Carriers Loosen Up On Web Fares

Acknowledging pressure from corporate clients, Continental Airlines vice president of multinational sales and revenue programs Dave Hilfman yesterday told Business Travel News, "For those fares that are exclusive to the Web, we are looking at making them available through other distribution channels at marginally higher levels based on cost." Other major network carriers were reluctant to comment officially, with one top official noting difficulty in establishing policy about such a volatile thing as airline pricing. While Continental's statement suggests that the global distribution systems could house Web fares plus a cost-related markup, other carriers are seeking ways for clients to use Web-only fares on the Web only. Still at issue, however, is how to track client purchases made online.

Asked whether his carrier would match such a move from Continental, one senior airline official said, "Probably not. But the flip side is, 'Would we make it available in channels that work for us?' In other words, if we offer a corporate ID of some sort, we could say, 'Your bookings on our site and on Orbitz can count.' But we still need to figure out how to track that. If we provide the reporting from our site, and Orbitz also provides a report, we have to be able to see our share as a portion of the total. We need to see what you've done on other airlines with some degree of measurable detail, without violating confidentiality on individual information or by airline."

While thus far the only airlines to state they will credit companies for Web-only purchases are Alaska, Delta and Southwest airlines--through their respective business-specific Web sites--carriers appear to be increasingly willing to credit purchases made on other sites, as long as the data are properly tracked and buyers don't expect any commissions. Travel agencies and technology vendors are scrambling to help clients with reporting Web-only buys, as well as to install the capability of showing differentials in Internet versus GDS pricing on an ad hoc basis.

One buyer said a recent conversation with her Delta sales rep indicated that the carrier was moving toward an official policy, even perhaps so far as to add an amendment to agreements. According to the buyer, whose annual U.S. booked air volume totals $8 million, "Delta said that with new contracts, it is now discussing rewarding buyers on the business they bring in through all channels." A midsize Chicago-area United Airlines client said: "We approached United about undercutting our deal at its Web site. After multiple discussions, United finally agreed to allow Internet bookings to count toward volume we are required to maintain, as long as we had information documented by the travel agency showing the disparity. United agreed to let Internet bookings count toward volume goals, but with no extra compensation on Internet bookings."

The United client said her company bought just 13 Web-only fares since November, but the savings totaled $7,000. "The policy now is that travelers can use ual.com--or other airline sites, but not the search sites like Travelocity--if the savings is more than $150, but only after the travel agency confirms they cannot beat the airline's Web fare."

"We do not have our head in the sand," said Continental president Larry Kellner, elaborating on what the carrier is considering. "We know that other than specific percentage-off sales on the Internet, fare differences are driven by the time of day, the channel, the way the program is loaded, etc. We are not trying to use the Web as a price discrimination tool. We are not trying to say that there is this great price on the Web but we won't allow the corporate traveler to get at it. What we are going to say is that we have to be competitive in the marketplace. If somebody launches a 20 percent off Web sale and we decide we have to match, that is what we are going to do.

"We also understand that we have GDS costs, commission costs and other costs coming through different channels," Kellner continued. "So if you want to come through a higher cost channel, we have to figure out a way to recover those higher costs. But we will continue to work with you to figure out a way for things to count that should count."

"This doesn't surprise me at all," said Mark Walton, principle with Houston-based Consulting Strategies. "Nothing is off the table, and as long as airlines have these fares in existence, the marketplace will find ways to use them."

Indeed, how long carriers will offer Web-only fares that compare favorably with those sold through traditional channels is a big unknown. "Web fares go away if too many people get them," reminded one top airline executive.