In increasing numbers, travel agents are dealing in what have been dubbed "gray market" airline tickets to foreign destinations. They are tickets for regularly scheduled flights on major airlines that are sold at substantially lower prices than you would pay if you booked a seat with the airline directly.

In recent weeks, you could buy round-trip tickets between Washington and Hong Kong on the gray market for as low as $750 for travel in September, with departure any day of the week. The lowest fare Northwest Airlines was quoting for the same period was $1,099 for travel Monday through Thursday -- a difference of $349.

Gray market tickets are a sort of under-the-counter arrangement -- part of the reason for the label "gray." But they are not tainted merchandise. They are special fares that the airlines, for obvious reasons, aren't eager for the public to know about.

What happens is this: On many international routes, particularly across the Pacific, competition is fierce, and many planes fly regularly with lots of empty seats. Knowing this, the airlines sell a certain percentage of these seats in bulk numbers at bargain rates to wholesalers called "consolidators." The consolidators then market them through participating travel agents to the public. Some travel agencies, also dealing in volume, make similar arrangements directly with the airlines, bypassing the wholesalers.

The airlines fill their seats, and the consolidators and travel agents have an attractively priced product to offer. A customary stipulation in the arrangement, however, forbids the consolidator and the travel agent to publicize the name of the airline or airlines whose discounted tickets they are selling. However, travel agents handling the special tickets say most major international carriers -- including U.S. airlines -- have operated in the gray market.

As a part of the charade, the official price -- not what you pay -- is printed on gray market tickets. However, they also are identifiable as discounted tickets so travelers can't cash them in for a refund of the higher price.

Sunday newspaper travel sections are dotted with ads for low-cost round-trip air fares to Europe, Asia, the Middle East, Africa and Australia. Many ads specify that the tickets are for "scheduled flights," which means the airlines -- which are not named -- serve regularly established routes. According to travel industry sources, the ads tend to be placed by travel agencies who either acquired airline seats from a consolidator or have made special arrangements on their own with the airlines.

Consolidators are not new to the industry, but until recently they sold mostly to small travel agencies serving an ethnic market -- travelers returning to the homeland in Asia, Europe and Africa in large numbers and on a regular basis. However, the market has expanded, particularly in the past year, to include the general public.

Gray market tickets are definitely a good buy, but only if you are aware of some potential problems in using them. For one thing, you have to be flexible in your plans; this means the tickets are a better value for vacationers than for business travelers. Passengers may not know, for example, what airline they are flying -- and therefore the departure time of the flight -- until shortly before the departure date.

In addition, some of the least expensive flights are booked on small, Third World airlines (although you are just as likely to fly on a well-known American or foreign carrier). And rather than flying nonstop, you may have to make one or more plane changes on connecting flights. Finally, in most cases you can't claim frequent flyer mileage.

How prevalent are gray market tickets?

"Hardly anybody flies across the Pacific at the reported rate," says Bob Biagio of Suburban Travel of Hyattsville, one of the agencies that regularly offers clients the deeply discounted fares. He may be exaggerating somewhat, but his remark illustrates the growing importance of the gray market in the airline industry.

Suburban recently advertised round-trip, nonstop flights from Washington to Tokyo at $849 through September and $795 from November through April. Comparable fares quoted by All Nippon Airways, a nonstop carrier from Washington-Dulles to Tokyo, is $1,305 through October and $1,229 from November through April.

Doris Davidoff, co-owner of Belair Travel in Bowie, says most of the European vacation tickets her office sold this summer were the deeply discounted fares offered by consolidators. However, she hands out a document listing the pros and cons of these fares to each client and requires that they sign a statement that they have read it.

Nevertheless, Davidoff, who is a nationally recognized authority in travel agency management, has gone on record advising other travel agents to consider handling consolidator tickets as a benefit to their clients. In a column she writes regularly for Travel Weekly, an industry journal, she says that agents "need to help clients get the best value for their travel dollar.

"If their needs are relatively flexible, and we have not offered consolidator tickets, we will lose them as clients."

One of the largest consolidators in the country is the Travel Committee in Owings Mills, Md., specializing in discounted transatlantic air fares. Spokesman Marty Sitnick says the firm, selling to travel agents, offers fares to Europe that "generally are anywhere from $75 to $200 less than the regular tariff."

Sitnick says his firm has contracts "with most of the major international carriers, including U.S. carriers."

This summer's business was "absolutely phenomenal," he says. The firm sent more than 12,000 travelers to Europe in June, a similar number in July and almost as many in August. "We ran out of seats and the airlines ran out of them."

In business for 20 years, the Travel Committee has long been known for its weekly charter flights to Europe, mainly from spring through fall. On a charter, the firm in effect rents an entire plane and attempts to fill the seats. However, in the past two summers, says Sitnick, the Travel Committee has switched from its European charter operations to sell discounted seats on regularly scheduled flights. Not only are gray market fares competitive with charter fares, but scheduled airlines fly a route more frequently than charters.

Sitnick says the airlines make discounted seats available to the Travel Committee because the firm has long-established contacts with many small "mom and pop" travel agencies and can market tickets to them more effectively than the airlines. "We do all the work and fill thousands of empty seats for them."

