Airlines cut travel agents` commissions

21st Mar 2002

Air travelers will probably pay more for tickets purchased from travel agencies because four airlines recently cut most travel agent commissions.

American, Continental and Northwest followed Delta`s lead last week to cut most commissions on tickets sold by travel agencies in the United States and Canada.






About 80 percent of airline tickets are sold through travel agencies. Critics of the airlines` decision say those agencies will likely be forced to charge fees to consumers.

``It`s an anti-consumer move,`` said Bill Maloney, executive vice president and chief operating officer for American Society of Travel Agents in Alexandria, Va.

However, Maloney said there wouldn`t be a major price increase for consumers. Travel agencies receive a 5 percent commission on a ticket and no more than $20 on a round-trip U.S. flight.
The decision by the airline companies might cause consolidation among travel agencies, reducing the number of agencies to which a consumer can turn, Maloney said.

There are 27,000 travel agencies nationwide, and about 30 agencies in the Lehigh Valley, said Gene Clock, president of the Lehigh Valley Travel Alliance. The group was created to pool resources for advertising in the face of slow travel times since Sept. 11. Analysts predict Delta`s action to be adopted industry-wide.
``If it`s not now, it`s later,`` said Raymond Neidl, airline analyst with ABN Amro Bank in New York City.


The top nine airline carriers lost $3 billion collectively in the fourth quarter because of Sept. 11 and a weak economy. They are expected to lose another $2 billion for 2002, according to ABN Amro. The industry isn`t expected to make a profit until 2003.

Cutting commissions is a major way for airlines to trim costs. For example, it`s saving Delta $160 million to $185 million annually, said James Higgins, airline analyst with Credit Suisse First Boston in New York City.


The four airline carriers that have eliminated most commissions will likely negotiate incentive programs to agencies that sell a large number of tickets, Higgins said.
Airline carriers hope their move will steer customers online. When a flier books a ticket online, it costs the airline carrier anywhere from nothing to $10, Higgins said.


For most airlines, about 15 percent of tickets are bought online.Since 1995, airlines have slashed commissions from 10 to 5 percent. But travel agents will survive, Maloney said. ``Consumers love us,`` he said. ``We are where America shops for travel.``

However, consumers might see travel agencies selling fewer airline tickets. Instead, they will diversify their business to other areas such as cruises, car rentals, hotels and tours, Maloney said.

Maryellen Iobst, owner of Iobst Travel Service agency offices in Emmaus and Easton, began four years ago charging customers a transaction fee of $5 a ticket. Over the years as the airlines decreased the commissions, that transaction fee rose to $30 a ticket. And now an additional, undetermined amount will be tacked onto the $30 because of the airlines` recent move.``We will have to pass along costs to consumers,`` said Clock, who is also vice president of sales and marketing for Iobst. ``It`s called survival.``


Pam Zitta, owner of Barmar Travel in Quakertown, will wait another week or so before she decides whether she will pass costs to consumers. ``I want to see what other agencies are doing,`` Zitta said. ``I want to remain as competitive as possible.``

Liberty Travel in Whitehall Township is not going to pass along any cost to fliers. If one of the airlines that cut commissions sells a ticket for $100, Liberty will sell it to the customer for $100, manager Allen Bernstein said.
If the agency does that, ``You might like us and come back and book a cruise with us next year,`` he said.
About a third of Liberty`s sales come from people who only buy airline tickets, he said.



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