Skyscanner Comments to the Commission s Evaluation Roadmap regarding the Code of Conduct for Computer Reservation Systems ( CRS )
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1 Skyscanner Comments to the Commission s Evaluation Roadmap regarding the Code of Conduct for Computer Reservation Systems ( CRS ) Skyscanner is a leading global travel search platform, where users can plan and book direct from millions of travel options at competitive prices through our website and apps. We have 60 million unique monthly visitors to our website every month to search a range of flight, hotel and car hire options. Our free mobile app has been downloaded over 50 million times and our products are available in over 30 languages and 70 currencies. We are not a travel agent and we do not sell any travel products or services to users. We operate our websites and mobile applications to allow users to compare the prices offered by airlines and OTAs in one place. When a user wishes to book a flight, we direct that user to the relevant website of the airline or OTA to allow them to make a booking directly. Founded in 2003, we employ over 800 staff, with offices in Barcelona, Beijing, Budapest, Edinburgh, Glasgow, London, Miami, Shenzhen, Singapore and Sofia. Skyscanner is now part of the Ctrip group. The Code of Conduct for Computerised Reservation Systems Regulation EC 80/2009 (the Regulation ) sought to address a changed market, whereby Computerised Reservation Systems ( CRS ) had been sold off from airlines and had begun operating as individual companies. The issue that the Regulation sought to address was to prevent system vendors that control CRS from enforcing unnecessary requirements on airlines which relied on CRS to sell tickets. This was successful, for a time, in promoting competition and enhancing transparency in the aviation industry together with other sector specific measures regulating fair competition and visibility for the benefit of consumers. Skyscanner welcomes the opportunity to comment on the Roadmap for the Evaluation of the Regulation (the Roadmap ). We encourage the Commission to consider our comments on the effectiveness of the Regulation in achieving its objectives, the impact on metasearch operators and the effect on consumer choice. We highlight in particular the significant technological advances since the Regulation came into force such as changes in mobile network connectivity, smartphone technology/ ubiquity and applications that have changed the airline ticket distribution market and allowed vastly greater consumer choice and ease of comparison. This has led to a dramatic change in consumer behaviour, signalling a
2 strong move towards the use of metasearch engines like Skyscanner to search for flights that can be booked with online travel agencies ( OTA ) as well as directly with airlines. Echoing this change, the European Consumer Travel Report, even in 2013, found that, Well over a third of online travel shoppers in all markets already use metasearch sites to compare flights, hotels and other travel products. 1 The aim of this response is to set out the areas where from the perspective of Skyscanner (and we assume other metasearch engine stakeholders) the Regulation could be amended to better achieve its aims. Relevance and Efficiency of the Regulation Changes in the way that airlines tickets are sold and distributed since the Regulation first came into force. Skyscanner welcomes the progress the Commission has made in pursuit of its aims of ensuring fair and unbiased conditions for air carriers in a CRS to protect the interests of consumers. However, there remain shortcomings as the existing Regulation does not account for new avenues of airline ticket distribution, which has fostered anti-competitive behaviour. Changing market conditions and practice means there is no longer a simple relationship between air carriers and retail outlets. The internet and e- commerce has introduced new stakeholders to the market and it has allowed airlines to attract bookings directly from passengers and travel agents via their own Passenger Service Systems ( PSS ), while also allowing metasearch engines like Skyscanner to aggregate information from PSS and CRS and provide simple comparison between airline tickets. A PSS is the internal inventory system of the airline, which also allows customers to place orders for tickets. Broadly speaking, CRS can be distinguished from PSS in that CRS act as the broker between the internal system of the air carrier and retail (or search) outlets, be they physical travel agents or online metasearch platforms. Most metasearch engines were launched in the mid-2000s but have gained a significant share of the market for comparing airline tickets in recent years. This is 1 European Consumer Travel Report Fourth Edition (2013) at page 5
3 evidenced by the volume of visitors we have on our website as referenced above. Metasearch engines aggregate flight information from a multitude of sources, including both from CRS, and directly from airline PSS, providing consumers with clear comparisons of prices and other information. Metasearch sites rely heavily on the flow of information from CRS as well as air carrier PSS, and makes them extremely vulnerable to restrictions of data flows. Comprehensive Information To best serve consumers, metasearch engines need access to comprehensive information, including from airlines. While this information is publicly available, metasearch sites such as Skyscanner are sometimes required to accept certain conditions in exchange for this flight information. These conditions can for instance include a limit on a metasearch engine s ability to display flight information from other third-party providers such as OTAs (who are often cheaper) which has an overall detrimental impact on consumer choice and value. Further, metasearch and CRS are not currently able to show the level of detail required to match the complex products now offered directly by airlines, for example seat, baggage, meal costs and other ancillary fees. This is because some airlines have made the decision not to provide certain additional information to third parties and instead keep this for use exclusively on their own websites. This has the effect of distorting the market by allowing airlines to leverage their advantage and discriminate against airline ticket distribution stakeholders such as OTAs and metasearch engines. A requirement for more comprehensive information from airlines would increase consumer choice and fair competition in air ticket distribution. This would be achieved by allowing consumers to make informed choices through like for like comparisons not only based on ticket price but additional factors such as baggage allowance, seat reservation etc. Skyscanner is committed to transparency and seeks reciprocity on ensuring there are no unfair conditions in airline ticket distribution. Whilst air carriers, system vendors and others have requirements to fulfil ticket distribution, there should be reciprocity on the part of air carriers and their PSS to provide the same care and access to flight information, free of unfair or unjustified conditions.
