Ever wondered how the airline, GDS, IATA, Consolidators and host agencies all work together.

Ever wondered how airlines, GDS (Global Distribution Systems), IATA (International Air Transport Association), consolidators, and host agencies work together to power the travel industry? Airlines provide the inventory of flights, while GDS platforms like Amadeus, Sabre, and Travelport act as centralized systems, distributing this inventory to travel agents worldwide. IATA sets global standards and ensures compliance, facilitating smooth ticketing and settlement processes through its Billing and Settlement Plan (BSP). Consolidators buy airline tickets in bulk, offering competitive rates to travel agents, while host agencies provide independent travel agents with tools, training, and access to booking systems. Together, they create a seamless ecosystem, ensuring travelers get the best deals and smooth experiences while enabling travel professionals to thrive.

1. Airlines

Airlines are the backbone of the aviation ecosystem. They own and operate flights, providing schedules, seat availability, and pricing to the market. Airlines focus on filling their seats to maximize revenue, but they can’t handle all sales channels on their own. Instead, they rely on intermediaries like GDS platforms, travel agents, and consolidators to sell their tickets to a global audience.

• Revenue Model: Airlines earn money through ticket sales, ancillary services (e.g., extra luggage, seat selection), and corporate agreements. To optimize this, they use sophisticated pricing strategies like yield management, where ticket prices fluctuate based on demand, season, and competition.
• Distribution Channels: Airlines have their own direct booking platforms (websites and apps) and call centers, but a large chunk of their revenue still comes through indirect channels. They need GDS, consolidators, and travel agencies to access customers in different regions and demographics.

Airlines pay commissions or fees to these intermediaries, which is why they carefully choose distribution strategies to balance costs and revenue.

2. Global Distribution Systems (GDS)

GDS platforms are the technology that powers global travel bookings. They act like massive databases where airlines, hotels, and car rental companies list their services for travel agents to access. The three main players in this space are Amadeus, Sabre, and Travelport.

• How GDS Works: Airlines upload their inventory (flights, seats, prices) into the GDS. Travel agents then log into the GDS to search for options that match their customers’ needs. GDS platforms display this information in real time, allowing agents to compare different airlines and book tickets instantly.
• Why GDS Is Essential:
  • It centralizes information, saving travel agents time and effort.
  • It ensures up-to-date pricing and availability.
  • It provides tools for managing bookings, issuing tickets, and handling refunds or changes.
• GDS Revenue Model:
  • GDS charges airlines a fee for every ticket booked through their system (known as a booking fee).
  • Travel agencies may also pay subscription fees to access GDS.

Without GDS, travel agents would need to contact airlines individually, making the booking process much slower and more complicated.

3. IATA (International Air Transport Association)

IATA is an international organization that represents most airlines worldwide. It doesn’t sell tickets or operate flights but plays a critical role in the aviation industry by creating rules and processes to ensure standardization and smooth operations.

• Key Functions of IATA:
  • Billing and Settlement Plan (BSP): IATA acts as a middleman for payments between travel agents and airlines. Instead of agents paying each airline individually, they deposit funds into BSP, which then distributes the money to airlines. This reduces the risk of errors and ensures timely payments.
  • Licensing and Accreditation: IATA provides accreditation to travel agents, which acts as a seal of trust and allows them to work directly with airlines and GDS.
  • Industry Standards: IATA creates standards for everything from e-ticketing to baggage handling, ensuring consistency across the globe.

For airlines, IATA ensures they receive payments promptly and securely. For travel agents, it simplifies payment management and provides credibility.

4. Consolidators

Consolidators play the role of ticket wholesalers. They negotiate deals with airlines to buy tickets in bulk at discounted rates, which they resell to travel agents. Airlines benefit from consolidators because they can sell large volumes of tickets in advance, securing revenue early.

• How Consolidators Help Airlines:
  • Consolidators handle tickets that might otherwise go unsold, especially for off-peak flights.
  • They expand the airline’s reach by serving smaller agents or those without direct GDS access.
• How Consolidators Help Travel Agents:
  • Travel agents get access to competitive prices without needing direct contracts with airlines.
  • Consolidators often provide support, such as managing refunds or ticket changes, saving agents time and effort.

Consolidators charge a markup on the discounted fares they offer, which becomes their profit margin. Travel agents may also benefit by adding their own markup before selling to the customer.

5. Host Agencies

Host agencies are organizations that support independent travel agents by giving them access to the tools and resources they need to succeed. For agents who are just starting out or don’t have IATA accreditation, host agencies provide a pathway to operate professionally.

• Services Offered by Host Agencies:
  • Access to GDS: Most host agencies have agreements with GDS providers, allowing their affiliated agents to book tickets through their account.
  • IATA Accreditation: Agents without their own IATA license can book tickets using the host agency’s accreditation.
  • Training and Support: Host agencies provide training on booking systems, customer service, and business growth strategies.
  • Marketing Tools: Some host agencies offer agents marketing materials, websites, or CRM tools to help attract and manage clients.
• Earning Model:
  • Host agencies typically charge agents a fee or take a percentage of their commissions.
  • In return, agents avoid the costs and complexities of setting up their own independent operations.

Host agencies are especially valuable for new or small-scale agents who need guidance and resources to compete in the industry.

How Payments and Bookings Work

Here’s a detailed breakdown of the payment and booking process:

1. Customer Inquiry: A customer approaches a travel agent or books online.
2. Ticket Search and Booking: The travel agent uses a GDS platform, consolidator, or host agency to find and book the ticket.
3. Customer Payment: The customer pays the agent upfront for the ticket.
4. Agent Payment:
   • If using GDS, the agent may deposit the payment directly with IATA’s BSP system.
   • If using a consolidator or host agency, the agent pays them.
5. Settlement:
   • IATA collects payments from agents through BSP and transfers the money to the airline.
   • In the case of consolidators, they manage their own payments to airlines, often through BSP as well.

This system ensures smooth and transparent financial transactions while allowing each player to focus on their strengths—airlines on operations, agents on customer service, and intermediaries on facilitating the process.

Why They Need Each Other

This ecosystem exists because no single entity can do everything:

• Airlines focus on running flights and rely on others for ticket sales and distribution.
• GDS platforms provide a centralized booking system, saving time and effort.
• IATA ensures secure payments and standardized processes for everyone.
• Consolidators give smaller agents access to competitive prices and airline inventory.
• Host agencies help independent agents operate and grow their businesses.

Together, this collaboration makes global air travel accessible, efficient, and profitable for everyone involved.

If you’re curious to dive deeper into how GDS integration works and how it can empower your travel business, we’re here to help! Whether you want to understand the technical details, explore how to streamline operations, or unlock the potential of advanced travel technology, our team is ready to guide you. Simply reach out to us through this form, and let’s start building solutions tailored to your needs.