BEFORE THE DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C. ___________________________

) In The Matter of )

) Docket No. OST-2013-0048 )

Agreement Adopted by the ) Passenger Services Conference ) Of the International Air ) Transport Association as ) Resolution 787 ) __________________________ )

SURREPLY OF OPEN ALLIES FOR AIRFARE TRANSPARENCY

Open Allies for Airfare Transparency (“Open Allies”) hereby responds to the June 21,

2013 Reply filed by IATA in this docket.1 Because IATA’s Reply only further muddies the

water with respect to Resolution 787, Open Allies renews its request that the Department reject

IATA’s Application for approval of that Resolution.

In its Reply, IATA repeats its claim that it is merely seeking the Department’s approval

of a process for developing a new XML data transmission standard and observes that the

adoption of XML to support airline distribution is not controversial. IATA Reply at 4.

However, as IATA itself admits (see id. at 4-5), Resolution 787 is highly controversial. The

reason is that, on its face, Resolution 787 goes well beyond an airline agreement on development

of an XML standard and sets forth a new airline distribution model, as even IATA concedes.

See, e.g., IATA Application at 2 (stating that it is not asking the Department to approve the

“stated business requirements or marketplace aspirations of NDC” that are included in

1 Open Allies submits this Surreply on the assumption that the Department will accept IATA’s Reply, which was submitted with a Motion for Leave. Further, Open Allies is submitting contemporaneously herewith a Motion asking the Department to accept this Surreply into the record in this proceeding. As explained in that Motion, IATA’s Reply has for the first time proposed significant conditions to any DOT approval of Resolution 787. Open Allies believes that this Surreply, including the discussion herein regarding the proposed conditions, will aid the Department’s review.

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Resolution 787); id. at 5 (remarking, incongruously, that DOT “should not ignore the aspirations

of IATA’s NDC described in Resolution 787”). It is for this reason that IATA’s Resolution has

drawn opposition from hundreds of commenters, including the several hundred members of

Open Allies.

From the start, IATA has, as a practical matter, asked the Department to overlook the

significant divide between what IATA says Resolution 787 is, on the one hand, and the plain

terms of the Resolution, on the other. This request has created enormous confusion and

ambiguity. If the Department were to approve Resolution 787, one could only wonder whether

the Department approved the Resolution as written, or as IATA characterizes it and has asked the

Department to approve it (i.e., “only insofar as it describes a means to modernize distribution

communications technology with a new XML standard”). This problem is compounded by the

fact that Resolution 787 is almost entirely about a new distribution model and has almost nothing

to say about an XML data transmission standard. Moreover, since its original filing, IATA has

further obfuscated its request by (1) adopting another resolution on its New Distribution

Capability (“NDC”) at its Annual General Meeting that is inconsistent with Resolution 787 and

(2) proposing conditions to approval in its Reply that are contrary to the plain language of

Resolution 787. Therefore, as discussed in Part I below, IATA’s Application for approval of the

Resolution should be denied, without prejudice to its future filing of a resolution that matches its

request.

As Open Allies demonstrated in its May 1, 2013 Answer, IATA-prepared documents

show that the intent underlying Resolution 787 is to rework airline distribution by replacing the

existing pro-competitive system of transparent, easily-comparable fares – which the airlines have

acknowledged constrains prices – with a distribution system designed to facilitate the shrouding

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of fares. This will allow airlines to increase prices, particularly for less price-sensitive business

travelers. IATA still has not shared the relevant documents with DOT, and in fact opposes Open

Allies’ pending motion that it be required to produce additional relevant documents bearing on

Resolution 787. Nor does IATA’s Reply address the serious concerns about the competitive

impacts of its proposal raised by Open Allies and other commenters.

Instead, IATA proposes certain conditions that it suggests the Department attach to its

approval of the Resolution. The proposed conditions, however, would not alter the terms of

Resolution 787. As explained in Part II below, the conditions would only further muddy the

waters and highlight the inconsistency between the terms of Resolution 787 and IATA’s

characterization of those terms.

It speaks volumes that IATA proposes multiple conditions to try to clarify exactly what it

is and is not seeking approval for. Instead of fixing Resolution 787, the proposed conditions

underscore that Resolution 787 addresses much more than IATA claims to be asking the

Department to approve. Rather than try to fix the Resolution with a series of conditions, the

Department should reject Resolution 787 and thereby avoid inevitable controversy over

inconsistencies and ambiguities that exist between the Resolution and the conditions. The

Department can then consider any new resolution or (perhaps more appropriately) recommended

practice that IATA might develop that is tailored to its request for approval and that excludes the

elements of NDC that have no place in a Department-approved IATA resolution. In Part II

below, Open Allies further addresses the problems with the conditions proposed by IATA.

If the Department does not reject IATA’s Application outright, it should require IATA to

produce relevant documents, as discussed in Part III below. Such documents will help shed light

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on the goals underlying Resolution 787 and allow the Department to make a more informed

decision on the Resolution.

Finally, Open Allies urges the Department to refrain from even the appearance of

favoring one distribution model over another. For reasons explained in Part IV below, the

Department should allow the market to govern the choice of distribution models and should not

endorse a model collectively agreed by airline competitors.

I. IATA Should Withdraw Resolution 787

IATA filed an Application that created confusion and ambiguity right from the start. In

that Application, it asked the Department to approve Resolution 787 only to the extent that it

establishes a process for developing an XML standard. However, the Resolution, by its express

terms and IATA’s own admission in the Application and certain underlying documents, also

defines a new airline distribution model, i.e., NDC. Therefore, from the very beginning, there

has been substantial uncertainty regarding exactly what IATA was asking DOT to approve, and

exactly what any such approval would (and would not) cover.

This uncertainty is reflected in the comments filed in response to IATA’s Application,

including those filed by airlines, many of which express support for NDC. Notably, Delta’s

March 21, 2013 comments are completely focused on changes to distribution that will be

effected by NDC. Delta observes (at pages 1-2) that Resolution 787 will move the industry away

from a “commodity based sales model” under which airline products and services are sold in a

“commoditized manner.”2

2 Comments by other airlines also focus on the new distribution model defined in Resolution 787.

For example, Finnair states (at page 1) that it supports Resolution 787 because, among other things, it would allow airlines to “provide more personalized offering and general content for consumers” and give consumers “more choice of options and comparability between airlines when different merchandising options are available for comparability.” The African Airlines Association states (at page 1) regarding Resolution 787 that “[t]he new airline distribution model will change the way an airline distributes its

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IATA’s actions since filing the Application have only made matters worse. As discussed

in Open Allies’ June 5, 2013 Supplemental Answer, on June 3, 2013, the 69th IATA Annual

General Meeting (“AGM”) adopted another resolution on NDC (the “AGM Resolution”). The

AGM Resolution contains statements that are at odds with Resolution 787, and only adds to the

confusion and uncertainty. As Open Allies pointed out at page 4 of its Supplemental Answer,

the terms of Resolution 787 “are uncertain and shifting, and appear to have changed once again

with the adoption of the AGM Resolution.” Open Allies urged that IATA “should withdraw its

current application for approval and embody the pertinent principles of the AGM Resolution in a

modified and final version of Resolution 787 approved by the PSC and re-filed with DOT. Only

then can there be any certainty about the exact agreement for which IATA seeks DOT approval,

the purpose and effect of that agreement, and the possible consequences of DOT approval on

distribution of airline services, airline competition and personal privacy rights.” However, IATA

did not do so.

Instead, IATA filed a Reply in this docket that proposes conditions to any DOT approval

of Resolution 787. The proposed conditions are not only inconsistent with Resolution 787, they

are also completely different from the provisions in the AGM Resolution. For example, on the

very important question of whether consumers will continue to be able to easily and

anonymously comparison shop (as they can today), IATA is all over the place. Both the

Application and Resolution 787 indicate that the answer is no. See Application at 6 (referring to

ending the EDIFACT standard), 10 (IATA “will not constrain the new standard by attempting to

make it backward compatible”) and 11 (distribution through the legacy networks will continue

only “for some time”); Resolution at 1.2.4 (“there should be no constraints driven by any

products and services.” American Airlines, Qatar Airways and British Airways/Iberia similarly support Resolution 787 for reasons that are focused on NDC.

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requirement for backwards compatibility”; backwards compatibility is justified “only if there is a

defined business need”). The AGM Resolution, on the other hand, affirms at paragraph 2 that

“the enhanced standards should support current shopping methods, including anonymous

shopping by customers.” On yet a third hand, one of the proposed conditions (which, like the

AGM Resolution do not actually amend Resolution 787) says: “Approval of Resolution 787 does

not constitute approval of any agreement among airlines to prohibit individual carriers from

continuing to utilize the EDIFACT standard.” What does all this mean? And what would

Department approval mean? Open Allies submits that the Department should not approve a

Resolution surrounded by such ambiguity.

Similarly, on the issue of whether Resolution 787 contains a mandatory requirement,

Resolution 787 states that member airlines and system providers “shall apply” the procedures in

Resolution 787 when distributing enhanced content. This is mandatory language. By contrast,

IATA asserts at page 7 of the Application that “Resolution 787 does not obligate any IATA

member to implement the provisions in whole or in part.” The AGM Resolution states at

paragraph 4 that “airlines and other industry players would be free to decide whether or not to

adopt the enhanced standards to support some or all of their distribution needs.” In its Reply,

IATA proposes an altogether different condition that says: “Approval of IATA Resolution 787

does not constitute approval of any agreement among airlines to restrict their use of any other

data transmission standard(s).” Again, it is unclear exactly what DOT approval of Resolution

787 would mean in light of all these contradictory statements.

In short, IATA has created a lot of confusion. At this point, there is Resolution 787,

which has been overlaid by an Application that appears to be describing a completely different

resolution; these documents have then been overlaid by the AGM Resolution, and all of that has

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been overlaid by the proposed conditions. The result is a jumbled heap. If DOT were to approve

Resolution 787, it would be totally unclear what such approval means and to which parts of

Resolution 787 such approval extends.

