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Author: LQueiros Big gold star, 5000 posts Top Favorite Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 2323  
Subject: Consolidators & Domestic vs Int'l Ticket Prices Date: 3/2/2001 7:29 PM
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I found the following discussion extremely enlightening. I hope you will too. The site also offers much more information about discounted travel.

From: http://www.travel-library.com/air-travel/consolidators.html#Section_3

Domestic vs. International Airfares
Much of the confusion about airfares comes from the fact that there are COMPLETELY different systems of airfares for domestic flights within any given country and for international flights.

The USA is the world's largest air travel market, and people from the USA travel within the USA much more than they travel abroad. As a result, many people from the USA -- including many US travel writers unfamiliar with the inner workings of the air travel industry -- make the mistake of applying their experience or knowledge of domestic USA airfares to international airfares, where they don't necessarily apply at all.

Domestic and international airfares, and the optimum consumer strategies for dealing with them, have NOTHING in common. Any advice about airfares, from any source (no matter how seemingly authoritative) that isn't explicitly identified as to whether it pertains to domestic or international airfares, is useless (at best) and misleading (at worst), and should in either case be completely disregarded.

Airfares within North America
Until recently, there were almost no "bucket shops", consolidators, or similar discounts on travel on scheduled airlines (i.e. other than on charter flights) within North America (within and between the USA, Canada, and the Caribbean).

Domestic USA airfares were deregulated in 1978. For domestic U.S. fares, since deregulation, airlines can publish pretty much any fares they want, and change them at whim. If they want to lower the fare, they publish a lower fare. Once published and filed with the government, a fare is available directly from the airline as well as from all its "appointed" agents, including brick-and-mortar travel agencies, online agencies, and those that sell both online and offline.

So getting the best domestic USA fare means learning how to search whatever computerized reservation system (CRS) the travel agent or Web site uses (the major ones are pretty comparable on completeness of listings of published USA domestic fares), figuring out which seats on which flight itineraries it applies to, booking seats accordingly, and issuing the ticket at the price determined by the CRS pricing robot.

It's natural to assume that by going directly to the airline and "cutting out the middle person" you would pay less than if you went through a travel agent or an independent Web site. But airlines have no reason, and certainly no obligation, to offer you the lowest price. Their goal, whether on the phone or on the Internet, is to convince you to pay as much as possible. Asking an airline how much they want you to pay for a ticket is like asking the IRS how much tax they want you to pay.

You may be better off buying your tickets (or preparing your tax return) with the assistance of an independent consultant -- a travel agent -- not beholden to any particular airline(s), even if you have to pay for their services. The worst place to buy your ticket, if you care about price, is directly from an airline. If you buy tickets from a web- based ticket sales robot, look closely at whether it is owned by an airline (as Travelocity was until recently owned and controlled primarily by AMR, the corporate parent of American Airlines).

In an effort to deprive the public of the independent advice of travel agents who might recommend their competitors, US airlines have so reduced the commissions they pay travel agents for issuing USA and Canada tickets that most agencies have found it necessary to charge fees for this service.

Are travel agents' services worth paying for? Surveys by journalists and consumer organizations have consistently found that good travel agents can use their expertise in finding the best fares to save most travelers enough money to cover the agents' fees. This shouldn't be surprising when one considers that the CRS's on which all airlines, travel agents, and robotic Web-based ticket sales sites rely for their data are owned by one or more of the airlines, and are optimized for their purposes: getting you to pay more, not less. The last thing CRS's are optimized for is getting travelers the lowest prices. It takes considerable skill and practice to use these tools to achieve a purpose directly contrary to the developers' intent.

But in theory, the best published fare for any domestic USA flight should be available directly from some airline, if you knew exactly what to ask for. If you fly often enough, and value your time cheaply enough, to make it worth investing your time in learning to make your own reservations, you can eventually learn to do almost as well for yourself on domestic USA tickets, in many cases, as all but the best travel agents.

Don't waste your time, or that of a travel agent, by calling international ticket discounters for discounts on flights within North America.

The best deals on airline tickets for travel within North America are special "Visit USA" and "Visit North America" fares for foreign visitors that are sold only outside North America. So foreign visitors should buy their tickets for travel within the USA in their home countries, and should not expect to be able to get cheaper prices once they get to the USA. Tickets within North America are invariably at least as expensive at the last minute as if you plan ahead, and usually much more expensive. Drastic "last-minute" discounts are, for the most part, a myth.

From time to time, some agencies are able to offer discounts on certain airlines for short-notice travel within North America, but in all but a few cases their prices are comparable to, rarely lower than, the lowest advance- purchase fares. So they are worth seeking out for last- minute travel, but less likely to offer significant advantages over published fares if you can plan ahead.

These domestic USA consolidator deals -- amounting basically to waivers of advance-purchase requirements -- change often, and are structured and marketed to make sure that these tickets are not usable by last-minute business travelers.

