Airlines' move puts squeeze on agents

In August, when the airlines cut travel agents' commissions to 5 percent of the agents' sales, Dade City's Rainbow Travel, Zephyrhills' Fantasy Travel and thousands of other small travel agencies across the country closed up shop for two hours in protest.

Many of them took to the sidewalks with picket signs.

Not only did the protest not change anything, but a few weeks ago, the situation got worse.

United Airlines, US Airways, Delta Air Lines, American, Continental, American Trans Air and Northwest Airlines eliminated commissions altogether.

For the agencies, many of them small businesses that survive on tight budgets and a core of loyal customers, the timing couldn't have been worse: Revenues had been bruised by a recession-induced travel slowdown, and the terrorist attacks of Sept. 11 had nearly ground travel to a halt.

Given that air sales make up about 50 percent of travel agency industry sales, it's no surprise that 319 of the Small Business Administration's disaster-relief loans went out to travel agencies.

The elimination of commissions "is going to be the straw that breaks the camel's back," said Sylvia MacVettie, owner of Travel Network Vacation Central in New Port Richey and North/Central Florida chapter president of the America Society of Travel Agents.

As deep as the cuts go, they hardly came as a surprise.

Delta first capped commissions in 1995, limiting them to 25 percent of sales for one-way tickets. The other major airlines followed suit and all made incremental cuts, leading to the recent move.

"Everybody knew that it was inevitable," said Greg Land, vice president of strategic online and leisure with Sabre, a Texas-based company that provides technology for the travel industry. Because the airlines' labor, fuel and food costs are pretty fixed, commissions were their last cost-cutting resort after shuttering city ticket offices and laying off thousands from reservation call centers, he added.

Back when the first cut occurred, MacVettie's business was almost entirely composed of airplane reservations. Since then, she has focused more on booking cruises, land-air packages and tours.

"There's more demand for it now; there are better commissions and they're higher-priced items, so we make better money," she said.

About four years ago, she started charging a $10 service fee to make up for the loss in commissions. Now that fee is $25 for domestic flights and $40 for international flights.

"That's not going to recoup our losses, but I think that's a fair charge to my clients who don't want to do it over the Internet," she said. She encourages those who are willing to book on the Web because she doesn't make any money on it.

"I've had some people walk away, but my clients understand," she said. "And they've got to judge the value of their hard-earned money just like I do."

Andrea Alka, manager of Rainbow Travel, isn't so sanguine about the situation.

She's steamed and confused that the airlines want to steer the customers toward the Internet and their own reservation centers, undermining all of the expertise and service the agents offer people about destinations, tours and prices.

"They're spending all this money to pay benefits to all these people at their reservations call centers -- a 5 percent commission is a bargain" compared to that, she said. "If they just use the distribution system that they have on hand, they'd be more profitable."

She's particularly ticked since the federal government gave the airlines $10-billion in loan guarantees to make up for lost business after Sept. 11.

Alka isn't sure there's anything she can do or even how it will end up affecting her business. For now, it looks like the battle that's going to be waged is going to be between the airlines.

Some of the smaller carriers, including Air Tran Airways, Frontier Airlines, National, Southwest Airlines and Midwest Express, have kept paying commissions to the agents.

For now.

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