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 -------------- ¶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 -------------- -------------- ¶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 -------------- ¶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