Airlines Discourage Bargain Hunts : Travel Agencies Face Hefty Fees to Use New Computer Programs

When Culver City contractor Richard M. O’Toole booked a last-minute business trip to New York recently, his agent quoted him a $1,180 round-trip fare. Then his agent’s computer went to work.

Two hours later, after electronically scanning thousands of fares listed in an airline reservation system, the computer spotted a $578 fare. The change meant O’Toole had to depart from Orange County’s airport, not Los Angeles International. But that was OK with O’Toole.

“It boils down to a 35-minute drive to save $600,” he said. “I didn’t think twice.”

Only a handful of travel agents use this new technology, which can potentially save consumers hundreds of dollars. O’Toole’s agent, Santa Ana-based Associated Travel Management, says its computer program saves an average of $150 for one customer in four.

But the new computer programs have drawn a strong reaction from the airlines. Sabre and Apollo, the reservation systems controlled by American Airlines and United Airlines, have socked the agencies with new fees to discourage extensive fare searches. Associated Travel said the new charges could cost it $300,000 a year.

The conflict over the new software has important implications for travel agencies, airlines and consumers. Travel agents need an edge to draw customers, but airlines make most of their profits from higher-priced tickets. Consumers are caught in the middle.

The software helps travel agencies keep up with the thousands of fare changes airlines make daily. Working 30 times faster than a travel agent, the software can scan through a reservation system and snare customer-pleasing bargains that an agent might never spot.

“There is no way an agency can check all those fares manually and stay in business,” said Jamie Nugent, a vice president at Rockville, Md.-based USTravel. “It is just too time-consuming.”

The reservation systems say the fees are justified because the new programs cause reservation networks to work harder. But agents and other industry experts say the airlines are also concerned that the new technology finds low fares for business travelers such as O’Toole, who normally pay full fare.

“I think the main intent is to limit the use of these programs,” said Steve Ballinger, editor of Travel Management Daily, an industry newsletter. “It seems the airlines are saying that just because there is a cheap fare out there doesn’t mean you have an unlimited right to find it.”

The controversy comes at a time when both airlines and travel agents are doing poorly. Airline traffic fell in July and was expected to decline overall in August as recession-battered consumers cut back on travel. Continental, America West, Pan Am, Midway and Braniff airlines are in bankruptcy proceedings.

With sales sagging, airlines are particularly anxious to sell high-priced tickets. Two weeks ago, the industry eliminated a three-day advance purchase fare in what observers viewed as an attempt to force business travelers to buy full-fare tickets. The new agency software threatens this strategy.

“Obviously, the airlines would prefer not to re-book at lower fares,” said Daniel Kasper, an airline industry consultant with Harbridge House.

The downturn in travel has also hammered travel agencies. The Airline Reporting Corp. said agency ticket sales dropped significantly in July, the heart of the important summer travel season. For the first seven months of this year, 423 agencies were in default to the Airline Reporting Corp., a clearing house for ticket sales.

Travel agencies believe that the software gives them a competitive edge, especially with increasingly cost-conscious business travelers. As agencies move from mere order-taking to travel management, “it is important for them to show corporate customers that they can save them money,” consultant Kasper said. “These programs let agencies do that.”

The fees are likely to discourage small agencies from investing in the new software, which costs up to $150,000. “There is no way a small agency can afford it,” said USTravel’s Nugent.

Travel agents book flights by punching keyboards linked via telephone lines to distant computers owned by reservation systems. Each “hit” on the keyboard represents an electronic inquiry about flights, hotel accommodations, or rental car reservations. According to American Airline’s Sabre, the average travel agent hits the keys 50 times to make a reservation. Computer programs make up to 200 electronic inquiries.

The reservation systems say they are imposing fees because the excess hits threaten to overload their entire reservation networks. In one instance, Sabre was forced to expand telephone line capacity from an agency to handle increased information flow. “We’re happy to do it, but there’s a cost involved,” Sabre marketing manager Peter Milnard said.

Sabre is charging agencies that exceed 105 hits for each reservation. Apollo initially proposed to a 66 keystroke limit, travel agents said, but is now allowing up to 100 hits. The reservation systems are charging between a cent and a cent-and-a-half for each electronic inquiry over the limit.

Not every agent finds the new limits easy to live with. Boston-based Woodside Travel said some agents in highly competitive markets, such as Los Angeles, exceed the new keystroke thresholds manually because there are so many airlines to check.

“Our reaction was, what does Sabre have to complain about?” Executive Vice President Nancy Barros asked. “It’s like, excuse me. . . .”

Barros said that after she protested, Sabre agreed to take a look at the limit.

The reservation systems say their limits aren’t hurting the travel agencies. A spokeswoman for Sabre said only two dozen of the 14,000 travel agencies on Sabre’s network got bills in excess of $50. An Apollo spokesman said the reservation system hasn’t billed anyone yet and is easing the new limits in as it renegotiates contracts with travel agencies.

Travel agencies say they’ve taken steps to avoid hefty fees.

Associated Travel developed what it calls a “stealth” version of its original software that is capable of taking an electronic picture of the information in the airline reservation system. Associated’s computer then scans the electronic copy for bargains. By using this technique, the agency immediately reduced the number of hits to 112 from 200. Though it may still pay a fee, it is less than the $300,000 it stood to pay without the revised software.

Other agencies have taken different approaches. Woodside Travel said it now looks for aisle or window seats less often. USTravel says it now conducts most of its searches at night, when fees are lower and when most fare changes are made.

“We don’t think (American’s) Sabre is out to destroy our program,” Woodside’s Barros said. “We think they would like to control how we use it.”