[House Hearing, 107 Congress] [From the U.S. Government Publishing Office] ISSUES IN THE TRAVEL AGENCY BUSINESS ======================================================================= HEARING before the SUBCOMMITTEE ON REGULATORY REFORM AND OVERSIGHT of the COMMITTEE ON SMALL BUSINESS HOUSE OF REPRESENTATIVES ONE HUNDRED SEVENTH CONGRESS SECOND SESSION __________ WASHINGTON, DC, MAY 2, 2002 __________ Serial No. 107-55 __________ Printed for the use of the Committee on Small Business U.S. GOVERNMENT PRINTING OFFICE 79-992 WASHINGTON : 2002 ________________________________________________________________________ For Sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512�091800 Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�090001 COMMITTEE ON SMALL BUSINESS DONALD MANZULLO, Illinois, Chairman LARRY COMBEST, Texas NYDIA M. VELAZQUEZ, New York JOEL HEFLEY, Colorado JUANITA MILLENDER-McDONALD, ROSCOE G. BARTLETT, Maryland California FRANK A. LoBIONDO, New Jersey DANNY K. DAVIS, Illinois SUE W. KELLY, New York BILL PASCRELL, Jr., New Jersey STEVE CHABOT, Ohio DONNA M. CHRISTENSEN, Virgin PATRICK J. TOOMEY, Pennsylvania Islands JIM DeMINT, South Carolina ROBERT A. BRADY, Pennsylvania JOHN R. THUNE, South Dakota TOM UDALL, New Mexico MIKE PENCE, Indiana STEPHANIE TUBBS JONES, Ohio MICHAEL FERGUSON, New Jersey CHARLES A. GONZALEZ, Texas DARRELL E. ISSA, California DAVID D. PHELPS, Illinois SAM GRAVES, Missouri GRACE F. NAPOLITANO, California EDWARD L. SCHROCK, Virginia BRIAN BAIRD, Washington FELIX J. GRUCCI, Jr., New York MARK UDALL, Colorado W. TODD AKIN, Missouri JAMES R. LANGEVIN, Rhode Island SHELLEY MOORE CAPITO, West Virginia MIKE ROSS, Arkansas BILL SHUSTER, Pennsylvania BRAD CARSON, Oklahoma ANBAL ACEVEDO-VILA, Puerto Rico Doug Thomas, Staff Director Phil Eskeland, Deputy Staff Director Michael Day, Minority Staff Director ------ Subcommittee on Regulatory Reform and Oversight MIKE PENCE, Indiana, Chairman LARRY COMBEST, Texas ROBERT A. BRADY, Pennsylvania SUE W. KELLY, New York BILL PASCRELL, Jr., New Jersey SAM GRAVES, Missouri CHARLES A. GONZALEZ, Texas ROSCOE G. BARTLETT, Maryland DAVID D. PHELPS, Illinois TODD W. AKIN, Missouri JAMES R. LANGEVIN, Rhode Island PATRICK J. TOOMEY, Pennsylvania ANIBAL ACEVEDO-VILA, Puerto Rico Barry Pineles, Professional Staff Member C O N T E N T S ---------- Page Hearing held on May 2, 2002...................................... 1 Witnesses Foley, Hon. Mark, U.S. House of Representatives.................. 5 Fenech, Lou, General Manager, Royal Holiday Travel............... 7 Siemsen, Celeste, President, Empress Travel of Coram............. 9 Morse, Stan, President and Owner, Marstan Travel................. 12 Alton, Jacquelyn, Owner, CWT/Almeda Travel, Representing Society of Government Travel Professionals............................. 14 Doernhoefer, Gary, Vice President & General Counsel, Orbitz...... 16 Thomas, Michael, President, OneTravel.com........................ 19 Appendix Opening statements: Pence, Hon. Mike............................................. 43 Grucci, Hon. Felix........................................... 46 Brady, Hon. Robert A......................................... 53 Prepared statements: Foley, Hon. Mark............................................. 54 Fenech, Lou.................................................. 56 Siemsen, Celeste............................................. 65 Morse, Stan.................................................. 76 Alton, Jacquelyn............................................. 80 Doernhoefer, Gary............................................ 89 Thomas, Michael.............................................. 102 Additional material: Prepared statement of Mark Ferguson, Aqua Software Products, Inc........................................................ 115 Prepared testimony of Nancy Budget Travel.................... 116 Prepared testimony of Bernadette Cairns, Budget Travel....... 119 Prepared testimony of Ellen Knapp, Business Travel Specialists, Inc........................................... 121 Prepared testimony of Marianne McInerney, National Business Travel Association......................................... 123 Prepared testimony of Dale Colson, Women Impacting Public Policy..................................................... 131 Prepared testimony of Kevin Iwamoto, National Business Travel Association................................................ 139 Letter to Committee from Buffalo Travel & Tours, Inc......... 144 Letter to Committee from Jonathan Zuck, Association for Competitive Technology..................................... 147 Letter to Committee from Competitive Enterprise Institute.... 148 Letter to Committee from Robert Rowen, Vanguard Airlines..... 152 ISSUES IN THE TRAVEL AGENCY BUSINESS ---------- THURSDAY, MAY 2, 2002 House of Representatives, Committee on Small Business, Subcommittee on Regulatory Reform and Oversight, Washington, DC. The committee met, pursuant to call, at 10:00 a.m. in room 2360, Rayburn House Office Building, Hon. Mike Pence (chairman of the committee) presiding. Chairman Pence. I would like to call the Subcommittee on Regulatory Reform and Oversight, the Committee on Small Business, into session. This hearing is entitled Issues in the Travel Agency business, and the Chair has a brief opening statement. We will also recognize the gentleman from New York, and also the ranking member for opening statements before we recognize the distinguished gentleman from Florida for our first panel, and I appreciate very much his attendance. Travel agents provide a service that most Americans take for granted. Unlike many other businesses, most Americans do not have daily contact with travel agents. We often forget that travel agents play a vital role in ensuring that Americans reach their intended destinations. They are a critical small business in many American communities. The necessary role that they play in the American economy was evident in the aftermath of the events of September 11. Riveting testimony provided by Bonnie Adams before this subcommittee on October 11 demonstrated the necessity of having a healthy and viable travel agency business in the country. As Ms. Adams testified, ``Travel agents were in their offices trying to help the many thousands of people stranded by nationwide airport closures. Many of them provided free assistance to people who had bought their tickets on the Internet and had no one else to contact for help.'' Today's hearing exams issues that are affecting the financial viability of the travel agency business. Technology has progressed to the point where many consumers are no longer using travel agents to purchase tickets or plan their holidays; rather they are using the Internet to investigate fares, see pictures of resorts and make reservations. New companies such as OneTravel.com and Orbitz were formed to take advantage of this new technology. This new technology even has affected how the federal government contracts for the provision of travel agency services. If there are cheaper and better ways for businesses to provide services than through travel agents, then the market has spoken. Travel agents will have to adapt to the changing economy just as many other small businesses have in the information age. However, the changes brought in the distribution of travel- related services, especially airline tickets, must at the end of the day be fair, particularly in light of the extraordinary commitment that this Congress made in the fall of 2001 to the airline industry itself. These changes cannot come as a result of unfair competitive practices by companies interested in extending their market power in the provision of air travel to new businesses or regulatory decisions that bias the marketplace in favor of certain interests. Before Congress takes any action, it is important that we understand the economic and regulatory problems faced by existing travel agents. We must also comprehend how new technologies and organizations are providing innovation in the delivery of travel services. Solutions to problems facing travel agents cannot stifle innovation, nor should the government favor new ways of doing business if they are based on unfair or unjust competition. The new system for selling and distributing airline tickets is not necessarily better if the system unfairly capitalizes on the existing market power and substantial federal assistance provided to the airlines. The issues being addressed in today's hearing are important as evidence by the appearance of good friend, Mr. Foley, the Co-chair of the Congressional Travel and Tourism Caucus, who has my taken time to speak on this issue in this panel today. If, in my estimation, unfair practices are endangering America's small travel agents, I will do my part to ensure that those unfair practices should be corrected. However, if the changes facing the travel agency business are the natural evolution of this sector of the economy, then I as a conservative would be loathe to take action. So I am here to learn about the industry and the changes in the agency business and its challenges for the future. And before recognizing several of my colleagues, let me specifically welcome Mr. Grucci from New York to our subcommittee. He will have the opportunity to make a statement after the ranking member if he should arrive. I also want to credit Mr. Grucci for his unique role in encouraging this hearing, and calling this issue to the attention of this subcommittee. I also want to thank and appreciate the former Chairwoman of this subcommittee, Mrs. Kelly, also from New York, who will be joining us as the morning proceeds. Your leadership has been an encouragement to the Chair and is largely responsible for our work today. With that, let me begin, as the ranking member is not here, by recognizing Mr. Davis from Illinois if he would have any opening statement at all. Mr. Davis. Thank you very much, Mr. Chairman, and I appreciate the opportunity to be here and to participate in this hearing, and I certainly want to welcome Representative Foley and look forward to the testimony of all those who have come and will participate. I am not a member of this subcommittee, and I had not intended to necessarily have any comments other than to suggest that I am seriously interested in the viability of the industry. I come from Chicago, which is transportation center of the universe as far as I am concerned, and as far as many other people are concerned. And so there is a great deal of activity, there is a tremendous amount of interest, and we have a great deal of concern that the industry remains viable, healthy and alive. And so I came to learn, to hear what is taking place, and I appreciate the opportunity to make those comments. Chairman Pence. We thank the gentleman from Illinois and appreciate his time in participating. Also, as I mentioned before she arrived, I want to recognize for any remarks the former Chairwoman of this subcommittee who sent a pace in the previous Congress, one that we have tried to keep up in the regulatory reform area of small business, and recognize Mrs. Kelly from New York for any opening comments. Ms. Kelly. Thank you, Mr. Chairman. I simply am delighted that you are holding this hearing. I think it is something that we very much need to address because the travel and tourism industry is one of the things that forms the heart of our small business network across this nation, and anything affects them adversely is likely to affect the economy of the nation. So I appreciate your holding this hearing, and look forward to the testimony from our witnesses today. Chairman Pence. And thank you. And lastly, the gentleman who first called this issue to the Chair's attention, and is largely responsible for having been the genesis of the hearing today, the gentleman and fellow freshman from New York, Mr. Grucci. Mr. Grucci. Thank you, Mr. Chairman, and I too would like to associate myself with your remarks. I do not believe that this is a hearing today to determine whether or not an industry should or should not survive because of how competition functions. Mr. Chairman I am outraged that there is not one airline representative at this meeting and I know they have been invited to be here. I think it is a disgrace that they have completely ignored Congress and its invitation to join in to understand what is going on because the bottom line here is that the airline industry had come to Congress with a legitimate problem, and had asked for help. And the taxpayers of this country rose to that occasion, to the tune of $15 billion. And we in Congress, and myself included, voted to support the airline industry, recognizing the huge impact that the airline industry had on traveling America--all the associated businesses that went along with our airline industry, our hotels, our restaurants, our limousine services, our taxi companies, and yes, our tourism, and the travel agents who play a big part in making tourism possible. They came to us and they said with a $15 billion package, we would be able to stay in the air. We would be able to continue to fly people around, and as a result all of the industries that depend upon airline travel will be able to survive, stemming off hundreds of thousands of job losses throughout the country as a result of the grievous attacks on September the 11th. Well, shortly after Congress stepped up and did what it felt was the right thing to do, the airline industries withdrew its commissions to the travel agencies all across the country, not with any advanced warning, not by sitting down with them and trying to negotiate a different rate schedule, but simply through their fax machines they received a document that said as of a certain time on a certain date you will no longer be receiving commissions, of which travel agencies probably close to 75 percent of their business revolves around commissions. Now, again, this is not to determine whether or not the airline industries ought to pay the commission, but certainly the airline industries, in my opinion, made very strong representations that with that $15 billion no one would suffer further; that they would be able to keep moving and keep the economy going strong. Well, not only did they not live up to their obligation and their commitment, in my opinion, they have also now duped the consumer who no longer will have the ability to deal with a human voice unless they want to pay additional fees, but the consumer is not seeing the benefit of the reduction in the commissions that are being saved by the airline industries. Those commissions are still embedded in their ticket price, but what is happening is the airline industries are pocketing that commission. Our travel agencies are being asked to take on a burden of dealing with the general public and not getting compensated by the airline industries, all at a time when an organization and a company known as Orbitz is receiving commissions and continuing to flourish, and ironically is sponsored and funded by the five major airlines in the United States. They are under an investigation by the Justice Department, and I am going to be following that investigation very closely. But the thing that really irked me the most was when it was brought to my attention that it is only American travel agents that have lost their commissions. There is still a nine percent commission being paid in Australia, the Bahamas, Brazil, the Czech Republic, Greece, Hong Kong, Hungary, Ireland, Indonesia, Israel, Italy, Jamaica, Jordan, Korea, New Zealand, Poland, Portugal, Saudi Arabia, and Zimbabwe. And a 10 percent commission is in Bermuda, Colombia and Peru. And what do we get in America for our hard-working, small business people from the airlines? Zero. And what do we get today from the airlines? Zero representation here at this hearing. Mr. Chairman, I am outraged that they are not here, and I think this committee ought to do all that it can to empower them to be here to testify at a subsequent hearing, including but not limited to the power that we have of subpoenaing. I have a written testimony that I will submit to the Chairman for purposes of incorporating in the record today. I am interested in hearing from our travel agents. I think that they will have a story to tell that will be