As far as the travel industry is concerned, airline consolidators are a recent phenomenon. These companies have only been around for the last half century or so, but they have developed into an integral part of the industry. As part of a monthly series on airline consolidators, today we’ll be discussing the history behind them and why they can benefit travel agents.
What is an airline consolidator?
Airline consolidators buy bulk tickets from airlines and then resell those tickets to travel agents at a discounted rate. This allows airlines to gain more exposure for ticket options, flight routes, and services and the travel agents get low airfare – sometimes 40-60% off published fares. As such, agents can make a decent commission while still giving clients a great deal. However, it was only within the last several decades that consolidators made this possible.
How consolidators began
Decades ago, airlines faced several dilemmas. Firstly, they needed a way to move a large amount of airfare, often on less popular routes. Secondly, they needed to circumvent the problem of only offering published fares. Why? Because anytime Airline A published a fare for $800, Airline B could easily see how much their competition was selling that same route and undercut the sale by offering a lower rate. Additionally, IATA rules prevented airlines from selling published airfare at a discounted rate. Therefore, airlines discounted fares, but sold them quietly to consolidators as coupons.
Airline consolidators saw a way to solve both of these problems. They began discretely buying up airfares at discounted rates from the airlines. These unpublished fares gave the airlines a huge new competitive advantage. The competition could no longer see their prices and unpopular route tickets were off the airlines’ plates. The risk of losing out on unsold tickets transferred from the airlines to the consolidator. Further, since travel agents bought fares in bulk, the airlines were not required to pay for costly marketing campaigns in order to sell specific routes.
Once consolidators acquired these fares, they advertised them in newspapers as coupons and heavily marketed them to the VFR (visiting friends and relatives) demographic. In the old days, these fares were very restrictive. You could not use frequent flyer programs nor could you make changes to the tickets unless you were comfortable paying a large fee to the consolidator. Thankfully, this is no longer the case.
Airline consolidators today
From their humble beginnings as a very niche market, airline consolidators have become an integral part of the travel industry. They serve as an invaluable tool for agents to acquire low net fares – sometimes as much as 65% off published fares – and secure a good commission while providing their clients with an amazing deal. And since airlines are not allowed to sell unpublished fares themselves, the only way travel agents will acquire this deal is working directly with a consolidator.
While tickets sold by consolidators were once restrictive, that is no longer the case. You may hear travel professionals who’ve been in the business a long time warn the younger generations about using airline consolidators. These travel veterans remember the days when clients had to plan their schedule around these rigid travel itineraries. Again, this is no longer the case. Clients are able to use frequent flyer with each airline and travel reward programs, and there is greater flexibility. Additionally, the fee for a consolidator to make changes to your tickets is much lower than it used to be.
Airline consolidators grew out of a need for airlines to move large amounts of airfare without costly marketing campaigns or setting themselves up for competition from other airlines. Consolidators in modern times not only benefit the airline, they benefit the thousands of travel agents who use their services and the agents’ customers.
This article is part of a monthly series on airline consolidation. Be sure to check out previous issues of Travel Weekly for other topics including airline consolidators and GDS, how to tell if a consolidator is reputable, and more. While some agents don’t use consolidators, it’s important that you are able to respond to questions from clients that may arise when they read something on the internet.