In particular, it's important to realize that none of the largest USA-based online agencies list ANY unpublished or consolidator fares on any domestic or international route. This includes Travelocity, Preview Travel, Microsoft Expedia (except the "Flight Price Matcher, as discussed below), GetThere.com (ITN.net), Trip.com, and the many other Web sites (including Yahoo, Netscape, Alta Vista, Excite, Infoseek, etc.) that use "private label" versions of one of these "booking engines" to provide their travel services.

Going to Travelocity, Microsoft Expedia, and ITN is like going to three different car dealers and asking each of them, "What's the manufacturer's suggested retail price of this car?" One of them may point out a model you hadn't known about, but all else being equal they'll all tell you the same list price, and looking at multiple sites that only list the same published fares is largely a waste of time.

Don't be misled by claims to "guarantee the lowest applicable fare". All that means is that the lowest applicable published fare. So what? You want an agency that charges less than the published fare. Unless an agency specifically advertises "consolidator" prices or "prices lower than the airlines", you can assume that their offerings are limited to published (list) prices.

If you want discounts, you have to go to a discounter. How do you find one? Most travel agencies -- including most brick-and-mortar travel agencies AND most online agencies -- are useless in finding domestic USA consolidator tickets.

There is no single source of information or comparisons of prices from different consolidators. Each lists only their own prices. At present, there are only a few major domestic consolidators, as discussed below. These are listed merely as a convenience, NOT an endorsement. Caveat emptor.

To avoid surprises, be sure to ask about all taxes, service fees, and charges for ticket delivery or other incidentals. Get a total ("What is the total amount that will be charged to my credit card for airfare and ALL other fees and services?") before you agree to pay anything.


Cheap Tickets (cheaptickets.com) sells mostly by phone, but does an increasingly large part of its business through its Web site. Prior to Priceline, Cheap Tickets was probably the single largest consolidator of domestic USA tickets. The Cheap Tickets Web site lists only their consolidator prices; it's up to you to check a published- fare site to see if a published sale fare might be lower.


Lowestfare.com also sells both by phone and over the Web. The agency is owned in part by Carl Icahn, former CEO of TWA. As part of Icahn's severance agreement with TWA, he is able to buy all TWA tickets at a certain percentage discount from the published fare. (TWA contended, unsuccessfully, that the agreeement was only supposed to cover tickets for Icahn's own use, not for resale.) This deal expires in 2003. In late 1999, following its IPO, Lowestfare.com bought Jetset Tours, a major wholesale-only international consolidator. Thus far, none of Jetset's prices have been made available through Lowestfare.com, and Lowestfare.com has made no comment on its plans. For now, Lowestfare.com is of interest mainly for domestic USA travel: if TWA has the lowest published fare for your route, you can probably get tickets cheaper through Lowestfare.com.


1Travel.com is the least-known of the major online domestic USA consolidators, but offers the widest array of choices and, as of now, the only integrated display of comparative display of published and consolidator prices. Of course, they list only their own consolidator prices, so some other consolidator might have a lower price. But at least you don't have to check a separate published-fare site to see how their consolidator prices compare to current published sales. They also offer (in the same integrated comparison), so-called "white-label fares" that offer many of the advantages of tickets from Priceline without the drawbacks of hidden prices or unforseeable schedules. These "white-label" prices are listed with the number of connections, approximate time of day, and price -- everything except the airline name, which is provided only after you have paid. (The most efficient interface to the white-label fares is at http://www.farebeater.com, after you first select flights and then click on "Farebeater Ultra" to get cheaper options.)


Hotwire.com quitely began selling tickets in August 2000, although more than a month later it still identified itself as a beta test and had not begun its ad campaign. Hotwire's entire concept is an imitation of 1Travel.com's "white label fares. The differences are that (1) Hotwire sells only these tickets on unspecified airlines, so you have to do your own comparisons of published and consolidator fares through some other source, (2) in exchange for giving them shares of ownership in Hotwire, Hotwire has gotten more, larger airlines to offer tickets through it than through 1travel.com, and (3) Hotwire sells only domestic tickets within the USA. It appears that Hotwire has agreements with most of the airlines that participate in Priceline, and that Hotwire's prices are similar to the lowest offers Priceline is willing to accept. So except for international tickets (where there are usually better deals elsewhere, as discussed in the balance of this FAQ), Hotwire seems to have eliminated any reason to bother with Priceline, even as a last resort.


Priceline.com is a consolidator with the huge disadvantage that they don't reveal their prices. Don't confuse Priceline with an auction. Priceline says themselves that they are not an auction. Priceline has contract prices with airlines just like any other consolidator. "Name your own price" is just a pricing mechanism. It ensures that you pay as much as you are willing, and no less. If you offer $50 more than Priceline's contracted cost, or $500 more, the airline (in most cases) gets the same amount. Priceline pockets the difference. Individual offers to Priceline are not sent to the airlines, not are they individually evaluated by the airlines -- they are evaluated only by Priceline to see if you have offered enough more than Priceline's contracted cost to make it worth their while. In most cases airlines don't even know how much you have paid, or how much Priceline has made on your tickets. It's throwing money away to make an offer to Priceline unless it's lower than the price from Hotwire or 1Travel.com, and it's unlikely that such a lowball offer will be high enough for Priceline to accept. So why bother?


