McGee on AA’s NDC: Changing the Rules on Miles Should be Illegal | Travel Research Online

Last week, after ASTA responded to American Airlines’ move to deny frequent flyer privileges to customers who are not booking through its New Distribution Capability (NDC), I had the good fortune of speaking with William McGee. He is one of the top authorities on airlines, and a consumer advocate in the never-ending battles between airlines and the public they are mandated to serve. There is no better way to get clarity on airline issues than to speak with McGee.

McGee’s current title is senior fellow for aviation and travel at the American Economic Liberties Project. But that doesn’t begin to describe his level of authority when speaking about airlines. Because that knowledge is so important as we approach an issue that arguably poses an existential threat to the retail travel community, let me briefly review a few relevant credentials before diving into the meat.

McGee first worked in the airline industry in 1985, 39 years ago. He was a real hands-on airline guy who worked in management of flight operations. Since that stint in the ‘80s and ‘90s, he’s been a journalist covering airlines and other aspects of travel for decades. In 2012 he published the book Attention All Passengers – The Truth About the Airline Industry, which has proved to be prophetic about issues he pointed out that are now surfacing as he predicted. He revealed how airlines were outsourcing maintenance to countries where it was cheaper and enabled them to cut corners that they shouldn’t be cutting. Now we’re seeing such things as doors flying off airlines in flight. Not a good trend. McGee warned us a dozen years ago.

McGee was consumer advocate for airlines with the Consumers Union for years and testified before numerous Congressional committees over airline mergers. He was usually one of one, or two, lonesome witnesses on the consumer side across from a squad of airline cheerleaders. There’s much more to the resume, but you get the idea. As airline issues have continued to get worse, McGee, by virtue of his incomparable track record, is one of the top authorities to go to. I was happy to get him on the line and ask what he had to say about American’s latest strong-arm moves with its NDC.

He was thrilled to respond because he has some passion about the overriding issues, as well as about the NDC in particular, and wanted to talk about it. From him, I gathered that the NDC issue is actually worse than I had previously realized.

Here’s a summary of what I learned from McGee.

While American Airlines PR is tossing out slogans like, “We want to make it more convenient for customers to enjoy the value and magic of travel,” what’s really happening is the same old story: disintermediation of the retail travel sector.

McGee outlined three negative effects of the NDC.

• “First is to drive out third-party sellers, partners,” he said. “That’s bad for travel agents, but also bad for consumers.”
• Second: “It’s clear they are going to customized pricing, so they can gouge people even more,” he said. “It’s inherently unfair and should be stopped at all costs. It’s a fancy way of saying, you and I are shopping for the same product, but I will pay more because they know I will.”
• Third: Privacy issues. “We did a lot of research on it at Consumer Reports, to see how it works,” he said. “We don’t even know the tip of the iceberg of the data that they have gathered on all of us: where we live, our income, what site you were on before and after, how quickly you shop before you buy, and how much the savings are worth to you.”

Forcing customers to book only through the NDC, either directly or through American’s “preferred” agencies, gives the airlines power to impose “dynamic pricing” or “customized pricing.” The airlines say, “That means you may pay less,” but it will most likely mean you will pay more. The airline isn’t going to all this trouble in order to reduce profits for your benefit as a passenger.

With the emergence of the NDC we are now getting a clearer picture of the privacy issues over websites planting cookies on your computer so they can monitor your every move on the internet. Many people shrug it off, saying, “I don’t care if they track me. I have nothing to hide…” But when airlines use the considerable data they have on you to figure out how much they can charge you for a ticket, it’s not just about your privacy, it’s about your pocketbook.

Decimating the retail sector would remove for the airline another layer of competitive pressure. They already have very little competitive pressure because four airlines control practically the entire, massive U.S. airline market. And they divide the territories according to their hub systems, and decline to compete fiercely against other airlines in their respective hubs.

The retail segment, as ASTA President and CEO Zane Kerby said in his statement, provides comparative shopping information. That is protection and support for consumers, which is needed to keep markets free and not monopolized. So, as bad as the issue is for travel agencies, whose livelihoods are threatened, it is just as deep a concern to the traveling public at large.

The changing of the rules for how frequent flyer miles work is an additional issue, and another one that burns McGee. “On top of that is the travesty of frequent flyer programs,” he said. “People go into these programs in good faith, then — ‘Guess what? We changed the rules.’ That should be illegal.”

Defining Our Airline Future

We are all reliant on a functioning airline industry. The airlines like to say that they operate in a free market when times are good. But when times aren’t good they come to Congress with their hats in their hands, knowing they have us all over a barrel as they remind us that a modern country cannot exist without an airline system.

In closing, let me clarify that when I speak of the NDC posing an “existential threat” to the retail segment, I do not believe the airlines will succeed in wiping out retailers, not that they haven’t tried for decades. They’ve tried and failed and will fail again. If American and its sister airlines got their way, they would probably eliminate travel advisors so they could completely own their customers, without interference from agents who represent those customers, look out for them, and present comparative shopping intelligence to help them make informed choices.

The airlines don’t want that. It would hamper their efforts to maximize profits. You can’t blame them for that, but they can’t blame the public for objecting. For the American public, who are not only the customers of the airlines, but also the taxpayers who subsidize them through their taxes, it is bad. We don’t need to reduce airline competition even more than it has already been reduced by gigantic mergers. It would not be good for the country for the airlines to eliminate the retail segment, totally own their customers and escape whatever competitive pressure they are still subject to in a vast market primarily controlled by four giants.

The airlines are in the position of power they are in, in large part because they have been granted antitrust immunity under law. They have all sorts of privileges and advantages built into the legal system, but they are granted these special privileges through governmental processes. In return, they are responsible for providing an airline system, one that serves America, not just the airlines and their shareholders.

P.S. – One more note. Excuse me, every time I say “travel agent,” I feel like I need to issue an apology. Does anyone find that title demeaning? I don’t. To me “agent” represents an active force, someone you can count on to help you when you need it, not merely to advise you. So, I tend to keep that word alive. I hope no one is offended.

And while we’re on the subject, between “advisor” and “agent,” which do you prefer? I like them both. I now suggest another alternative: “Advocate.” This is the role we are referring to when we talk about being the last line of resistance between the traveling public and the giant airline corporations who treat them like cattle. To me, it’s a highly honorable role at this historic moment, whichever of the A words you choose. The airlines are coming in for the kill, and this is not entirely metaphorical. If they were to succeed in wiping out the retail sector, the public is the next victim, with no protection. All of us, in the retail sector and in the public, cannot let this happen.

David Cogswell is a freelance writer working remotely, from wherever he is at the moment. Born at the dead center of the United States during the last century, he has been incessantly moving and exploring for decades. His articles have appeared in the Chicago Tribune, the Los Angeles Times, Fortune, Fox News, Luxury Travel Magazine, Travel Weekly, Travel Market Report, Travel Agent Magazine, TravelPulse.com, Quirkycruise.com, and other publications. He is the author of four books and a contributor to several others. He was last seen somewhere in the Northeast US.