The International Air Transport Association (IATA) is a global trade group representing 230 airlines worldwide, and whose stated purpose is to advocate for “inter-airline cooperation” that promotes safe, reliable and economical air travel. Throughout its history, the IATA has been more publicly known for coordinating price-fixing agreements between airlines, which have resulted in a series of antitrust investigations by the United States Department of Justice and from competition authorities in the European Union.

Background

The IATA was formed in Havana, Cuba, in April 1945, initially with 57 member airlines primarily based in North America and Europe. As of 2011, the group has 230 members which include nearly all major airlines, such as American, Continental, Delta, Federal Express, JetBlue, United, UPS and U.S. Airways. Tony Tyler is director general and CEO of the IATA as of 2011, and the organization is overseen by a 30-member Board of Governors, which include the top executives of many of the major airlines. Peter Hartman, the president and CEO of KLM Royal Dutch Airlines, is the board’s chairman.

Mission

The IATA’s mission includes three types of actions: representing the industry and lobbying governments and regulators; leading the industry by working with airlines to increase passenger convenience; and serving the industry by providing support with products and expert services. The IATA’s website says that the organization’s work benefits all industry stakeholders, such as simplifying the travel and shipping process for consumers, and keeping governments informed about aviation industry complexities.

Mission

The IATA’s priorities for 2011 include a wide range of projects and initiatives. These include actions such as: implementing the NextGen system to guide and track air traffic more precisely in the United States; implementing Fast Travel initiatives that give passengers more self-service options; achieving cost savings in industry taxes, charges and fuel fees; and various regulatory initiatives such as receiving European approval of an IATA safety audit.

Price Setting

Beginning in the 1940s, the IATA began coordinating a tariff-setting system for international flights. Once two airlines agreed to a price for a flight, the governments involved in each part of the flight had to also approve. The IATA argued that this pricing collusion was needed to help maintain a smooth interlining process, in which a cooperative agreement is needed to handle passengers for flights that require multiple airlines. In an October 2003 article, The Economist reported that this tariff-setting agreement “amounted to an amazing global cartel than made OPEC (the Organization of Petroleum Exporting Nations) look amateurish.”

Considerations

Beginning in 1978, the U.S. airline industry was deregulated, with the federal government no longer participating in price setting. In addition, nations developed Open Skies agreements to encourage pricing to be determined by market forces. In the meantime, the U.S. Justice Department and the European Union’s Competition Commission investigated and fined numerous airlines for alleged price fixing. As a result, the IATA has scrapped its tariff-setting system and developed a system of “Flex Fares,” which charges an average far for each route and then adds a premium for the convenience of interlining.

About the Author

Erik Arvidson has 12 years of professional writing experience, including six years as a senior reporter at the Massachusetts Statehouse for several suburban dailies, and most recently as PR Manager of a telecommunications company near Boston. He received a Bachelor of Arts degree in English/communications from North Adams State College.

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