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U.S. Airways Seeks To Ground High-Flying Sabre

Posted  May 2, 2011

U.S. Airways is seeking to ground high-flying Sabre Holdings Corp. – which runs the largest U.S. global distribution system linking travel agents with airline fares and other services – for allegedly engaging in monopolistic acts.

U.S. Airways has filed an antitrust lawsuit against Sabre in the U. S. District Court for the Southern District of New York.  The airline’s complaint in U.S. Airways, Inc., v. Sabre Holdings Corporation et al., No. 11 CV 2725 (SDNY), alleges that Sabre has suppressed the ability of travel agents to book tickets directly with airlines, and that it used anti-competitive practices to force the airline into an unfair agreement.

According to U.S. Airways, Sabre threatened to pull U.S. Airways’ listings from its services, which includes the reservations systems used by online travel agency Travelocity, potentially forcing U.S. Airways into bankruptcy because the Sabre Global Distribution System accounts for 35 percent, or about $3.5 billion, of U.S. Airways’ revenues.

Sabre responded to the suit by stating that the antitrust claim was a “misguided attempt by an airline” to undermine a distribution model that “has brought competition to the airline industry,” and that Sabre would “aggressively defend against US Airways’ lawsuit, pursue our own legal rights and take appropriate action to protect consumers’ right to a transparent marketplace.”

The case is just the latest development in a wave of antitrust suits against the global distribution system in the airline sector.  In January, American Airlines sued Sabre on similar grounds, saying that it could lose “countless sales” if Sabre were permitted to give preference to other airlines in flight listings.  American accused Sabre of anticompetitive behavior by slanting information viewed by travel agents before they book flights.  That action is on hold until June 1 as the parties try to reach an agreement.

And just last week, American sued online travel agency Orbitz Worldwide and its largest stakeholder, Travelport, over “anticompetitive business practices” for trying to control the distribution of airline tickets.  In that suit, American contends that Travelport and Orbitz violated Sections 1 and 2 of the Sherman Act by using their control over the distribution of air fare information to maintain their monopoly power and to hinder the development of alternative technologies that could help consumers find cheaper fares.  American pulled its listings from Orbitz and Expedia in December after those services declined to include American’s Direct Connect reservation system for its listings.

In contrast to American, U.S. Airways signed a multiyear content agreement with Expedia in January.  U.S. Airways touted this agreement in announcing its first quarter of 2011 financial results in a section entitled “Notable First Quarter Accomplishments.”  There is no mention among its notable first-quarter accomplishments of U.S. Airways’ agreements with Sabre and Travelocity in February.  Instead, although the action occurred in April, after the first quarter ended, U.S. Airways noted among its “accomplishments” that it filed an antitrust lawsuit against Sabre.

Tagged in: Antitrust Litigation, Monopolization,