As the world of travel distribution is being challenged by a large number of external pressures, the focus has been on the airlines versus their GDS partners.
But which are the injured parties in the overall war? And, perhaps more of a conundrum, why is it like this?
For anyone who is a fares person, you can stop reading now - you know this stuff. However for many who have struggled with airline pricing we hope that you can use this article to explain to your stakeholders why it is so complicated.
To answer these questions we have to go back to basics and attempt to understand why prices vary.
Clearly airlines believe fares are their own and that only they should have the rights to determine who gets to display and manipulate the data; who gets to use the data; and where and how it gets used.
This appears fine in theory, but there is a strange quirk: airlines in the past have ceded the ability to determine the price for a ticket to the GDS or their own internal systems.
The very act of not having a formalized reference price for most airlines makes this whole process fraught with possible abuses. The impact? Multiple correct prices for the same product.
- Different prices from the airlines to the GDSs and subsequently to GDS customers online and offline
- Different prices for the same product sold in different jurisdictions
If we look at the possible sources of airline-based fares and pricing, the process for what actually determines a fare is almost beyond belief.
It has a guarantee that the pricing will be different and that the process of enforcement in today’s internet-based transparency seem a little arcane.
As pricing has become more complex - with different taxes, more volatility for surcharges and the imposition of fees for direct and indirect items, for example - then the ability of the pricing mechanisms to keep up are challenged.
Furthermore, the airlines themselves have never enforced a standardized unique pricing mechanism. There are therefore four major issues:
1. Pricing
Each pricing algorithm used by the GDSs are, by definition, different. In other words: the calculations are different, therefore the prices are different:
- the logic of the pricing is different,
- the order of the pricing elements are different
2. DisplayNot every GDS correctly enforces all the rules of the pricing. If they did then some of the airlines fares would never price. There is perhaps a little "give" in the system to accommodate specific instances when the pricing might not work.
3. Publishers
- ATPCO, which publishes fares, rules, routings and footnotes, does not provide a reference point for the fare in the form or a test case service.
- SITA, which can and does both, provides a filing service for fares and at the same time has a fares and pricing engine can do this. But an airline's own website might use a different mechanism for determining the fare from the price.
4. Location and currencyThe use of multiple geographic points for determining pricing elements (taxes and unidirectional pricing elements such as fuel surcharges) means that the use of a currency exchange system must occur. However, the "home" currency of the GDS can vary. The location of this home can also have a different impact on the final price.
The GDSs are not to be blamed for this. The airlines liked this process as it contributed to the overall goal of obfuscating pricing. But the enforcement process is also somewhat difficult to comprehend and digest.
Enforcement is accomplished by checking prices issued post-fact and punishing with a harsh stick for any transgressions.
If a price is found to be incorrect or, more accurately, if the airline finds that the price on a ticket does not measure up to the airlines’s impressions of what the price should be, then the airline has the right to charge a deficit price up to the value of the (usually not widely used) full fare price of the ticket.
In theory, if the agency messes up the ticket and fails to completely book the reservation according to the rules then the full fare can be charged back to the agency by the airline.
However if the GDS autopriced the fare and the agency followed all the rules, then agency is protected in most cases by the GDS fare guarantee programs.
The onus to fix this rests with the agency as the airlines have very broad rights in these matters including taking money from a bank account.
Perhaps now you can see why this is not a trivial matter.
In many cases the actual amount of variation can be just a matter of a few pennies. However in some cases they translate into hundreds of currency units of difference.
Just have a look again at the differences in the fares from the Orbitz website. In a future article, I will try and answer the next big question: does full content hurt more than just GDS competition?