BA cuts fares, tells agents: up to you to make money(1)

19 January 2001

Airlines around the world are moving swiftly to a zero commission payment policy in the wake of moves by British Airways to adopt a new fee structure.

BA has attempted to patch up its deteriorating relationship with UK travel agents by reducing many of its fares from April 1, 2001, to reflect the changes in payments to agents.

British Airways will pay agents for the basic service of making a booking, issuing travel documents and collecting the fare.

All BA fares sold in the UK except the multi-carrier fares, will be adjusted by the difference between the current percentage commission paid to agents and the new booking payments.

Other international airlines will be watching BA's move with interest. Lufthansa will axe commissions next year and has predicted that fellow Star Alliance partner British Midland is also "very likely" to follow suit.

Another Star Alliance member, Singapore Airlines, has already introduced nett fares to the public.

Lufthansa German Airlines executive vice-president, Thierry Antinori, said of the carrier's cuts in commission from seven percent to zero percent: "We are not looking to cut out agents completely, we consider them our main partners. But the new function of the travel agent is to act as a consultant."

BA has had a difficult time persuading agents they will be better off under the new arrangements, due to take effect on April 1.

Some agents in the UK have been trying to drum up support for a protest against zero commission by calling for a week-long boycott of BA, beginning around Valentine's Day.

"I will suggest nobody sells British Airways on Valentine's week, just to show how out of love we are with the company," said one UK agent. The protest is likely to run out of steam in light of the fare cuts.

Business travel agents especially are expected to be happy with the reduced fares. Some had threatened to take their business elsewhere if BA did not keep its promise to make the cuts.

BA said the new scheme more accurately reflected the cost incurred by the agent. "Previously, commission on lower fares was insufficient to cover the work involved and was cross-subsidised by commission on higher fares," said a BA spokesman.

All First Class and Club World customers will pay less for their British Airways' fares and many other customers will also pay less. Based on today's fares, return First Class fares will drop by up to £516 (US$770), Club World fares will be reduced by up to £376 and long haul economy fares will be cut by up to £110.

Some lower fares will increase by an average of £2, since the new booking payments will be higher on these fares than the previous percentage commission.

BA is also encouraging online booking by providing a discount of £5 for long haul flights and £3 for European and domestic flights.

" We have been able to hand back significant savings to our customers on long haul and business fares as we are paying less commission on higher fares. Although some of the lower fares are going up, the increases are very small.

The new, more transparent scheme means that customers can choose the level of service they require from the agent and know exactly what they are paying for.

Over time, this will encourage process efficiencies, drive down distribution costs and lead to a better deal for the customer.

It also makes it clearer what we pay agents for and what customers pay agents for directly. Many customers want a range of additional services offered by agents, such as itinerary planning, out of hours services and dedicated service desks, for which they are likely to be charged a service fee.
- Tiffany Hall, British Airways head of UK & Ireland sales

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