Cathay: No plans for nett fares yet but...

28 September 2000

While Cathay Pacific has no immediate plans to launch nett fares to consumers in the Hong Kong market, Ian Callender, the airline's general manager, sales and regions, said, "That is always a possibility."

Speaking at the Abacus conference in Hong Kong last week, he said, "Inevitably, we would see the possibility in the Hong Kong market. We are seeing a trend and if we want to go on the Internet with a credible fare offering, then we have to move towards fare transparency."

In his presentation, Callender highlighted industry trends which revealed that an airline's own website was becoming a major source of bookings - from 25 percent of revenues for major European carriers to as high as 70 percent for low cost carriers such as Easyjet.

"If the competitors can do it, we have to follow," he said.

In making public nett fares in the Singapore market this month, Singapore Airlines also cited the need for fare transparency. SIA's move, unprecedented in the Asian market, was the talk of the more than 800 agents at the Abacus conference.

It has left Singapore agents seething in anger at what they say is the "typical arrogance" of the national carrier and agents in the region are keeping a close watch on developments although many believe few national carriers in the region would dare do what SIA has done.

Said Javier Berenger-Testa, vice president of Mondial Tours & Travel, Philippines, "Filipinos will always need travel agents. They need visas to travel anywhere."

Philippine Airlines is also not a likely candidate to make such a bold move. In the Philippines, the only carrier that has cut commissions remains United Airlines.

In Singapore, agents say the next three months will determine how the chips fall. It all depends on how other airlines react to the SIA move - will they follow suit or will they see this as an opportunity to seduce agents with more incentives.

If SIA's market share, estimated at 53 percent, drops, then agents say SIA would have to review its stance.

However vice president-sales of SIA, Chia Boon Kuah, said he was confident other airlines would follow. "The US has had fare transparency for the last five years."

It is not the issue of fare transparency that is upsetting agents they say but it is the implication that SIA now sees it unnecessary to pay agents for the work they perform on behalf of the airline and wants agents to charge consumers.

National Association of Travel Agents Singapore (NATAS) president) Lee Liat Cheng said, "We take credit risks, we put up bank guarantees, we train staff, we do the job on behalf of the airlines - surely that is worth something. We are not asking for much but a reimbursement of costs."

One agent jested that SIA obviously believed in "thinking global but acting local".

The Singapore market forms only about 20 percent of the carrier's total revenues base, yet it has chosen to act in this small market. "They knew they would be able to get away with it at home. This is so typical of Singapore companies," he said.

One school of thought at SIA likens it to a provision store analogy where store owners have to pay certain suppliers, especially those of premium branded products, for their goods to be stocked, and displayed.

SIA sees itself as a premium, branded, product that consumers will demand and agents have no choice but to offer the product.

This raises the question. Who does the agent work for - the airline or the consumer? Do agents sell what they make money on or do they sell what the customer wants?

Lily Agonoy, a veteran Hong Kong travel agent who is now operations manager of British Airways, sees it as a three-party relationship. "The traditional role was, the agent worked on behalf of the airline. Now they have to work on behalf of the consumer as well."

NATAS' Lee who runs Anglo French Travel has a simple answer. "I'm in the business to make money. I've been making money all the time and this year, I had my best profits ever. The day I stop making money, that's when I'll quit. I am a businessman."

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