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American Airlines Awarded Just $1 In Decade Old Court Case

SimpleFlying logo SimpleFlying 5/24/2022 Luke Peters
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A legal case initially brought by US Airways and inherited by American Airlines after the merger of the two carriers in 2013 has resulted in the Dallas-based mega-carrier being awarded just a single dollar in damages by a US court, despite winning the case. Let's unravel the background of the legal action to discover why the airline's victory leaves it with little to celebrate.

Background to the case

Following a three-week trial, A US court jury has decided on a legal battle that has rumbled on for over ten years, having first been brought by US Airways in 2011. The case was brought against Sabre, the global distribution technology specialist company, which US Airways claimed was employing hostile anti-competitive practices to increase its revenue from selling the airline's tickets. The claim also accused Sabre of restricting US Airways' ability to directly recover costs imposed upon it by Sabre from travel agents.

The dominance of Global Distribution Systems (GDS) such as those operated by Sabre has been an issue for the air travel industry for years. For decades, a small handful of players have effectively controlled the GDS industry as an oligopoly.

The major GDS providers, including Texas-based Sabre, along with Amadeus based in Madrid and UK-headquartered Travelport, hold almost total control over how airlines sell their tickets through travel agency networks worldwide.

RHL Images via Wikimedia Commons<\/a>"" data-modal-id="single-image-modal" data-modal-container-id="single-image-modal-container" data-img-caption="""">
The case was originally brought by US Airways in 2011. Photo: RHL Images via Wikimedia Commons

Anti-competitive practices

The lawsuit was initially brought by US Airways and taken on by American Airlines' legal team following the merger of the two carriers. The airline claimed that practices used by Sabre had cost it nearly $300 million and amounted to uncompetitive practices - also known as 'antitrust' behavior in legal terms. These practices included -

  • Forcing the airline to make all of its fares (including special discount fares) bookable through Sabre;
  • Preventing it from reaching out to travel agents and business travelers directly; and
  • Barring the airline from charging travel agents a separate fee to cover Sabre's service.

In 2016, American Airlines, having taken on the case, won initially at trial and was awarded US$15 million in damages. That first hearing found that Sabre's practices had caused $5 million in financial harm to US Airways. The punitive damages awarded to the airline were tripled under US antitrust laws to act as a deterrent against Sabre's further misconduct.

However, Sabre appealed that decision and was successful in having it overturned. The judge hearing the appeal ordered a new trial based on new antitrust standards brought in by the US Supreme Court in 2018 following a case involving credit card fees. These new standards made it far more onerous for those bringing an antitrust lawsuit to prove losses occurred as a result of the direct or indirect actions of the other party.

In the latest trial, American Airlines attempted to prove that Sabre's practices ultimately harmed consumers and that competition couldn't be protected in a less restrictive way. It also had to demonstrate that it had suffered financial losses directly due to the anti-competitive practices it accused Sabre of perpetrating.

American Airlines had to demonstrate that financial harm was suffered as a result of Sabre's practices. Photo: Airbus

A hollow victory for the airline

Last week, in the latest twist in this aviation-related legal saga, a federal court jury in Manhattan agreed that while Sabre's practices may not have followed the spirit of current antitrust laws, the consequences of its practices meant that the airline had not suffered any financial losses as a result. Furthermore, American Airlines had failed to convince the court otherwise.

In awarding nominal damages of just US$1 to American Airlines, the court was effectively giving out a clear message that it was unimpressed with either side's conduct in the case. The token damages awarded signaled a slap on the wrist to Sabre for its tactics which, although perhaps not in breach of the law, could be described as questionable.

Similarly, the court was unimpressed that American Airlines had failed to demonstrate that US Airways had suffered any financial loss due to Sabre's conduct or practices and, as a result, should not receive any damages. The dollar awarded was simply a nominal way to bring the legal proceedings to a formal close, sending both parties on their way with lessons to be learned by both sides.

In a somewhat muted victory statement issued by American Airlines following the verdict and picking up on the judge's comments, a spokesperson stated that,

“We expect this decision to discourage further misconduct by Sabre and bring needed competition to airline distribution. The jury found that Sabre is a monopolist that abused its power.”

In response to the findings of the court, an even more muted response issued by a public relations firm acting on behalf of Sabre said,

“We believe the jury’s award of $1 is commensurate with the evidence presented,”

An ongoing industry battle

For decades, airlines have been perpetually disgruntled at global distribution services companies like Sabre. They have always claimed that excessive fees and anti-competitive terms imposed by the few major GDS companies that provide flight schedules, fare discount information, and booking services to travel agents effectively cost them hundreds of millions of dollars in profits.

Additionally, as just a handful of players control the market for GDS systems, the airlines are left with little choice but to accept the terms offered to them by the GDS companies, however unpalatable they may be.

American Airlines was awarded a token single dollar for all its efforts to bring the case to a conclusion. Photo: Boeing

The battle between airlines and GDS companies is primarily over the corporate travel market. Big corporate travel agencies use GDS services to show all major airlines and their sale fares in a single search. And because the distribution services usually require airlines to list every fare in their system to be included as part of the agreement, the services are precious to corporations that can benefit from competitive fares that they might not otherwise have access to.

Airlines have found workarounds to the GDS issue by selling tickets through their own websites. Those sites can offer special deals not available through Sabre and companies like it. However, online travel agencies which compete with the airlines' websites in the online leisure travel market continue to use GDS suppliers as they pay them to do so. Meanwhile, airlines stopped paying online agencies commissions on ticket sales over a decade ago.

The GDS companies strike back

The GDS companies are keen to demonstrate that they are not the 'bad guys' in this ongoing debate. They claim they are constantly fending off efforts by tech-driven interlopers and upstart online travel agencies to weaken their position in the marketplace and claim they are forced to employ tactics such as those identified in the US Airways and American Airlines action to protect their place in the market.

Ultimately, changes in the industry since the case was filed a decade ago make this latest court verdict less significant in any event. According to Sabre, distribution service fees now take up less than 5% of the cost of the average airline ticket, and its average fee in the first quarter of 2022 was $5.28 per ticket. Additionally, Sabre argues that fewer tickets are sold through the GDS services as airline websites grow in importance, sophistication, and, most importantly, customer appeal.

What do you think of the decision in this case? Do you believe that there will continue to be a dominant presence of GDS companies as the industry develops in the future? Let us have your thoughts in the comments.

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