very compelling, and I welcome our colleague, Mr. Foley, who will be testifying in just a moment. Thank you, Mr. Chairman, and I yield back the remainder of my time. [Mr. Grucci's statement may be found in the appendix.] Chairman Pence. Thank you, and the Chair recognizes the ranking member for this subcommittee from Pennsylvania, Robert Brady, for any opening remarks. Mr. Brady. Thank you, Mr. Chairman. I apologize for being late, and because of my tardiness I will not bore you with an opening statement. I will just submit it for the record, and I am interested to hear what my colleague and friend, Mr. Foley, has to say. Thank you. [Mr. Brady's statement may be found in the appendix.] Chairman Pence. Thank you, and the Chair is pleased to welcome to this hearing today as our first panel the Co-chair of the Congressional Travel and Tourism Caucus, a man very, very familiar with these issues as they bear both on small business and the economy at large. The gentleman from Florida, Mr. Foley. STATEMENT OF THE HONORABLE MARK FOLEY, REPRESENTATIVE FROM THE STATE OF FLORIDA Mr. Foley. Thank you very much, Chairman Pence. I feel like just revising and extending Mr. Grucci's remarks and calling them my own because they really hit on a number of topics that I wanted to discuss. Mr. Chairman, Mr. Brady, Mrs. Kelly, Mr. Davis, and Mr. Grucci, I appreciate and thank you for the opportunity to speak regarding the state of travel and tourism, and travel agents in the current economic environment. The termination of the pay-based commission structure to travel agencies should serve as a warning light--much like the low oil light in your car. While eliminating commissions for travel agents does not appear from the outset to have an immediate impact on travel, this small change has the potential to lead to a seizure of parts of this economic engine if ignored. As a former travel agent and now the Co-chairman of the Congressional Travel and Tourism Caucus--along with Congressman Sam Farr--the news of this removal of the pay structure by the airlines hit especially close to home. In fact, last month I sent to a letter to Attorney General John Ashcroft to review the actions of the airlines questioning the timing of the airlines dropping commission payments within days of each other. I would like to submit that letter for the record. Travel agents play an important role as a filter, an educator, a promoter and feeder to the purchasing public. In bad times, the airlines have relied on travel agents to bolster sales, but with the advent of the Internet airlines are expressing more hubris. In fact, during those bad times they are often referring to us as their partners in the travel and tourism industry. In good times, we are ignored and neglected. In fact, the airlines have entered in the online travel market in force--something that in itself reflects our changing times. Let me say for the record that I believe in a robust market economy, as does the Chairman. And in my last seven and a half years in Congress as a frequent, frequent flyer I can attest to the special role that the airlines play in the United States. However, our efforts to promote the airlines, including the $15 billion bailout of the airlines, carries a responsibility from the airlines to the American public. That $15 billion payment from the taxpaying public makes them, in a sense, de facto shareholders in the major airlines. In my meetings with virtually every segment of the travel and tourism industry in the wake of September 11, I heard various proposals to buoy the second largest industry in the United States. I, too, share Mr. Grucci's dismay at the fact that no airlines chose to appear. During the discussion of the $15 billion bailout, I could not get through the hallways because of the clutter of airline representatives that were there begging and asking for salvation. One of my personal concerns with the airline bailout was that it would not filter down, and I said this at the time, through the airlines to the family-owned travel agencies, the baggage handlers, the taxi cab drivers, and other related interests. And the decision to drop travel agent commission seems to bear that concern out. When a consumer walks into a travel agency, the airline ticket they purchase are often just a part of the overall travel package. By the airlines undercutting commissions, they are undercutting potential ground transportation, accommodations, and entertainment service sales offered to the traveling public by travel agencies. While it has been suggested by some that this latest round of commission cuts is the result of September 11--and I sincerely hope this is not being spread by the airlines--the truth is that airlines have been ratcheting down commissions for a number of years, and this has been a final blow that travel agents have been predicting for years. Mr. Chairman, it is critical that the traveling public continue to have free market access to an assortment of travel services and fares provide by travel agents. I thank you for calling this hearing, and I appreciate the members' interest in this subject. [Mr. Foley's statement may be found in the appendix.] Chairman Pence. I thank the gentleman for his comments, and in the midst of a very busy schedule your passionate remarks are a very important commencement for our hearing today. I want to recognize the gentleman from Puerto Rico who has joined us, if you had any opening remarks on this before we begin our next panel. With that, I will invite anyone on the panel that may have any specific questions or wish to amplify the comments made by Mr. Foley, and would begin with the ranking member. Mr. Grucci. Mr. Grucci. No. No, thank you, not at this time, Mr. Chairman. Chairman Pence. Ms. Kelly? Anyone? Ms. Kelly. No. Chairman Pence. Okay, with that, we will---- Mr. Foley. Thank you, Mr. Chairman. Chairman Pence [continuing]. Dismiss the witness, and again thank you. And our second panel, if you could take places at the table, we will begin very quickly. [Pause.] Chairman Pence. I would like to thank you for coming to this hearing of the Subcommittee on Regulatory Reform and Oversight, and we thank you for your commitment to good government, your willingness to dedicate time and appropriately travel to participate in this discussion. I want to let you know the ground rules. There are little light boxes in front of you. Those of you that are veterans are already familiar with the system. Each of you will be recognized for five minutes, and the green light means go, and yellow will come on about a minute before your time is up, and the red light, we ask you to respect, knowing that your full statement, if you do not waiver from your prepared statement, and we can add the balance of your statement to the record for the hearing and you need not be concerned about that being added. And we will, in the interest of time we will hear from all of the witnesses, and then proceed with questions from the members in attendance if that meets with the approval of everyone on the panel. And the Chair now recognizes the gentleman from New York, who will introduce our first witness. Mr. Grucci. Thank you, Mr. Chairman. It gives me great privilege to introduce Lou Fenech. Lou opened Royal Holiday Travel in Glen Cove, New York, in 1976, and worked as the general manager. The company was expanded in 1984, with a branch office in Sayville, New York, where it is currently. He is the president of the company. Lou is a graduate of Georgetown and received an MBA from Long Island University. It is also important to note that Lou is currently a deputy squadron commander of the Civil Air Patrol. Lou came to me in March to discuss the impact of the elimination of commissions to travel agencies, and has educated me on the problems travel agencies are facing regarding access to fares. It gives me great privilege to introduce to you Lou Fenech. STATEMENT OF LOU FENECH, PRESIDENT, ROYAL HOLIDAY TRAVEL Mr. Fenech. Thank you, Mr. Grucci. Chairman Pence, Congressman Grucci, and members of the subcommittee. My name is Lou Fenech. I am president of Royal Holiday Travel of Glen Cove and Sayville, New York. We are a 26-year- old travel company. Mr. Chairman, thank you, and Congressman Grucci, for providing this opportunity for me to testify today. The main reason for my appearance before this esteemed committee is to provide information that will help you focus on the current state of the travel industry. The majority of travel agencies are small companies, specializing in leisure travel. Over 52 percent of them are owned by women. We are active members of our local downtown business communities, members of our local chambers of commerce, and are taxpayers. We support our local schools, sports teams, charities and places of worship. We are your neighbors, your relatives and your friends. We are also in trouble. For many years our company and many companies just like us have relied on the sales of airline tickets as a major component of our income picture. When you stop to think about it, wherever a client may decide to go most trips begin with a trip on an airplane. Now, under the guise of survival the airlines have decided to change their distribution system and discard the sales force that has kept them in business and helped them to grow over these past five decades. We all know the toll of the tragedy of the September 11th has taken on this country. I believe that the travel industry has been the hardest hit of all. I also believe that when a major industry appears before Congress and is granted a generous aid and assistance package funded by our taxes it should be incumbent on them to ensure that this largesse not be used only for their own survival, but also for that of the countless small businesses that rely on them. Failing that, at least not make the situations of these small business any worse. This was not the case with the airlines. Not only did they received a $5 billion grant and up to $10 billion of loan guarantees, they turned right around and cut our commission to zero. They claim that the consumer should have to choose between paying for our expertise and buying directly from them. They also told both Congress and the travel public that it was our fault that they were not profitable. Yet airfares have actually increased since our commissions were cut. The reality of the situation is plain to see. The airlines have been hemorrhaging money since the advent of deregulation when they undertook a campaign of global expansion. The cost of this expansion were staggering. So too were the loans that they took out to pay for it. The problems arose in late 1980s and early 1990s, when their loans came due at precisely the time of an economic period of slowdown, extended period of economic slowdown. Airlines began to go bankrupt, there were many mergers and acquisitions, and the number of airlines dwindled to the few that are left today. Now faced with reduced competition, the airlines, led by Delta Airlines, began a campaign for the systematic destruction of the travel agency distribution system. Over a seven-year period they took our commission from 10 percent to zero, an agonizing bit at a time. It is interesting to note that the only major carrier not to take this path has been Southwest Airlines, who to date have supported the travel agency distribution system, and seems to be the only carrier to remain profitable. This cut to zero only affected travel agents in the U.S. and Canada. Travel agencies in countries around the world in places like the Persian Gulf, including Yemen, are still paid nine percent or more by these various same airlines. Old-timers in our industry tell stories about the first commercial airplane flights and how much trouble they had in converting their steamship clientele to airline passengers. I can tell you stories from my 26 years in business how difficult it was to sell an air ticket after a DC-10's engine fell off or after someone blew up an airport half way around the world. Even now, over seven months after the 9-11 tragedy, and with all the billions of dollars that were spent to make our airport secure, we still have a hard time convincing clients to fly. We have always felt that this was just part of our job. It was part of what we were being paid to do--until now. The major airlines' elimination of the commission traditionally paid to travel agents on the sale of domestic airline tickets is anticonsumer and anticompetitive. It threatens to deprive consumers of their access to their preferred source of travel information, and tickets. It threatens to deprive the public of their only source of neutral and objective comparative information. It relegates consumers to the airline-controlled distribution channels where they will inevitably be directed to choices serving in the airlines own bottom lines. Congress has expressed its interest to continuing the availability of travel agent services. Your holding this hearing is indicative of your desire to help. In light of the actions being taken by the airlines, we respectfully request the following actions: Please pass HR 1734, giving travel agents access to all fares. Please urge the DOT to aggressively investigate Orbitz. Press the DOT to complete the appointments to the national commission to ensure consumer choice and information in the airline industry. Finally urge the DOT to launch an investigation to review the actions of the airline industry specifically relating to the appearance of collusion and the imposition of zero commissions and their concerted effort to eliminate the travel agency distribution system. I thank you very much for your attention. [Mr. Fenech's statement may be found in the appendix.] Chairman Pence. Thank you, Mr. Fenech. We will come back to you after the panel is done testifying for questions. I think our next witness is also to be introduced by the gentleman from New York, Mr. Grucci. Mr. Grucci. Thank you, Mr. Chairman. Yes, and indeed I would like to introduce our next witness, and I think it is indicative that she is here to testify today because over 50 percent of the travel agencies are owned by women, and 82 percent of the workforce are women, and we can see who will be impacted most by these airlines' decisions. Celeste is the owner of the Empress Travel in Coram, New York, a small neighborhood mom and pop full service travel agency. She has been a travel agent owner since she entered the business in March 1978. She volunteers currently as president of New York State Chapter of the Association of Retail Travel Agents, ARTA, the largest nonprofit trade group representing travel agents exclusively. She serves on the ARTA's board of directors. Welcome, Celeste. STATEMENT OF CELESTE SIEMSEN, PRESIDENT, EMPRESS TRAVEL OF CORAM Ms. Siemsen. Chairman Pence, members of the subcommittee, good morning. I thank you very much for inviting me here this morning to speak at this hearing. My name is Celeste Siemsen, and I am very proud to appear today as a small business owner in New York's First Congressional District. I would like to take this opportunity to thank Congressman Grucci, who is our congressman, for having these meetings arranged. It is very important to small business and the travel agency community that our voices be heard in Washington at this time. I make my living as the owner of Empress Travel, a full service neighborhood mom and pop agency, which I opened up 24 years ago, seven months pregnant with a three-year-old in the back room. It is located in Coram, New York, and with the little spare time that I do have raising a family and running a business, I do volunteer as the president of New York the Association of Retail Travel Agents. I am also the past presidents of Travel Agents of Suffolk County, TASC, and currently the legislative chairperson. Today, I closed my agency to travel at my own expense to Washington for one reason and one reason only--survival. Thousands of other small business owners around this country like me need your help to defend our business against the unfair practices of the major U.S. airlines. We are facing these threats in two key areas: One, unfair commission policies; two, unfair restrictions on selling airline tickets over the Internet. First, let me speak about the airlines' commission