Don`t be surprised if your travel agent urges you to book your next flight with Roots Air.
At a time when some of the world`s biggest airlines are squeezing commissions, Roots Air is hoping rich payouts to agents will entice them into promoting the fledgling carrier. Roots Air has been offering commissions of up to $500 for a domestic booking. And with Air Canada`s commissions capped at $60, agents say they can`t help but respond.
“We`re going to support them wholeheartedly,” said Joanne Thachuk, president of Travel Sensations in Toronto. “Then Air Canada might see they`re not the only game in town.”
“The bottom line is: Where are you going to get more money?” said Debbie Shecter, who owns Golliger`s TravelPlus in Toronto.
A division of Toronto-based Skyservice Airlines Inc., Roots Air is offering 8-per-cent commissions with no upper limit, unlike Air Canada, which pays 5 per cent and caps domestic commissions at $60. As a special promotion, Roots Air is paying 20 per cent on travel booked before tomorrow.
Roots Air hopes that if it treats travel agents well, they will return the favour by promoting the new airline, which is set to take off March 26 with flights between Toronto, Calgary and Vancouver. It`s a sensible strategy. But it flies in the face of moves by some of the world`s most powerful airlines, who are gambling they can reduce commissions without losing customers.
While smaller airlines such as Toronto-based Canada 3000 Inc. continue to pay 12-per-cent commissions, Air Canada has halved commission rates and introduced caps in recent years. Two weeks ago, Northwest Airlines Corp. of Eagan, Minn., and KLM Royal Dutch Airlines of the Netherlands took things one step further by announcing that they were eliminating commissions altogether for Internet travel sites in Canada and the United States.
The news rocked the on-line agencies, with shares in Travelocity.com
falling by a third the day after the announcement. Travelocity, and many of its competitors, responded by slapping a service charge on travel booked with Northwest and KLM. But industry observers say other airlines are likely to follow.
“This is the name of the game. The bricks-and-mortar agencies are next. There`s nothing anybody is going to be able to do to stop this,” Terry Trippler, an airline expert with OneTravel.com, told Associated Press.
Air Canada, which is in negotiations with agents over commission rates, is reviewing the Northwest/KLM announcement, but said it has made no decisions about its own commissions for on-line bookings.
Airlines in Canada have always paid Internet travel agents the same as conventional shops, even though dot-com commissions are lower in the United States.
David Provost, an analyst with Gomez Inc. in Boston, said the big airlines are gambling that travel agencies will sell their tickets even if they`re not getting paid for them.
That`s because the low-margin airline bookings draw customers who also make high-margin bookings for such items as car rentals and hotel rooms.
Expedia Inc., the Redmond, Wash.-based on-line travel agency, has compared airline tickets to the bread and milk at the back of a convenience store that draw in customers who make other purchases.
“If you`re a travel agent and you`re not selling airline tickets, you`re not much use to people,” Mr. Provost said.
Randy Williams, president of the Association of Canadian Travel Agents, said it`s a mistake not to compensate agents. He said the move forces the sellers to introduce service charges, which shifts costs to consumers from airlines.
“The consumer should not have to pay for work we`re doing on behalf of the airline or on behalf of the supplier. The supplier should be paying for that work,” he said.
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