IATA’s request is not only ambiguous, it has also engendered substantial opposition from

a diverse group of commenters, including Open Allies, GDSs, online and traditional travel

agents, corporate travel departments, travel agent and tour operator associations, business and

consumer groups, individual consumers, and the American Antitrust Institute. The opposition

was generated for a simple reason – the terms of Resolution 787 are in many cases troublesome

or at least ambiguous, and the trail of documents created by IATA and certain of its member

airlines makes quite clear that the goal of the Resolution goes far beyond any communications

standard and is in fact to re-design the current distribution business model to become NDC.3

Any such re-design of a fundamentally competitive distribution system should remain the

bailiwick of the free market, and should not be part of a Department-approved resolution by most

of the world’s airlines.

Open Allies, in particular, submitted documents showing that:

a. the XML standard-setting exercise that IATA says it is proposing is inextricably intertwined with a new business model for the pricing and sale of airline tickets;

b. the purpose and effect of the new business model is to impose on consumers and

the travel industry a new opaque model for the pricing and sale of airline tickets that would undermine or even end the current transparent and pro-competitive regime of published prices that any consumer can shop anonymously;

c. IATA and the airlines have confirmed that the existing transparent system of

publicly available fares that can be viewed anonymously has constrained their ability to raise prices; and

d. NDC is the “solution” to that problem.

3 See pages 17-29 of the May 1, 2013 Open Allies Answer for an analysis of these documents.

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In its Reply, IATA ignores the documents demonstrating that NDC is designed to

eliminate fare transparency, except to state (at page 17) that commenters who argue that IATA is

seeking to replace the existing system “seem to be proceeding on the mistaken premise that the

standardized format envisioned in Resolution 787 mandates a change in business practice.”

However, IATA also acknowledges, as it must, that Resolution 787 – which according to

IATA’s own definition is a binding action agreed by airline competitors – describes a new

business model. Indeed, any objective reading of Resolution 787 reveals that it deals almost

entirely with the new business model and very little with an XML standard. Contrary to IATA’s

claim (at page 22 of the Reply) that opponents of approval have failed to meet their burden of

proof, Open Allies’ unrefuted showing based on IATA-generated documents regarding the intent

and likely harmful effect of Resolution 787 demonstrates that the agreement is adverse to the

public interest.

IATA portrays concerns expressed by commenters as “hobgoblins invented by those

vested in the status quo.” Reply at 18. It also states that “commercial opponents appear in the

main to be current beneficiaries of the legacy distribution system.” Id. at 5. These comments

belittle the serious concerns raised by commenters and ignore the depth and breadth of

opposition to the Application.

For example, the Global Business Travel Association, which describes itself as the

“leading trade association serving business travel buyers and providers, serving a network of

more than 20,000 business travel professions,” urged DOT to reject Resolution 787, saying (at

page 6 of its April 4, 2013 Comments):

Based on the lack of clarity and extremely limited information provided to date, the business travel buyer community has no choice but to urge the DOT not to approve the Application until any benefit or adverse impact is clearly defined. Business travel

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buyers want and need a voice in this regulatory proceeding, as well as in the development and implementation of changes to fare distribution models. With hundreds of billions of dollars spent on airfare each year, no interest is more directly impacted by more or less transparency and more or less choice than the business travel community.

The Consumer Travel Alliance, joined by Airlinepassengers.com, likewise urged

rejection (at page 2 of its April 29, 2013 Comments):

IATA’s Application for Approval of an Agreement (Resolution 787) by the Department of Transportation (DOT) should be DOA. ● DOT should never approve an application that seeks to

limit technology. ● DOT should never approve an application that seeks to

limit consumers’ ability to comparison shop for prices across an industry.

● If these are not the goals of IATA, then DOT does not have

sufficient information in this application to make an informed decision.

The American Antitrust Institute also explained (at pages 6 and 7 of its May 1, 2013

Comments) why Resolution 787, in its present form, should not receive Department approval:

If the intent – as the Application states – is limited to implementing a new technical standard governing data interchange, then IATA should withdraw its Application and issue such a standard without requesting DOT approval. If IATA does not withdraw its Application, the DOT should not assume the risk of accidentally “smuggling in” any aspects of the NDC model by granting unneeded approval for the XML standard.

Approval of the NDC standard is a separate matter for purposes of regulatory oversight and should be presented to the agency at another time, subjected to separate notice requirements, and opened up for comment. Anything less than a separation of dockets serves to muddy the waters around the Resolution 787 proposal, risks confusing the public on the scope and breadth of the competitive issues surrounding NDC, and seriously threatens to short circuit full DOT review. The AAI submits, therefore, that the DOT cannot approve Resolution 787 in its current form. The DOT

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should place the burden on IATA to resolve the tension between Resolution 787 and the language in IATA’s Application for which it seeks approval. Specifically, IATA must take the necessary steps to eliminate confusion as to whether it now seeks approval of the XML standard (which it believes it does not need), the NDC standard (which it believes it does not currently seek), neither, or both.

The Department should respond by disapproving Resolution 787, while signaling that it

would consider a more narrowly tailored resolution that comports with IATA’s request to adopt a

new messaging standard.4 Open Allies and others could then comment on a resolution that is

consistent with IATA’s stated goal, rather than the current ambiguous Resolution, made even

more so by the jumble of conditions that in some cases conflict with its very terms.