policies. After September 11th, Congress was hit immediately by a powerful, multimillion dollar airline lobbying bailout package, five billion in direct cash gifts, 10 billion in guaranteed federal loans. Less than 72 hours after the first plane hit a target in New York City the airline lobbyists had drafted this legislation and started lining up support in Congress. On September 22, President Bush signed the Air Transportation Safety and Stabilization Act, guaranteeing this money for this airlines. Throughout the hearings and discussions on Capitol Hill from September 11 to September 22nd, the message was the same. Congress wants to help the airlines. The airlines promise in turn that helping them would naturally assist the other related industries. That is not true in the case of travel agencies. What happened is that the airlines took the $5 billion taxpayers' dollars, mine included, and six months later they steamrolled over small businesses like mine in a direct attempt to put us out of business. Here is what they did. With these tax dollars in hand, they cut the commissions paid to travel agents like myself for selling airline tickets to zero. That is correct, zero. In other words, the airlines want the travel agents to work for free, and in serving our customers who want to buy airline tickets. What makes the situation even worse is that the airlines have attacked only the American agents, and as Congressman Grucci has already stated to you, the chart that I have here shows that the major carriers, like Delta Airlines, continue to pay full commission to travel agencies in the Bahamas, Egypt, The Caymans, and other overseas countries while the U.S. agents get paid zero. What does this say about the trust Congress has put in the airlines after September 11, when travel agencies in Korea, the Persian Gulf, and even Afghanistan get full commission by the U.S. airlines, while hard-working American travel agents like myself get paid zero? The zero pay policy has hit our industry hard. Four out of five travel agents are women. We own most of half of all the U.S. travel agencies. Most U.S. agencies get paid less than $2 million in annual volume sales, averaging salaries of $28,000 for front-line agents, and $35,000 for agency owners. Unlike the airlines last fall, I am not here to ask for a bailout. I am asking for fairness. Why should these airlines receive federal bailouts, guaranteed loans, antitrust immunity, or any other taxpayer-funded benefits, when they are competing unfairly in the marketplace? In other words, we are asking for a level paying field. If Delta Airlines, American Airlines, United Airlines, and other carriers want to pay overseas travel agents while they put U.S. travel agents out of business, well, that is their business-- but not very patriotic where I come from. But they do not need to have anymore help from Congress to do this in their plan. I would like to also address the second thing that is very important to the travel agent community, and at least maybe--we could at least get a start in granting the travel agent community antitrust immunity as the airlines enjoy right now. This will give us the same privilege that the airlines have to cooperate with each other. Thank you once again, Chairman Pence, and the members of the committee, for your time and attention this morning. [Ms. Siemsen's statement may be found in the appendix.] Chairman Pence. Thank you, and having started a small business in my basement when I was not seven months pregnant, I appreciate your success. I want to recognize the gentlelady from New York who will introduce our next witness. Ms. Kelly. Thank you, Mr. Chairman. I am very pleased to find Stan Morse here this morning. It is my pleasure to introduce him. Stan and I have been working together for a long time. He comes from a small town, like many travel agents. Millbrook, New York is a place where people go into Stan's business because the trust Stan. They know if they walk in to Stan's office and say they say, ``Stan, I want to go to a particular place, can you help me? Can you help me find not only plane reservations but can you tell me where the best hotel is, and is there shopping?'' Stan gives a full service to the people who come into his office. This is what travel agents do. And I also sit on the air subcommittee in Congress. I heard the testimony of the airline industry, and I voted to give them, I am somebody who voted willingly to give them the money to help them get the bailout that they needed following 9-11. However, I find it extremely troubling that that money that we voted to give them did not go anywhere except into the airlines' personal pockets, so that the airlines, they said, would continue to run. They, I believe, used the public's concerns about safety in the air, and at this point it is, as we see repeatedly in the newspapers, somewhat in question, but they used that concern about safety to gain money from the Congress, and it was our intention that some of that would go on into travel agents fees to help the travel agents survive the terrible impact that 9-11 had on their businesses. In fact, that did not happen. I know of two other people that I represent who have sold their travel agencies in the last year simply because they feel they can no longer survive and provide the quality of service that they have been able to do in the small towns that I represent because of the squeeze that they are experiencing from the large airlines because of the lack of commissions. If we in America value the quality of our small town life, if we value the people who are there helping us get our travel plans and having an individual, a face that we know that is helping us travel, I believe very strongly we have to support people like Lou and Celeste and Stan Morse, my constituent. And I am very proud to have Stan here today because Stan is not only a small leisure travel agency in Millbrook, New York, but Stan is the president of the Hudson Valley Chapter of ASTA, the American Society of Travel Agents, and we have a lot of those members in my district. So, Stan, I am glad to have you here speaking for them, and speaking for so many of the people who are members of your organization. Welcome. STATEMENT OF STAN MORSE, PRESIDENT AND OWNER, MARSTAN TRAVEL Mr. Morse. Chairman Pence, Congressman Davis, Congressman Brady, Congressman Grucci, and Congresswoman Kelly, thank you sincerely for allowing us to speak at this hearing today. I am co-owner of Marstan Travel of Millbrook Limited, a small leisure travel agency in New York State. I am also president of Hudson Valley ASTA, with 200 members. The purpose for appearing here today is to provide some factual data on travel agencies in the United States. For reference, the data are from the 10-year period 1991 to the year 2000. The year 2001 was a unique year for the travel industry and for the most part deserves special attention, particularly due to the events of September. During the 10-year period from 1991 to the year 2000, sales of airline tickets in the United States rose from $48 billion to a whopping $83 billion, an increase of 73 percent. For the same 10-year period of time, the number of air tickets rose from 150 million to 200 million, an increase of 33 percent. These data show America likes air travel, and has cultivated that liking. Travel agents were critical to this increase in air travel for we produced over 80 percent of the airline tickets for the traveling public from 1991 to 2000. And despite the introduction of Internet tickets in the late nineties, agents still produce about 75 percent of all airline tickets in the U.S. today. Only approximately 10 percent of air tickets are done online today, and it is apparently that the great majority of American travelers still want to use travel agents over the alternatives of ticketing on the Internet or by calling the airlines directly. But from a travel agent's perspective, the airlines have nearly done everything they can to push us out of air ticketing. During the period of 1991 to the year 2000, especially as the fallout of five successive commission caps and cuts starting in 1995, the number of U.S. travel agencies has dropped from 23,000 to 18,000, a decrease of about 21 percent. Just one year later, a few short months ago at the year end of 2001, the number of travel agents dropped further to the 16,000 range, a drop of nearly 30 percent since 1991. And on March 14, this year, just six weeks ago, all commissions were eliminated for all small U.S.-based travel agencies. And I believe everyone in this room understands the words ``zero commissions.'' And where there is zero dollars coming in, over 95 percent of the small agencies nationwide now charge service fees. The average service fee for a small travel agency today is 20 to 25 dollars. My agency, for example, has been forced to charge an average fee of $40 per airline ticket, and as a result we have seen a sharp drop in airline ticketing since its starting fees five years ago. With fewer tickets, our computer contracts are in question since we are required to produce a minimum number of tickets to avoid severe penalties for shortfalls. Now, on top of all of this is Orbitz, the consortium of five of the six major airlines, which offers low-fare tickets online. The only major U.S. carriers not signed onto Orbitz is Southwest Airlines. The major airlines behind Orbitz, that is, American, Delta, United, Northwest and Continental, carry over 75 percent of all air passengers today. And since small travel agencies are out of the commission picture, the major airlines through Orbitz have set their sights on limiting Travelocity and Expedia, their two biggest competitors. At first blush, the low fares offered by Orbitz appear to benefit the traveling public, but once Expedia and Travelocity are gone, the sky may be the limit for what the airlines can charge for air tickets. And with drastically lower airfares available online, fares which are not available to travel agents, the airlines have delivered the second blow to travel agency. First it was commission elimination. Now it is low fares not available to travel agents and available on the online. One year ago there were seven major airlines, and now there is six; five of which have banded together in Orbitz. Travel agents feel we have passed through oligopoly to the early stages of airline monopoly. Clearly, it is a bad position both for travel agents and the traveling public in general. What we both need is a level playing field in air ticketing. Thank you. [Mr. Morse's statement may be found in the appendix.] Chairman Pence. Thank you, Mr. Morse. Our next witness that the Chair will recognize is Jacky Alton, who is the president of CWT Travel and Almeda Travel. In addition to having a master's in education from Howard University, she got a B.A. from Fisk University, and currently is responsible for the overall management of government, military and corporate operations nationwide for CWT and Almeda. She manages the overall operation of six locations in defense travel region five, two locations in defense travel region one, three locations in region four, as well as a home office in Houston Texas, and is another great example of the role of women in this industry, and the successful role that women play in the travel industry as well, as well as, I might add, minority women. And so we recognize Jacky Alton for five minutes, and thank you for being here. STATEMENT OF JACQUELYN ALTON, OWNER, CWT/ALMEDA TRAVEL, ON BEHALF OF THE SOCIETY OF GOV'T TRAVEL PROFESSIONALS Ms. Alton. Thank you, Mr. Chairman, and thanks to this subcommittee for inviting me. I would also like to tag onto Celeste. I will have been in business 25 years June 1, and raised both of my children in the travel agency industry, and my son is working in it now. I am very disturbed because I do not know if he has a future or does he need to look for another position outside of this industry, with what is happening. Although there are some positive signs of improvement, I am speaking in regards to government travel specifically though, there are positive signs of improvement in the $20 billion government travel market, much will depend on a win/win relationship of government contracting officers and the travel industry in the months ahead. The Airlines Reporting Corporation as of March 2002, as has been stated, shows a very large decrease in the past 12 months of travel agencies. For every new travel agency location on an annual basis, we estimate 13 closed their doors. Regrettably, one of these casualties happened in Indiana, of one of our members who was a federal government subcontractor. Small businesses have insufficient opportunities to bid on and retain federal government contracts. In a typical travel management relationship, we see four major hurdles faced by these small businesses. The first one is the RFP and contracting phase. Small business set asides are few. DOD plans to bid out approximately 28 travel management contracts as small business set asides, 8.6 percent of DOD's estimated total air volume. That is a long way before the 23 percent federal small business goal is reached. A second one is bundling of travel management into IT and other contracts. A third is the A76 studies which have been brushed aside. And then we have incomplete RFPs; RFP writers should be required to respond to their own work. Requiring past performance in similar work areas. GSA and DOD propose that the government procure travel management technology in many cases from a single Global Distribution System vendor, and that all travel agents would be required to use the same GDS system. Another obstacle is the unreasonable contract length of time, that this travel system is requiring 60 days or no notice, to cancel contracts that roll into the new round of reprocurement, at no cost to the government. Zero commission, as others have stated, is a very large obstacle. Small travel agents are less competitive in RFP financial evaluations. The last one is the improper use of size standard codes. An example is Peterson Air Force Base using NAICS 561599 of $5 million income, and then Wright-Patterson Air Force Base at the $5 million level as published in Commerce Business Daily. Many disaster relief loans are being made at the $3 million level, but the basic services contracting remains at $1 million for the travel agent. Increasingly, micromanagement by the government poses a problem. The travel industry has experience in negotiating and operating best value programs. Wage determination by the U.S. Department of Labor. End-to-end travel solutions currently being developed by DOD and other have placed must of the responsibility of a trip planning and sort out of options on the traveler. Lastly, leave the travel arrangements to those who are trained, proficient and knowledgeable about government travel, and industry regulations. Financially, equity value of travel agency ownership has plummeted the past several years with parallel cuts in available levels of bank lines of credit. Many government receivables are in the 90-day column versus the Federal Prompt Pay Act. Last year we had $40,000 of federal receivables, and I am a small business, that were outstanding for one year. That is very hard for me to have to deal with. Small travel agency owners and managers basically worked without compensation in the months following September 11th. Layoffs of long-term and family employees have been particularly painful. I personally had to not take a salary from October to January so that I did not have to lay off the majority of my staff. There is still a delay in waiting for policy directives, especially at DOD. Failure to provide equitable adjustments on an objective and timely basis. For rebid, the large size of some small business set aside contracts and the low-size standard can force an incumbent into the position of not being able to rebid. I am in that position now. I am being penalized for growing and working hard. In conclusion, Mr. Chairman, the answer to your basis question is that small travel agencies remain at a disadvantage in bidding on and operating government travel contracts at a reasonable profit. That disadvantage is growing as government priorities favor technology