Recently, China’s primary, stable, all-in-one, state-railway-bureau-directly-operated official railway ticketing platform, 12306, announced an expansion into the airline ticket market. This move is not expected to reduce airfare costs directly, yet it signifies a notable shift in the competitive landscape for Online Travel Agencies (OTAs) like CTrip, potentially impacting their market share and profitability.
Understanding the mechanics of airline ticket sales is crucial here. Airlines set their flight schedules, seat pricing, and then distribute this information through a Global Distribution System (GDS). OTAs access this data, aggregating flight options for consumers as intermediate information sources without directly influencing ticket supply or pricing. Similarly, railway tickets follow this model, with OTA revenue deriving from commissions, sales bonuses from airlines, and fees for ticket changes and cancellations. They OTAs are notoriously famous for offering overwhelmingly termed insurance contracts for reschedule or refund, and they charge a inflated fee for any uninsured reschedule, not to mention cancellation.
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