Eleven U.S. airlines charged yesterday that the two giants of their industry, United and American airlines, have used their computer reservation systems to gain an unfair advantage in the highly competitive deregulated airline business.
United and American developed and own the systems that a majority of travel agents use to book flights, not just for those airlines, but for travel on other companies' flights as well.
The central allegations are that the systems' owners programmed their computers to favor unfairly the computer screen display of their own flights, to the disadvantage of perhaps more convenient competing flights, and that they have charged other airlines high fees to book flights through their systems.
The civil complaint, filed in U.S. District Court in Los Angeles, seeks a total of $350 million in damages, which could exceed $1 billion under the treble-damage provisions of the antitrust laws. The complaint also seeks a permanent injunction prohibiting the practices.
United Airlines spokesman Joe Hopkins said, "We believe the suit is without merit and will vigorously contest it."
American spokesman Lowell Duncan said, "American Airlines denies that it used its automated reservation system in a monopolistic manner or that its user fees are unreasonable. This lawsuit is merely another effort by some of our competitors to return to the days of government regulation, when large carriers were compelled to subsidize smaller ones."
The suit is but the latest chapter in a long-running controversy that involves the airlines, the Justice Department, Congress and the Civil Aeronautics Board. It comes just seven days after a new CAB rule took effect that prohibits bias in the "first-screen" display that travel agents see when querying a computer reservation system.
As the rule took effect, so did a new list of charges United and American levies on other carriers to book their flights. Several carriers have complained that their fees were increased; both United and American spokesmen said yesterday that fees went up in some cases and down in others, depending on a number of variables.
Nonetheless, Sen. Nancy Landon Kassebaum (R-Kan.), chairman of the Senate aviation subcommittee, has already announced that she will hold hearings on whether airlines should be required to divest themselves of computer systems.
The Justice Department developed substantial information on the issue, which it gave to the CAB during its deliberations on the new rule. Justice said that "the operators of airline-owned computer reservation systems , particularly American Airlines and United Airlines, have considerable market power over rival airlines," and said it was concerned that, "absent government intervention, the economic harm associated with the exercise of this market power will persist."
Elliott Seiden, chief of the Transportation Section of Justice's antitrust division, said yesterday that computer reservation systems continue to be "a matter of great interest and concern in the Department of Justice. With the CAB rules having just gone into effect, we are anxious to see how they work."
Maxwell M. Blecher, the Los Angeles attorney for the 11 complaining airlines, said in a telephone interview that, "The allegations in the complaint were derived largely from the Justice Department findings that there were some probable violations."
The complaint was filed by Washington-based USAir, Pacific Southwest Airlines, AirCal, Ozark Air Lines, Republic Airlines, Muse Air, Alaska Airlines, Midway Airlines, Northwest Airlines, Western Air Lines and Pan American World Airways.