II. IATA’s Proposed Conditions Do Not Solve the Problem The conditions proposed by IATA do not resolve the problem of the disparity between

the express terms of Resolution 787 and IATA’s characterization of the Resolution. As shown

below, the conditions are inconsistent with the plain language of Resolution 787. Consequently,

they further confuse rather than clarify the intent, scope and effect of the Resolution, and would

likewise confuse the scope and meaning of any DOT approval. Moreover, the proffered

conditions do not in any event remedy the problems posed by Resolution 787.

A. IATA’s Efforts to Disclaim that Resolution 787 Defines a New Distribution Model Are Ineffectual

In responding to commenters’ concerns that Resolution 787 embraces a new airline

distribution model and thus IATA’s request for approval appears to cover much more than what

IATA says, IATA disclaims any ability or desire to dictate to any airline a particular business

4 The necessary amendments could be accomplished rapidly by IATA using the mail vote

procedures for resolutions to be approved by traffic conferences found at Article IX of the Provisions for the Conduct of The IATA Traffic Conferences. Under the provisions of Article IX, any resolution may be adopted by mail vote if that vote is requested by the IATA Director General (subsection 1.4), with the voting period set by subsection 3 at 21 days.

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model. This response misses the point. To the extent Resolution 787 represents an agreement

among airline competitors on a new distribution model (as appears to be the case from the text of

the Resolution and underlying IATA-prepared documents), DOT’s approval will confer the

agency’s imprimatur on that distribution model – regardless of IATA’s ability or intent to dictate

anything to its airline members.

This potential outcome raises serious concerns for Open Allies (and many other

commenters) for two broad reasons. First, Open Allies believes that a Department-approved

airline agreement on NDC would likely harm consumers and competition because it would

supplant the existing regime of transparent and pro-competitive comparison shopping, provide a

means to increase fares – especially for less price-sensitive business travelers, reduce

competition, penalize consumers who decline to provide their personal information, and invade

consumer privacy. Moreover, the choice of distribution models, and the means of implementing

them, should be left to the market. DOT should have no place in sanctioning a joint airline effort

to impose their will by dictating the choice of distribution model to individual airlines that might

not support such model and to travel retailers.

As the Department has repeatedly recognized, the way in which travel options are

presented to consumers is important. Airlines should not be permitted to collectively agree on a

methodology for such presentation, particularly where, as here, that methodology would

undermine comparative shopping. Individual airlines and independent, non-airline entities

involved in the distribution and sale of air travel such as GDSs and online ticket agents have

considerable expertise and should have the option to develop and select distribution models of

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their choice. Such decisions should not be made by agreement among horizontal airline

competitors with the imprimatur of the federal government.5

Second, because of the uncertainty and ambiguities surrounding IATA’s request, NDC

would not receive (and has not received) a full airing in this docket. Nonetheless, the plain

language of Resolution 787 indicates that NDC is part (indeed, the main part) of what the

Department is being asked to approve.6

IATA’s proposed condition does not remedy this problem. That condition states:

Approval of Resolution 787 does not constitute approval of any agreement among airlines regarding any method of distributing air transportation.

It is hard to figure out exactly what would be left of Resolution 787 if IATA’s proposed

condition were imposed, and the Department and others should not be given the task of doing so.

5 IATA agrees that “[h]ow distribution practices evolve should be left to the market.” Reply at

18. Consequently, there is no basis for the Department to approve Resolution 787 as written. 6 See, e.g., Sections 1.1, 1.2.5.1 and 3.1. Section 1.1 states in relevant part: “This resolution

recognizes that a standard process is required for airlines to create their own product offer within their own systems (i.e. assemble fares, schedules and availability - all in one transaction) which will be provided directly by and owned by the airline. This will enable more agile pricing and more personalized offerings. In this way, all product offers (including ancillaries) will be available for distribution through all channels that an airline wishes to sell them through. In this regard, this IATA standard will enable the creation of a Dynamic Airline Shopping engine Application Programme Interface (DAS API) based on IATA XML messages. The focus of this resolution will describe the main business processes that are required to support it.”

Section 1.2.5.1 in turn provides that Enhanced Airline Distribution shall “allow individual carriers to determine its own prices and the nature of those products offered, depending on who the requestor is and what they are requesting. This will require authentication and the provision of historical data based on previous transactions.”

Finally, Section 3.1 specifies the kinds of personal information that carriers have agreed among themselves they have the right to demand before quoting prices to consumers. See also pages 17-26 of the Open Allies Answer for discussion of the IATA-prepared documents that confirm the Resolution is an agreement on a new method for how air travel will be distributed, with that model premised on “knowing who is making the request.”

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Instead, the Department should not act unless IATA puts forward for approval a resolution that

clearly covers only that for which it seeks approval.7

B. Passenger Privacy

IATA claims on page 10 of its Reply that “nothing in Resolution 787 directs airlines to

require authentication before transmitting an offer through the travel agency channel.” This

claim is flatly contrary to the words of Resolution 787. Specifically, section 1.2.5.1 of the

Resolution states that Enhanced Distribution “will require authentication and the provision of

historical data based on previous transactions.”