investments for the basic service of travel management, and lessen its commitments to small business and free enterprise. Thank you very much. [Ms. Alton's statement may be found in the appendix.] Chairman Pence. Thank you, Ms. Alton, for being here and for that presentation. Gary Doernhoefer is a man with an extraordinary background both in the area of airline work as well as being an accomplished author and researcher in the area of antitrust law while at American Airlines. As an attorney, he completed the successful settlement of the ATPCO antitrust litigation with the Justice Department and private class action lawsuits. He is the author of a case study on the unsuccessful regulatory efforts to gain approval of the American Airlines/British Airways alliance, and he published a book with the Brookings Institute entitled ``Antitrust Goes Global.'' In 1998, Mr. Doernhoefer became senior counsel, government affairs, for American Airlines, working full time here in Washington. He represented American Airlines here on Capitol Hill, and became a widely respected voice for the industry and antitrust law. In September of 2000, he accepted a position as vice president and general counsel for Orbitz, LLC, the name of which has come up in some comments already. And it is a technology development company supported by what has been described as a consortium in the airline industry to create a new website to distribute air and other travel services over the Internet. Inasmuch as Mr. Grucci pointed out, the lack of a presence of a representative of the airlines here, we are especially grateful, Mr. Doernhoefer, that you would be willing to join us for the subcommittee representing the company with which you are affiliated, and address many of these issues, and you are recognized for five minutes. STATEMENT OF GARY DOERNHOEFER, VICE PRESIDENT AND GENERAL COUNSEL, ORBITZ Mr. Doernhoffer. Thank you, Mr. Chairman, and members of the subcommittee, and Congressmen Grucci. On behalf of Orbitz, the online travel agency, and its 180 employees that go to work every day in downtown Chicago, let me express my appreciation for the opportunity to be here and talk about some of these issues. It is well known that there is a wave of change sweeping across travel distribution systems, and change is always a frightening thing. Orbitz believes, however, that while these changes bring new challenges to travel agents, many industry observers underestimate the skills and value that professional travel agents have and their ability to adapt to new business conditions. Most importantly, however, the changes in the industry are bringing about needed relief to a distribution system that is broken; a system that for years has boasted leading edge technology in the form of computer reservation systems, or CRSs, but that were deployed in a tragically inefficient and unnecessarily costly structure. Let me talk about the structure for a moment. Textbook economics would state that any marketplace operates best when the consumer pays directly for the service or good they buy. An educated consumer can weigh a product's benefits and costs and make reasonable decisions. Over time, in a competitive market, this simple structure will force all sellers of the service or good to compete to offer superior quality at a reasonable price. Travel distribution is not so simple. Historically, airlines sold most of their seats through a distribution chain with many steps. A consumer calls a travel agent, the travel agent uses a CRS to find fare and schedule information, the CRS taps into the individual airlines' systems to determine whether there are seats still available, and to place the booking. This distribution chain has not followed the simple market I just described because at two points in the chain the party receiving the service is not the one that pays for it. Travel agents provide a service to the consumer, but they were paid a commission by the airline. Likewise, the CRS provided information and booking services to the travel agent, but again the CRS was paid a booking fee by the airline, not the travel agent. These distribution costs, travel agent commissions and CRS booking fees, became part of the airlines' marginal cost for selling each ticket. As these costs went up, fares had to go up as well. The consumer was ultimately paying for these distribution services indirectly through hidden costs driving higher airfares. Eventually, this inefficient structure led to distribution costs becoming the third highest cost category for the airline industry, behind only labor and fuel. Not surprisingly, this system could not last. As airlines faced pressure to reduce costs, they lowered what they could-- travel agency commission--starting in 1995. But the overall system adjusted, just as you would expect. To make up for the lost commission revenue, travel agents began charging their customers directly for the knowledge, expertise, and professional service they provided. And where the agents earned the fee with good service, customers have been willing to pay it. The latest round of commission cuts is nothing more than the logical conclusion of this seven-year process. Finally, the cost of the professional service offered by the travel agent to the consumer is now transparent to the customer, because it has been removed as a buried element of airline marginal costs and put squarely on the table for the consumer to see and evaluate. The travel agents' concerns are still legitimate however, and should not be minimized. Travel agents are still caught in a paradox. Although the small travel agent may now collect nothing from the airline, they nevertheless appear to the airline to be an expensive means of distribution. Ending commission payments eliminated only one of the two costs borne by the airlines when a travel agent sells a ticket. The airline must still pay a CRS booking fee for every travel agent transaction. Although the airlines have unbundled the cost of travel agent commissions from their other marginal costs, the CRS booking fee incurred on every transaction remains obscenely high and obscured from competitive pressure. The CRSs, originally built and owned by the airlines, are now largely independent. Each of them has thousands of travel agents locked into using their system and thereby generate booking fees that the airlines must pay. For years, nearly every airline has had to keep paying spiraling CRS costs or risk losing sales to the thousands of travel agents if the CRS removed that airline from the computer displays. And the travel agents that contracted for CRS service had no incentive to bargain for lower booking fees, because they did not have to pay them--they were charged directly to the airlines. Only Southwest Airlines, and more recently and to a lesser degree, JetBlue, have successfully avoided this trap, largely shunning travel agency distribution while conditioning its customers to book directly with the airline. Unable to subject the CRS booking fees to competitive pricing pressures, the airlines seized on the Internet as a lower cost alternative. Each developed their own website and for the last five years encouraged customers to book there by making some of their lowest fares available exclusively on their own sites. The in June, 2001, Orbitz was launched as a lower cost alternative to the two dominant online travel agents, Travelocity and Expedia. Just as the airlines had reserved their webfares for their own low cost websites, Orbitz earned access to the webfares by offering the airlines much lower distribution costs than any of its competitors, including a rebate of the booking fee. The key to understanding the business model of Orbitz is to understand that it offered the airlines--all airlines--a deal; lower distribution costs, including a rebate of a portion of the CRS booking fee, in return for a promise to let Orbitz sell all of their inventory, including webfares. It is not an exclusive offer and competitors have finally begun to lower their costs and gain access to the webfares as well. But it is a trade, lower costs for access to inventory. And if the government were to require airlines to give everyone the same access to fares regardless of the cost of sale, there would be no point in Orbitz or anyone else offering to lower costs of distribution for its service. We would quickly return to the same broken system that existed before we launched. Orbitz is no more threatening to traditional travel agents than Travelocity or Expedia. Today, only 12 to 14 percent of total travel is purchased via the Internet. Of that, roughly half is sold by individual supplier sites like AA.com or Hilton.com. The rest, only five to six percent, or six to seven percent of total sales, is split among third party sites like Expedia, Travelocity and Orbitz. Orbitz is still the smallest of the three in total travel sales. Thus, Orbitz' market share in the total distribution market is less than two percent. Mr. Chairman, I have one conclusion that will help, I think, shed significant light on this if I may continue. There is a way out of the travel agents' paradox. Given time, there is little doubt that the Internet will develop a direct substitute for the CRSs and their high cost. Many travel agents already make bookings directly on airline websites or other Internet agencies, thus accessing the webfares for their customers. Today, that is cumbersome. Tomorrow, we hope it is not going to be. Other companies and Orbitz are all working on better technology to help the travel agent place bookings around the CRSs and have access to the webfares. If we let the market work, the solution is near. In the meantime, we really should avoid rushing into government regulation that may in fact cut off the market's first healthy response in ten years to mend a broken distribution system. Thank you, and I appreciate your allowing me a few extra moments. [Mr. Doernhoefer's statement may be found in the appendix.] Chairman Pence. Thank you. Our last witness is Michael Thomas who is the president and CEO of OneTravel.com. He is the founder of that Internet travel company. He is recognized in the industry for creativity and innovation. Graduate of both Dover College and Exeter University in England; recognized in the Travel Agent Magazine as one of the 100 rising stars. Recently he has been profiled in New York Times and Success Magazine. He is near and dear to my heart because he is the very imagine of a entrepreneur with very little gray hair. Mr. Thomas. More every day. Chairman Pence. We appreciate very much your willingness to be here and to give us your perspective on these issues. Michael Thomas is recognized for five minutes. STATEMENT OF MICHAEL THOMAS, PRESIDENT, ONETRAVEL.COM Mr. Thomas. Thank you, Mr. Chairman. I am Michael Thomas, President and Chief Executive of OneTravel.com., an online travel agency based in East Greenville, Pennsylvania. I appreciate the opportunity to appear before the committee this morning to discuss critical issues relating to the online travel distribution systems and our inability to access and sell the best fares. I founded OneTravel in September 1995, in a barn on a sheep farm in rural Pennsylvania just as the online travel agency was developing. The barn reinforced the culture I wanted to create for OneTravel; one of thrift and creativity. The launch of Orbitz in June 2001 marked a major turning point in the distribution of travel services since Orbitz was formed by and is wholly owned by the five largest U.S. airlines who collectively control about 80 percent of the domestic air travel market. Orbitz was structured by its airline owners so that it would inevitably dominate the distribution of air travel. This domination results from two provisions in the contract that airlines must sign in order to participate in Orbitz; First, a most-favored nation or MFN provision under which an airline must offer to Orbitz any fare that it offers anywhere else as well as its webfares posted on its own site. This provision has the effect of eliminating the incentive for airlines to negotiate special deals with other travel distribution outlets, thus ensuring that Orbitz alone receives the best fares. Second, the Orbitz agreement provides that airlines must fulfill annual promotional support for the benefit of Orbitz, and that one of the means of meeting that promotional obligation is to provide fares exclusively to Orbitz. These two contractual provisions have resulted in Orbitz's dominance in the offering of exclusive discounted webfares for domestic airline travel, and we find ourselves unable to effectively compete against Orbitz. It is no surprise that in the period since its launch in June 2001 Orbitz is now as large or larger than Travelocity and Expedia, and on a course to dominate the online distribution of airfares. It has already attained booking revenue in excess of over $1 billion. Ironically, while the number of users of online services is growing, we and other agencies are effectively being foreclosed from the sale of domestic airline tickets and being forced to do as best we can on refocusing on tours, cruises and vacation packages. Our experience has shown that a difference of only a few dollars between competitive airfares is frequently sufficient to determine a consumer's choice of websites for purchasing tickets. The impact of the Orbitz only webfares on our business is clear. While the total number of unique visitors to the site has increased substantially during the past year, the look-to- book ratio has declined 45 percent, to a mere 0.63 percent of all unique visitors. This means that while OneTravel is experiencing some of the same general increase in interest by the public as the large online travel agencies are now experiencing, fewer customers are actually booking on OneTravel because it does not offer competitive pricing in many markets due to its lack of webfares and special deals with Orbitz owner airlines. OneTravel's total monthly revenue from domestic air bookings has declined substantially since Orbitz's launch. I attribute this loss of revenue in large measure to Orbitz's ability to use the joint powers of its owners to restrict fare access and thus competition. In fact, this marks the first year since the launch of the company that we experienced a significant reduction of revenue in one of our key business segments. Naturally, this loss in domestic airline booking revenue has also made it more difficult for us to diversify our business into other travel areas. And the same, of course, holds true for the many off-line travel agencies that are small businesses and that are also suffering as a result of the unique ability of Orbitz to offer the special discounts reserved for it by its airline owners. Orbitz claims that its growth is not due to these anticompetitive clauses in its contract, but because it uses superior search technology. This is not accurate. Orbitz uses a search technology called ITA, which it licenses and is available to others, including OneTravel. Orbitz's growth is due instead to its exclusive access to low-cost webfares. According to a Sabre recent filing with DOT, on any given day up to 75 percent or more of the first 10 options displayed on Orbitz in response to a specific city pair request are webfares that are not distributed to independent travel agencies like OneTravel. Orbitz claims that it is unbiased and that it is the only neutral travel website. However, the truth is that Orbitz is heavily biased in favor of its owner airlines which reserve their best fares for Orbitz alone. This not only disadvantages other online travel agencies, it also disadvantages small airlines. According to a Sabre recent filing with DOT, from the period of July 1, 2001 to February 28, 2002, 71.6 percent of the airline bookings made on Orbitz were for flights on Orbitz's owner airlines. This compares to 51.3 percent big-5 bookings on OneTravel, a 40 percent difference. The airline owners of Orbitz claimed that they formed Orbitz in response to the alleged high cost of distributing airline travel through CRSs. It is now, however, more expensive for airlines to sell tickets through Orbitz than through OneTravel. The major airlines have eliminated commissions to all travel agents, including