Airlines describe it as a fast and efficient method to help passengers find the best fare possible. The Justice Department calls it price-fixing and illegal.
The traditional way airlines go about changing air fares came under attack by a Justice Department antitrust suit filed on Monday, which charges that the airlines have ripped off passengers by conspiring to limit fare competition via a giant computer clearinghouse.
But the department's proposals for settling the suit--which would dramatically alter the fare-setting process--have met with confusion and criticism, and probably will not result in any dramatic or immediate benefits for travelers.
Some critics contend that the changes could even hurt consumers by hitting them with unexpected fare increases.
In the long run, "there may be fare discounts offered that may not be currently offered," said Con Hitchcock, an aviation specialist with the Aviation Consumer Action Project in Washington. "But you won't see an immediate drop in fares."
The Justice Department's three-year probe of airline pricing methods focused on how carriers use the Airport Tariff Publishing Co., which is owned by several of the nation's largest airlines that were named in the suit--Alaska, American, Continental, Delta, Northwest, TWA, United and USAir.
Every day, airlines submit thousands of fare changes and proposed changes to the powerful ATP computer in suburban Washington. The system digests all the information, which is then distributed to individual airline computer reservations systems used by travel agents and the carriers themselves to reserve and purchase tickets for passengers.
In this manner, airlines said, passengers and travel agents can find out about all current fares, schedules, potential fare hikes, temporary sales and conditions--all from one source. The airlines themselves use the system to reserve and purchase tickets from other carriers.
"There needs to be some orderly system for putting those fares in the market place or otherwise chaos reigns," said Al Becker, spokesman for American Airlines.
But the Justice Department said the airlines also manipulate the system to set prices and discourage discounting. In one common industry practice, airlines will submit a proposed fare hike for a future date to ATP, allowing other airlines to match or not, the department said. Unless there is total agreement by the airlines, such fare hikes are often postponed, the agency said.
The proposed price hikes are often nothing more than trial balloons that put pressure on consumers to buy tickets to avoid increases that will not take place, said J. Mark Gidley, acting chief of Justice's antitrust division.
In another misuse of the system, the Justice Department said, airlines that have proposed fare cuts have sometimes reversed course after other carriers retaliated by submitting deep discounts of their own. This denies consumers lower fares, federal investigators said.
To rid the system of such abuses, the Justice Department has proposed that airlines give no advance warnings in the computer system of fare changes. A carrier can only disclose the beginning and ending of a fare sale if it advertises it first in newspapers or other general media. United and USAir have already consented to go along with the proposals and settle charges.
"There is an awful lot of fare cutting that just goes into the computer," said Elliott M. Seiden, vice president of government affairs at Northwest. "We could never afford to advertise all the changes we make."
While the proposal would eliminate sneak peaks of rivals' pricing plans, it also means travel agents and airline reservations agents could not tell a customer when unadvertised sales--which are common--begin or end, or when a fare hike will go into effect. As a result, travelers who reserved a seat at one fare might purchase the ticket the next day to find the price has increased, airlines and travel agents said.