IATA also takes issue with the notion that the collection of personal information will

enable airlines to better identify less price-sensitive business travelers who are willing to pay

higher fares. IATA says this notion “strains credulity” and is “contrary to business reality”

because the airlines will not “punish their most loyal and highest yield customers with higher

fares or fees than they would impose on those who have little or no prior relationship with the

airline.” IATA Reply at 11-12. However, the “business reality” is that airlines already structure

their fares in a way that imposes higher rates on business travelers (who are indeed their highest

yield customers), while offering lower fares to leisure travelers who do not have the same loyalty

7 If despite these serious shortcomings the Department nonetheless were to approve the

Application (an outcome which Open Allies strongly opposes), the proposed condition should be revised, along the following lines:

Approval of Resolution 787 does not constitute approval of any agreement among airlines regarding any method of distributing air transportation, and this approval shall terminate in the event the IATA airlines agree upon NDC or any other distribution model without first obtaining separate DOT approval.

The proposed additional language is consistent with IATA’s representations in the Application. To be clear, if IATA were to seek approval of NDC in a separate proceeding, Open Allies would likely oppose such application, since Open Allies does not believe that DOT approval of an agreement by airline competitors to adopt and implement a particular distribution model serves the public interest.

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to the airline. It is, quite frankly, hard to imagine any other reason for inquiring as to whether the

purpose of the trip is business or pleasure.8

IATA’s argument at page 12 of its Reply that airlines will not use personal information to

enhance their ability to price discriminate because consumers will seek fare quotes anonymously

or obtain competing offers likewise is flawed. First, it assumes consumers will still have the

ability to engage in anonymous fare shopping once NDC is implemented, which may very well

be a false assumption for reasons discussed in the Open Allies Answer and below. Second, for

business travelers who require nonstop service, there may be no viable competing offers if the

airline has the only nonstop service in the market and has adopted NDC for that market. Finally,

IATA’s statement at page 12 that airlines will still be subject to privacy laws is hollow because

such laws will not prevent airlines from using personal information to price discriminate and

may not include adequate protections for such information. In this regard, it is important to keep

in mind that this is not a situation where consumers will have a real choice about whether to

provide personal information, given the binding nature of an IATA resolution.

In the face of these concerns, IATA proposes the following condition:

Approval of IATA Resolution 787 does not constitute approval of any agreement among airlines to require, as a condition of receiving an offer for air transportation, the disclosure by any passenger of personal information of any kind.9

One problem with this condition is that it could be read as meaning that the condition would be

satisfied if consumers were provided as little as one – and only one – fare quote for a particular

8 In today’s transparent distribution model business travelers who shop anonymously can take

advantage of published fares set by the airlines to gain sales from the marginal customers, that is, those who would not fly if fares were set above a certain level. In an NDC world, business travelers would lose that capability and thus would pay more, particularly on routes with only one airline offering the nonstop services that time-sensitive business travelers strongly prefer.

9 Emphasis added.

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itinerary. Further, it seems inconsistent with the actual language of Resolution 787, as explained

above.

Notably, IATA’s Reply also contains a slightly different formulation of this condition at

page 33:

Approval of IATA Resolution 787 does not constitute approval of any agreement among airlines to require, as a condition of receiving at least one offer for airline transportation, the disclosure by any passenger of personal information of any kind.

The “at least one offer” language lends support to the conclusion that IATA is in fact proposing a

condition that would be met if anonymous shoppers were given only one offer, even if priced at a

punitively high level. Of course, any agreement between competing airlines to limit offers to

anonymous shoppers to only one offer plainly would be anticompetitive and would constitute

illegal price fixing.10

C. Mandatory Effect of Resolution 787

In its Reply, IATA acknowledges that the Resolution would have mandatory effect since

if an IATA member airline chooses to distribute enhanced content, it would be required to use an

IATA-developed XML standard.11 IATA says this is not a problem because the Resolution 787

standards are non-exclusive. IATA proposes a condition to approval that would state:

10 To avoid such a reading, the phrase “as a condition of receiving an offer [or “at least one

offer”] for air transportation” would need to be deleted, so that the full condition would state:

Approval of IATA Resolution 787 does not constitute approval of any agreement among airlines to require the disclosure by any passenger of personal information of any kind.

Such a revision would not disturb any existing DOT approvals that enable airlines to require the data they need to fulfill their contracts of carriage with those who have purchased tickets.

11 This acknowledgment is contrary to IATA’s assertion in the Application that “Resolution 787 does not obligate any IATA member to implement the provisions in whole or in part.” Application at 7.

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Approval of IATA Resolution 787 does not constitute approval of any agreement among airlines to restrict their use of any other data transmission standard(s).

