ATLANTA, GA, March 14, 2002—Delta Air Lines (NYSE:DAL), today announced that it will no longer pay “base” commissions to travel agents for tickets sold in the United States (including Puerto Rico and the U.S. Virgin Islands) and Canada, effective immediately.
This change applies to all tickets, Miscellaneous Charge Orders (MCOs) and Prepaid Ticket Advices (PTAs) issued by travel agents in the United States (including Puerto Rico and the U.S. Virgin Islands) and Canada for all domestic and international travel. This change does not affect Delta’s commission policy regarding tickets purchased outside the United States and Canada. While Delta is eliminating published base commissions, it will continue to pay individually negotiated incentive commissions to select agents.
Last year, the company faced the most serious financial and operating challenges in its more than 70 years of operations. Delta 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. In this extremely difficult financial environment, the company must pursue all opportunities to reduce costs, including the cost of distributing Delta tickets.
Technology has fundamentally changed airline ticket distribution practices. The rapid growth of electronic ticketing and the Internet allows customers to shop for, buy and receive Delta tickets, on their own terms. The cost of distribution through electronic channels is much lower than traditional means. This new market reality is forcing both Delta and travel agents to adapt.
Travel agents remain an important part of Delta`s sales network. They are successfully adapting to the new competitive environment. Most travel agents are now charging service fees, marketing specialized travel services, focusing on travel packages, and capitalizing on their own use of enhanced technology to increase their profits. Some customers clearly prefer to arrange travel through a travel agent because of the unique expertise they provide. Because customers are willing to pay for that expertise, travel agents will continue to thrive in the marketplace.
The elimination of published base commissions at Delta removes one of the last vestiges of a commission program developed in a regulated environment. 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. In contrast, Delta’s pay-for-performance program will reward key travel agencies who achieve superior sales results for Delta.
Delta will make no public comments on its revised commission programs beyond this news release.