Three weeks after saying it would stop paying commissions to online travel agencies, Northwest Airlines continues to quietly send commission checks to Microsoft-backed Expedia, the No. 2 online travel company, according to sources familiar with the deal.
Northwest and alliance partner KLM Royal Dutch Airlines are continuing to pay Expedia while they are in talks over the proposal to cut the 5 percent commissions, the sources said Monday.
Travelocity executives confirmed that they stopped getting the commissions immediately after Northwest`s announcement late last month. Travelocity, the most popular online travel site, has imposed a $10 fee for Northwest and KLM flights.
“We don`t work for free,” said Expedia spokeswoman Suzi LeVine when asked to confirm whether Northwest was still paying commissions to the Net travel company. Northwest executives declined to comment.
PhoCusWright analyst Kate Rice said that if Northwest didn`t end commissions to Expedia it could mean the airline is rethinking its position and may be willing to negotiate with some of the heavy hitters of online travel.
“What Northwest appears to be doing is what the rest of the airline industry is doing in the offline world, which is paying only those agencies that provide value and generate significant business,” Rice said. “Across-the-board commissions paid to anyone that sells airline tickets are clearly on their way out,” she added.
Some analysts have predicted that all airlines will eventually dispose of online commissions.
Rice said she had expected Northwest to cut a deal with Expedia since learning they were in negotiations regarding the commissions. She speculated that Northwest was negotiating with Expedia because it has shown flexibility in putting together package deals that benefit the airlines. Expedia has begun buying large blocks of tickets from an airline on specific travel routes, usually one that the airline needs help in moving.
This is only one of the ways that Web travel agencies and the airlines could continue to do business, Rice said. She anticipates that the future relationship between airlines and travel agencies include the agencies having to guarantee ticket sales.
“There might be more of a moving toward the model where the agencies tell the airline: I`ll guarantee a certain amount of business,” Rice said. “An airline could then say, `We`ll waive some of the restrictions.` The agency now has something to offer its customers.”