As a practical matter, however, the requirement to use the Resolution 787 procedures

when distributing enhanced content will result in the IATA XML standard being the only one (or

nearly the only one) used by airlines and other travel distributors. An airline that has already

undertaken the time and expense of making its system compatible with IATA’s XML standard is

extremely unlikely to choose to incur the additional time and expense involved with coding to

use a different standard. Open Allies urges the Department to leave the choice of such standards

to the marketplace and not to favor one standard over another by endorsing a collective airline

agreement imposing a particular standard.12

D. Data Ownership

The issue of data ownership highlights another inconsistency between Resolution 787

and IATA’s depiction of the Resolution. Section 1.2.7 of Resolution 787 explicitly states: “This

distribution model assumes each airline distributing its individual products and services is the

owner of its own content.” Similarly, Section 1.1 states categorically that the “product offer …

will be provided directly by and owned by the airline.” In response to concerns expressed about

these provisions, IATA concedes that “data ownership is an issue separate from the standard for

data transmission and not to be resolved under Resolution 787.” IATA Reply at 15. It proposes

the following condition to approval to clarify that DOT’s approval does not extend to any

agreement among airlines regarding the ownership of data:

12 Alternatively, were any condition along these lines to be imposed, Open Allies suggests the

following condition in place of the one proposed by IATA:

Approval of IATA Resolution 787 does not constitute approval of any agreement among airlines to require the use of any particular data transmission standard(s).

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Approval of Resolution 787 does not constitute approval of any agreement among airlines regarding the ownership of the data that would be transmitted via the XML-based data transmission standard envisioned in the Resolution.

Again, IATA proposes a condition to approval that is inconsistent with the express terms

of the Resolution, thereby resulting in confusion. The Department should expect no less than

that IATA will present a resolution that matches its request for approval and nothing more.13

E. Backwards Compatibility

Section 1.2.4 of Resolution 787 explicitly states that “there should be no constraints

driven by any requirement for backwards compatibility” and that any justification for backwards

compatibility must be based only on “a defined business need.” In response to concerns

expressed by commenters about this provision, IATA argues that “freedom from a backward

compatibility constraint will expedite development of the proposed XML enhanced content

standard and reduce development costs.” IATA Reply at 16. Even if this is true, championing

speed and development cost reduction as justifications for not allowing backwards compatibility

implicitly assumes that the new system is good and the old one is bad. Here, that is not at all

evident. The existing pro-competitive system of transparent, easily-comparable airfares has

constrained fare increases, as even IATA has recognized. It is not clear, and certainly has not

been shown by IATA, that NDC or IATA’s putative XML standard (or a rush to implement

either) will benefit consumers. Further, Section 1.2.4 is an agreement among horizontal airline

13 Alternatively, if any condition were to be imposed along these lines, DOT should modify

IATA’s proposed condition to carve out completely data ownership issues and any references in Resolution 787 to same:

This approval does not in any way address the issue of data ownership and specifically does not include approval of Section 1.2.7 of Resolution 787 or of any other reference to ownership in the Resolution.

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competitors not to support other distribution models that provide consumers with fare

transparency. Such an agreement is improper and should not be condoned by DOT.

IATA proposes the following condition:

Approval of Resolution 787 does not constitute approval of any agreement among airlines to prohibit individual carriers from continuing to utilize the EDIFACT standard.

This condition does not address Open Allies’ concern that the opaque NDC business model

would not be compatible with the current system of transparent, publicly-filed fares that any

consumer can shop anonymously.14 Further, IATA’s proposed condition is also too narrow

because it focuses only on the EDIFACT standard and not on the use of existing (or future) XML

standards that would compete with the putative IATA XML standard.15

III. If the Department Does Not Reject IATA’s Application Outright, It Should Require IATA to Produce Relevant Documents

On March 18, 2013 (one week after IATA filed the Application), Open Allies filed a

motion for a scheduling order that included a request that IATA be required to produce relevant

documents in IATA’s possession relating to Resolution 787. In that Motion (at 3-4), Open Allies

stated the reason for the request and described the limited scope of documents it was requesting:

Given sharply contrasting views about the consequences for consumers and other stakeholders of this inter-carrier agreement, and the magnitude of the adverse effects for consumers if the agreement is as described in some IATA documents that are

14 Notably, the AGM Resolution states at paragraph 2 that new standards “should support current

shopping methods, including anonymous shopping by customers.” However, no such language appears in Resolution 787 or in IATA’s proposed conditions. Open Allies urges the Department to reject Resolution 787 and make clear that it will not approve any amended version of the Resolution that does not include this language.

15 The following condition on backwards compatibility would be more appropriate if any condition were to be adopted along these lines:

Nothing in this approval shall authorize any restriction on backwards compatibility, and this approval specifically does not include approval of Section 1.2.4 of Resolution 787.

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already available, we respectfully submit that IATA (including its relevant subgroups of carrier members, notably the Passenger Distribution Group members) should be required to produce in this proceeding all documents in IATA’s possession (whether authored by IATA or not) that relate to Resolution 787 or NDC.

In its decision of March 28, 2013, the Department extended the deadline for answers to

IATA’s application but deferred action on this request. In both its Answer of May 1, 2013 and

its Supplemental Answer of June 5, 2013, Open Allies renewed that request, unless DOT were to

dismiss IATA’s application. At page 25 of its Reply, IATA urges DOT to reject this request,

saying that “the massive fishing expedition sought by opponents and the consequent cost and

delay it would occasion are clearly inappropriate.”

