Airline Rule Change Abruptly Hikes Circle Trip Costs

By | March 28, 2016

[UPDATE, April 1, 6:29 p.m. EDT: Delta now says that while “end-on-end combinability of non-refundable fares has been restricted,” booking within one passenger name record “multiple one-way tickets for the purpose of constructing legitimate circle trips” is again possible. “You can book any one-way ticket we offer for sale, but we do not recommend using multiple one-way tickets to create connecting itineraries,” the airline added. “It increases the likelihood that customers could experience service failures such as lost baggage and missed connections.”]

[UPDATE, April 1, 5:05 p.m. EDT: American Airlines and United Airlines revised new U.S. domestic fare combinability rules to again allow circle trips on a single ticket.

According to United, “most legitimate open jaw and circle trips will now auto-price on a single ticket.” Nonrefundable one-way fares only can be used for one-way itineraries or simple roundtrip itineraries back to the origin city. The airline said the changes impact “all” sales channels, including global distribution systems, though online booking tools “may not support all itinerary type pricing requests.” United said its system allows for “multiple tickets in the same record,” but cautioned agencies about “possible consequences.”

AA said it adjusted fare filings to reduce “unintentional changes” to pricing for multi-city trips, circle trips and open jaw itineraries, “and will continue to work on technical enhancements in order to address these complex itineraries.” The airline’s stated reason behind the initial changes last week was to “prevent combining nonrefundable local fares to create a connecting itinerary.” Travelers still can book multiple one-way fares in that manner, though that requires multiple tickets. The airline “strongly” discourages that because it means a greater likelihood of “missed connections for checked baggage or cancelled tickets if travelers miss a connection.”]

[UPDATE, March 30, 1:57 p.m. EDT: American Airlines: “We’re monitoring the situation closely, and have been making adjustments based on customer feedback.”]

[UPDATE, March 30, 1:23 p.m. EDT: Industry sources said American, Delta and United are revising new policies on combinability. “They’re trying to find a middle ground,” said one travel executive. “They are working on how to adjust their philosophies to make sure the business traveler isn’t seeing a huge spike in fares.” Another source said, “We’re seeing some one-way fare pricing inside of a single itinerary” within the global distribution systems, the Concur booking tool and direct airline websites. That’s a reversal of what the three carriers enacted last week. None of the three has yet to confirm the latest changes.]

Processing fees on domestic circle trips skyrocketed last week after the big three airlines changed rules on nonrefundable fare “combinability,” forcing travelers and agents to create multiple transactions to get the best rates. Otherwise, booking in the traditional manner is resulting in fares higher by hundreds if not thousands of dollars.

Corporate travel professionals began catching on to the change as the week closed, for many on a holiday. Some are only just now taking a look at the situation. First reported in The Company Dime LinkedIn group, and almost simultaneously by The Beat, the development could have big implications for travel management.

If they stick, the new rules mean that to avoid fully refundable rates, agents or booking tools need to create three passenger name records for a trip running from A to B, then B to C and C to A — known as a circle trip. That generates three fees to an agent or booking tool.

Without advice to the contrary, business travelers using online booking tools could easily book three segments on one PNR the same as they always have — and pay far higher than the lowest possible amount. If it’s a preferred carrier, maybe they don’t think twice about it. Or maybe they only think, “More miles!”

circle trip

“This is going to be huge,” Riot Games global travel wizard Sean Parham wrote Friday in The Company Dime LinkedIn group. “It will certainly impact my contract. I just ran a test LAX-JFK/JFK-SFO/SFO-LAX under one PNR and the price was $1,749. Priced as one-ways it came in at $396. I will have to consider disabling multi-segment bookings in my online booking tool to counter this.”

The pricing oddity was apparent on consumer online sites, as well. A trip priced last week on Google Flights to Atlanta from Cincinnati, then to Jackson, Miss., and then back to Atlanta came to $2,310. Breaking that into three one-way tickets showed $1,109.

“These higher priced round-trip or multi-leg fares are not just showing up in GDSs, but also on airline websites and online travel agencies,” said A&I Travel Management president Rebecca Martin. “As such, a knowledgeable full-service agent is currently the one and only source of the lowest airfares available.”

Sources said Delta was first to make the change, technically related to Category 10 fares filed through the Airline Tariff Publishing Company. The airline on Friday confirmed it had “recently made a change to the combinability rule of certain domestic one-way fare products.”

According to a Delta spokesperson, “This rule change was implemented to ensure that the fares we make available in the marketplace are consumed as intended.”

American and United matched. An AA official said, “We have made changes.” A spokesperson for United said, “We’ve matched the industry on domestic combinability changes. Various combinability restrictions already existed in many international markets, but generally combinability rules can change frequently in the marketplace.” According to Executive Travel Consultants, United last week made this announcement:

United as well as multiple U.S. carriers (including American and Delta) have made changes to the CAT10 domestic combinability fare rules impacting some one-way fares. Non-refundable fares will only allow customers to travel either on a one-way itinerary or to return back to the origin city (e.g., A -> B -> A type combination). For example, a trip such as ORD-DEN-LAX-ORD may no longer be combinable, but ORD-LAX-ORD or ORD-DEN-ORD is not impacted. Customers can still book multi-city circle trips and/or open jaws; however, the fares that do not have this combinability restriction may be slightly higher. As this change is in the fare rules, it applies across all channels, including united.com and all GDS providers. Note that refundable fares may still be booked as end-on-end and are not impacted by these combinability restrictions. Many international fare rules already carry combinability restrictions.

It’s not clear exactly what behavior the carriers are trying to correct.

According to one industry source, the Big Three airlines had been allowing travelers to combine onto one ticket two separate one-way fares — one to and one from a “connecting” city — even if those two fares had different rules. The reason behind allowing such combinability rather than offering only more traditional connecting itineraries was to compete against “ultra low-cost carriers” like Spirit Airlines. The new airline policies have closed the loophole, at least for lower-level fares.

The source called the impact on circle trips an “unintended consequence.”

Implications

One travel agency source who was on the phone with the airline trio much of last week claimed their revenue management departments made decisions without consulting sales. The source was hopeful that adjustments could be made this week.

Short of that, “it is a complete mess,” according to Casto Travel president and COO Marc Casto. “Interestingly, it is not in all markets. These price increases are firmly targeted at the business traveler. In short, throw your 2016 travel budgets out the windows.”

While dust continues to settle, it’s clear the biggest potential impact is on costs. Either travelers are paying the vastly higher combined circle-trip fares or splitting the tickets and paying additional fees.

Asking not to be quoted by name due to a lack of authority to speak publicly, one travel manager said that as many as one in five of the company’s domestic trips is a circle trip.

As Executive Travel Consultants pointed out, the more separate tickets there are, the more travelers would pay in change fees.

More broadly, the change could make the likes of Yapta much more attractive. Why continually re-shop for better rates on one ticket when you can do so on three?

Meanwhile, it would seem that transaction-based pricing — long the norm for corporations and their TMC partners — could fall out of favor if airline pricing and ticketing moves toward a segment basis.

For now, travel managers need to consult with agency partners, educate travelers and take a close look at messaging and rules in their booking systems. Pre-trip approval workflows may warrant a rethink.

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