COLOMBIA'S POWERFUL TRAVEL AGENCIES SEEK STATE INTERVENTION

UNCLAS BOGOTA 004048

SENSITIVE
SIPDIS
EEB/TRA/AN, DOT OFFICE OF NEGOTIATIONS

E.O. 12958: N/A
TAGS: EAIR ETRD EINV ECON EINT PGOV CO
SUBJECT: COLOMBIA'S POWERFUL TRAVEL AGENCIES SEEK STATE INTERVENTION
IN ONLINE TICKET SALES


1. (SBU) Summary. Colombia's powerful travel agency association
has consistently lobbied for protectionist regulations to stave off
the airlines' competitive advantage in online ticket sales. Two
regulations are pending GOC approval that airlines oppose: one
would require airlines to charge an administrative fee for online
sales, and the second would allow travel agencies to offer the same
discounted ticket prices to their clients as the airlines sell
online. Vice Minister of Tourism Oscar Rueda told us the GOC will
likely not approve the online administrative fee, but may force the
airlines to make their discounted fares available to the travel
agencies. Post has consulted frequently with the U.S. airlines and
advocated that the GOC not adopt these measures. End summary.



TOP COVER

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2. (SBU) In recent years, Colombia's travel agency sector has had
a powerful ally in President Uribe, who has supported regulations
that help travel agencies, sometimes at the expense of the air
transportation industry. Coincidentally, Uribe opened the annual
congress of ANATO, Colombia's association of travel agencies, seven
of the last eight years. Travel agencies have an effective lobby
in ANATO. It has lobbied against a resolution that would require
travel agencies to send weekly payments to the airlines from ticket
sales rather than twice-monthly payments, and for several
regulations that would block airlines from posting lower fares
online than the travel agencies can offer.



PROPOSED REGULATIONS FAVOR TRAVEL AGENCIES

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3. (SBU) Delta, Continental, and American told us that their
direct sales make up between 8-20% of their total sales in
Colombia, with internet sales representing only a small part of
direct sales. American Airlines manager Jose Maria Giraldo said
Colombians are still very cautious about making purchases online,
and Colombian "signature on file" laws make online purchasing
difficult. However, all three airlines told us they were concerned
about two regulations that would affect their online sales.




4. (SBU) The two new regulations, under consideration by the GOC,
appear to favor the travel agencies: the first regulation would
require airlines to charge an administrative fee for online sales
(it is not clear where the fees would go); and the second would
allow travel agencies to sell tickets at the price the airlines
offer on their websites. Travel agencies have pushed for these
regulations, complaining that their industry is in danger of
collapse. The first regulation was nearly approved in June, but
after pushback by the airlines and the Embassy, the government
backed down and requested a study of the impact this proposal would
have on the airlines. Ironically, ANATO conducted the study, which
is under review by the President's office.




5. (SBU) According to the association of air transport companies
in Colombia (ATAC),ANATO's study does not take into account the
international market, and concludes that the domestic market for
airfares is inelastic and therefore will not be affected by the
administrative fees. ATAC, which represents 95% of airlines that
operate in Colombia -- including Delta, Continental, and American
-- disagrees with the methodology of the study and its conclusions,
arguing that the data is incomplete and the domestic market is
sensitive to price elasticity. The airlines note that the increase
in travel this year is largely a result of lower prices.



GOC LOOKING FOR A COMPROMISE

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6. (SBU) A decision on the internet regulations is expected soon.
EconCouns raised the airlines' concerns in a meeting with Vice
Minister Rueda on December 17. Rueda responded it was unlikely
that the GOC would approve an administrative fee for internet
sales. Rueda argued that a regulation allowing travel agencies to
offer the airlines' discount online rates to customers could be
acceptable if the airlines did not pay agency commissions or incur
any costs.
BROWNFIELD