IATA’s protests about Open Allies’ targeted request for documents are entirely

unconvincing. First, on the subject of delay, Open Allies filed the request for disclosure of

information that would help shed light on the true nature of this controversial agreement just one

week after IATA filed its Application. Open Allies’ request was a legitimate and necessary

effort to get the full set of facts on the table. It was not an effort to cause delay. IATA’s

complaint about delay rings hollow given that it took IATA over seven weeks to submit a Reply

to the timely filed opposing comments in this proceeding.

Second, IATA’s description of Open Allies’ request as a “massive fishing expedition” is

wrong. The request is narrowly targeted to seek only documents “related to Resolution 787 or

NDC.” No subject matter other than the very Resolution for which IATA seeks approval is

covered by the request.

Third, IATA’s vague and unsubstantiated claims of “consequent cost” fall short of

establishing that the request is unduly burdensome. IATA makes no attempt whatsoever to

explain even the magnitude of the likely costs of document production, much less detail them. If

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such generalized protests about the burden (and delay) required to produce relevant documents

were sufficient to carry the day, no party would ever be required to make disclosure of

documents in its possession. IATA is the party seeking approval here. The cost of complying

with an appropriately tailored document request would pale in comparison to the global effort it

has invested to date in promoting NDC.

Accordingly, unless the Department rejects IATA’s Application (which Open Allies

urges for the reasons stated above), it should require IATA to produce relevant documents as

described in Open Allies’ Motion of March 18, 2013. It is only reasonable to allow interested

parties (and the Department) to review the underlying documents to better understand what

Resolution 787 is about, particularly in these circumstances where substantial uncertainty and

confusion remain on that key question.

IV. DOT Should Allow the Market to Govern the Development and Choice of Distribution Models

IATA suggests that Resolution 787 and its NDC model are needed because the “legacy”

systems have resisted and slowed change and are wedded to outdated standards that no longer

serve the industry. Nothing could be further from the truth. GDSs have long been, and continue

to be, at the forefront of technological developments in travel distribution. Moreover, as IATA

itself acknowledges (Reply at 4), GDSs already use XML as a messaging standard. See also

IATA Application at 5 (referring to the Sabre Red, Travelport Agencia and Amadeus Airline

Retailing Platform products); Sabre’s May 1, 2013 Answer (describing Sabre’s XML

implementations); Amadeus Answer at 1-3 and Exhibit I (discussing and providing examples of

Amadeus’ XML capabilities). In fact, to a substantial degree GDSs provide the technology used

by IATA member airlines.

- 21 -

The results of an IATA survey (published on May 23, 2012) of airlines and GDSs on

their respective XML readiness show that GDSs are far more ready than many airlines to handle

XML messaging.16 At the attached numbered slide 7, IATA compiled the airline responses to

questions about the capability of their major systems to utilize XML. The attached numbered

slide 10 summarizes the results of responses to those questions by “IT Providers,” that is, the

GDSs. When the two sets of results are compared, they establish that the airlines as a group lack

the capability to use XML and have markedly inferior XML capabilities to those of the GDSs.

Turning to the numeric scores, on a 5 point scale where 1 is fully capable, and 5 is not capable,

of having their major systems use XML, the un-weighted airline average was 2.71 and the

weighted average was 2.29. By contrast, the IT supplier average rating was 1.38. In other

words, the average score that GDSs attained for XML readiness was far superior to the ratings

the airlines gave themselves.17

The fact that the industry is already moving in the direction urged by IATA demonstrates

that the marketplace around competitive technology for airline distribution is working and should

be allowed to govern future developments. There is no need for the Department to interfere and

to appear to favor one distribution model over another by approving Resolution 787 and the

NDC model that, IATA’s claims notwithstanding, remains embedded in the terms of that

Resolution.

16 The two relevant slides (7 and 10) of the survey results are attached at Exhibit 1. Open Allies

would be happy to make the full study available upon request, but did not attach all of the survey results (which exceed 50 pages) because of its bulk.

17 IATA made no effort on the IT supplier side, unlike on the airline side, to produce a weighted average that accounted for the volumes processed. Open Allies members believe the relatively greater readiness of GDSs to handle XML messaging would have been even more striking if a weighted average had been produced by IATA for IT Suppliers.

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V. Non-Airline Stakeholders Have Not Had a Voice in Resolution 787

IATA paints the Resolution 787 exercise as one where non-airline stakeholders have been

extensively involved. As the Answers of the American Society of Travel Agents, the European

Travel Agents’ and Tour Operators’ Associations and the Guild of European Business Travel

Agents, Business Travel Coalition and Open Allies make clear, this picture is not accurate. Non-

airline stakeholders have had no meaningful voice in the design of NDC and the adoption by the

airlines of Resolution 787.

IATA also observes (at page 21) that non-airline stakeholders representing travel agents,

GDSs and other technology providers are participating in a Distribution Data Exchange Working

Group (“DDXWG”). While some representatives18 have been invited to attend the DDXWG

sessions, they have been completely excluded from the development of the IATA XML standard,

which is being handled exclusively by IATA and Farelogix. Everyone else has been shut out of

this process. DDXWG did not choose the Open Axis XML schema over the Open Travel

Alliance schema. Rather, that decision was made by the IATA Passenger Distribution Group,

where only airlines have a vote.

