Q:Is it legal for airlines to sell
international tickets through consolidators at prices below the
airlines' published rates?
If not, is it legally and financially risky to do business
with these consolidators? If so, how can my agency minimize the
risk?
A: Consolidators sell in three ways. Two ways
are legal and one way is illegal. However, that illegality is not
the reason why you might hesitate to use consolidators.
The first legal way for consolidators to do business is to
obtain very large commissions for themselves and then rebate a
portion thereof -- no matter how large -- to the passenger.
For example, if the business class fare is $4,000 and the
airline's commission is $2,000, the consolidator might keep $250,
your agency might keep $350, and the passenger would pay
$2,600.
The second legal way for consolidators to do business is for the
airline to file special rates in its official, government-filed
tariff and then offer the specials only through selected
consolidators.
Because federal law requires airlines and their agents to sell
international air fares only at tariff prices, with no discounts
not authorized in the tariff, a tariff amendment is necessary to
legalize consolidator pricing that is not based on commission
rebates.
The illegal way for consolidators to do business is to obtain
from the airline special rates or waivers that are not filed in the
tariff.
A variety of formalities and subterfuges are used to paper over
the illegal discounting, such as using unearned upgrade
certificates, stickers and nontariff fare bases.
However, the various forms of paperwork are irrelevant; what
counts is whether the sale by the airline is at an authorized
tariff rate, minus commissions.
Let me hasten to add that this illegality should not concern
you. In 1988, the U.S. Department of Transportation announced that
it would not enforce the law unless discounting was discriminatory,
deceptive or in violation of the antitrust laws.
It has been more than a decade since the government tried to
crack down on any discounter.
The real problems with consolidators are more practical: The
airline might decide not to honor a consolidator's ticket, or the
consolidator could go out of business before it sends the
ticket.
Next week, we'll discuss how to protect your agency and clients
against these problems.
Mark Pestronk is a Fairfax, Va.-based attorney specializing
in travel law. He answers your questions in the Crossroads Legal Issues forum. To contact Mark directly,
e-mail him at [email protected].