Understanding International Air Fares & Fare Construction

Consolidator (Net) Fares

IATA and Non IATA Travel Agents

IATA Travel Agents

The purpose of IATA accreditation is to formally recognize travel agents that are authorized to sell and issue airline tickets on behalf of IATA member airlines. In the USA, a similar system is run by Airline Reporting Corporation or ARC.

Strict criteria apply when agents wish to be recognized by IATA. Once accredited these agents are given a unique numeric code which allows instant recognition and identification of their agency. It also gives the agency access to airlines’ seat inventory, fares and rules, ticketing facilities and access to and use of the billing and settlement plan (BSP) in their country or area. Accreditation also offers the agency IATA standard practices and procedures, such as ticket refunds when applicable.

Non IATA Travel Agent

Certain travel agents may be a part of a larger franchise or buying group and do not need to issue tickets-in house, or they simply do not seek IATA accreditation to run their business. However, any agent who wants to earn commission through a GDS and be part of the travel distribution system will also want to be formally identified. To address this, a separate recognition mechanism has been set up by IATA called the Travel industry designator service (TIDS). To apply for a TIDS code an agency must be non-IATA, book through a GDS, book with travel suppliers worldwide, and meet other IATA defined qualifying standards.

Consolidator Net Fares

We will now examine the fares made available to the travel agency network via consolidators, and how this distribution channel can benefit both airlines and travel agents. Consolidators distribute what the industry refers to as net fares, which enable the travel agent to set their own pricing level and therefore manipulate what they can earn on a fare

Advantages of Consolidator (Net) fares to airlines

The principal advantage to an airline of offering fares through a consolidator is that it forms an additional distribution channel for these fares.

Local markets are often dominated by one or two airlines, and non dominant carriers must therefore compete for market share and travel agent loyalty. Non stop or most direct routings between two cities are usually displayed prominently on GDS screens, and are the first to be seen by a travel agent. Airlines using hubs or connecting flights between these same two cities are therefore at a disadvantage and consequently understand the benefit of using pricing incentives in order to attract business.

It is more efficient for an airline to deal with as few distributors of its products as possible, as this utilizes the fewest resources. Let us suppose that a flight has one hundred seats available. Instead of having to provide the reservations, fares, ticketing and accounting staff to service one hundred individual customers, an airline will prefer to deal with twenty travel agents, each using their skills to sell five seats apiece. By the same reasoning, a travel agent acting as a consolidator will further reduce the number of individual transactions with the airline, by grouping together the sales of many travel agents, thus filling an even greater number of seats through one channel.

Advantages of Consolidator (Net) fares to travel agencies

In the past the international airfare commission level was usually 9%, paid directly by an airline to each IATA travel agent. Today an airline may offer 0% commission to the travel agency network in general but pay an incentive commission to agents producing a higher volume of sales.

While commissions can still be earned on some published and promotional airfare, today net fares offer an agency a way to control how much they earn on each ticket, within the upper earnings boundary determined by the published fare and the lower earnings boundary determined by the net fare price an offer from the consolidator. The price mark up then becomes the substitute for a commission. Both IATA and non IATA travel agents are able to access and sell consolidator airfares. Consolidators usually have customer service staff to assist travel agents with the interpretation of fare rules, regulations and applicable taxes. When using a consolidator, all the ticketing and IATA related accounting is done for the travel agent.

Pricing Structure of Consolidator (Net) Fares

There exist consolidators’ rates for published first, business and economy class fares. Sometimes there are also combinable net fares for first/economy and business/economy fares and net fares which combine more than one air carrier.