Financially battered Delta Air Lines, in significant cost-cutting move, has decided to eliminate base commissions paid to travel agents in the United States and Canada, an action likely to hurt the smaller online travel agent operations.
The American Society of Travel Agents (ASTA), representing 24,000 agencies online and off, called the move “anti-consumer.”
The airline`s decision follows similar moves by Continental Airlines and Northwest Airlines last fall, following the decline in ticketing caused by the terrorist attack on the United States.
Atlanta-based Delta said the change does not apply to commission policy regarding tickets purchased outside the United States and Canada. Delta also said it would continue to pay individually negotiated incentive commissions to select agents.
Travel agents had been paid 5 percent or up to $10 each way on domestic tickets and up to $50 each way on international tickets. Delta (NYSE:DAL) reported a net loss of $486 million for the December 2001 quarter, and a net loss of $1 billion for the full year 2001, excluding unusual items.
The ASTA said that the action is an attempt to “balkanize” the industry, seriously disadvantage secondary and smaller carriers in Delta strongholds and shift all airline distribution costs to the consumer.
Tom Parsons, chief executive of Bestfares.com, was quoted by Reuters as saying that of about 30,000 travel agencies nationwide, about 10,000 could go out of business if Delta`s move spreads industrywide.
The move clearly puts pressure on smaller online travel operations, too. The larger ones, like Travelocity (NASDAQ:TVLY) and Expedia (NASDAQ:EXPE), generally have the clout to negotiate new deals with Delta. Priceline`s model is largely unaffected by such moves, analysts have said.
Prior to deregulation of the airline industry, airlines were required to pay base commissions to travel agents at a rate fixed by the government without regard to efficiencies or sales results achieved by the agencies.