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More airlines to drop agent commissions

American, Continental and Northwest follow Delta's lead, prompting travel agents to raise their prices.

©Los Angeles Times
March 20, 2002

AMR Corp.'s American Airlines, the world's largest carrier, Continental Airlines Inc. and Northwest Airlines Inc. said they will match Delta Air Lines Inc. and stop paying basic commissions to domestic travel agencies, making it all but certain that the rest of the airline industry will follow.

Although other airlines eventually were expected to adopt Delta's change, the three carriers waited just days before saying they no longer would pay a basic commission for tickets issued by agents in the United States and Canada. Most carriers had been paying a maximum base commission of $20 for a round-trip ticket.

The rest of the airlines, which collectively are forecast to lose an additional $3-billion this year as air travel slowly recovers from Sept. 11 and the recession, will take the same step "sooner rather than later," predicted Richard Bittenbender, an analyst at Moody's Investors Service.

Richard Copland, president of the American Society of Travel Agents, said the cutoff was expected and that agents will sell fewer tickets, "at least in the short term," without the commissions.

Agents also will start charging travelers higher fees to book seats.

"The one who's going to get the short end of the stick is the traveling public, because what the airlines are doing is raising the price of airline tickets indirectly," said Copland, whose group represents 26,000 agencies.

Bay Pines Travel in St. Petersburg has increased its booking fee from $14 to $25 for trips on the three airlines that eliminated base commissions, owner Debbie Elgin said.

"The phones are still ringing," she said. "We're booking away from carriers that don't support us, and our customers agree that we should have a level playing field."

She wasn't surprised that American and Continental joined Delta in cutting out base commissions and expects other airlines to follow suit.

"It would totally floor me if no one else jumped on with them," Elgin said. "I feel terrible. It's potentially threatening my industry."

American and Continental, the nation's fifth-largest carrier, declined to comment further. They announced the move Monday evening. Northwest joined them Tuesday. United Airlines declined to comment.

The airline industry "is trying to return to profitability, and if there is any way they can see to lower costs or increase their revenues without affecting passenger traffic, they're going to take it," said Bittenbender, the Moody's analyst. American last year spent $835-million on commissions, down almost 20 percent from $1-billion the prior year.

Like Delta, American indicated it will keep paying bonus commissions to agents who drum up exceptional business. To survive, some agencies probably will merge to generate the ticket sales that will earn those bonus fees, analysts said.

At Carlson Wagonlit Travel, a Minneapolis network of 1,400 travel agency offices, spokesman Steve Loucks said agencies will have to focus more on planning vacation packages and providing other niche services.

He said nearly 100 agencies have joined the Carlson Wagonlit franchise in the past six months to boost their sales. Once they join, they are treated like one large operation and entitled to the same preferred relations with airlines, he said, adding: "It's really become more difficult to go it alone out there."

-- Times staff writer Steve Huettel contributed to this report.

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