IATA proposes flexible fares for international travel
Andrew Compart, Travel Weekly, 7/3/2007
IATA is seeking approval for a new fare-setting method that would continue to give U.S. and Canadian consumers the option to buy international interline tickets with the flexibility to change itineraries or switch flights to a different airline.
IATA needs Transportation Department approval for the product it calls Flex Fares because the DOT decided airlines no longer should have antitrust immunity to use the method in place for the past half-century, in which they were allowed to negotiate the level of certain types of fares at IATA tariff conferences.
The DOT decided to withdraw its antitrust immunity for those conferences as of June 30, after deciding that the rate-setting forums, while restricted to certain types of international fares such as the flexible multilateral interline fares, provided too much of an opportunity for airlines to stray into anticompetitive and anticonsumer abuse on all types of international fares.
Australia has taken similar steps and European Union competition authorities have already ended their exemption of the tariff conferences from E.U. competition laws. In fact, the new Flex Fares product already is being offered within the E.U.
The Flex Fares product lets customers change airlines after ticketing; develop and change complex itineraries within a single ticketed price, even during the course of travel; and include an unlimited number of stopovers.
Under the new fare-setting method, IATA each year would calculate an average fare in each market in each class of service and then add a 10% premium. The one-way fare would be 75% of the roundtrip price.
"The building blocks for the Flex Fares price will be set by market forces, not by any airline agreement," IATA told the DOT in making its case for why the new system should be approved.
"The Flex Fares products do offer benefits that other products offered by single airlines or groups of airlines cannot match," IATA said. "Only time will tell whether travelers feel those benefits are valuable enough to them to warrant paying a premium price."
Airline participation in Flex Fares is voluntary and open to any carrier.
Fewer than 7% of all transatlantic trips involve nonalliance interlining, according to the most recently provided DOT statistics. But Steve Lott, IATA's spokesman in Washington, said 7% is still a significant number.
He also said IATA still believed that Flex Fares would be chosen by a large number of travelers, even by those using airlines in the same alliance, because of the flexibility the product would provide.
For example, a passenger who had flown Atlanta-Paris-Frankfurt on Delta and Air France and originally planned to return the same way could instead change in Frankfurt and fly nonstop to Atlanta on Lufthansa, via Montreal on Air Canada or via London on British Airways.
IATA said it expected usage to be lower in the U.S.-Europe market because there were a lot of nonstop flights between cities.
It expects higher usage on routes to the Middle East and Africa, where there are fewer direct or nonstop flights.