Share this article

print logo


Travel agents on the Niagara Frontier and across the country predict their numbers will shrivel -- while airfares climb -- should the nation's airlines succeed in cutting travel-commission rates.

The agents' dire warnings of higher fares follow moves by three of the nation's largest airlines -- United, Delta and American -- to reduce travel-agent commissions to 8 percent from the 10 percent figure put in place less than three years ago.

The airlines and industry analysts say the reduction could save the industry from $600 million to $700 million annually if all of the carriers followed the three front-runners.

Currently, distribution costs, including agent commissions, represent airlines' second-largest expense, a $12 billion annual bill.

"It's quite clear that the airlines can do nothing about fuel prices and little, if anything about labor costs," said Julius Maldutis, an airline analyst with Salomon Brothers. "The only area management does have power over is in the area of distribution expenses."

However, travel agency trade groups and individual agencies say the airlines are cutting their own throats by trimming agent commissions.

"Agents represent about 85 percent of the distribution network for the airlines," said John Connors, vice president of AAA of Western & Central New York. "The airlines never have found a more efficient distribution system than agents, even doing it internally."

Those agencies hoping to remain in business will be forced to charge a fee for services, many industry players say.

"With the current 10 percent commission, 9 percent to 9 1/2 percent of that amount, $25 to $30 per ticket, is eaten up by ticket processing costs, things like paying for ticket stock and the costs of computer reservation systems," said Christian Privett, senior manager of communications for the American Society of Travel Agents. "If you lower that commission to 8 percent, you're forcing agencies to operate at a loss."

Less than three years ago, most airlines followed the lead of Delta and capped payments made to agents at 10 percent up to $25 for one-way domestic tickets, and 10 percent up to $50 for round trips. International flights were tagged with a 10 percent commission with no cap.

At the time, the American Society of Travel Agents filed a class-action suit on behalf of the industry and reached an out-of-court settlement pegged at about $86 million. That money is expected to finally be distributed, averaging about $2,000 per agency.

"The caps were devastating; this is worse," said Richard Chojnacki, president of Taylor Travel Service Inc., and the agents association's upstate New York chapter president.

Chojnacki said agents and agencies that want to stay in business no longer have a choice -- they must institute some sort of fee just to survive.

Should agencies choose to go out of business, it will force the consumer to spend time calling individual airlines to try and get the best fare, Chojnacki said.

"Agents simply cannot survive with this commission change," Chojnacki said.

"When the consumers' choices are limited, we all know what happens to price," Privett said.

According to the agents association, before the 10 percent commission was instituted in early 1995, 10 percent of agencies nationwide charged fees. That figure today is more than 20 percent. The association represents about 27,000 travel agents.

Ironically, travel agents say it wasn't that many years ago that the airlines were begging them to help them survive. Even print advertisements carried the line "see your travel agent."

Now, with the airlines enjoying some of the most prosperous times in the history of air travel, travel agents say the carriers are turning on the group that helped them survive.

"We would hope that at a time of record profits, the airlines would reduce fares for their customers -- not go after their partners," said AAA's Connors.

There are no comments - be the first to comment