The head of the Australian Travel Industry Association (ATIA), Dean Long, has appeared before a government inquiry to voice the association’s concerns about the way airlines are manipulating the New Distribution Capability (NDC) to the detriment of travel agents and consumers.

Long told the inquiry into bilateral air service right agreements that there were “unintended effects” of NDC. “It allowed airlines to assume the role of sole price makers, enabling them to enhance profit margins on their most affordable products without market competition pressure.

“This transformation has resulted in notable consequences that have serious ramifications for Australian consumers and the agents who support them,” Long said.

ATIA’s membership base includes retail and corporate travel agents, tour operators, wholesalers and consolidators, ranging in size from the largest listed organisations such as Flight Centre, Helloworld, Corporate Travel Management and Webjet, through to small independently owned and operated travel businesses.

Airline dominance raises concerns

AITA’s head Dean Long, says that NDC had unintentionally allowed airlines to dominate pricing without competitive pressures.

Long said due to the lack of competition, it was clear airline commitment to the local distribution model “is under significant pressure”.

“This is because the travel and aviation industries were (and remain) largely supportive but unprepared to fully adopt NDC.

“While internationally, NDC can be somewhat mitigated, domestically, the concentration of market power has caused disruption to the air ticket distribution ecosystem. It has resulted in serious consumer harm in the form of higher airfares and further reduced competition, in terms of both airline travel itself as well as air ticket distribution, Long told the inquiry in Sydney.

He said that significant price increases have not been confined to a specific class of travel, although the growing popularity of premium economy seating has seen even greater price rises for this category. Examples of higher fares were an 81% increase in Sydney-Hong Kong economy fares, and a 59% increase in Sydney-Singapore premium economy fares.

Prevention of competition from travel agents

Further, Long said, due to the consolidation of major airlines and limited domestic competition, airlines had taken the opportunity to seek to reduce competition for the distribution of airfares.

He continued, “This is done by only making available selected fares through proprietary IT systems - preventing any competition from travel agents on the efficient distribution of these highly sought-after tickets.

“While airlines may be able to increase their margin by distributing more fares through their own direct channels there is a net loss in competition for distribution across the market – with consumers losing out.”

Controversy surrounds Australia's decision on Qatar Airways

The Senate inquiry was called to investigate the Australian government’s recent decision to block a request from Qatar Airways to add extra services between Doha and Australia.

The Australian government cited “national interest” for its decision to refuse Qatar’s request, without explaining what it meant by “national interest”.

Qatar Airways CEO Akbar Al Baker called the decision “very unfair”, and his view was shared by large sections of the travel industry in Australia, including Flight Centre boss Graham Turner, who has called on the government to reverse its decision to reject Qatar Airways from doubling its flights to Australia.

The call for reform in air traffic rights

Long told the inquiry, there were critical flaws in the existing [bilateral air traffic rights] system, where decisions “often lack a comprehensive understanding of their impact on passengers”.

“The need for reform is glaring, as it is crucial that all stakeholders, not just airlines, have a direct say in determining supply and demand,” he added.

Long submitted that alliances had done little to improve competition among airlines. “Interestingly, as was the case with NDC, global alliances were largely promoted by IATA and others as pro-consumer but have greatly diminished the competitive vigour of the international air transportation market.”