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Travel Agency Commissions - Who Pays Them?

Sat Dec 13, 2003 12:18 am

I know there are a lot of "experts" on this site, as well as people who are in the biz. I had a question: do any airlines still pay travel agency commission on tickets sold? If so, how much? Does it vary by type of booking (ie, phone/website, etc.)?

Obviously the internet has proved to be a major foe for travel agencies, who now cater to a much narrower audience. As far as I know, only those who are not internet savvy or distrusting of it, some business travel, and those interested in package tours/discounts go through travel agencies - I don't remember the last time I booked a flight at an agency!

With this knowledge and the downturn in the economy, I thought most airlines stopped paying commission altogether or put caps on how much was paid per booking. I'd be interested to hear what people in here know...
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RE: Travel Agency Commissions - Who Pays Them?

Sat Dec 13, 2003 12:33 am

Commissions are still very much paid by airlines to travel agent for tickets sold on their services. Commissions are of different types and are commonly guided by IATA regulations on these. The commission rates vary between 5 - 9%. Commission on domestic tickets may be lower than international rates which are presently at 7%. (It was 9% and some countries still follow the same but are slowly but surely coming to a 7% slab). Airlines may also have a system of commission caps where instead of a percentage, a fixed amount will be paid as commission for tickets within a certain price range, with the amount going up for each higher slab. The US market was the first to introduce commission caps which is a very common practice today.

Another form of commission is called Overriding Commission which is paid out to General Sales Agents. This commission (regulated by IATA Reso. 876B) is an additional 3% which is paid on the net retention by the airline to the GSA.

Other favoured ways of incentivising agents are Productivity Linked Bonuses which are again a percentage paid out based on a certain productivity level that they commit to the airline.

This subject is quite extensive, the points above are a very very brief gist of the agents commission mechanics.

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RE: Travel Agency Commissions - Who Pays Them?

Sat Dec 13, 2003 12:36 am

very simple: the passenger
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RE: Travel Agency Commissions - Who Pays Them?

Sat Dec 13, 2003 12:38 am


it actually also depends on the country where you are...

For example here in Germany, practically all airlines still pay a commission to us travel agents - although Lufthansa has just announced that they'll be reducing that to 0 by September 2004 (which was a bit of a surprise considering that, according to Lufthansa, travel agencies are responsible for 92% of their sales here).

In general you can say that we get 5% for domestic and european flights, 7% for intercontinental business and first class flights and 9% for economy intercontinental.

There are dozens of exceptions to that rule, for example there are some that also pay 9% for business and first, but there are also some that'll only pay 7% for economy (intercontinental in both cases).

Then again, there are other markets (the US for example) where, as far as I know, most airlines pay nothing, but again, that'll have several exceptions.

Hope that gives you a bit of an idea...  Big grin


P.S.: Just to add one thing to Going64's post that I only just now saw - at least in the case of LH going to 0% commission, LH has announced that they will not be reducing the fares by the amount that was now the t/a commission - so, in the end, everything will simply get more expensive for the passenger here (since they've announced that they'll also be charging service fees through their own website)

[Edited 2003-12-12 16:46:26]
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RE: Travel Agency Commissions - Who Pays Them?

Sat Dec 13, 2003 12:46 am

Thanks Frank - that does seem strange that Lufthansa would cut commissions when they rely on so much sales from agencies. I wonder if that number is incorrect?
I suspect you are correct about US travel agencies. If anyone knows what the "exceptions" are in the USA, I'd be curious to know.

My inside contact at a US LCC has told me that they pay travel agencies NOTHING as about 75% of their sales come through their own website! Why pay a travel agency when you can get that sort of business without a middle-man? It seems that most travel agencies survive by adding surcharges to ticket prices or by leveraging contracts with major businesses. But even the latter has curtailed, with many businesses sending their employees to travelocity and expedia when making their travel arrangements!

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RE: Travel Agency Commissions - Who Pays Them?

Sat Dec 13, 2003 12:57 am

I'm certainly glad I haven';t earned my living as a travel agent. Travel agencies are on their way out ... You can even book a cruise online - who needs an agent? With and other innovations, I see no need for the traditional travel agent.