OneTravel, but Orbitz requires its airline participants to pay transaction fees of about $7.50 per ticket to Orbitz. The total cost to an airline of an Orbitz- issued ticket is about $14. In contrast, on OneTravel there is no commission, so the same ticket would cost about $7.50, about half as much. The data established that Orbitz's claims that it would provide a lower cost alternative to travel distribution by other outlets is not well grounded in the fact. To address these consumer harm and competition concerns, and preserve the role of small business and travel distribution, this committee should urge the department to prohibit Orbitz by virtue of its joint airline ownership from enforcing its MFN clause, and from entering into arrangements that allow it exclusive access to webfares. Thank you for your consideration of my testimony. I would be more than happy at this time to answer any questions. [Mr. Thomas' statement may be found in the appendix.] Chairman Pence. Thank you, Mr. Thomas, and I want to thank all of the witnesses for very compelling and very challenging presentations. The Chair will ask a couple of questions to get things started, and then we will yield to the ranking member, and Ms. Kelly and Mr. Grucci, Mr. Davis, respectively, as their time permits them to remain, although I will reserve a few questions for later in the hearing in the interest of my colleagues' time. Let me begin with Mr. Fenech and Ms. Alton and those that are involved directly in the industry on a day-to-day basis. Mr. Fenech, you said that seven years ago the airlines began to cut commissions, and we heard testimony from Mr. Morse about the decline of agencies during that period of time; 1991, 23,000 agencies, and then today down to 16,000 agencies. We have heard testimony today that there is a wave of change that is productive and good for the consumer and for the industry. What I would really like, if you could just limit your comments to maybe a minute, the agents in the room to address the issue for the committee of the criticality of the commission structure in particular to your business given the fact that we have acknowledged that there have been changes, the travel agency business has changed and evolved, and added service fees. But what is the long-term prognosis, beginning with Mr. Fenech, and we will just go in order, if this is not in some way addressed or if there is not balance restored to that relationship, in your view? Mr. Fenech. Thank you, Mr. Chairman. Chairman Pence. And I guess I would ask, the ultimate question would be, is the industry essentially--is the small business industry of travel agencies destined to go away or is it simply going to continue to winnow? Mr. Fenech. I would like to answer that question and also give you a little other information as well on that point. To ask whether we are going to go away, it depends. If all of our suppliers follow the airlines' lead as already Hertz, Avis and some of the major car companies have done, yes indeed the travel agency industry is doomed. We are an agent just as if we were a sports agent. We get paid a commission for doing a service for a client. We have always been agents of the airlines, okay. We have not been agents of the consumer. The airlines have made that very clear to us by the fact that they have made us sign an agreement with no negotiations whatsoever. It is a take it or leave it agreement. They make a change to it. They send us the change and say here it is. It is effective immediately. No bargaining, no negotiation. Whenever we have attempted to gain the right to bargain we have been told that we are in antitrust--against antitrust laws. We are not allowed to--we are not allowed to be together to bring this 75 to 90 percent of the distribution to bear. Companies, large travel companies, notably the American Automobile Association, and those companies were not as affected by these cuts because they have the right within their own organizations to stop the sale of a specific airline offending or whatever. Chairman Pence. Let me interrupt you if I can, and go to Ms., is it Siemsen? Ms. Siemsen. Siemsen, yes. Chairman Pence. Siemsen, thank you. Pretty powerful statement there. Is it your understanding in your career, and I will ask this of the others, that you were agents of---- Ms. Siemsen. The airlines. Chairman Pence [continuing]. The airlines. Ms. Siemsen. Right. Chairman Pence. When a person came through the door, you were not the agent of the customer. It was always your understanding and so the breaking of a compensation relationship there fundamentally changes your---- Ms. Siemsen. Definitely, and also you have to realize that in order for me to sell airline tickets, the airlines have to supply us with the information which in the beginning we were done through a CRS system, which was initially set up by the airlines themselves. They themselves set the rules about it. Now, a discussion was made about paying for the CRS system. I have had a CRS system in my office for over 15 years and I pay a monthly fee for my CRS system. Those agencies that are larger than myself that can make the segment count on those CRSs were able to negotiate a fee to be able to come out with zero cost to them for a CRS. But I have a $350 a month fee that I have to now pay to keep an airline system in my office, and I am not getting paid to sell their airline tickets anymore. My whole concept of figuring out my budget was based on I was expecting to get X amount of money. And I have to tell you, I did not start charging service fees, I come from an area that, unlike so other areas, my clients cannot afford to spend an extra $25–$30 for an airline ticket. They just do not have that kind of money. They are the same kind of clients that do not have the money to go and buy a computer, and a majority of them do not even have a credit card. They come in with cash to buy an airline ticket. So now they are going to be penalized, spending more money for an airline ticket because in order for me to stay in business I have to now charge him a fee to be able to purchase an airline ticket because they do not have a credit card, they do not have a computer. Chairman Pence. Let me go to Mr. Morse if I can with the same question. You were the one that threw out these statistics that describe an industry that is imploding because of this broken relationship. I am intrigued by Ms. Siemsen's comment that, particularly for small businesses the CRS system becomes now not only not a profit center but it is a drag on the system. Ms. Siemsen. I called it an albatross around my neck. Chairman Pence. Forgive me for interrupting, but let me let you address that for just a minute. Mr. Morse. Well, back in 1995, just before the commission cuts and caps occurred, our agency was selling about 900 segments of air a month. A segment is an individual flight somewhere point to point. As of this last week, we were down to below 300 segments. My contract calls for 300, and if I am on a shortfall for any length of time it is a fine flat out. It is a cost to doing business. We introduced fees over this year, this period of time. We started out with a $10 fee, went to 15, went to 25, and with going to zero, we now have to charge $25 plus five percent of the air ticket. That just covers basic costs, Congressman, just basic costs. We do not make a penny on this dog-gone thing. Now, the problem is that that differentiates the cost to the customer by a 40 to 45 dollars cost for going directly to the airlines. Chairman Pence. Right. Mr. Morse. They are coming less and less to us. Now, my agency is located in a good position. We will probably survive even though we are doing less and less air ticketing, and do not forget, the air ticketing is critical to any vacation travel outside of your geographical area that you cannot drive. You must use the air. And yet it is being cut off and we are being cut off. We have had five agencies in three other local communities near Millbrook, New York that are going out of business. Chairman Pence. Let me interrupt if you if I can. Mr. Morse. Yes, sir. Chairman Pence. And we will have more time. But, Ms. Alton, how central is specifically the issue of commissions to the small business travel agency industry going forward? Ms. Alton. For me, like others, lots of people do not have computers, especially minorities and senior citizens do not have the access to computers and the ability to deal with that. So consequently, they want to come to a travel agency. But when they find that we have to charge a fee, then they get on the telephone, or something else but that very much impedes travel because people try to say everyone has a computer these days. That is exactly not true. Everyone does not have a credit card either, and I find that a lot with my constituency. They come and pay by cash, so they do not have the opportunity to pay-- even if they had a computer, they would not be able to go online and do that. Chairman Pence. Can you continue to provide that service though if there is not some correction in the commission structure? Ms. Alton. No, we cannot continue to provide it because some people just cancel trips. They just cannot afford to pay. I have so much allotted for that. But at zero commission, it is like we are working on piece work and however many tickets we sell per day, and whatever the service fee is, that is how much we make. And if we do not sell any tickets that day, then we have to start sending people home because we do not have any form of payment. Chairman Pence. All right. Thank you. Let me just ask one more question to Mr. Doernhoefer. You obviously have a great expertise in antitrust law, and there have been some terms thrown around in this hearing that I am sure are defined terms for you, and there has even been calls for DOT to investigate the possibility of collusion between the airlines and Orbitz. And explain to this committee how we should not view Orbitz in the way that has been characterized by some of the witnesses today; that we should not view it as a collusion of half a dozen major airlines that are simply trying to essentially eliminate the current distribution system and replace it. And in a free market environment that would not be wrong, but the possibility of unfair competitive practices and the possibility of collusion is obviously a very serious allegation. How is it not that case, in your judgment? Mr. Doernhoefer. Well, Mr. Chairman, there are published guidelines from the antitrust division of the Justice Department and the Federal Trade Commission specifically on this topic of collaboration among horizontal competitors, and Orbitz was designed with a very careful eye to meet the issues that are raised by those. But my best answer to your question is to give you an analogy. I liken what Orbitz is and does to a farmer's market. If you had 20 farmers in rural Ohio where my family lives, each of whom have a roadside stand to sell their product, and they sell their product through major distribution centers like grocery stores and so forth, very much like the travel agency community. And one day five of those farmers decided to buy some land along the highway and set up some tents, and then went to all of the farmers in the community and said, I will rent you space. I will charge you a fee for selling your produce in my farmer's market, but I will charge everyone exactly the same. And those 20 farmers came to that farmer's market and sold those produce in the farmer's market, and are still in their own roadside stands for less money than they sold the same product in the grocery stores and so forth. That is an exact parallel to what Orbitz is. We are the farmer's market of the travel distribution industry, created by five; same offer made to every airline in the United States, including the small airlines, and I have entered for the record a letter from National Airlines that talks about how much we have benefited their ability to distribute their product; a small airline that finds our offer and our resource a very valuable resource. Chairman Pence. Thank you. I am going to do two things here very quickly before I recognize the ranking member for any questions. I am going to do that, but simultaneously excuse myself very briefly as I am involved in the farm bill debate on the House floor that just began a few moments ago. Using your farm analogy, you reminded me. And I am going to ask the former Chair of this subcommittee if she would be so gracious as to take the gavel in my absence, and while she moves her chair I will recognize the ranking member for any comments or questions that he might have for the panel. Mr. Brady. Thank you, Mr. Chairman. Mr. Morse, how long have you been in the travel business? Mr. Morse. We have had our agency now for 18 years. I have been a front-line agent for nine. Mr. Brady. Eighteen years. Mr. Doernhoefer, the airlines that deal with you and deal with Orbitz, they save money by doing that? Mr. Doernhoefer. Yes, sir. They do. When we first entered in these agreements, we took what was then the market price of commission that was being paid to online travel agents, like Expedia and Travelocity, people who were there before us. We offered the airlines a declining cost schedule over the subsequent years so that every year that payment, we would start lower than they were then, and we would get lower every year. We addressed this CRS problem and worked out an arrangement by which we could give the airlines back some of the money that they were paying to the CRS to lower both the commission fees and the CRS fees, and it was an offer that was wildly successful. We have 44 airlines, not just our owners, but 44 airlines that accepted that agreement, and we sell all airlines. In contrast to the testimony that was presented a moment ago, any airline, every airline is sold on Orbitz except Southwest, and that is at their choice, not ours. Mr. Brady. Okay. So I am trying to get this in my own mind that we have people here with 18 years, 24 years, 26 years, 25 years of experience in business, respectfully, and we are--to elaborate on my new Chairperson's comments--we are bailing out our airlines to the tune of billions of dollars, and they are now trying to save a little bit of money at the expense of these people that are in small business for all these years. And this lady here has to lay off her son, and I am wondering--I mean, they had to sit with a proverbial barrel when that happened. But I am wondering where we are going here as a Congress that we are bailing out billions and billions of dollars so they can get money to put people out of business that have been in business for 20 some years. I just have a problem with that, and I think I am going to have a problem with that for a long time to come, especially if there is anymore of the bailouts that are going to come in front of us. Madam Chairman, that is all I have. Ms. Kelly. Thank you very much. Mr. Grucci. Mr. Grucci. Thank you, Madam Chair. Before I start in my questioning, I mentioned in my opening remarks that there were no one here from the airline industry. Let me just give them an opportunity to identify themselves if indeed they have arrived since my opening comments. Is there anyone here from the airline industry? Any representative from the airline industry? I know they are not at the panel, but is there anyone in the audience? [No response.] Mr. Grucci. No, not one representative from the airline industry chose to come to this hearing today. I think that in itself speaks volumes of what is going on in the airline industry. I want to ask a question regarding Orbitz. You had indicated that Orbitz--does Orbitz get a commission from the airline industry? Mr. Doernhoefer. Yes. I mean, effectively, yes. There is a fee. It never happens to be called a commission in the agreements, but they receive a payment. Mr. Grucci. You receive some kind of reimbursement for your service? Mr. Doernhoefer. Yes, sir. Mr. Grucci. Who started the--who started Orbitz? Mr. Doernhoefer. Well, the long history of Orbitz is that it initially was an effort by the entire industry, the Air Transport Association. That effort sort of failed and fell apart, and was resurrected by Delta, United, Continental and Northwest, and they made the