Graham Turner, head of Australia’s travel retailer, Flight Centre, has told travel agents not to give up on airlines paying them commission.
Turner (right) was speaking only days before Qantas announced that it is slashing commission to travel agents for domestic and international bookings. Qantas will cut international commission from nine to seven percent from January 1, 2005, and domestic commission from five percent to one percent from July 1, 2005.
Turner has predicted that the tide will turn in favour of agents as low-cost carriers around the world reach a point where they will have to pay commission to agents to secure business.
“I think we will be earning overrides and have differential pricing to websites from the low-cost carriers. It might take a few years but it will happen because they need us as the means to fight the legacy carriers,” said Turner, who was speaking at the 2004 Australian Federation of Travel Agents’ conference.
Turner said traditional airlines that had cut commissions were now seeking to reintroduce payments to agents and even low-cost carriers whose business model was aimed at cutting agents out of the equation were now looking to pay commissions.
He cited the example of US carrier Southwest that was paying commissions to encourage more agent-sourced business.
Turner said efforts by airlines to persuade agents that their future was linked to service fees instead of commissions was “one of the biggest cons of all time”.
He compared a service fee to that of a supermarket levying a fee on customers when they paid for a packet of cornflakes at the checkout.
Australian Federation of Travel Agents’ chief executive Mike Hatton said that legal advice indicated that there were no grounds for an action against Qantas by AFTA either through the Australian legal system or the competition watchdog, the ACCC.
He added, “AFTA is continuing to work with Qantas on various initiatives. These include training programmes and administrative changes designed to smooth the transition to a service fee environment, and hence make agent management of this situation with the travelling public an easier task.”
Hatton said AFTA had not been given any reason for the changes “save that the airline does not believe that in the current competitive environment commission levels as they are today are unsustainable”.
“This rationale is hard to accept given the recent Qantas profit announcement.”
Hatton said it was of concern to AFTA that mainstream press quotes and speculation were sounding the death knell of Australian travel agents.
“Australian travel agents are resilient and versatile and have adapted very readily to change as change has flowed through the industry,” he said. “There is absolutely no evidence available to AFTA that the announced changes will lead to the demise of a large percentage of travel agents in this country.
“Statistics quoted from overseas sources where changes such as this have taken place are based on experiences in vastly different markets and circumstances than those that pertain in Australia today.”
It is believed that Qantas has reached separate commission agreements with some travel retail chains.
Hatton added, “The decision that has been taken is a decision made by Qantas for their own commercial reasons. Any alternate arrangements that Qantas may have reached with major chains within Australia are a matter for those chains and the members of those chains, as AFTA is not privy to or a party to those arrangements.”