The commissions have been continually cut over the past 8 years or so. More and more passengers are using e-tickets and purchasing their tickets via the web. In the US, there is a cap on commission earned from international ticket sales I can't recall the amount. Airlines hate paying those commissions, and I believe that eventually they will be completely removed, if they haven't been already.

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RE: Travel Agency Commissions - Who Pays Them?

Sat Dec 13, 2003 1:00 am

Richierich --

I worked as a travel agent for 10 yrs prior to leaving last year (the agency that I worked for closed after being in business for 28 years). I now work for another agency as an outside agent (putting together groups for cruises, trips to Las Vegas, etc). I haven't tried to sell air since being on my own, and I don't intend to restart any time soon. It is just not worth it any more.

It used to be that all airlines used to pay 10% commission with no caps, whatsoever (please understand that the 10% was paid only on the base fare, not on any taxes, PFC's etc). Delta was the first to change the commission structure...they still paid 10%, but "capped" commissions at $50 round trip or $25 one way. Then another carrier lowered the commission rate to 8% with the same caps. Then they were lowered again to a cap of $25 round trip and $10 one way. Then the percentage was changed to 5% with the caps. Finally, commissions were dropped altogether. When I left my old agency, SW still paid commission (I believe they no longer do) and Spirit still paid a small commission for internet bookings only.

Airlines will still pay "override" commissions to an agency if they achieve or surpass a pre-determined goal. Here in Detroit, it was quite easy to get an overide commission from NW because of their dominance here. The override commission did not come close to what the agency used to get from actual ticket sales (the agency that I used to work for average between $1500 and $2000 in commissions per week on air ticket sales.)

Commissions are still paid by Tour Companies and Cruise Lines, and these sources will pay an occasional override for acheiving pre-determined goals.
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RE: Travel Agency Commissions - Who Pays Them?

Sat Dec 13, 2003 1:05 am

Traditionally in the US, the airlines paid agents a 10% commission, essentially a distribution cost that covered the agent's time and effort in finding and booking the flight and issuing a ticket. In those early days, finding a rock-bottom fare was less of an issue than picking the airline with the best service and most convenient flights because regulation meant that the fares were essentially all the same. As a result, airlines tried to create incentives for agents to promote and sell one airline over another, and as such there would sometimes be bonus commissions (overrides) for a particularly productive agency, along with promotional goodies like calendars and model airplanes. After deregulation, there was no incentive to really promote service, as lowest price became increasingly more important, and yet agents still got a commission for many years for being the airlines' ticket distribution network, although there were increasingly less extra goodies. Eventually, with the advent of the internet, which put the formerly proprietary reservations system pricing and scheduling data in the hands of consumers, and the advent of the e-ticket, which meant that passengers didn't need an actual airline ticket printed up by an agency, the airlines finally eliminated the need to pay agents anything, except in some extraordinary cases. Because the customers of travel agencies often continued to request airline tickets, many agencies had to initiate a booking fee or service charge of some type because otherwise they would get nothing for their efforts in finding and booking flights. Today, as a result of all this, most US travel agencies are focusing on selling cruises or travel packages that, unlike airline seats, are not viewed as a commodity and require some selling and consumer education, and as such, continue to pay a commission. The cruise industry in fact has an agreement with the travel agency community that cruise lines will not sell tickets on the web directly in the way airlines do.
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RE: Travel Agency Commissions - Who Pays Them?

Sat Dec 13, 2003 4:44 am

I was a travel agent for five years and I can't imagine why nowadays anyone would ever need to go and see a travel agent if they have a credit card and some proximity to an internet cafe if they don't own a computer (hard to imagine). In the old days, fares were more complicated and as someone else said, it was kinda proprietory information that was withheld from the customer (god knows why selling plane tickets should be made so much more incredibly complex than selling, say, groceries). Now, you can get one-ways, fare structures have been simplified and basically, if you can't work it out on your own, you shouldn't be allowed near an aircraft at all. Going to a travel agent to book a flight is like getting someone to operate your telephone for you, or tie your shoelaces. So when travel agents whine about commission being cut, I don't know why they should expect to be paid for such a simple job. Travel agents are probably still relevant for elaborate package holidays, cruises and complex business travel (ie long itineraries or groups). Other than that, they're like flight engineers, unfortunately.
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