IATA To Introduce Interline Fare System In 2007

The International Air Transport Association next year will introduce a new "flex fares" system that retains the benefits of interlining once tariff conferences traditionally used to set interline fares are abolished. The move represents a major shake-up in the way that airlines set fully flexible, interlineable airfares.

Interline fares are more expensive than negotiated corporate fares and other fare types, but they offer considerable advantages to business travelers. Passengers can switch to and from any IATA member airline on the route they are flying and also take a trip involving two or more carriers on a single ticket with all baggage transferred.

However, the system was in danger of collapse because the European Commission is lifting the block exemptions from antitrust laws that allowed airlines to collude on setting interline fares at so-called tariff conferences. The block exemption on routes within the European Union runs out at the end of December, with routes from the European Union to the United States and Australia to follow in June 2007 and, provisionally, between the E.U. and the rest of the world in October 2007.

Under the new system, IATA automatically will calculate an average fare for every route based on the full, unrestricted fare currently being charged on it. IATA then will add a percentage premium for the benefits of interlining, giving a total price for the new flex fares. "Passengers will not notice a difference in their ability to use tickets purchased at this fare to fly a different airline, add stopovers, take an earlier or later flight, or fly a different route," the association said in a briefing note.

The flex fares can be bought for intra-E.U. routes beginning Jan. 1, good for travel from March 1. IATA said it hopes to implement the system for fares from the United States to Europe and Australia, and eventually worldwide, later in 2007. The average fares on which the flex fares are based will be recalculated every March and October. Asked what will happen to the price of an interlineable ticket when the flex system is introduced, an IATA spokesman said: "On average, most fares will be the same or lower, but there will be some exceptions."

The spokesman added that the European Commission has given "encouraging feedback" about the introduction of flex fares in preference to tariff conferences. Regulatory approval will be required by the U.S. Department of Transportation to introduce flex fares for international flights to and from the United States.

Philip Carlisle, chief executive of the United Kingdom's Guild of Travel Management Companies, responded favorably to the news of the flex fares solution. "This confirms that there are ways of achieving interline fares other than through tariff conferences and we are interested in knowing more about it," he said. "It seems a welcome solution in principle and very much in the interests of our customers."

The GTMC estimates that 10 percent to 15 percent of the fares its members currently sell are interlineable.