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U.S. Gives Online Travel a Boost

The government's decision not to regulate online sales of airline tickets is either a great victory for capitalism and the Internet, or a move that may hurt the consumer and decimate the traditional travel agency business in a bid to help the nation's ailing airlines.

The U.S. Department of Transportation is proposing revisions to the regulations governing the Computer Reservation System (CRS) so that all airlines won't have to participate in all four such systems. The government is also proposing an end to the prohibition on exclusive deals between travel agents and airlines.

"DOT has taken a very positive step that will promote new competition in the travel distribution marketplace where it is sorely needed," said Gary Doernhoefer, vice president and general counsel at Chicago-based Orbitz, a travel site backed by a consortium of five major U.S. airlines.

"The agency clearly recognizes that the Internet has benefited travel distribution by increasing competition and improving offerings for consumers and travel suppliers," he said.

Opponents say the proposed rules changes will likely make things worse for consumers because airlines would be able to pick and choose which reservation systems they post fares on. For the individual trying to find the cheapest tickets, more work may be involved rather than less, critics contend.

"Basically, the DOT is allowing CRSs to compete on the same playing field as online travel agencies," said Lorraine Sileo, an analyst with travel research firm PhoCusWright in Connecticut. "That means they can make special deals, have exclusive offers, work with preferred suppliers, etc."

"The real winners (and they can use a win) are the airlines, who will now be able to choose the terms by which they work with CRSs," Sileo told internetnews.com. "As for the consumer - it's the same story - look on multiple sites to get the best deal, and don't just rely on one source."

CRS systems provide information on airline schedules, fares and seat availability to travel agencies and allow agents to book seats and issue tickets. Currently, there are four CRSs operating in the United States: Sabre, Galileo, Worldspan and Amadeus.

Orbitz and others have said that the current rules are outdated and actually drive up fares by forcing carriers to pay more in fees to the computer networks.

The DOT said that "the airlines' growing use of the Internet for selling tickets has weakened their dependence on the (CRS) systems and possibly the need for at least some of the existing rules."

"The department will continue to address on a case-by-case basis any competition concerns raised by Internet travel services, such as in its ongoing informal investigation of Orbitz..." the DOT said in its proposal.

Orbitz over the past year has taken steps to broaden access to its fares, but it has been the subject of an intense lobbying campaign by its rivals, who took their case to Capital Hill.

The possibility of Congressional intervention was raised in mid-July at a House subcommittee hearing in Washington called to examine supplier-owned online travel sites such as Orbitz.

In September, two formal complaints filed by the American Association of Travel Agents against the airlines and Orbitz were dismissed by the Transportation Department.

Critics contend that a relaxation of the rules governing CRS systems actually will hurt consumers.

"You want to have airlines competing with each other with many different travel distributors," Bruce Charendoff, a lobbyist for Sabre, told the Wall Street Journal. "This is going to lead to higher prices for consumers and less choice of distribution outlets."

The DOT's proposed rules changes would likely become final after a 90-day period for comments.