Fliers Starting to Pay for Dysfunctional Booking System

Two airlines' initiatives this week warn of a radical shift.
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Ever think about how screwy the whole process of airline reservations really is?

Until fairly recently, I don't think most people gave it much thought. But that is about to change -- because airlines, in an attempt to defray hundreds of millions of dollars in ticket distribution costs, have decided that the end user (you and me) will now pay a bigger part of the freight if we choose to book tickets in a manner the airline does not prefer.

While you are probably aware of the fact that airlines have been steadily reducing the amount of commissions paid to travel agents to book airline tickets, this past week saw two unprecedented inititives launched by two different airlines that portend a radical shift. In both cases, the passenger is now being targeted, not the travel agent.

In the case of

Delta Air Lines

(DAL) - Get Report

, the airline announced on Thursday that all domestic round-trip tickets that are

not

booked through their Internet site, will now be assessed a $2 charge, effective immediately. Now, this includes

all

tickets not booked through their site. In other words, if you go to the airport and buy a ticket directly, and do not use a travel agent, yep, you will be hit with the charge. The hue and cry surrounding this announcement has been pretty loud -- both from the travel agent community and passenger-rights' groups.

The reasoning for this change? Simple. Delta wants to encourage passengers to use its Interent site to book their airline tickets. Fine. But we would suggest that the airline would have suffered a great deal less negative publicity -- the

American Society of Travel Agents

, the

Consumer Federation of America

and the

Aviation Consumer Action Project

all issued releases condemning the airlines' moves -- if it had simply rewarded those who use its Web site to book tickets, instead of penalizing those who do not. Of course, it goes without saying that the potential income from the reverse method is much greater.

On Friday,

Alaska Airlines

(ALK) - Get Report

pulled a new rabbit out of the ticketing hat. The airline announced that those passengers who insist on a traditional paper ticket, as opposed to an "e-ticket," will now be slapped with an additional $10 service charge, effective immediately.

There is no doubt that we can expect to see other airlines match the announced changes or come up with new twists of their own.

Some news reports have been quick to say that these efforts are an attempt by the airlines to "subsidize" airline profits at the expense of the passenger. But at least one airline industry consultant, Robert W. Mann, sees the moves differently. He blames the

Computer Reservation Systems

, or CRS, and the travel agencies, which have for years used unproductive booking practices.

"In a nutshell, Delta's move is designed to defray the unconscionable burden of CRS costs that are created by unproductive booking practices in travel agencies," Mann explains, noting that he believes the move is targeting the wrong transactional party.

Mann concludes, "While generating the desired outcome, the unfortunate aspect of Delta's execution is that the customer ends up paying -- when the agency really ought to pay and bear the burden of either the fee or cleaning up their booking practices to avoid it."

For those of you who are not familiar with the way the traditional agency booking system operates, here is an overview: Most airlines pay a Computer Reservation System to list all their available flights for purchase. While the

Sabre

system, owned by American Airlines

(AMR)

, is the most well-known, there are others. The Computer Reservation Systems then charge travel agencies for the right to use their systems.

However, there is a little known quirk of the Computer Reservation Systems that more than irks airlines: They also charge the airlines for bookings made by agencies that are never turned into tickets. These are known in the industry as "passive bookings" and considered "transactions" by the CRS.

Somewhere along the way, as Frank Arciuolo, executive vice president of

Airline Automation

, puts it, the Computer Reservation Systems have become a "transactional-oriented business." Arciuolo's company audits Computer Reservation Systems for airlines -- in an attempt to lower airlines' CRS costs.

And if this were not enough to upset airlines, there is the fact that travel agencies are also rewarded by the Computer Reservation Systems for higher numbers of transactions -- not tickets booked. The more transactions an agency makes, the lower the CRS fees charged to the agency.

This system is truly dysfunctional. The airlines are charged for bookings that never materialize into tickets, and travel agencies have a financial incentive to make as many bookings as possible. So the middle man -- a CRS -- is the only one consistently making money on the transactions.

See why Robert Crandall was brilliant when he developed the concept of Sabre?

Brilliant as it was, we think it's time has come and gone. It is crucial that the dysfuntional relationship between the Computer Reservation Systems, the airlines and the travel agencies be modified.

Hitting up passengers to compensate for this tangled situation is certainly not the answer.

Holly Hegeman, based in Dallas, pilots the Wing Tips column. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks.