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Wednesday, May 23, 2012

Making Sense of the Airline Distribution Noise - Airfares by Agency Channel


With all the noise over airline distribution, how has it really changed since 2010?


I'm glad you asked.

For well more than a decade, I've been analyzing the changes taking place in airline ticket distribution here in the US.  There is a lot of noise over this issue, particularly as the airlines continue to invest in direct distribution and their online presence. 

Nothing quiets noise quite like the facts.    Today's post will focus on the difference in airfares for the travel agency channels.  The data is provided by the Airlines Reporting Corporation (known as ARC).

ARC settles transactions for the Mega Travel Management Companies (Amex, CWT, BCD, HRG, Maritz, Omega, CWT/SATO, SATO), the Online Travel Agencies (OTAs) and the other brick and mortar agencies.   All told, as of April 2012, there are 13,896 ARC approved travel agencies in the US.

Average Fares per Channel 2010 - 1Q2012

Let's start with the average airfare for each channel.  Yesterday I wrote about this for the most recent quarter in 2012.   Here is a picture of how this has changed since 2010.

In 2011, domestic airfares increased 7% each for the Mega TMCs  and 8% for all other brick and mortar agencies.  In the 1Q of 2012, domestic airfares increased 3% over full year 2011 each for Mega TMCs and all other brick and mortar agencies.   Online domestic airfares went up 5% for the same period. 

In measuring their effectiveness as a distribution channel, the Mega and brick and mortar agencies consistently produce higher average ticket prices (and as a result, a much higher yield) for the airlines than their online travel agency counterparts.

In 2011, international airfares increased 5%, 4% and 3% respectively for Mega, Online and all other brick and mortar agencies over 2010.  In the 1Q of 2012, international airfares increased 4% over full year 2011 each for brick and mortar agencies.   Mega agency average fares remained basically the same.  Online agencies were the only ones that saw a decrease at 7%. 


In measuring their effectiveness as a distribution channel for international tickets, the Mega agencies consistently produce highest average ticket prices (and as a result, a much higher yield) for the airlines than their online travel agency counterparts.  Brick and mortar agencies produce higher average ticket prices (and as a result a higher yield) than online travel agencies.
Tomorrow's post will focus on the changes in Domestic Air Transaction Volume.

Stay tuned.
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