This summer's success was not without some difficulties. Sitnick says that the volume of business caught the Travel Committee by surprise. "We were short of printers {to print out the tickets}. We were short of phones. Lots of people got mad at us because we weren't answering the phones."

The firm's goal is to get tickets to passengers 14 days prior to their departure, says Sitnick. But some didn't get them until the day of departure. "Our printers wouldn't print fast enough."

Despite their profusion, the discounted tickets appear to have a certain nebulous legality, another reason why the market dealing with them has been labeled "gray."

As a result of air travel deregulation, U.S. carriers can sell tickets for travel in the United States at whatever price they choose. But international air travel has not been deregulated. Officially -- under the Federal Aviation Act -- it is illegal to sell an international airline ticket for less than the established fare agreed upon by the U.S. and foreign governments. However, as Davidoff points out, the Department of Transportation has not chosen to enforce the law in regard to the sale of bulk seats to consolidators.

Hal Paris, a spokesman for the Department of Transportation, says its position is this: "No case has been brought in this area in the last five or six years. The department's basic enforcement policy is that we won't bring action against rebating or discounting as long as there is no unjust discrimination, consumer fraud or an anti-trust violation. We haven't seen any of that."

Davidoff writes in Travel Weekly: "While some of this discounting may be contrary to provisions of the Federal Aviation Act, it is clear the Department of Transportation, the agency charged with enforcement of this law, believes this practice benefits travelers, and the DOT virtually encourages consolidator activities."

"We have no problem selling these tickets," she says. "Those of us who are ethical -- and I consider myself very ethical -- have to look at the realities of life today, and you have to serve the client."

Both Davidoff and Suburban's Biagio say that their agencies are careful about which consolidators they deal with, seeking out those with established reputations for good service. A client's payment could be in jeopardy if an unreliable consolidator defaults, says Davidoff.

She tells clients, "We send the funds to the ticket distributor. In the event of default or bankruptcy of the ticket distributor, Belair Travel will make every effort to help you obtain a refund, but you will only get whatever refund we can get."

Biagio has learned to steer his clients away from consolidators offering flights on obscure airlines. "We got six-page letters," he says, in which people complained about "bugs and leaky galleys. I don't need that. They don't need that."

Travelers interested in discounted fares can check the travel ads for an idea of what kind of discount fares are being offered, comparing them with prices quoted by the airlines. You can deal directly with the agency placing the ad -- assuming you have confidence in its reliability -- or you can ask a reputable travel agency to provide you with a discounted fare. Some may not be aware of the "gray market" and others might prefer not to handle such tickets, but it shouldn't be difficult to find one that will.

To check on a travel agency's reliability, call the Better Business Bureau in its area; the consumer affairs office of the American Society of Travel Agents in Alexandria, 739-2782; or the consumer complaint office of the U.S. Department of Transportation in Washington, 366-2220.

It's hard to say where the gray market is heading. If European travel is as heavy next summer as it was this year, it is doubtful transatlantic carriers will release many seats at bargain rates. Travel agents wonder if the airlines eventually will discontinue such bulk sales to consolidators as the public becomes more aware of them. People in search of the cheapest fares may shop the consolidators and avoid the airlines. Says Davidoff: "Some airlines admit they regret opening Pandora's box."

On the other hand, Travel Committee's Sitnick says his firm is introducing discounted fares this fall and winter in the domestic market. It plans to offer daily round-trip fares between Washington/Dulles and Miami for prices that range from $99 (low season) to $169 (high season). The price will include "an open bar." It also is attempting to put together discounted fares to the Caribbean, Central America and South America.

Discounted fares have their pluses and minuses. Before you purchase one, you should be aware of what you are -- and what you are not -- getting.

On the negative side:

Stopovers may not be permitted, even for an additional fee. If you want to see more than one country, you will probably have to pay for an advanced-purchase ticket at the official rate.

Seat availability can be very limited during the busy travel season to whatever country you are headed. Airlines aren't going to release seats to discounters when they can fill them at a higher price themselves.

The routing may be convoluted. Travel Committee's Sitnick says his firm attempts to put passengers on nonstop flights, but those fill first. Often a trip may require one or more connecting flights. "We don't guarantee nonstop service."

You may not know until two weeks (or even less) before the flight what airline you are flying. This means you also won't know the departure hour. And, adds Davidoff, "tickets frequently do not arrive until very shortly before departure."

Cancellation penalties can be stiff -- up to the entire cost of the ticket. Ask about such penalties. Travel agencies advise clients to purchase cancellation insurance in case they become ill before or during the trip.

On the plus side:

As a passenger on a regularly scheduled airline, you are treated to the same service as other economy class travelers.

Depending on the consolidator, you may be able to buy a round-trip ticket providing for a length of stay of up to a year. On some routes, especially to high-volume destinations in Asia, you may be able to buy an open ticket for your return, good for six months or a year. When you know your return date, you contact the travel agent's representative in the city where you landed.

You can save a lot of money on air fares.

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