Continental Airlines has decided to stop
offering net fares to tour operator partners as of March 31, saying
the move would have little impact on its business or on that of its
wholesaler partners.
But tour operators
were divided over the decision, with some agreeing that it would
have little or no impact and others predicting that the move would
have a noticeable effect.
Julie King, a
Continental Airlines spokeswoman, said that "with retail fares
declining, our net fares were not competitive and were not being
used."
'This is a simplification'
"We will continue
to work with tour operators and Continental Airlines Vacations in
conjunction with retail leisure fares, which are very attractive,"
King said. "Overall, this is a simplification of our leisure sales
and marketing since it eliminates our having two disparate fares in
the market for the same trip."
Steve Bennett, a
spokesman for Certified Vacations, which operates private-label
vacation packaging services for Continental and Delta Air Lines,
echoed that sentiment.
"This doesn't
affect Continental Airlines Vacations at all," he said. "Net fares
had become noncompetitive. Published fares had become much lower.
They are not a big part of bookings anymore and haven't been for a
while."
Tim Mullen, senior
vice president of Apple Vacations, said he was not surprised by
Continental's policy change, and he speculated that other airlines
would follow Continental's lead.
"I think the future
will be all airlines contracting seats with tour operators that
come to them with some risk," Mullen said. "Operators will have to
guarantee seats in order to get contracted fares. Quite a
significant number of airline seats are sold at published fares
anyway."
Many wholesalers
were reluctant to talk about Continental's elimination of net
fares, fearing that doing so could compromise their own
negotiations with Continental and other airlines.
Speaking on
condition of anonymity, an executive of one major wholesaler told
Travel Weekly that other major airlines were not likely to follow
Continental's move and that in fact some were already moving in the
opposite direction, toward enhancing their bulk-rate systems to
make them more effective for the purpose of selling
vacations.
The executive said
that the no-nets policy might work in domestic, close-in or mass
market destinations where competition and Internet price
transparency often pushed published fares as low as nets. But he
said it was a different story in long-haul destinations, where
prices were more stable and the airlines relied on tour operators
to fill a substantial proportion of their seats.
The airlines need
tour operators, and the tour operators need net fares to function,
he said, because a stable, opaque net fare enables operators to add
a markup and to plan ahead.
Bob Drumm,
president of General Tours World Traveler, agreed.
"In the Caribbean
and Mexico, where published fares are very low, this policy would
make sense," Drumm said. "With long-haul operators like us, it's
different. When selling packages to mass market destinations, it
makes sense to follow the retail ball because airlines sell online,
through agents and operators. They have many channels. In long-haul
destinations where the price is not so volatile and where advance
planning is required, brochures are printed, groups are sought,
then net fares become more key."
Individual agreements are key
Just as key to
operators' business models are the individual pricing agreements
that they hammer out with carriers on a one-to-one basis. But the
details of those agreements are seldom if ever revealed.
"Contract
negotiations are always confidential," said Ron Letterman, chairman
of Classic Vacations. "And there are always exceptions" to
published fares.
A Continental
employee confirmed that the airline would have "carve-outs" at
certain destinations -- that is, exceptions to the rule.
Airlines are
prohibited from speculating publicly on future fare policies, but
at press time, no other airlines had followed Continental's
lead.
To
contact reporter David Cogswell, send e-mail to [email protected].