The last of the US Department of Transportation (DoT) rules on global distribution systems end later this year, but their sunset may be bright news for the distributors.

Dismantling two decades of regulation, the bulk of the rules were swept away at the start of this year, but in two key areas the rules will continue to run until the end of July. Those are the prohibition against display biasing and the regulations that bar GDS companies from using their contract power to secure parity in airline participation or to limit access to web-only fares.

The DoT will not give up oversight and retains regulatory power to intervene if it spots anti-competitive practices by airlines or systems. "We intend to monitor developments in the industry during this period and beyond," announced the DoT, suggesting it would monitor practices such as the sale of passenger reservations data (the so-called market intelligence business), and the tying together of GDS and airline deals with corporate accounts. The DoT adds that it retains the power to"re-examine" the deregulation depending on the course of future events.

In announcing the end of the regime, which is still officially dubbed the Computer Reservations Systems rules, DoT said it would pay particular attention to any airline attempts to control a given system. That extends to Orbitz, the powerful online site established by the US majors. "We recognise that Orbitz may enter the GDS business," says the department, and if so, then Orbitz would be subject to an operational review.

Henry Harteveldt, the Forrester Research analyst argues that the big three GDS providers - Sabre, Galileo and Worldspan - have all to gain. "This is frankly the best news that Sabre and its competitors could have got, because it will allow them to become market-based companies," he says. "The airlines will be able to use the GDSs as much as a marketing tool as a distribution tool."

Until recently a GDS was not allowed to negotiate booking fees with individual airlines, and if a carrier still owned a stake in a reservation system, it was required to participate in all the ticket systems to prevent bias. Thom Nulty, former chief executive with travel giant Navigant and now with the Seabury consultancy, predicts that "pay for position" on the display screen, or bias, will creep into the US market.

But the rules do not affect the ranking of preferred airlines that has been widely implemented by corporate accounts and their agencies. In fact, Amadeus executivevice-president commercial David Jones says that bias in effect already exists as travel arrangers apply their so-called "business rules".

CSFB analyst Ben Berensen points out that deregulation has been so clearly "anticipated and pre-empted by recent price shifts" that it is unlikely to impact materially on booking fee revenue in the near term. Paul Keung, an analyst with CIBC World Markets, adds that the elimination of the rules clearly favours the larger airlines and bigger distribution systems such as Sabre, but it is uncertain how the industry will take advantage of deregulation in the long term.

Deregulation of the systems in Canada is under review, and the European Commission's long-running consideration of liberalisation may advance in the next year or two.

Source: Airline Business