USA airlines say CAPPS-II could cost them "tens of millions of dollars"

This week Ms. Nuala O’Connor Kelly, the Chief Privacy Officer of the USA Department of Homeland Security — with whom I met last week in Washington, DC (more on that and the PhoCusWright conference of travel executives I attended in Orlando in future articles) — has posted two more batches of letters received by her office during the August-September 2003 public comment period on the CAPPS-II (CAPPS 2.1) Privacy Act notice.

Many of the public comments (including my comments and many of those I’m aware of from other privacy advocates and civil liberties groups) still haven’t been publicly posted, so there’s no way to know what is yet to be revealed.

But the most recently-released batches include comments raising questions about CAPPS-II from, among others, the director of the Sacramento (CA) airport system, Americans for Tax Reform, People for the American Way, former Member of Congress Bob Barr, the Association of Corporate Travel Executives, and, most significantly, the Air Transport Association of America (ATA) — the trade association and lobbying group for USA-based airlines.

ATA’s comments warrant reading in their entirety.

As had British Airways — the only airline to file comments on the earlier CAPPS 2.0 Privacy Act notice — ATA’s comments indicate considerable concern with the apparent incompatibility of the CAPPS 2.1 proposal and European Union data privacy law (with which ATA members that sell tickets in the EU, as do even purely “domestic” USA-based airlines) must comply. ATA also stressed that, “Consumer acceptance, both in the United States and overseas, of CAPPS II depends on the government’s assurance of suitable privacy protections.”

But privacy is only one of two issues ATA describes as “indispensable considerations in the development of CAPPS II…. We also believe that the implementation and operational issues associated with CAPPS II need to be clearly recognized.”

ATA’s comments on these “implementation and operational issues” of CAPPS-II, including its costs, warrant quoting at length:

Implementation and application of CAPPS II will impose substantial new requirements on passengers and airlines. As we have noted in previous conversations with TSA officials, passenger name records do not contain all the categories of information that TSA contemplates will be available for CAPPS II…. Moreover, some current PNR categories are not mandatory. CAPPS II will consequently require airlines to change significantly their practices for acquiring information from customers. This will create substantial new resource demands on airlines.

The essential implications about the anticipated CAPPS II passenger information collection requirements are:

1. Airlines will have to obtain the required CAPPS II information from every passenger. This will be more intrusive for the passenger and far more resource intensive for the airline than is the case today.
2. Airlines do not control third parties, such as travel agents and online booking entities, through which the majority of air transportation is purchased. Any failure of such a party to obtain mandated information will have to be remedied at the airport, which will delay passenger processing and inconvenience customers.
3. Information in many instances will be obtained from passengers orally and entered manually into reservations systems. This will not only impose greatly expanded resource demands on airlines, it will also place demands on the time of customers.

As indicated above, airlines will need to reprogram their reservation systems to accommodate the mandatory collection of the expanded information categories. In addition, reservation call “talk time” will increase markedly, affecting the length of time a consumer is on a reservation call and the cost of such calls to air carriers. Furthermore, because the majority of reservations are made through third parties, most notably travel agents, airlines often do not have direct contact with the passenger until he or she arrives at the airport. This means that airlines cannot assure that information is collected from such customers at the time of reservation. Any CAPPS II rule must recognize this fundamental characteristic of airline distribution…. The failure to do so will result in serious delays for airline passengers at airport check-in, where airline customer service agents will have to collect from them the information that is necessary for CAPPS II.

The foregoing is not meant to be an exhaustive explanation of the implications of the mandatory collection of CAPPS II passenger information. It is intended, instead, to underscore that changes in the reservation and passenger processing environments will have substantial consequences, including added expenses and the likelihood of increased customer processing times.

The ultimate cost to the U.S. airline industry is unclear because the exact requirements of CAPPS II are unknown, as is the likely level of third-party provision of the required passenger information. With those caveats, the reprogramming and transaction costs of CAPPS II could generate tens of millions of dollars of costs for the aviation industry. This would be a very substantial burden for the airline industry, which is struggling to recover from unprecedented financial losses.