4 Issues Requiring Further Attention Scope of the Regulation The scope of the Regulation is no longer broad enough to address the modern way airline tickets are distributed. This fact has resulted in anti-competitive and discriminatory practices. In this respect, the Regulations are no longer fit for purpose and should be amended to include all stakeholders in airline ticket distribution channels. Airline PSS are not covered within the scope of the Regulation. Technological advances have allowed airlines to distribute tickets without using the CRS (as defined in the Regulation) and instead using their own PSS. This gap has enabled air carriers to act in a manner that is anti-competitive in relation to air ticket distribution and has resulted in airlines offering discounts for bookings made via their PSS. This is a restriction on competition and allows PSS operators to take advantage of a dominant position. An example of such discriminatory and anticompetitive behaviour is the Distribution Cost Charge introduced by the Lufthansa Group in This charge is not applied to flight tickets purchased using Lufthansa s PSS channel or via its selected ticket distributors. As this charge is not applied evenly to all stakeholders it has the effect of distorting competition in the market. The Lufthansa Group (part of the IAG parent carrier) has maintained that since it is one single carrier this practice does not fall within the scope of the Regulation. As a result of the growing use of PSS and the resultant restriction on competition, we strongly recommend the Commission consider including PSS within the scope of the Regulation. Bringing PSS within the scope of the Regulation would encourage transparency and neutrality and stop anti-competitive behavior such as surcharges for non-direct channels and selective distribution. Metasearch
5 The Roadmap refers to the fact that the Regulations do not apply to metasearch engines or airline websites. Metasearch has been extremely successful in reducing search costs for consumers and increasing competition in the marketplace. OTAs and metasearch websites help consumers search for suitable flights and offer a wider variety of options to consumers such as multi-airline flights that can result in reduced costs and/ or travel times for consumers. A survey of around 700 flight shoppers commissioned by the CMA showed that, of the people who shopped around for flights in the last three months, 65% used a comparison (i.e. metasearch) site for their search 2. The success of metasearch engines like Skyscanner demonstrates the increasingly important role that metasearch plays in air ticket distribution, with a significant amount of airline ticket sales being booked via metasearch. Metasearch engines are a key stakeholder and should be considered an integral part of the sector and a group at risk of facing anti-competitive behaviour from airlines. European Added Value Air travel is fundamentally important to all EU countries and their citizens. It is justified for the EU to intervene in this domain on the basis that transparency, accountability and fair competition are fundamental to ensuring trust in the marketplace for airline tickets and will result in a benefit to consumers. The current Regulation combined with technological advances and the evolving internet economy has allowed practices such as the Distribution Cost Charge to introduce significant anti-competitive effects on the operation of the market. It is unclear how any meaningful change can be achieved absent EU intervention and it is likely that the dominant airlines would increase their direct share and monopolise the market by reserving cheaper flights for sale via their own PSS that do not currently fall within the scope of the Regulation. This is likely to lead to increased prices (through lack of price dispersion) for consumers and further limit consumer choice. Conclusion 2 Kantar (2017), Digital comparison tools, Consumer research, Final report, Prepared for the CMA, p. 25.
6 Skyscanner remains committed to transparency and trust and ensuring there is a level playing field for all stakeholders involved in airline ticket distribution. Changes in technology and commerce since the Regulation came into force in 2009 have signaled a dramatic change in consumer behavior in the market. This has allowed new stakeholders to emerge and gain a significant role in the airline ticket distribution arena. However, we are of the view that the Regulation needs to be amended to evolve with the changing market and for the foregoing reasons, is no longer fit for purpose in its current form. Skyscanner welcomes this intervention and looks forward to continuing to deliver leading metasearch results in a fair and competitive market across the EU.
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