Brokers Are Pressured

The airlines are starting to put pressure on brokers who sell frequent-flier tickets.

Brokers buy the seats earned by members of the airlines’ mileage programs and resell them, well below published rates, at a profit.

For example, a broker can pay $200 for an $800 seat and sell it for $600.

Everybody benefits . . . except the airlines!

TWA and Northwest recently moved against such brokers. They filed suit several months ago to put a few of the bigger ones out of business. However, cases are still pending.

American, which earlier won broker cases, recently filed four new actions in courts in New York City, Salt Lake City and Ft. Worth, Tex. United is carefully watching all of this legal activity, and probably will begin its own line of attack.

Airlines say coupon brokers are costing them millions of dollars in sales. Airline management claims such activity threatens the stability of the system because they earn nothing from re-sold tickets.

Frequent fliers have rolled up a staggering amount of free trips--in the billions of miles. In addition, accrual rates accelerated at the beginning of this year when some airlines began offering frequent fliers triple mileage, 2,000-mile minimums and other “enhancements.”

Marketing Spurred Effort

Why did carriers get themselves into such a predicament in an effort to gain customers? That’s another story.

In any case, the free flights are enough to sink some airlines . . . if they were all taken at once.

The airlines, of course, are betting that they won’t be; that they can’t be. Historically, passengers just don’t claim their trips at the same time.

As long as that pattern continues, the airlines will honor their commitments. (However, United and American recently adjusted program terms and conditions to lessen potential liability.)

Some Have Many Miles

People who fly, particularly on business, tend to accumulate these travel awards by the handful, often on more than one airline.

One individual I know probably has earned about 36 free flights on four carriers in two years.

What scares the air transportation industry is that he may decide to sell his free-ticket vouchers to a broker. And he is only one such person.

The airlines claim that the brokers are engaged in illegal activity. They say free-travel miles should be taken by the earner or should be “given” away. Free trips should not be sold, bartered or bought.

Rules Rethought

Meanwhile, the imprecise language of the frequent-flier programs set by some airlines is muddling the air. Only after the airlines noted the proliferation of the brokering network did some reinterpret and even rewrite the rules.

Now that brokering has become a big business (some operators are said to routinely sell as much as $30 million or $40 million worth of seats a year), the airlines have been forced to seek relief through the courts.

The situation is particularly troublesome in first- and business-class sales. Many people use brokers to help them upgrade to a better cabin while paying lower-than-coach fares.

First- and coach-class tickets are high-yield items for carriers, helping offset the dilution caused by all of the regular coach discounts offered.

New Security Plans

Some airlines have developed departments of security people who try to identify passengers traveling on someone else’s frequent-flier coupons. In some cases such ticket holders have been denied boarding when they were identified.

The brokers argue that a free seat, including all rights, is owned by the person who earned it, and that airlines are liable for the coupon, so it doesn’t matter who uses it.

That position will be heard often in court. In the meantime, it’s business as usual for many brokers.