Extrapolating from this ATA estimate, the total cost to the hundreds of airlines around the world that have interline agreements with USA-based airlines, and accept reservations that include travel to, from, or within the USA, would likely be at least an order of magnitude greater than those to the couple of dozen USA-based airlines, i.e. in the hundreds of millions of dollars And the costs to the CRS’s, the hundred thousand or more travel agencies, and the many other tour operators and software and services providers around the world who deal with reservation data could conservatively be expected to exceed a billion dollars.

When I spoke with Ms. O’Connor Kelly last Thursday morning, she told me that, “We expect that CAPPS-II will reduce the cost to airlines compared to what they have to do now for CAPPS 1.” She couldn’t say on what that opinion was based; in fact, she appeared to deny that it had any basis at all. Her statement that CAPPS-II would reduce airlines’ costs was immediately followed by her saying that she didn’t yet have any cost estimates for CAPPS-II because the program hasn’t yet been tested or deployed, and many decisions about how it will work haven’t yet been made.

When I asked specifically whether she, the DHS, or the TSA had solicited or received any estimates of CAPPS-II costs or required implementation times from airlines, CRS’s, or travel agencies, she only reiterated (with annoyance) that no cost estimates had been completed — not mentioning that she had received, and withheld from public release for almost two months, an estimate from the collective voice of USA-based airlines that costs to them alone could be increased by “tens of millions of dollars.” (By comparison, the line item for CAPPS-II in the DHS budget for fiscal year 2004 is US$35 million, making it highly unlikely that the DHS could afford to defray the airlines’ costs, much less those of other companies involved in collecting and processing reservation data.)

Ms. O’Connor Kelly has professed great interest in “listening” to public comments on the CAPPS-II proposals. But if she had read the ATA comments, there was certainly no evidence in her responses to my questions that she had understood or paid any attention to them. The same could be said for my comments, and most of the other public comments: she had my comments in front of her on the table when we met, but but she professed surprise when I mentioned key points that I had explained in them, and in my other writings, in great detail, many months ago. In fact, there was nothing in anything Ms. O’Connor Kelly said in our hour-long conversation, or in the written analysis of the CAPPS 2.0 comments that accompanied her office’s CAPPS 2.1 notice, that acknowledged any of the major lines of criticism of the CAPPS-II proposal, or gave any indication that she had actually read or endeavored to understand them.

When I had pressed Ms. O’Connor Kelly as to whether her office, the DHS, or the TSA were consulting with the travel industry on the potential impact of CAPPS-II, she said that, “We have talked to some of the airlines.” So after reading the newly-released comments, I spoke with ATA Vice President James Casey, in whose name they were filed, to see if ATA was being consulted on CAPPS-II plans.

Mr. Casey of ATA told me that, “We don’t have any information the public doesn’t have about CAPPS-II”, that no far as he knew there had been no response from anyone at the DHS or TSA to ATA’s comments, and that he didn’t expect any.

He also said that so far as he knew there had as yet been no discussion at all of what would be required beyond ATA on a global scale for CAPPS-II, such as modifications to the ATA and IATA Airline Interline Message Protocol (AIRIMP) to support transmission of the additional data proposed to be required for CAPPS-II.

The implication is that the DHS and TSA, particularly Ms. O’Connor Kelly’s office as the initial recipient of the public and industry comments, have ignored warnings of potentially huge implementation and IT infrastructure costs from the airlines through ATA, and from myself as the only travel agent to file comments on CAPPS-II. And they have made no effort to contact or consult with even those parties within the travel industry who filed comments raising these issues.

So much for dialogue and consultation with CAPPS-II “stakeholders”.

[Addendum, 26 November 2003: Because of a “referring page” restriction, it isn’t possible to link directly to the CAPPS 2.1 public comment files. All 4 files of comments released to date are linked from this page — more will presumably be added someday. The ATA comments are on pages 30-37 of what is currently the first of the listed files of comments, with the link labeled “Letters received to DHS/TSA-2003-1, CAPPS II System of Records Interim Final Notice, 11-07-03”. And you’ll have to enable referral logging in your browser for the download links to work.]