IATA Rule Changes Provide Int'l Fare Savings

Almost two months after the International Air Transport Association relaxed several key restrictions in its fare purchasing rules, buyers and travel management companies are identifying opportunities to construct cheaper air itineraries. Looking beyond the immediate fare reductions, they also said the changes may bring important process efficiencies that ultimately could provide even greater savings by speeding the drive toward pan-European travel management operations. Meanwhile, one TMC source warned that organizations with heavy usage of multi-sector itineraries need to review net fare deals as these may now work out to be more expensive than published fares.

IATA simplified a complex range of rule changes for standard published fares on Jan. 15 by scrapping sales indicator codes, amending the higher intermediate point check and abolishing the country of origin minimum check. The essence of these changes is the removal of restrictions on buying a ticket in a different country than where a trip originates. In some cases, these relate to how certain sectors of the journey are priced; in others, to obtaining a fare at one end of a route when previously it was only available at the other. It also means that travelers can buy two one-way tickets even where these work out cheaper than a return fare.

Assessments of the benefits this brings to buyers vary. American Express director of industry affairs Bernard Harrop said the resulting fare harmonization will lead to no overall change. "There are some opportunities and some price increases. It will probably balance out as price-neutral," he said.

However, another major global TMC told BTN it is seeing cheaper fares in 2 percent to 3 percent of the tickets it issues. It gave two examples of how customers are better off. One is a Sofia-Brussels-London one-way ticket, with the first leg on SN Brussels Airlines and the second on BMI British Midland. The price before Jan. 15 was ?925, it now is ?265. Another is Amsterdam-Moscow return, with the outbound journey on Aeroflot and the return on KLM. This cost ?1,925 before Jan. 15. It now is possible to buy an outbound single for ?392 and an inbound single for ?480, for a total of just ?882.

That still is likely to be more expensive than many buyers' negotiated fares, but some buyers believe there will be a small number of occasions when the new flexibility in construction will offer the cheapest option.

"We have lots of route deals with airlines but these fares are useful for segments where we have no special agreements," said Yves Galimidi, travel manager for the InterIKEA group.

The main winners appear to be travelers flying business class on multi-sector itineraries to or through countries where fares per kilometer are low. These include the Middle East, Asia and Latin America, and are particularly helpful for travelers starting their journeys in countries with a high published fare per kilometer, such as the United Kingdom.

Scholefield Turnbull & Partners, a London-based TMC which specializes in arranging travel for board-level executives, therefore has been a significant beneficiary of the rule relaxation. One route on which it has seen lower fares is London-Buenos Aires. For frequent travelers, Scholefield Turnbull now is able to buy return fares from Buenos Aires for £2,412, as opposed to a return from London for £5,140, with the traveler taking a one-way ticket to the Argentine capital to start the sequence. Alternatively, for one-off travelers, it now is possible to buy London-Buenos Aires one way for £3,736 and Buenos Aires the other way for £1,227, which works out to £4,963, almost £200 cheaper than a standard return.

However, there is evidence that airlines are countering the new opportunities for cheaper fares by reintroducing restrictions as they file new fares on an individual basis. Turnbull said this is particularly apparent on routes to Japan, Nigeria and Tunisia.

These limited examples of restrictions aside, Turnbull said the ability to build cheaper itineraries creatively but legitimately from published fares has improved considerably. As a result, buyers need to review their corporate net fares where used for the major leg of a multi-sector itinerary.

The problem for buyers, Turnbull warned, is that if they opt for a non-interlineable net fare for the major leg, they have to buy a second published fare to cover the minor leg. This combination of net-plus-published fares now could work out to be a more expensive option than a published fare for the entire itinerary following the new opportunities provided by the reforms of Jan. 15.

"If your travel profile tends towards trips involving multiple sectors, you should pay particular attention to this issue," Turnbull said.

While buyers assess the possibilities for fare reduction within their travel patterns, they also can consider the less apparent, but equally significant, implications for process improvement. Turnbull already has experienced one small example of this: a potential client that sources its Mumbai-London tickets from a travel agency in India has approached Scholefield Turnbull about handling these, as well as trips originating in the United Kingdom.

"We can now buy tickets for the same price as agencies in India, so businesses which have lost control of their total travel program, through purchasing some tickets from other countries, can now channel it all through the same travel management company in one country," Turnbull said.

Neil Hammond, global travel manager for Schlumberger, has grasped the same point. "I welcome the change because it will enable us more and more to centralize the management of our travel program," he said. "We are implementing a European operations center right now with Amex in Nice and we are booking in France, but having to ticket locally. Airlines have always maintained that we have to do that because we are paying different fares in different markets. If those pricing distinctions disappear, there will be no need for separate ticketing anymore."

Airlines continue to offer restricted, market-specific promotional fares but the new rules do at least remove the need to emulate different national global distribution systems for published IATA fares. Hammond said significant labor savings will be created if he can employ one larger team to handle all bookings on a single GDS, then several smaller teams that each handle only one national GDS.

American Express expects the process savings generated by the rule changes ultimately to prove greater than the purchasing savings. "We are conducting pilot studies to see what the opportunities are,"said Harrop, although he refused to further elaborate, citing competitive reasons. However, Harrop did reveal the pilot will study whether there are consequences of generating savings on issues such as value-added tax calculation and collection of management information.

The ability to book more fares through a single-market GDS also means there will be less need for multi-market IATA accreditation and billing and settlement plans, which also will create efficiencies. "We are moving towards the ability to book, ticket and settle where we want," Harrop said.