• U.S.


5 minute read
John Greenwald

FOR DECADES, U.S. AIR TRAVELERS have enjoyed what amounted to a bit of a free ride whenever they stepped onto a plane. They relied on travel agents to find them the best fares on the most convenient flights and to book hotel rooms and rental cars-all without charge. But these complimentary services are likely to vanish now that the major airlines have targeted their obsessive cost cutting at travel agents and demanded that they slash the commissions they charge the carriers for distributing tickets. Agencies across the country are determined not to get squeezed, and so passengers will.

That is happening already: American Express Travel, the country’s largest agency, said last week it will charge $20 a ticket on domestic flights costing less than $300 and credit the fee toward cruises or tour packages. Carlson Wagonlit, the No. 2 agency, will charge a $15 fee to first-time customers who travel alone and book no other services; such flyers will then receive $25 certificates, good for future trips.

The airlines have gone after travel agents because they are convinced they have run out of options. Struggling U.S. carriers, which have lost a total of $10.5 billion in the past four years, have laid off tens of thousands of workers, demanded wage and benefit givebacks from employees, canceled or delayed billions of dollars of orders for new aircraft and reduced service to hundreds of small communities. But travel-agent commissions, which at $7.8 billion were the airline industry’s third largest cost (after labor and fuel) last year, remained largely untouched.

Delta ended that benevolent policy two weeks ago when it scrapped the 10% commission that airlines have paid agents to distribute tickets for domestic flights. Instead, Delta placed a $50 cap on fees for ticketing round trips costing $500 or more. American, United, Northwest, TWA, Continental and USAir swiftly joined the formation in moves that the industry says could save it $800 million this year.

Yet these seemingly benign cutbacks could change air travel for everyone. The American Society of Travel Agents said in a preliminary estimate that as many as 10,000 of its 25,000 members could be put out of business. For consumers, the choice is paying for services they have long taken for granted or buying their tickets directly from airlines or through computerized reservation systems. But dealing with the airlines could leave passengers at their mercy, with a narrow range of information. “Agents give fares and schedules for all the carriers,” says Michelle Melroy Rafati of Melroy Travel in Salt Lake City, Utah. “The airlines won’t be anxious to give their competitors’ schedules.”

Travelers can also go online to get the latest flights and fares from computerized sources like American Airlines’ SABRE system. But this again raises the specter of possible bias. The U.S. Transportation Department launched a probe of SABRE and other airline-owned systems last fall after asta and several airlines complained that SABRE favored American’s flights. In 1984 the Civil Aeronautics Board ordered major carriers to display flight information in an impartial manner.

Even so, fares and schedules change so fast, and come in so many permutations, that novices can find it tough to navigate online systems. “Between New York and Chicago there are over 300 fares at any given point in time,” says Roger Ballou, president of American Express Travel RelatedServices Group. “That’s just the airlines. Then there are hotels, cars and everything else.” Still, travel experts predict that do-it-yourself ticketing, which accounts for less than 5% of all airline reservations, will grow rapidly as more Americans turn to their computers.

Faced with the prospect of a diminished future, travel agents are fighting back in the courts. In what could be the start of a flood of challenges, Travel Network Ltd., a New Jersey firm that franchises 350 agencies around the world, last week sued six airlines for allegedly conspiring to fix commissions at artificially low levels. Particularly hard hit will be agencies that rely on business-travel packages, that cost more than $500 apiece for the bulk of their revenues-as compared with agencies that specialize in budget-vacation trips. “The airlines are willing to pay you your regular 10% commission on all of the garbage,” says Karen Kalmus, president of Travel Agency Accounting Systems, a Kansas City, Missouri, consulting firm. “But on all of the sirloin steak, they are not going to pay you.”

Ultimately, many airlines would be happy to eliminate tickets altogether. “This is definitely part of a trend to reduce passengers’ reliance on travel agents and ticketing,” says Julius Maldutis, who follows the airline industry for Salomon Brothers. Valujet, a profitable 16-month-old Atlanta carrier that mostly plies the Southeast, has never issued tickets; travelers get confirmation numbers that they use to pick up boarding passes at airports. Southwest Airlines began offering all passengers the option of ticketless service this month. Even giants like United and Delta are testing similar systems. “As Delta becomes more competitive,” says vice president Vincent Caminiti, “we are going to give consumers what they have been asking forðPrice! Price! Price!” Perhaps, but to get those savings, they may first have to accept chaos, chaos, chaos.

–Reported by Bernard Baumohl and Jane Van Tassel/New York and Wendy King/Washington

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