US Airways Tails at the Charlotte hub (David Neal), originally uploaded by Airliners Gallery.
US Airways (Phoenix) yesterday (April 21) filed a federal civil antitrust lawsuit in the Southern District of New York against Sabre Holdings Corporation to halt anticompetitive and anticonsumer practices, as well as recover monetary damages.
According to the complaint, Sabre, which is a dominant distributor of airline fares and content to travel agents, has engaged in a pattern of exclusionary conduct to shut out competition, protect its monopoly pricing power, and maintain its technologically-obsolete business model. US Airways contends that Sabre has wielded its significant market power and control through exclusionary commitments from travel agents and other Global Distribution Systems (GDSs), as well as through anticompetitive requirements placed on US Airways and other airlines in order to sell their tickets. All of these actions by Sabre hurt consumers through higher prices, reduced innovation and fewer choices.
According to the airline, Sabre is the largest GDS in the United States and exercises enormous market power over airlines, including US Airways. Over 35 percent of US Airways’ revenue is booked through Sabre and Sabre affiliated travel agents. Sabre structures the distribution model so that travel agents, whether they are a traditional travel agency or one of the large online travel agencies that many consumers use directly on the Internet, are typically forced to rely on a single GDS to book airline tickets on behalf of their customers. According to the complaint, Sabre imposes significant economic penalties on travel agents relating to bookings not made using Sabre. If Sabre excluded US Airways from its offerings to its travel agents, those agents could no longer book US Airways tickets through Sabre. US Airways would not be able to survive the subsequent loss of revenue. Given this disproportionate market control, US Airways is forced to accept Sabre’s monopolistic practices.
The lawsuit follows after the recent execution of a new distribution agreement between Sabre and US Airways, which was reached in late February 2011. During negotiations with Sabre, US Airways made it clear to Sabre that it sought a new contract without exclusionary restrictions that protect Sabre from competition. However, Sabre threatened to shut off access to US Airways if the new agreement did not include these anticompetitive restrictions. According to the complaint, US Airways was forced to acquiesce to Sabre’s “my way or the highway” demands as a part of any new deal.
The complaint also alleges that Sabre has been aggressive in suppressing the ability of travel agents to book tickets directly with airlines using so-called “direct connections.”
US Airways fully expects that its lawsuit will not disrupt the display or distribution of US Airways tickets on Sabre during the litigation.
Copyright Photo: David Neal. Please click on the photo for additional information.
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