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Whats Air Canada Getting At?

Sat Mar 23, 2002 12:45 pm

I was reading the following article, if you ask me it really seems like AC and Milton are really pushing Tango, and want Travel agents to book pax. on Tango, rather than mainline, all in order to hurt, or for that matter try to hurt, Westjet?
Although, it may just be another attempt to lower AC's costs, however, wont in increase Tango's operating costs aswell?

And, as I read earlier on this forum, it was said Tango's costs were low, but not that low.

Again, I am baffled by Air Canada's decisions.

TORONTO (CP) - Following the lead of U.S. airlines, Air Canada announced Friday it will eliminate most of the commissions it pays travel agents - a move expected to hit consumers in the pocket book. Starting on April 22, the Montreal-based airline will no longer pay travel agents commissions for tickets issued in Canada.

Effective immediately, it will stop paying commission on tickets sold in the U.S., Puerto Rico and the U.S. Virgin Islands for travel on the main Air Canada service or Air Canada Regional.

However, Air Canada will continue to pay commission on tickets issued for travel on Tango, its new no-frills service that's in direct competition with Calgary-based WestJet Airlines.

Louise Crandall, spokewoman for the Association of Canadian Travel Agents, said Air Canada's decision to follow the lead of the U.S. carriers will hurt travel agents and consumers alike.

"Air Canada is asking travel agents who book and deliver 70 to 80 per cent of their tickets to work for nothing," Crandall said from the industry group's headquarters in Ottawa.

Travel agencies will be forced to start or increase service fees for their customers to make up for the lost revenue, she said.

"In short, Air Canada is passing the cost of distribution of airline tickets onto the consumer," Crandall said.

Air Canada would like its customers to book flights using an online Web site or phoning one of its call centres directly, she added.

But that will do consumers a disservice because airlines want people to think there are only one or two fares available.

"In fact, if you called a travel agent you would find there are dozens of fares available. And only a travel agent would give you unbiased advice on options that, in the long and short term, would save the consumer money."

Air Canada refused to provide comment on the release issued Friday afternoon.

Prior to the changes announced Friday, the airline - which has about 80 per cent of the Canadian domestic airline market - paid travel agents a five per cent commission up to a maximum of $28 for a return ticket.

For Lesley Paull, who owns a 10-employee travel agency in Edmonton, those commissions accounted for about 40 per cent of overall revenues.

Like many agencies, which have long expected airlines to eventually stop paying commissions, Paull Travel also charges its corporate and individual clients a service fee.

Paull said she doesn't expect to lay off staff immediately because there's still the same amount of work to do to serve her clients. That might change, however, if clients aren't prepared to pay higher service fees that her agency will have to put in place.

"But I'm hoping we can work it out so it's beneficial for the customer and for us and we can all move forward so we don't have to deal with this again," Paull said.

Air Canada said it would continue to pay commissions for flights booked by travel agents on Tango, which is in stiff competition with WestJet.

Both WestJet and Tango pay up to nine per cent commission on flights booked using Web reservation systems, rather than the more costly computer reservation systems run by Sabre, Galileo/Apollo, Amadeus and Worldspan.

Air Canada said it will also continue its Horizons 2000 program, which provides bonus payments for agents that book high volumes of flights on its airlines.
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RE: Whats Air Canada Getting At?

Sat Mar 23, 2002 1:59 pm

Although I'm frequently critical of AC, I support this decision.

Travel agents really provide little value added service. Keeping a reasonable eye on seat sales and web sales will get you the same cheap fares as any travel agent. And we have all dealt with 'air-head' travel agents who don't know a 737 from a 747. Indeed, I have NEVER met a travel agent who really provided me with any value.

AC recognizes this. It's time to remove the middle man...and that's what AC is doing.
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RE: Whats Air Canada Getting At?

Sat Mar 23, 2002 2:03 pm

In some ways I agree with Air Canada. Though the exclusion of Tango is suspicious to me. It's basically inviting travel agents to make an extra profit by booking passengers on Tango. Just another way Air Canada is trying to bring down Westjet.

Fly Westjet!
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RE: Whats Air Canada Getting At?

Sat Mar 23, 2002 2:07 pm

You'd think that AC would want to bring down Tango costs down by nixing the commissions for Tango operations as well. Aren't loads on Tango quite healthy anyways? I really don't see the logic in excluding Tango from the cut. Maybe someone can enlighten me?
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RE: Whats Air Canada Getting At?

Sat Mar 23, 2002 2:37 pm

Thats what I was getting at, why Tango?

I could careless about travel agents, I just found it odd to include their low cost arm, and not the mainline.

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RE: Whats Air Canada Getting At?

Sat Mar 23, 2002 3:30 pm

For once I'd agree with Air Canada wholeheartedly. I don't really see any real use for travel agents as far as fares are concerned. But I do find it odd that AC still wants to keep paying commissions for Tango.

BTW, I've quit dealing with travel agents a long time ago. In my experience, travel agents don't usually come up with fares any lower than what's advertised in seat sales or on the website. I usually book my flights by phoning the airline directly. That way, I save money by not having to fork out $30-40 bucks just to use a travel agency. (this is a result of the commissions being cut, after all!)
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RE: Whats Air Canada Getting At?

Sat Mar 23, 2002 3:36 pm

My speculation is that if Air Canada were to cut comissions for Tango as well, then from the travel agent's point of view, for discount fares where there's a choice of WestJet or Tango, the travel agent will try and sell WestJet harder (as they still pay comissions). Keeping comissions on Tango doesn't send all the travel agents booking their passengers on WestJet.

Although it's interesting that because of this, travel agents will be promoting Tango flights over Air Canada mainline flights.
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RE: Whats Air Canada Getting At?

Sat Mar 23, 2002 3:54 pm

I talked to Milton in December of 2000 and he told me of the importance of this new low cost carrier because he wanted AC to compete with the low fare Canadian carriers. He also told me not to get into the airline business.

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RE: Whats Air Canada Getting At?

Sun Mar 24, 2002 2:56 am

I agree that some travel agents are useless and may not provide real value, but they do serve an important purpose. Often they can be used as a sounding board, or if they are good can find a deal that an individual can't If the airlines don't want to pay commission to travel agents, agents shouldn't be allowed to sell seats on those carriers. Apart from commissions, the airlines don't pay anything for what really amounts to a reservations center.

Do you really think that the airlines will forward the savings on to the consumers--no way. Air Canada charges a fuel surcharge, but only agreed to lower it when they were pressed by the media that fuel costs had dropped significantly. Kind of like how Canadian Income Tax was supposed to be a temporary measure. I would be surprised if Air Canada ever gets rid of the fuel surcharge.

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