initial investment, and American Airlines invested later. Mr. Grucci. Are they still the major investors in Orbitz? Mr. Doernhoefer. They are. Mr. Grucci. Are those the same airlines that you get commissions from? Mr. Doernhoefer. We get commissions---- Mr. Grucci. Fees. Mr. Doernhoefer. We get fees, essentially a commission, from all of the airlines--from all airlines that sell through us. A couple of airlines have recently, who had not signed our agreement, our charter associate agreement, but we were nevertheless selling their product have come to us and said no more, they are not paying those fees anymore. Mr. Grucci. What is the return on the airlines' investment? Do they get a percentage of the profits of Orbitz? Mr. Doernhoefer. We are still a private company and we have yet to turn a profit, so there has been no return. Mr. Grucci. So there is no reimbursement. What is the anticipated return of investment for the major airlines that funded Orbitz? Mr. Doernhoefer. That would be far too speculative for me to be able to even guess at at this stage in our life. We have been up and running less than a year. Mr. Grucci. Is it fair to assume that they are getting a benefit currently? Mr. Doernhoefer. Well, the entire industry, the entire airline industry is getting a tremendous benefit in that we entered the market and started putting pressure on all aspects of the distribution channel, both--particularly Expedia and Travelocity, our competitors in the online market. We have forced them to match some of the offers that we made. They have lowered their payment schemes, and we put pressure on these Computer Reservation System fees, and we will continue to do so---- Mr. Grucci. Does any member of the airline industry sit on the board of the directors of Orbitz? Mr. Doernhoefer. Yes. All of the members, all of the current members of the board of directors are from the five airlines that still own us, plus our CEO. Mr. Grucci. Where did your CEO come from? Mr. Doernhoefer. Well, his background is he was once at American, then at Sabre, the largest of the computerized reservation systems. Then he ran--he was chief executive officer of Swiss Air for a number of years, and came from Swiss Air to Orbitz. Mr. Grucci. So with the exception of the CEO, the rest of your board of directors are comprised of the five airlines that have funded Orbitz? Mr. Doernhoefer. Yes, sir. Mr. Grucci. I do not have a quarrel with Orbitz. I do not wish to think that Orbitz, and I am not going to get involved in the Justice investigation that is underway, what are they investigating you for? Is it an Antitrust investigation that is underway. This hearing today is to understand if the travel agents that have appeared before me in my district and now here have a legitimate beef, and it seems to me that they do. It seems to me that there is some discrimination that is taking place by the airline industries against an industry that has serviced them for so many years, and it appears to me, and I am not an attorney and I do not wish to engage you on the battlefield of legal scholarly discourse, but I believe that there is a benefit coming back to the airline industry as a result of owning an agency that pays itself a commission. Since the airline industry is the board of directors, one could argue that they own the company. And as a result of that, not only through their investment, but through their management of the company they are paying themselves a commission that they may not be realizing currently, but in doing so they are not paying commissions to other American travel agents, but are paying commissions around the world. I guess one can make an argument that that those who came here to do such terrible evil to us has bought a ticket from an agent in Saudi Arabia or some other Middle East country, and that agent got paid a commission. Here in this country that cannot happen. To me, that is wrong. And so my issue here very clearly is that we stepped up at the request of the airline industries, and as mentioned earlier by the ranking member, you could not walk down these halls without getting bombarded by airline people, whether they were the lobbyists, the CEOs, the people who had a legitimate problem were here walking these halls, camping out on our doorsteps, asking us for the kind of support that they needed to keep an industry alive. And I really do not have question for any of you because none of you can answer this question because nobody from the airline industry is represented here today. So you know, you are going to have bear with me while I vent a little bit. The issue that now comes up is the CRS. My understanding is that the CRS was established by the airline industries. Would any other travel agent--want to comment on that? Lou, do you have any---- Mr. Fenech. Yes, sir. Mr. Grucci [continuing].--Knowledge of the CRS, its formation, who formed it, how it came about and what it does? Mr. Fenech. Yes, sir. I have been involved with the CRSs since 1979, when we were first automated. Basically, at the time you had to show a certain volume of sales before an airline would automate you. The original airline automation services were done by TWA, which was PARS, Eastern, which is now defunct, United and American. American Sabre is still the number one CRS, and a number of agencies subscribe with Amadeus, which is now the derivative of the Eastern Airline system, having gone back and forth between Continental and their ownership, and mergers and acquisitions. Truthfully, the way this all comes down to it, at the very base, if you boil it all down, the CRSs are the airlines. The CRSs--the airlines have been forced to divest themselves of the majority interested in the CRSs. However, they still maintain an interest in the CRSs. So in effect, they are charging themselves booking fees. They have always set those booking fees, and then what they do is they turn around to use and say you will now make these bookings utilizing our system. We will then either give it to you if you can generate enough income for us via the segments. You will then be given a system for free to operate. We still have to pay to have our ticket stock sent to us. We still have to pay for the security of that ticket stock and the system. In addition to that, now they are telling us, most of these CRS companies are switching over to an Internet-based product which is saving them money again. The cost of the CRSs has always been borne by the travel agent. We are the ones that are using the system. The other question I have about CRSs and the Orbitz issue, the whole thing is owned by the airlines, again. So if they are asking us to pay for the internal development and the losses that they have been sustaining all the way along, where are they getting this money from? It is coming from our commissions again. They are not paying us the travel commission because they say that they are losing money. That money is being lost basically as a part by the amount of research and development money that they have had to pay to inaugurate these systems. Mr. Grucci. Thank you. I have one more question if I may, Madam Chair, and it's to Mr. Thomas. If the move is to online ticketing, which I guess the argument from the airline industries would be that is in the best interest of the general public because now they can receive cheaper airline fares even though it puts an agency and an industry out of existence, which I do not believe is the right thing to do, but that is a second issue. The issue is why are you not applauding this move, why are you at a competitive disadvantage with colleagues of yours who are online service? Mr. Thomas. Congressman Grucci, it is an unfortunate reality that the airlines through the creation of Orbitz and the fact that they have put two measures in--contractual measures in place to provide themselves an effective monopoly position, the MFN clause, as well as exclusivity provisions, that they have access. The sole access to all the webfares and the webfares make up an increasing, increasingly great part of the fares that are out there, and these fares are typically lower than the fares that are put into the CRSs, and therefore provide a competitive advantage to Orbitz. These are fares that are oftentimes--sometimes five to 10 dollars cheaper even when you count the service fee that Orbitz puts on their tickets, and sometimes hundreds of dollars. The other day I did a search and I found the cheapest fare one travel, and ITA software, which is the technology that Orbitz uses, in the several hundred dollar range, it was five-- six hundred dollars, and the lowest fare on Orbitz was $200. So the discrepancies are sometimes striking and very significant. Mr. Grucci. So if I could just understand this correctly. Even online service get two different prices? Orbitz gets one, and you get another notwithstanding the issue that the travel agents get even a third because they now have to tack on a fee to the ticket price. So you are not on a competitive basis with other online servers, namely, Orbitz, because the airlines give them a favorable, a favorable rate versus one that they give you? Mr. Thomas. That is correct, and essentially I view that as a subsidy by the airline industry to Orbitz given that they are allowed to sell tickets at a lower price than are generally made available to other travel agents and/or online sites such as OneTravel. Mr. Grucci. Thank you. I yield back the remainder of my time, Madam Chair. Ms. Kelly. Thank you. Mr. Davis. Mr. Davis. Thank you very much, Representative Kelly. I appreciate the opportunity to be here and to participate. As I indicated earlier, I am not a member of this subcommittee, but I wanted to come for two or three reasons. One, I wanted to be here to welcome Mr. Doernhoefer and Orbitz. They come from the great City of Chicago, a city that I represent and love, and continue to hope to see its development. I also come because I have some tremendous interest in how we maintain a market-based economy, and at the same time try and effectuate as much of what I call fundamental fairness as we can in the regulation of our business and industries, trying to use regulatory devices only to the extent necessary, because obviously the more you regulate the less I think you utilize and are making use of the concept of market impact. The questions that I wanted to ask, first to the owners of agencies, how much of your business is domestic air travel? Mr. Fenech. Currently, my mix for our agency is approximately 45 to 50 percent of our ticketing is done for domestic airline ticketing of our whole profit mix. Mr. Davis. Anyone else? Mr. Morse. I would say we are probably closer to 60 percent domestic. Ms. Alton. I would say 65 percent domestic. Mr. Davis. And so anywhere from 45 to 60 percent of your activity is domestic airline travel. If that then is significantly reduced because of, one, you are not getting the commission, do you get a commission on international? Mr. Fenech. Not by the domestic airlines. Ms. Siemsen. Not Caribbean. Mr. Fenech. Not by our United States airlines. Mr. Davis. So actually you get nothing. Mr. Fenech. Exactly. Mr. Davis. And anytime a person accesses ticket through your business---- Mr. Fenech. We have to charge a fee. Mr. Davis [continuing]. You have to add an addition cost to them. Mr. Fenech. Exactly. That's correct. Ms. Siemsen. Right. Mr. Davis. Which of course mitigates against, unless there is some other reason, they really would not come to you? I am saying---- Mr. Fenech. Right. Mr. Davis. From what my daddy taught us, I probably would not come very often to you. The other question that I have probably has as much to do with the digital divide as it does with this particular industry because I recall just the other day in another committee asking the question about online job applications and there being some agencies that the only way you really know if there is a job vacancy you have got to go online. And it occurred to me that many of the people who were unemployed---- Ms. Siemsen. And have a computer. Mr. Davis. In all likelihood might not have a computer, so they were disadvantaged twice. Mr. Doernhoefer, all of your activity essentially is online, right? I mean that is---- Mr. Doernhoefer. We do customer support subsequent to making a booking via the telephone, but the initial search and buying the airline ticket, hotel reservation, whatever is all on line. Mr. Davis. And the best fares and the best deals and the best possibilities and all of those one probably would find those through the search, I would imagine? Mr. Doernhoefer. That is right. We can only sell what the airlines give us to sell. Mr. Davis. Right. Mr. Doernhoefer. We do not make up the fares ourselves, but the airlines, because it is less expensive for them to sell when the customer does it themselves on the Internet, either on their own--on the individual airline website or on Orbitz because of our structure and agreements, they put their lowest fares on those sites because it is the cheapest place for them to sell them. Mr. Davis. And so I guess what I am getting around to is that if the dominant activity is going to be online, then we still need to find some way for what I would call disadvantaged consumers. While I represent downtown Chicago and all of the things that are there, I also represent 68 percent of the public housing in Chicago, and a lot of what is around it as well. So I have got an awful lot of consumers who need to find the best fares, but they are not going to be able to do so because they do not have computers. Mr. Doernhoefer. Could I, if I may? I picked up this brochure which is from ASTA, the travel agents organization, and it is addressed to consumers. And I find a section very interesting. It describes a solution to the problem you have just identified. It says, ``Some personal service agents are responding to the Internet challenge by becoming skilled Internet operators. They have added online knowledge to their prior expertise and have figured out how best to use the Internet for trips from your home city, which sites have the best deals, how to play the auction game, and generally how to take maximum advantage of what the Internet offers.'' What it points out is nothing prevents a well trained professional travel agent from using the Internet on behalf of their customer and finding them that lowest fare. Mr. Davis. And I know our time is---- Ms. Kelly. In the interest of responding to that, yes, I am going to extend this period just in case somebody else at this table would care to respond to Mr. Doernhoefer. Mr. Thomas. Yes, please. We have still--even with what Mr. Doernhoefer said, we have still created a divide in that consumers will have to pay a premium via a travel agency as compared to what they could get the same fare directly on Orbitz, and this over time will inevitably lead to Orbitz gaining a dominant market position and with the end result being total domination and control of the North American travel market. I think that unless steps are taken, this is where it leads because consumers are looking for the lowest fares, and over time will gravitate to any solution that provides the lowest fares on a consistent and regular basis. And as soon as it becomes widely known that that Orbitz is the site, the location to buy tickets at a lesser price, over time it will disadvantage not just the travel agents, the brick and mortar, but the online travel agencies as well and eventually will diffuse even the larger online travel agencies that today are competing vigorously with Orbitz. Ms. Kelly. Thank you very much, Mr. Thomas. Anyone else have something they want to add? Ms. Alton. Ms. Alton. It still would be a Catch-22 because if we were to book the Orbitz and the person still does not have a credit card they would not be able to make the purchase. We also have the CRS contracts that require us to have so many bookings to be paid for, and then on top of that we all report to the Airline's Reporting Corporation, where it would be against our rules if we started using our own credit cards to pay the general public's traveling fee, which would in turn be a loss to us. So to go onto Orbitz and to sell from Orbitz just because we can find it and using our personal credit