Lawsuits fly over Northwest's new GDS fees

As expected, the battle of the lawsuits and press releases started soon after an announcement Tuesday by Northwest Airlines that it was taking steps to align its distribution costs with those of the low-cost carriers it increasingly is competing with for customers. The airline said it was instituting a "shared GDS fee" for travel agencies and other customers who don't use the Northwest Web site.

Northwest will bill travel agents who use global distribution systems such as Sabre $7.50 of the average $12.50 cost charged by the distributor for each roundtrip domestic ticket. Northwest also will charge $5 for each domestic ticket bought through Northwest reservations offices and $10 to buy a domestic ticket at airports in the United States and Canada. Customers and travel agents can avoid the fees by using Northwest Web sites.

Within hours of the Northwest announcement, Sabre Travel Network said that it is instituting a new policy for any airline participating in a direct-connect availability (DCA) three-year program which charges a fee on tickets issued through Sabre that is not also applied to the airline's own Web site. The policy was effective immediately for Northwest Airlines in response to its announcement today imposing new ticketing fees on all domestic tickets issued through U.S. and Canadian travel agencies using a global distribution system (GDS).

'Not a fare increase'

Sabre's lawsuit alleges the fees violate Northwest's commitment to sell tickets through Sabre at the same price the airline offers on its Web sites. Northwest has said the fees are not a fare increase.

"We are taking proactive measures to protect consumers from hidden and selective fare increases. And we are standing up for online and offline travel agents, who have long-provided great service to consumers and corporations," said John Stow, president of Sabre Travel Network.

Then, Worldspan issued a statement that Northwest Airlines' plan to charge United States and Canadian travel agencies a shared GDS fee on Northwest travel in the U.S. would violate agreements Worldspan has with Northwest. Worldspan said the fee amounts to a hidden fare increase to consumers and corporations and undermine a healthy and competitive agency distribution channel that provides comprehensive choices in air travel. Worldspan said it remains committed to vigorously protecting the interests of its traditional and online travel agency customers who play a vital role serving consumers, corporations and the travel industry.

Worldspan is shocked

"Worldspan is shocked by Northwest's announcement," according to a company press release. "Based on its agreements with Northwest, Worldspan firmly believes that the fees Northwest says it intends to bill to travel agencies cannot be charged to Worldspan's traditional or online travel agencies."

It was not only the GDS companies complaining. AAA said that travelers will pay more, waste time and lose access to travel experts under new fees announced yesterday by Northwest Airlines. "These new fees are worse than a fare increase," said Steve Frank, president and CEO, AAA Minneapolis. "Not only will they result in higher fares, but they penalize travelers and travel agents for using customer friendly booking methods."

"Northwest has suggested that customers use the airline's Web site to avoid fees," Frank said. "This eliminates easy comparison shopping through travel agents and online agency web sites while limiting travelers to just one airline -- certainly not a customer friendly way to engender loyalty among travelers. Similarly, Northwest has suggested that travel agents use its Web site to book their clients, creating redundant work and unnecessary delay by forcing travel agents to use the airline's unwieldy site."

Travel agents penalized

"Travelers will have to pay more to benefit from the fare comparison abilities of travel agents and travel Web sites. Travel agents are penalized by being pushed to Northwest's inferior online booking site, instead of computer reservation systems used by nearly all major airlines," said Jeff Ogden, president and COO, AAA Minnesota/Iowa.

Despite the strong reaction, Northwest is moving forward. The airline has filed a lawsuit against Sabre Travel Network in the U.S. District Court for the District of Minnesota. Northwest noted that Sabre had issued a press release announcing that it instituted measures that will make it more difficult for travel agents to view Northwest flights and sell Northwest tickets.

The Northwest suit alleges that Sabre's bias action against Northwest flights in the airline schedules it provides to travel agents are in breach of the contact Sabre signed with Northwest in July of 2003. That agreement specifically prohibits the bias imposed by Sabre yesterday. "Sabre has clearly breached our contract with the actions they initiated on Aug. 24," said Al Lenza, vice president of distribution and e-commerce for Northwest.

"The bias they have imposed against Northwest flights are denying the flying public a fair and complete choice of both schedules and fares," Lenza said.

Other airlines to follow

Henry Harteveldt, a respected airline analyst with Forrester Research, said other major airlines are studying whether to add fees and cut their distribution costs as well. "In six to 12 months, there's no question that other airlines will match this strategy" unless distribution systems like Sabre's move to overhaul their business models, he said.

Northwest's lawsuit didn't surprise Richard Copland, president of the American Society of Travel Agents. But he said the suit won't be resolved soon enough to change anything in the near term. Northwest "could be in and out of bankruptcy five times before that lawsuit ends," he told Associated Press. Copland said Northwest's new fees, if followed by other airlines, could put distributors like Sabre out of business.

Northwest Airlines is the world's fifth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and approximately 1,500 daily departures. Northwest and its travel partners serve nearly 750 cities in 120 countries on six continents.