Open Allies members stand ready to work with IATA should it decide to propose a new

standard. Today, Open Allies sent to IATA the letter attached hereto as Exhibit II, again making

that request should Resolution 787 not be approved. Any such standard should protect the

interests of consumers and have no adverse impact on transparency or competition, unlike

IATA’s current approach.

18 While IATA continues to suggest in public statements that full collaboration with industry

associations is occurring, in fact it has refused to recognize association representatives as legitimate representatives for their industry segments in the actual development process. Meetings of industry association staff and leaders with a few IATA management representatives are not equivalent to full, transparent and open participation in the development process. The American Society of Travel Agents, among others, has been excluded from that process.

CONCLUSION

For the above reasons, the Department should disapprove Resolution 787 without

prejudice to re-filing of a more narrowly tailored resolution that is focused exclusively on an

XML communications standard, Le., the standard for which lATA purports to seek approval. If

the Department chooses not to reject the pending Resolution, it should require lATA to provide

the documents requested by Open Allies before any further action is taken.

July 15,2013

Respectfully submitted,

I/tvJ ({)J IA}; 0 ~" Andrew Weinstem ExecLltive Director Open Allies for Airfare Transparency 913 S Street, NW Washington, DC 20001 202-667-4967 andrewwstn@gmail.com

EXHIBIT I

IATA SURVEY RESULTS (SLIDES 7 AND 10)

1st EATF Survey – XML

B. OVERALL DATA PROCESSING ENVIRONMENT

4. Are your major systems in the following business areas CAPABLE of using XML technology to exchange data with 3rd parties? Please use the following rating scale:

1 - Fully capable

2 - Mostly capable

3 - Capable to a limited extent

4 - Capable to a very limited extent

5 - Not capable

a. Airline distribution

b. Reservations management

c. Departure control

d. Planning and scheduling (incl. slot management)

e. Flight operations

f. Airport operations

g. Baggage handling

23 May 20127

AIRLINES

2.712.64

3.00

3.00 3.00 3.002.91

2.29

2.48

2.86

3.03

2.882.76

2.39

1

2

3

4

5

a b c d e f g

Average ranking

Highest ranking

Lowest ranking

Weighed average

(no)

(all)

1st EATF Survey – XML

B. OVERALL DATA PROCESSING ENVIRONMENT

4. Are your major systems in the following business areas CAPABLE of using XML technology to exchange data with 3rd parties? Please use the following rating scale:

1 - Fully capable

2 - Mostly capable

3 - Capable to a limited extent

4 - Capable to a very limited extent

5 - Not capable

a. Airline distribution

b. Reservations management

c. Departure control

d. Planning and scheduling (incl. slot management)

e. Flight operations

f. Airport operations

g. Baggage handling

23 May 201210

1.38

1.141.17

2.00

1.20

2.00

1.60

1

2

3

4

5

a b c d e f g

Average ranking

Highest ranking

Lowest ranking

IT SUPPLIERS

(no)

(all)

EXHIBIT II

OPEN ALLIES LETTER TO IATA

 

Open Allies for Airfare Transparency

913 S Street, NW, Washington, DC 20001 – 202-667-4967 – info@faretransparency.org

 15  July  2013    Mr.  Tony  Tyler  Director  General  &  CEO  International  Air  Transport  Association  33  route  de  l’Aéroport  1215  Genève  15  Switzerland    Dear  Mr.  Tyler,    I  am  writing  on  behalf  of  Open  Allies  for  Airfare  Transparency  to  urge  IATA  to  withdraw  Resolution  787  on  Enhanced  Airline  Distribution  from  further  review  at  the  U.S.  Department  of  Transportation  (DOT)  so  that  IATA  can  launch  productive  discussions  with  other  stakeholders  in  the  airline  travel  distribution  system  on  a  more  constructive  and  viable  approach  to  this  important  issue.    As  you  predicted  in  your  original  DOT  filing,  Resolution  787  has  prompted  a  deep  backlash  across  the  travel  industry  on  both  content  and  process  grounds.    Open  Allies  and  other  key  travel  industry  organizations  were  excluded  from  the  discussions  and  drafting  of  Resolution  787,  and  our  nearly  400  members  are  seriously  concerned  about  its  potential  impacts.      Thus,  we  urge  you  to  withdraw  this  proposal  and  work  with  partners  who  distribute  your  members’  services  –  including  independent  distributors  and  sellers  of  air  travel,  corporate  travel  departments,  and  travel  trade  associations  –  to  create  and  propose  a  broadly-­‐supported  new  resolution.    Should  you  agree  to  do  so,  we  stand  ready  to  work  quickly  and  collegially  to  bridge  our  differences  on  these  matters,  and  we  believe  we  can  find  common  ground  by  the  end  of  the  year.    No  matter  how  the  opportunity  emerges,  we  look  forward  to  starting  with  a  clean  slate  and  working  constructively  with  IATA  should  it  wish  to  work  toward  the  establishment  of  a  common  technological  standard  that  will  benefit  consumers  and  all  other  stakeholders.          

           Andrew  Weinstein  Executive  Director  Open  Allies  for  Airfare  Transparency