cards would still be a Catch-22, zero commission, and then still would have to charge the person a fee. Mr. Fenech. That is correct. Ms. Kelly. Thank you very much, Ms. Alton. Mr. Davis. Madam Chairman, if I could just say I thank you for your indulgence. This has been very enlightening and beneficial and helpful to me. I want to thank all of the witnesses for their answers, and it just helps me to recognize that there are no simple solutions to very complex problems and complex issues, but I remain hopeful because I do not want to see any small business not be able to continue in this country. I mean, I believe that small businesses are indeed the economic engine that continues to drive our economy, and I think we need to do everything to try and preserve and protect them while letting our market impact work its will to a extent. So I thank you very much. Ms. Kelly. Thank you very much, Mr. Davis. I have some questions of my own, and first, I would like to ask Mr. Doernhoefer. I do not really understand why the airlines--why it is appropriate in your view, according to your testimony, that the airlines should give you a fee and not give the travel agents a fee. I do not understand that. You said you get a fee. How much fee do you get? Mr. Doernhoefer. It will vary as I said over time. We need to make sure we put this back in perspective. When we sign these agreements, the fee schedule we were charging was lower than what everyone else was getting. So let us not lose track of that. Ms. Kelly. Could that be because the airlines owned you and the travel agents already had their contracts with the CRS? Mr. Doernhoefer. Well, we---- Ms. Kelly. I mean, somebody could have signed on to a five- year contract with CRS unknowing that Orbitz was going to sign a lower fee contract with the airlines and undercut their services, and also unknowing that the airlines were willy-nilly going to cut all of their fees. You make a statement that I feel is just really incredibly presumptive. In the very first part of your introduction you say that, ``Changes to the industry are bringing about needed relief to a distribution system that is broken.'' You have not demonstrated to me in one fact of what you have said so far that this system was broken, and that it allowed your entry. So I would like for you answer that question. Mr. Doernhoefer. Very well. Ms. Kelly. About why it is fair for them to pay you fees and it is not for the travel agents to get fees. Mr. Doernhoefer. Let me first address why it was broken. Congresswoman, when we arrived on the scene there were travel agents, there were consumers, and there were CRSs, and the CRS industry, the four companies that constitute an oligopoly that were forcing higher costs on both these small travel agents and the airline industry had a higher profit margin than either the travel agents on one end or the airline industry on the other. The middleman was taking out the profit and punishing both ends of the spectrum. Ms. Kelly. Excuse me, sir, but the middleman was owned by the airlines also as I understand it. Mr. Doernhoefer. It was not, and that is not true anymore. Ms. Kelly. Oh, Sabre was not? Mr. Doernhoefer. It is not owned by the--it is a completely independent, publicly traded corporation today. Ms. Kelly. Currently. Mr. Doernhoefer. It was not---- Ms. Kelly. But when it came into existence---- Mr. Doernhoefer. It has no control by the airlines. I am sorry. It is publicly traded. It was spun off by American Airlines several years ago. It has a 50 percent---- Ms. Kelly. You still have not answered my basic question. Why is it appropriate for you to get fees and they do not? Mr. Doernhoefer. Okay. Now let's go to the--and you are right, I have not addressed that, but I wanted to first talk about what was broken in the industry. The second thing that was broken and is still to some extent is that these people at this table provide a service to the consumer. The customer comes in the door, and says I need your help to find my vacation plans, find the cheapest fare, whatever. The right way to go about that, and frankly, it is something that Orbitz believes in as well, is that we serve the customer. And if we do a good job, and find them a cheaper fare, then they should pay us for that professional service, and we charge a customer a fee just like the people at this table do. Now that---- Ms. Kelly. You tell me how you are finding a cheaper fare when they are giving you the cheaper fares? Mr. Doernhoefer. We are finding---- Ms. Kelly. What effort are you putting into this when they are giving it to you? I am only looking at what your testimony is. Mr. Doernhoefer. We find a cheaper fare because we went out and find the ITA software, which we have talked about, which was not fully utilized in any website. We spent tens of millions of dollars to develop a website that was easier to use, that did not rely on the CRS, which was the old mainframe technology and was slower, less efficient and more expensive. We spent tens of millions of dollars to develop an entirely brand new system with the best software we could find. No one else did that. Ms. Kelly. Who paid for it? Mr. Doernhoefer. The airlines, the owner, the owner investors of the---- Ms. Kelly. The airlines. Mr. Doernhoefer. The five airlines; not all airlines, but five airlines. Ms. Kelly. So what they were trying to do is develop, if I understand you correctly, they were trying to develop a system that would make it cheaper for them to do business; is that correct? Mr. Doernhoefer. That is absolutely correct. They were trying to figure out---- Ms. Kelly. Well, they are in business. They are entitled to do that. Mr. Doernhoefer. They were trying to streamline their distribution channel by cutting out the high cost GDS. Now to your question about us receiving still a fee, I mean, frankly, this move to zero commissions is fairly new. We are under pressure from our owners and others in terms of the contract that we have signed with them. However, it is the case that small agencies are not getting paid anymore by the airline industry. Large agencies, as the testimony, came in are still being paid commissions. We are a large agency. We sell over 20,000 airline tickets a day, and we spend tens of millions of dollars in marketing to the entire country, making sure our website is available, and we actually just can move more business on behalf of the airline industry than, unfortunately, the smallest of the travel agents cannot. We are still being paid a fee. We are being paid, in our estimate, less fee than other comparably sized travel agencies because we are---- Ms. Kelly. Can you name--I am sorry to interrupt you, but I only have a certain amount of time also. Mr. Doernhoefer. Sure. Ms. Kelly. Can you name at least two or three other large agencies that are getting fees? Mr. Doernhoefer. Oh, sure. I mean, absolutely. Things like American Express, Carlson/WagonLit, the big major agencies, and my competitors, Travelocity and Expedia are still being paid fees. They will be paid fees to actually reward their shifting of market share from one airline to another. They will engage in contracts where they will be rewarded for performance in moving market share. We cannot and will not do that. We are an unbiased, neutral site, but we are being paid a small fee that will decline every year for the next ten years by contract until it is essentially zero, and that was the scheme by which the airlines were trying to put downward pressure on all of their distribution costs. Keep in mind that distribution costs ultimately go into the cost of the ticket. It has to go somewhere. And as you lower those costs, you give room for the airline industry to lower fares. Ms. Kelly. Why do you need if you are so successful and you are getting all this input from the airlines, why do you need this most-favored nations clause? Mr. Doernhoefer. When we went into business, Congresswoman, we said we need to serve the suppliers and the consumer. Every bit of consumer testing we did said the consumer is tired of having to go to 20 different websites to be sure they have the right fare. So we said how do we encourage the airline industry as a whole to make sure we get to sell everything they are selling, and the answer was to lower their costs. It is not exclusive. Travelocity and Expedia or any agency that can move as many tickets as we can is welcome to match our costs and get exactly the same deal from the airline industry, and indeed they are. It is simply a statement that is not true to say that webfares are not available on Expedia and Travelocity today. Mr. Thomas. It is certainly not available on OneTravel and OneTravel is a cheaper cost channel than Orbitz is today. That is clearly established. My concern is that Orbitz is misrepresenting the way the compensation structure is, and even though OneTravel works with a CRS the cost per ticket today is half of what Orbitz charges as charter members, and that is not including the fee that they charge on top of the money that they get from the airlines, and it does not include the fact that they get a subsidy from the airlines that allow them to have a cheaper fare even after they have put on the fee. Furthermore, Mr. Doernhoefer said earlier, mentioned something about National Airlines, and including a record into the testimony. I would like to--my concern is really multi- fold. Aside from making sure that we have a competitive and vigorous environment for OneTravel and other players in the travel industry to thrive, I am concerned about the long-term impact for consumers, and I am also concerned about the long- term impact for low-cost carriers. I believe that Orbitz is a vehicle for the major airlines to wrestle control of the market in order for them to be able to manipulate the market in the future and disadvantage the low-cost carriers. I would like to enter into the record a letter from Vanguard Airline that says that during the period that they were a charter associate of Orbitz, that Orbitz displayed inaccurate fare information about Vanguard flights, and blamed such inaccuracies on fabricated deficiencies in Vanguard's system. And that moreover, Orbitz strong-armed a most-favored nation clause and in-kind promotion exclusivity in a manner that we believe is not justified by our contractual agreement. The whole letter will be in the record. Ms. Kelly. With unanimous consent, of course. Mr. Thomas. Thank you. Ms. Kelly. Mr. Fenech, would you like to respond to this dialogue we have been having? Mr. Fenech. Yes, ma'am. I just want to go over a part of one thing here. Orbitz, as you may correct me if I am wrong here, but has a great connection with a company called WorldSpan; am I right? Mr. Doernhoefer. Yes, that is true. Mr. Fenech. Okay. WorldSpan is the automation system that I subscribe to. WorldSpan has not given me any of the technology, the benefits of the technology that they have given to Orbitz. Okay, yet I am paying to be on WorldSpan. Moreover, WorldSpan is jointly owned by Northwest, Delta, and TWA, who then was bought out by American. So, ma'am, how do they say that the CRSs are not owned by airlines when WorldSpan is clearly in fact owned by airlines? Ms. Kelly. Thank you for explaining that. Ms. Siemsen. Ms. Siemsen. Thank you. When I opened up my agency 24 years ago, we did things the old way. We called each airline, tried to get the best fare, handwrote the ticket, and gave it to the consumer. The airline at that time was Eastern Airlines, and they came to me and said, we have a new system that we have developed for the smaller agencies because my American sales rep tell me I did not qualify for Sabre's requirements. So my Eastern sales rep came to me and said, I have this computer system that will bring you up to date, give you technology, have all the access to all the affairs, yada-yada-yada, let us go online. Okay, so we go online with this computer system. Now, the airlines at that time, Eastern Airlines did own System One. They set the CRS fees. They are the one that set my fees. They are the ones that set my ARC requirements. My whole life is tied into what the airlines require me to do. I do not understand how they can sit here and claim that the airlines have nothing to do with this computer system. They set the fees to begin with on the CRS. Mr. Fenech. They paid themselves. Ms. Siemsen. Right. Ms. Kelly. Mr. Doernhoefer, do you want to comment on that? Mr. Doernhoefer. I do. There is a horrible, ugly history to the CRS industry when it was owned by the airlines. One CRS is still owned by the domestic airlines, and that is WorldSpan. The dominant agency, Sabre, has 50 percent market share and is completely independent. The other two, one is owned now by Cendant Corporation, which has hotels and rent-a-cars and so forth, and the fourth is owned by foreign airlines. Now, those are the four choices that all of the people at this table have today to place a booking. There is essentially no other way to do it. Congresswoman, if this committee and the people at this table would work together to eliminate the regulations which exist today to allow the airline industry and Orbitz to offer a cheaper booking channel directly to the travel agents, they would get access to the webfares and airlines could save money by avoiding the CRS fee. We could implement that by the end of this year if there were no regulatory obstacles, but the fact is there are and we cannot--and the airlines that own us support the concept. We could do that but for the existing CRS regulations that prevent Orbitz from offering a desktop version directly to the travel agency community. Ms. Kelly. I am interested, Mr. Doernhoefer, that your response was concerning whether or not the airlines could save money. We bailed out the airlines. I voted for a $15 million or billion dollar package to make sure--I cannot even remember how much it was, they kept coming back more and more and more--for a package to help keep the airline industry from going completely into some kind of real economic tailspin after 9-11. Your concern right now in front of this committee this morning after having heard all of this with the travel agents, you are still concerned about saving the airlines money. We do want to keep the airlines in business, no question about it, but if we do not help them--Mr. Morse, I would like to ask you and the rest of the people at this table, are you not going to be edged out by the kinds of arrangements that we see here with Orbitz and that Mr. Doernhoefer has talked about. Mr. Morse. Well, the level playing field means we should have access to all fares. It is very plain and simple. Mr. Doernhoefer is saying, well, that eliminates the need for Orbitz. I do not agree. We have a free market economy, but we also have an entrepreneurial spirit going bad. We have gotten into the oligopoly and monopoly access. We need access to all the fares. We also need, for example, from the CRS contract folks, any notification well in advance of any termination contract. Right now, Congresswoman Kelly, if I walk home today and find out that Delta Airlines has shut off my system because of maybe a debit memo that is in conflict for some period of time, I have no access. I have no control. I am all of a sudden shut down, and my Delta customer walks in the door, I cannot serve him, and that is an arbitrary thing on the part of the airlines right now. Much of what I am saying is in the heart of H.R. 1734, the Consumer Bill of Rights, and that is what I would like to see, but level playing field in airfares is more important than anything. May I add just a couple of little comments? My contract for the CRSs right now stated in the year 2000. It is a five-year contract. With the zero commissions and with everything else going on right now, I have got three years of fines facing me for short falls on a contract I cannot get out of for three years. Second of all, to pick up on Mr. Davis's point, yes, I can do the online ticketing through Orbitz or anybody else. I still have to charge that fee, absolutely. He is saying, well, you should be charging the fee. The customer is going to pay. I am sorry. The customer is going to pay the fee. Thank you. Ms. Kelly. Thank you very much, Mr. Morse. The Chairman of the committee has come