biased displays were banned.
    Even so, airlines have found other ways to game the system. One method seems to be with third-party travel sites, so that biased displays were carried over from reservations systems to travel sites. Shortly after I became editor of Consumer Reports Travel Letter in 2000, I decided to test such rumors by repetitively searching for identical fares on competing sites in real time, and benchmarking the fares through analyst Bob Harrell, who had access to Sabre and could simultaneously retrieve computer reservations data. Our first test, in October 2000, examined Cheap Tickets, Expedia, Lowestfare, and Travelocity and found “disturbing evidence of bias,” including advertised airlines dominating flight listings and bogus itineraries listed first. In June 2002 we tested again—this time with six sites, including Orbitz—and confirmed they all received some compensation from airlines. But then and now, it’s difficult to know how such payments affect displays.
    Starting in 1995, airlines began cutting base commissions to travel agencies, from 10 percent down to 0 percent. However, many airlines continue to pay TACOs, travel agency commission overrides. These secret agreements can be tied to an agency’s total booking volume for an airline, an increase in such volume, or even its volume in conjunction with a rival airline’s volume. The danger to consumers, as the Oster-Strong report stated, is that overrides are often not revealed to them, so travel agents have an incentive to withhold information on competing flights. 5 Both the General Accounting Office and the DOT’s