Airlines Cap Commissions on International Travel, Raising Concerns Among Travel Agents

Strategic Insights -

Travel agents are expressing concern over a recent trend among major airlines to cap commissions on international travel. Northwest Airlines, following in the footsteps of United Airlines, American Airlines, Delta Airlines, and Continental Airlines, has capped commissions on international travel at $100 per ticket. This move is expected to save the airlines millions of dollars annually, but may lead to higher prices for consumers and potentially put some travel agencies out of business.

Key Takeaways:

  • Northwest Airlines has capped commissions on international travel at $100 per ticket, following the lead of United Airlines, American Airlines, Delta Airlines, and Continental Airlines.
  • Travel agents had previously received 8% of the fare for every international ticket booked, with no dollar cap on commissions.
  • The cap on international commissions is expected to save the airlines millions of dollars annually, but may lead to higher prices for consumers.
  • Travel agents are concerned that this move will put some agencies out of business and may require them to start charging service fees to recoup lost income.
  • The Justice Department is suing to nix Northwest's alliance with Continental Airlines, which has added to the concern among travel agents.
  • Approximately 15% of travel booked in the Twin Cities is for international destinations, with a significant impact on commissions.
  • A round-trip flight to Asia, typically costing $6,000, would generate a $480 commission for travel agents under the prior rules, but is now capped at $100.

Statistics:

  • 8%: The percentage of the fare that travel agents previously received for every international ticket booked.
  • $100: The new cap on commissions for international travel, as set by Northwest Airlines.
  • $72 million: The amount that Northwest and other major US carriers agreed to pay travel agencies two years ago to settle accusations of anti-competitive behavior.
  • 15%: The approximate percentage of travel booked in the Twin Cities that is for international destinations.
  • $6,000: The cost of a round-trip flight to Asia.
  • $480: The commission that travel agents would have received for a round-trip flight to Asia under the prior commission rules.
  • $100: The new commission that travel agents will receive for a round-trip flight to Asia under the capped commission rules.

Sources:

  • Saint Paul Pioneer Press (St. Paul, Minn.)
  • PioneerPlanet (The World Wide Web site of the Pioneer Press)
  • Knight Ridder/Tribune Information Services