Air Transport World

Commissions spiral down.

Agents turn to fees as Internet sales, e-ticketing chip away at income

The airline attack on distribution costs swelled from a trickle into a flood in the early part of 1998. And as commissions plunged and electronic ticketing and Internet sales expanded, travel agents turned increasingly to service fees to bolster their incomes.

Among the 50 airlines from whom data were obtained in Air Transport World's annual study, the amount paid out in travel agent commissions dropped 7% in the first few months of this year, even as passenger revenues were rising 3.3% (see tables). As a consequence, the percentage of revenues devoted to commissions fell to 7.6%, from 8.5% in the 1997 first half.

In the full 1997 year, commission expense was up 1.6% while revenues were ahead 5.4%, reducing the commission percentage of revenue to 8.3% from 8.7% in 1996, according to the responding airlines. Meanwhile, average revenue per passenger climbed steadily, from $138.37 in 1996 to $144.36 in the 1998 first half.

Other studies confirm the steepening decline in commission expense. The Air Transport Assn. reports that commissions as a percentage of operating expenses fell to 7.7% in 1997 from a high of 10.9% in 1993 among U.S. Majors and Nationals (see table). Those airlines paid $6.1 billion in commissions last year, down from $7.6 billion five years earlier. Data analyzed by TravelScan paint a similar picture (see charts).

The growing shift to e-ticketing and to selling tickets via web sites obviously is contributing to the commission contraction. Among the 33 airlines that provided information, 17 offer e-ticketing and 16 are selling on the Internet. …

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