Last month, before a US watchdog began an antitrust investigation against some airlines, the Travel Technology Association (TTA), a lobbying group, published a much-cited report on airline market power.
The report's nature, and its timing, may remind some people in the travel industry of the fictional drama House of Cards (in its current Washington, DC, version).
After all, industry and political allegiances have many cross-currents in the real-life DC that can be not wholly unlike the TV series's tales of political intrigue.
TTA is the DC-based lobbying arm of several major online travel agencies, such as Expedia and Priceline, and metasearch companies, such as Skyscanner and TripAdvisor, and the global distribution systems (GDS) Amadeus, Sabre, and Travelport. (In the past 12 months, TTA has increased its membership 70%.)
The report's lead author was Fiona Scott Morton, currently a professor at Yale University.
But in 2011 and 2012, Morton was deputy assistant attorney general for economic analysis for the antitrust division at the Department of Justice (DoJ), where she oversaw "approximately 50 Ph.D. economists who do economic work related to analyzing the competitive effects of mergers."
As a former DoJ chief staffer, the report's lead author would have been recognized by its officials who have since launched an investigation into the airlines.
Two-thirds of the TTA report, "Benefits of Preserving Consumers’ Ability to Compare Airline Fares," was about how some airlines, most prominently Delta (the world's largest airline, by passenger volume), have pulled their fares and inventory from some travel websites, such as TTA members Skyscanner and TripAdvisor.com/flights.
(CORRECTION: 9pm ET: This article originally said Delta had also pulled information from Orbitz. Not true. My bad.)
But the report didn't stop there. It went on to make a broader case that the airlines were constraining capacity in various ways unrelated to distribution channels for airfare and inventory.
In a 15-page section, the report made the case that:
- "consolidation in the airline industry has reduced competition";
- "the airline industry is highly concentrated";
- "the airlines have substantial market power";
- "there are operational and marketing barriers to entry";
- "the recent American Airlines-US Airways merger has led to further price increases";
- "airline profits are at an all-time high";
- "significantly lower fuel costs have not led to lower prices."
None of those economic-themed arguments necessarily have anything to do with how airlines distribute fares and inventories through the online and GDS channels.
The report got wide media attention because of the two-thirds of its case against airlines withholding content from third-party price-comparison platforms.
But the report also got attention for the one-third final section that reads quite a lot like an economic brief about possible antitrust issues in the airline industry.
Published on May 19, the report noted that "airline executives have recently made statements about pricing “to demand,” rather than to costs." It cited the statements of a few airline CEOs.
On June 11, the New York Times business columnist James B Stewart, a two-time Pulitzer Prize winner and an alumnus of Harvard Law School, picked up on the theme, citing fresh statements from CEOs about "discipline."
His article, "Discipline for Airlines, Pain for Flyers", quoted Morton.
The New York Times also leaned heavily on the TTA report, citing its data that was unrelated to online price comparison or fare distribution. For instance, it quoted the report's argument that, in the author's paraphrase:
"despite a decline in jet fuel prices of 24 percent and a drop in nonfuel operating costs of just under 3 percent in 2014, the average fare per mile increased 0.5 percent during that period."
Jet fuel prices aren't usually a hot topic for travel website lobbying organizations. Neither are airport slot restrictions, another topic of the report.
Tnooz reached out to TTA for a response. A spokesperson said:
"The association learned of the Justice Department’s on-going investigation as the news broke Wednesday."
The report itself has a disclaimer that reads:
"The views expressed herein are the views and opinions of the authors and do not reflect or represent the views of Charles River Associates or Yale School of Management."
When asked about that, an association spokesperson said:
"The Travel Technology Association stands behind the work of Dr. Scott Morton."
On July 1, the Associated Press reported that the DoJ had launched an investigation into possible collusion among some major airlines regarding possible capacity coordination on seats and routes. Airlines said they were cooperating with the investigation. Nothing has been proven so far.
Investigations like this have turned up things in the past. In the mid-2000s, 21 airlines were hit with fines totaling $1.7 billion, and four airline executives went to jail, as a result of a price-fixing case regarding airline cargo.
Overlapping alliances, fiefdoms
Just as in House of Cards, the array of alliances on various issues are constantly morphing in DC.
Morton also participated in the DoJ's investigation, begun in 2011, of global distribution systems such as Sabre and Amadeus, who, as noted above, are members of TTA.
Separately, the DoJ has also had a turf battle over jurisdiction of the sector with the Department of Transportation, which has some overlapping oversight duties.
Meanwhile, the US airlines recently began a heavily coordinated attack in Washington, DC., and in Brussels, on Middle Eastern supercarriers such as Emirates, which is the world's largest airline by kilometers flown.
The US airlines allege that these carriers receive unfair state subsidies and should be penalized by governments in some way to level the playing field.
The Business Travel Coalition (BTC), a lobbying firm whose mailing address is in Pennsylvania but which often does activism in DC, applauded the investigation into the airlines, while in the same week published a survey suggesting that a majority of Americans do not fear the Gulf State carriers.
BTC, a for-profit group, doesn't disclose its membership.
So take out the popcorn, as travel industry stakeholders continue to respond to the unfolding events in ever-changing ways.
RELATED: The Travel Technology Association's report on airline market power
NB: Promotional image of the US version of House of Cards via HBO