Airline Ticketing: Impact of Changes in the Airline Ticket Distribution Industry

In 2002, when major U.S. airlines posted net operating losses of almost $10 billion, they paid over $7 billion to distribute tickets to consumers. Of these total distribution expenses, airlines paid hundreds of millions of dollars in booking fees to global distribution systems--the companies who package airline flight schedule and fare information so that travel agents can query it to "book" (i.e., reserve and purchase) flights for consumers. Each time a consumer purchases an airline ticket through a travel agent, the global distribution system used by the travel agent charges the airline a set booking fee. Concerns have been raised that the global distribution systems may exercise market power over the airlines because most carriers are still largely dependent on each of the global distribution systems for distributing tickets to different travel agents and consumers and therefore must subscribe and pay fees to each. Market power would allow global distribution systems to charge high, noncompetitive fees to airlines, costs that may be passed on to consumers. GAO was asked to examine changes in the airline ticket distribution industry since the late 1990s and the effects on airlines, the impact of these changes on travel agents and consumers, and what the relationship between global distribution systems' booking fees and related costs suggest about the use of market power.