back so we have changed chairs. Back to you, Mr. Pence. Chairman Pence. Thank you. Thanks for filling in and indulging me as I participated in the floor debate, and especially thank you for your veteran handling of the hearing, I can tell on my return. Before I recognize Mr. Grucci, we are obviously at a disadvantage because while I think we invited to the hearing several airline companies to come and talk with us, we did not get a favorable response. Neither do I think there is any representative for any of the airlines that have been mentioned today or that might be involved with as owners in Orbitz.com. And if anyone in the room is associated with any of the airlines, you can wave your hand in the air, and I would be happy to correct the record. It is frustrating to the Chair that we do not have that representation here because I think, as the gentlelady from New York just shared, a great deal of the angst that I think is felt in the industry, and, frankly, is profoundly felt on Capitol Hill as I think this strong turnout shows at this subcommittee hearing, strong bipartisan diverse turnout shows is that following, and the number specifically being 15 billion, 5 billion in direct payments and 10 billion in loan guarantees, the memory of the Chair is very much that that airline package was sold as a way of stabilizing the travel industry in America, staving off the kinds of losses that would result in the collapse of airlines which would have affects on everyone from vendors at airports to people in the travel industry. I guess my question, and this may not be a fair question, but given your background at American Airlines, Mr. Doernhoefer, is there--among your clients and owners, is there any sense that you bring to this hearing about a, and maybe I picked this up a little bit in your comment a few moments ago, but a desire in the wake of that $15 billion action last fall by Congress, is there a desire in the industry with which you are associated, a desire to address this issue and to stave off what we appear to see, an implosion among agents for the airlines? And if you do not feel competent to answer that question, then I understand that, but I would be grateful if you did. Mr. Doernhoefer. Mr. Chairman, I appreciate it, and I really cannot speak on behalf of the airlines other than just a very high level general sense, and that is that the airline industry today is still hemorrhaging losses at an alarming rate. My colleagues at American Airlines tell me they are still today losing $4 million a day in their operations at a time when they are being asked to incur additional costs to increase security. So without knowing, you know, the details of their current thinking, I think you have an industry that is still very much in lifeboat mentality, and probably not looking outwardly nearly as much as we might like, but looking inwardly for their own survival. Chairman Pence. And certainly the Chair would recognize that focus that has to be the focus of every business. So your judgment outside looking in, but with your background in the industry, would be that there was not the expectation that the $15 billion bailout was about stabilizing the industry, it was about stabilizing the airlines specifically? Mr. Doernhoefer. I guess I cannot quite adopt that view. I mean, I think--I do not know what the expectation was or how far they thought that money would go---- Chairman Pence. Right. Mr. Doernhoefer.--To actually reach some stable point, but I can tell you that the industry is questioning every aspect of its current operations, trying to figure out how to fix the predicament they find themselves in today. But I would suspect that most of that is they are looking at their own operations for how to cut costs, and how to operate efficiently and safely, and consistent with the new security regulations, and actually stem the losses. Chairman Pence. Mr. Fenech, one question, and then I am going to yield back to--at this point I think I am going to recognize the ranking members after this question, then Mr. Grucci had a question or two. You made a comment that was news to me, that the airlines have not been alone in eliminating your commissions, that the rental car companies and others have. My question is has this trend essentially paralleled the reduction of commission in the airline industry? Mr. Fenech. Well, sir---- Chairman Pence. And how widespread is it among--excuse me for interrupting you, but I have a legal background and I understand agency relationships. And the first question in an agency relationship is who are you representing. And it strikes me as peculiar that so many of the companies that you have been representing when I walk through your door no longer pay you anything. Mr. Fenech. It is peculiar to us too, sir. Chairman Pence. I do not understand. Mr. Fenech. It is astounding to us, sir. Chairman Pence. Well, how widespread is that apart from the airline industry? Mr. Fenech. Well, right now the rental companies have did this on a corporate level, so if they have a negotiated corporate rate, they have determined that those are not commissionable to travel agents, okay. It is endemic though. This is what is going to be the trend. As the airlines do this, the rest of the industry looks at that and says, okay, let us see what the reaction is going to be. What are these travel agents going to do? Are they going to go on strike against the airlines? Are they going to stop selling their services? We cannot do that. We have no antitrust immunity to draw any sort of a strike or even a negotiation against the practices that we have been forced to accept. Our own agency agreements were never negotiated. They said if you want to sell airline tickets, you must have a bond, you must secure our documents, you must be open for business in a storefront location a certain member of hours per week. They investigate. They sent a representative in to look at our office, make sure we were there. No negotiation. They cut our commission. No negotiation. Our own agreement that we have signed says that the airlines will determine compensation. Chairman Pence. So it is happened in part of the related industry, and you believe it will become much more acute if this---- Mr. Fenech. I am very afraid because there are major cruise lines right now which are also merging and being absorbed by each other to the point where that is also becoming questionable to our future in the commissions. Chairman Pence. Let me yield to Mr. Brady, the gentleman from Pennsylvania, for any further questions. Mr. Brady. Thank you, Mr. Chairman. Just an observation and statement, but also to answer you. I have a union background. Be a little careful how you speak. I am liable to help you get organized, and that might be a bad thing. [Laughter.] Mr. Fenech. I would welcome it. Mr. Brady. If you want to talk to me about it, I have to have my union hat and say we could always talk. Mr. Fenech. We will do lunch. Mr. Brady. Okay. [Laughter.] Mr. Brady. I guess, Mr. Doernhoefer, I am not trying to single you out or try to look at you in any kind of way, shape or form. You are in business. You need to be in business, and you should be in business to make money, but the only thing that troubles me is that we talk about something that is broken. And I am wondering whether or not if this thing gets fixed, do 25 years of service in this table go out of business. So maybe we need to look at it a little bit more and try to come up with some type of--whatever we can come up with and try to have you stay in business competitively, but also have them 25 years, we like to say mom and pop, and in your case mom and son. We like to keep them in business too because there is a personal touch other than pushing on a computer when you deal with a travel agency. And I found out a lot of times that when there is a mix-up, no fault of anybody, but just there is a mix-up, that you cannot sit there and holler at that computer as much as you can maybe holler--not so much holler, but talk to one of them and have somebody tell you just what is going on. So you know, I just think that I might appreciate you having the sharing to bring this to light, and I would like to be a part of anything to try to make some type of solution come, and maybe we should do lunch. [Laughter.] Chairman Pence. Thank you, Mr. Brady, and the gentleman from New York had a few more questions before we conclude here. Mr. Grucci. Mr. Doernhoefer, I said earlier I do not have a quarrel with Orbitz. I think I have changed my position on that. [Laughter.] Mr. Grucci. I think after listening to your testimony and listening to some of the things that were said I do have a quarrel. I have a quarrel when five of the major airlines owns an organization that markets tickets and they pay themselves a fee. And one could argue that the reimbursement to the airlines or the return on investment is the fact that they are getting the market share of the traveling public, putting other online competitors at a disadvantage because the tickets are being offered to their own organization far cheaper than others. And then hearing you indicate that we could fix that problem by moving some kind of legislation that would allow the travel agents to become agents for Orbitz and sell Orbitz's low fares. I never heard anything about commissions being paid, but I would suspect that there would be some kind of reimbursement. So the question that I would have is if it could happen through legislation, why cannot it happen without the legislation? Why does government need to jump into this thing to make it happen? Why cannot the industry fix its own problem before government has to? And I do not need you to answer those questions because you cannot speak for the airlines, and I would not expect you to, and I would not ask you to be put in that position. I would once again point out that the airlines are not here to answer those questions, and as a result of that, you know, this hearing today is still left with a lot of unanswered questions. But one question in my mind has been answered. The next time I see an airline industry representatives walk through my front door I will be a little less willing to help them and a lot more reluctant to believe what they are telling me to be true to be true. What I would like to ask and, Celeste, you have spoke eloquently about your operation, how long you have been in business. What is going to happen to you and your business in the next year? Ms. Siemsen. It depends if I can get out of my CRS contract. That is going to be a big part of it since I still have a $350 a month fee that I do not have anything to offset it right now. I do, I am part of a franchise, so hopefully, and we are more leisure than we are corporate, which is good for me. But if the airlines go to the next step and eliminate the commission based on how I do my packages to the Caribbean. Right now we book through a tour operator. So right now their commissions have not been hit, but yet they still have contracts with the airlines through the rest of this year. So we have no idea whether or not those contracts are going to be honored for the tour operators, and that only helps me in my businesses as far as packages are concerned. If we do not get any help, we do not get any relief, I would say I will probably be able to hold on through the rest of this year. I do not know what next year will bring considering the climate out there. Mr. Grucci. One last question, Mr. Doernhoefer, and this you can answer, I would suspect. It has been reported that between 70 to 75 percent of the sales of Orbitz is done to the five major airlines that are board members and have funded the foundation in the beginning and the genesis of Orbitz. Is that true? Mr. Doernhoefer. Our sales, Congressman, almost exactly mirror industry market share. So yes, because the five biggest airlines sell about 80 percent actually of all domestic airline tickets period, their sales on Orbitz reflects almost exactly their market share statistics, and that is because we cannot bias. We cannot move share one way or another, so our internal share looks just like industry share. Mr. Grucci. Mr. Thomas, is 80 percent---- Mr. Thomas. That is---- Mr. Grucci. Let me ask the question first. Mr. Thomas. I am sorry. Is 80 percent or 70 to 75 percent of your business done with those five major airlines? Mr. Thomas. No, it is about 50 percent; it is actually 51 percent. But I would like to have Mr. Doernhoefer elaborate. Given that they went to--Orbitz went to utilize the ITA technology in order to provide unbiased fair displays, it really does not explain why Orbitz meaningfully changed the display on its own site from the original design that ITA has. And I believe that that change in design is largely in order to effectively bias in favor of the major carriers that have a greater route structure. Mr. Grucci. Thank you. I have no further questions, Mr. Chairman. Chairman Pence. Thank you, Mr. Grucci. And again, the Chair would like to say for the record that Mr. Grucci played a pivotal role in assembling this hearing, and I and other members of the Small Business Committee look forward to working with our colleague as we collate and digest what we have learned in this hearing today. But I think it is safe to say that without Felix Grucci's leadership this hearing would not have occurred. That said, allow me to thank all of the panelists and also Congressman Foley who joined us earlier. As I said earlier, I have a small business background having hung the fluorescent lights and put a fax machine in the basement of my house, and greatly appreciate the challenges that all of you face in the small business environment. And I also have a great love for communication and the information age, and admire both of the men who are here and who are part of that information revolution. These are difficult issues. This is obviously a time of transition in the industry. It is my hope that all of the participants of the panel will recognize that, and I say this on behalf of the ranking member, the gentleman from Pennsylvania, the distinguished panel of minority members who joined the committee today, the distinguished panel of members of the majority who joined the panel today, I hope that all of you who are feeling beset by these changes in the industry will have seen evidence today that this Congress on both sides of the aisle is aware, interested, as of today better informed, and poised for action. And though the man in the cross-hairs today who did an able and capable job of speaking on his behalf and on behalf of Orbitz.Com is not a representative of the airline industry. I know that your tie is to your clients, and your former employees are deep, and I am confident that, and trust that in some informal way you will help, in addition to the media gather here today, you will help carry back the concerns expressed by many members of Congress to those major airline industries. I think Felix Grucci's comments are fairly echoed by all of us who heard the airline bailout bill sold here on Capitol Hill not as a way of helping airlines specifically, but about stabilizing the travel industry in America which obviously the jurisdiction of this subcommittee and of the Small Business Committee generally is about looking after and tending to the interest of small business Americans, and it is our hope that that messages makes its way back to the airline industry, that there is concern on Capitol Hill and that this hearing does not represent the end of that concern. It really represents the beginning of that concern, and asking some questions that will hopefully ultimately result in--whether it is future legislation, whether it is deregulation, but that it will result in the kinds of changes that will allow all the ships to rise in this industry, and ultimately for the consumer to have the best service, which we know happens in that corner travel agency where they can walk in and get the right answers, and a word of encouragement in combination with the very best prices, and that is the ambition of this committee. With that the Subcommittee on Regulatory Reform and Oversight of the Committee on Small Business stands adjourned. Thank you. 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