It has been called a cancer to free market trade and a boil on consumers” wallets. As recently as last week, British Airways called its rules Byzantine, accusing it of presiding over some of the most anti-consumer practices in global aviation history. So, one would think that when presented with the opportunity to show it is at last changing with the times, the International Air Transport Association (IATA) would shout from the highest peak. IATA had such an opportunity on 15 January, when, after much prodding, it eliminated the International Sale Indicators (SITI, SITO, SOTI, SOTO), allowing fare calculations to be based on the point of departure rather than the place of booking.
But rather than issue a flurry of self-glorifying press statements that blare to the world, ”Hey, look at me. I”m great. I”m the consumer”s best friend,” IATA let its opportunity quietly sail by. There does not seem to be a single mention of the rule change on IATA”s website.
Why? Is IATA so incensed over the ceaseless name calling that it was hoping people wouldn”t notice? Did it expect the typical round of badgering rather than praise for a job well done? Does IATA know it changed the rule? Whatever the reason, the opportunity to prove it is not an archaic, anti-consumer club was missed.
Now, the industry must tweeze apart the regulations with surgical precision, examining and re-examining every possible implication. And since IATA has yet to utter one word about the rule change itself or its implications it seems the industry will be left to do its own probing.
In the coming months, advocacy groups such as The Association of Corporate Travel Executives ” to name just one of IATA”s myriad critics ” will lead endless discussions on what the rule change means for its members, while individual corporations and travel agencies will pilot programmes to measure the depth of the rule reform.
Under the former regulations, airfares were constructed based on market level and priced differently depending on place of booking. Now, fare calculations will be based on point of departure. To say the potential impact of this rule change is huge is to put it mildly. Put simply, the rule change will affect every traveller in the world. It will make a large impact on corporate travellers especially, because it will change how fares will be calculated when travel originates in a different country other than where the ticket was purchased.
Put another way, the rule change means that ticket prices should be identical irrespective of the country in which they are purchased. In theory, this will allow travellers to choose from a greater pool of fares.
Topaz International uses the example of a passenger purchasing a one-way ticket prior to 15 January from New York City to Seoul in business class for $2,400 and a separate return ticket Seoul to New York City connecting in Tokyo for $3,500. The return ticket is greater because the ticket is sold and ticketed in the USA with travel originating in Korea. The return ticket is considered as a SOTO ticket (Sold Outside/Ticketed Outside). Former fare construction rules required a higher intermediate fare check to be made at all ticketed points for SOTO tickets. Since the Tokyo to New York fare is greater than Seoul to New York, the Tokyo ” New York fare is charged on the return ticket.
Today, however, the International Sale Indicators no longer exist. Higher Intermediate Point checks only need to be based on stopover points regardless where the ticket is issued and sold, with a few exceptions. Therefore, the fare on the return ticket from Seoul to New York would be $1,900, a savings of $1,600! In addition, the elimination of the Country of Unit Origin Minimum check will eliminate having to charge a higher fare if a passenger should travel via the country of origin on a one-way ticket.
Take the example of a passenger travelling from Atlanta to Mexico City and Sao Paulo, connecting in Miami. Previous fare construction rules required the passenger be charged two separate fares: one from Atlanta to Mexico City and another from Mexico City to Sao Paulo. However, since the passenger is travelling via a point in the country of origin (MIA), a fare check must be made from Miami to Mexico City and Miami to Sao Paulo to ensure the fare from the country of origin is not undercut. Now, this check is no longer required, allowing the passenger to pay a single fare, in this example from Mexico City to Sao Paulo fare.
But it”s not all good news. There still exist layers upon layers of algorithms that hold strict and complex governance over fare construction. In addition, there are multiple ”sub rules” that still stand defiant to free market ideals. The Directional Minimum Check (DMC) epitomizes the flaws in IATA”s existing rulebook.
The DMC is not applicable for sales made in the USA and its territories. However, under the rule change, the DMC will be applicable to one way and normal open jaw journeys to/from/via Japan when the traffic document is issued in any other country other than the country of ticket origin, and the journey does not terminate in Canada, USA, or US Territories. Borrowing once again from Topaz, we take the example of a ticket issued in Los Angeles for travel to Seoul, connecting in Tokyo and going on to Singapore. The passenger would still pay whichever fare is greater: Seoul to Singapore; Seoul to Tokyo; Tokyo to Seoul; Tokyo to Singapore; Singapore to Seoul; or Singapore to Tokyo.
Prior to the middle of this month, it was legal to compel a traveller to pay more money for the same product. There seems something inherently wrong, if not wicked, with that practice. IATA should be applauded for taking a sizable first step toward improving the process of fare construction, but there still remains much room for reform.
IATA must at least attempt to untangle the web of bureaucracy which binds it to such an archaic system. It also should remember one thing my mother always told me: you don”t get credit for what you ought to be doing. But perhaps IATA knows that already. Perhaps that”s the reason it chose not to make such a big splash on 15 January. Perhaps it does recognise how much more work still needs to be done”perhaps.
http://www.iata.org