Microsoft Expedia's "Flight Price Matcher" is an imitation of Priceline's hidden-price system. (Priceline is suing Microsoft for patent infringement.) I've seen no evidence that Microsoft has set their minimum acceptable profit margins any lower than Priceline, or that Microsoft has negotiated lower costs from the airlines than Priceline. You can't make offers to two such services at once without risking having both accepted, nonrefundably. So I can't see much reason to bother with this also-ran unless you just feel better about giving your money to Mr. Bill than to Priceline's rival billionaire Jay Walker.
Further discussion of domestic tickets, and of online agencies, is beyond he scope of this FAQ. I'll be dealing with these issues in much more detail in my next book in the Practical Nomad series, a consumer guide to using the Internet for travel planning and purchasing, scheduled for publication by Moon Travel Handbooks in late 2000.

International Airfares
Unlike domestic fares in the USA, international airfares remain regulated, and the official fares published by the airlines give little indication of the actual prices at which agents sell tickets on those airlines. It's as much a waste of time to consult Travelocity or any other Web site for international airfares (especially for more complex, long-haul, or multi-stop itineraries) as it is to call a travel agent (rather than checking airline fares yourself on the Web) for travel within North America.

The differences between domestic and international airfares are largely due to the differences in how they are, or are not, regulated. Unlike deregulated domestic USA airfares, international airfares are regulated both by international treaties and by an international airline price-fixing cartel, the International Air Transportation Association (IATA).

It's worth noting that every US-based airline operating scheduled international passenger flights has voluntarily joined IATA. US airlines' invocations of "open markets", "free trade", and "open skies" can be dismissed as completely hypocritical and self-serving drivel until such time as they exercise their right to withdraw from IATA, as any of them could at any time. US airlines are allowed to participate in IATA "traffic conferences" only because of a special exemption granted them from US anti-trust laws which normally forbid such industry-wide collusion on prices.

Why do airlines join IATA? What is the reason for any cartel? It exists to keep prices, and airlines' profits, artificially high.

International airfares are set by international agreement and regulated by the airline cartel, IATA. Most international airlines are closely related to, if not directly owned by, their national governments. Most governments in turn have an interest in protecting the profits of their national airline, and the IATA fares are therefore set artificially high.

As a condition of membership in IATA, airlines agree (voluntarily, remember) to sell tickets only at IATA-approved prices. IATA rules officially prohibit discounting, and in some countries these rules are actually enforced -- one reason some countries have no local ticket discounters (although tickets originating in those countries can often be bought in other countries, if you know where to look).

Airlines like the cartel because it raises the prices paid by price-insensitive business travelers. But it's not the whole story. If airlines sold tickets only at IATA fares, they would have too many empty seats that might be salable at less-than-official prices.

The revenue-maximization problem for the airlines is how to get some money for seats that can't be filled at official fares, without destroying the benefits of the cartel by allowing people who would be willing to pay full fare to get away with paying any less.

The system the airlines have developed for preserving the cartel while actually selling discounted tickets at less than official fares relies on the intermediary of the travel agency, and the loophole that neither IATA nor international airfare treaties restricts how much commission an airline can pay an agent for selling a ticket. So the airline can pay a large commission to a travel agent, then turn its back and avert its eyes while the travel agent rebates some portion of the commission to the traveler.

All sales of international tickets on scheduled airlines at less than official fares are made through travel agencies, not directly by the airlines, and ultimately depend on rebating of commissions by travel agents to customers. This is how travel agencies can and do, quite legally, offer lower prices for international tickets than the airlines themselves.

Airlines know what is happening, of course, but they have to pretend they don't. In order to maintain plausible deniability and keep their hands clean with IATA, airlines must maintain the fiction that all tickets are sold at official fares. Since airlines cannot admit that they are even aware of discounting, airlines cannot admit to any knowledge of agents' actual discounted selling prices. Strange but true: by the nature of the system of discounting, airlines do not usually know themselves, and couldn't admit to knowing if they did, by which agents or at what prices their tickets are most cheaply sold.

All official fares are "published" either in hardcopy in the Official Airline Guides (OAG) or the Air Tariff, or electronically in the computerized reservation systems (CRS's) such as Sabre, Apollo, Amadeus, Worldspan, and Gabriel. By the very nature of the IATA price-fixing system, airlines cannot admit any knowledge of the fact that agents are selling tickets for less than the official fares. So only published fares are shown in any CRS. Since all the major CRS's are owned by the airlines, no CRS contains any publicly accessible information on agents' actual discounted selling prices.

The glut of official international fare information available through gateways to CRS's such as GetThere.com, Travelocity, Microsoft Expedia, etc. is deceptively comprehensive-seeming and impressive but fundamentally useless in finding discounted prices. If you want to pay less than the official international fare, you have to buy your ticket from an agent who gives discounts, not from an airline directly or from a source (such as a CRS Web site) that is limited to published fares.

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