Air ticket consolidators turn profit in shifting landscape

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Consolidators say that airlines continue to work with them.
Consolidators say that airlines continue to work with them. Photo Credit: Karen Roach/Shutterstock

Huseyin Ozyurtcu, the owner of Picasso Travel, remembers a time more than four decades ago when KLM said that it planned to phase out its use of air ticket consolidators, of which his company is one.

Such a move might have been damning for Picasso, since KLM, along with Pan Am, were the behemoths at the time when it came to supplying consolidator inventory. 

"Now, 45 years later, we are still going," said Ozyurtcu, whose company maintains offices in six U.S. cities.

Airlines have made steady efforts in recent years to drive more ticket sales into direct channels. Many are also making a concerted attempt to merchandise their flights and seats as differentiated experiences rather than mere commodities that compete mostly on schedule and price. 

But even as surging travel demand has coupled with still-recovering capacity levels over the past 10 months to create the most pricing power that airlines have experienced in recent memory, longtime air ticket consolidators say that business remains solid, and their partnerships with airlines continue to be strong. 

"Airlines recognize this channel very well," said Lali Kumar, vice president of sales for Austin, Texas-based Mondee Holdings, which owns five of the top U.S. ticket consolidators, including C&H International, SkyLink, Transam Travel, Cosmopolitan Travel Service and Hariworld. "The international airlines, including the U.S. carriers, have been very supportive of this channel because it creates incremental business opportunities."

According to Travel Weekly's 2022 Travel Industry Survey, 17% of travel advisors book airfare through a consolidator. That's nearly as many as the 20% who said they book directly through a GDS platform, confirming the continued significance of consolidators both for airlines and for leisure travel agencies.

Airlines "are working with us the same as ever," said Arvin Shah, CEO of Detroit-based consolidator Sky Bird Travel. "The consolidator is cheap distribution to airlines. It doesn't cost them anything."

A changed landscape for consolidators

Still, despite the consolidators' relative bullishness, their business model has become more challenging through the years, said Henry Harteveldt, who studies airline distribution for his Atmosphere Research Group.

Though he didn't offer specific figures, Harteveldt said consolidators now represent less than 5% of the ticket sale channel share mix for most airlines. That number would have been above 5% a few years ago. 

He attributes the decline to consumers doing their own discount ticket searches via OTAs and metasearch sites as well as to airlines' increased efforts to drive traffic to their own channels, such as their websites and direct connects.

In addition, Harteveldt noted, with the exception of the Covid period, airlines have enjoyed strong demand for more than a decade. Still, every airline will have different needs in relation to its use of consolidators, Harteveldt said, with those needs often varying from route to route.

"An airline that is a dominant carrier on a particular route may not need a consolidator," he said. "But where competition is fierce or an airline may be new, or an airline has not seen bookings materialize through more traditional channels, they may turn to consolidators to help them out." 

Consolidators also acknowledge that in some respects, their business has become more challenging. Ozyurtcu said that Picasso had between 130 and 150 employees handling its consolidation-related business prior to 2018. Today the number is between 80 and 100. 

One change, he said, is that margins have dropped as technological improvements have enabled airlines to be more adept at inventory management. A decade ago, Picasso Travel enjoyed $30 to $50 markups per ticket. Now, its average markup on a roundtrip fare doesn't exceed $10. 

Travel advisors who use Picasso, Ozyurtcu said, can typically save their clients 5% to 10% on economy tickets, depending on how much markup the advisor takes. However, on some high-yield tickets the savings can be as much as 25%. 

Consolidators also emphasize that they focus heavily on their own technology stacks. Focus areas include agent shopping portals, post-purchase servicing tools and NDC capabilities. 

Kumar, for example, said Mondee has close to 50,000 advisors signed up for its cloud-based agent portal TripPro, which offers automated ticketing and support, chargeback management and other tools. 

Mondee sells tickets via Sabre and Amadeus or through its own booking engine. 

Kumar used the term "Uberization" to describe the at-your-fingertips capabilities that Mondee offers travel advisors. 

"The time to market is very important in our business," he said.

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