Agents Find Not-So-Friendly Skies Over Commission Cuts

You don’t usually hear Mary Kay cosmetics reps bad-mouthing Mary Kay, or Amway people slamming Amway, or brokers grumbling about a stock you want to buy. But if you’ve been within earshot of a travel agent in the last few weeks, you’ve probably heard a lot of angry and colorful language about this country’s leading airlines.

In a move that is expected to cost travel agencies--and save the airline--$80 million to $100 million per year, United on Sept. 18 cut its standard commission payments to agents on domestic and foreign airline tickets from 10% to 8%. Within days, Delta and American airlines had followed United, each likely to save a comparable amount of money, and still others came along after that. Within 10 days, the trend had spread to international carriers KLM, Lufthansa and Air Canada.

The American Society of Travel Agents, still smarting after a similar commission cut in 1995 (capping commission payments at $50 per round trip, no matter the ticket price), called the move intolerable and unreasonable. ASTA President Mike Spinelli fumed that the major airlines had “virtually handed the travel agency community a one-word message: Goodbye. . . . This action is designed to force the public to deal directly with the airlines.”

If you’re a casual leisure traveler, all this shouting may have left you unmoved: After all, United has pledged that these changes have “no direct impact on the cost of tickets for consumers,” and other airline officials have made similar pledges. And if you’re a do-it-yourselfer or a believer in the Internet as a marketplace, you may have already stopped calling travel agents and started dealing directly with airlines.

About 20% of airline tickets are sold without travel agents, and as agents are squeezed and airline-consumer communications are streamlined, that figure is likely to increase in coming years. Some agents say this move will make them more motivated than ever to give good customer service and put travelers’ best interests first, even though their checks come from the airlines.

So what does this commission-cut flap mean to the majority of consumers who buy their airline tickets through travel agents? Several things, most of them bad.

Here’s a virtual certainty: Your travel agent will be more eager than ever before to steer you toward a cruise, an organized tour or an air-lodging package, products that so far still carry 10% commissions. This can be good. Cruises and tours run by reliable companies can be had at bargain rates, especially in off seasons. And air-lodging packages can shave a lot off the cost of separate air fares and hotel rates, without any real sacrifice of independence. But a traveler who wants an individualized itinerary (the most time-consuming task an agent faces) may find himself, or herself, facing an uninspired travel agent.

Or facing new fees. After decades of charging consumers nothing, many agents are talking about imposing service charges or transaction fees ($10 to $15 are numbers often mentioned) on straight airline ticket sales and other time-consuming tasks. Many major agencies tested this idea following the first commission cut two years ago, but found substantial customer resistance and backed away.

Ironically, one place a mid-sized travel agency might find relief is in an alliance with one of these much-resented airlines. Despite the cut in standard commission rates, individual airlines still quietly offer “overrides”--boosted commission rates--to agencies that steer particularly large numbers of customers their way. Thus, if Tom’s Travel Agency stops scattering its customers among seven airlines and instead does its best to funnel business to Dick’s Airline, Tom may get a boosted commission rate. That way, he might avoid charging his customers service fees altogether, or he might ask for them only from passengers insistent on using a non-favored air carrier. The only problem, of course, is that while Tom and Dick are happily allied, who’s left to look for the airline that will best fit the needs of Harry the customer?

(On the flip side of this, some vengeful agents may steer travelers away from United, just as many agents scorned Delta after it kicked off the 1995 commission cuts.)

Another alternative for owners of small travel agencies--with stress rising and revenues diving--is to get out of the business. For their customers, every closure and consolidation is likely to mean starting over in the search for a sharp agent--a search every bit as difficult and dependent on personal references as finding a reliable car mechanic.

Hoping to smooth out marketplace anxieties, airlines have suggested that they’ll reinvest the new revenues in improving service. Some, perhaps. But before you go looking for increased legroom in coach class, consider that airline stocks rose with the announcement of the commission cut: Would Wall Streeters be celebrating if they thought the airlines were going to hand this newfound money back to consumers?

If any of the prospects above leads you to thoughts of dumping your travel agent now and doing things yourself, keep in mind the hidden price you’ll probably be paying: the time it takes to gather the same information a travel agent summons with a few keystrokes. You’ll need to be online, or willing to fight your way through busy signals and the on-hold Muzak of several different airlines, since no single airline will give you information on competing fares, nor is an airline reservation agent likely to suggest money-saving alternatives.

If you are online, you’ll still need a bit of time and expertise to get the best price. For instance, you may be willing to switch travel dates in order to save money, but many air fare booking sites won’t tell you about those options unless you ask a time-consuming series of specific questions about specific dates.

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Reynolds travels anonymously at the newspaper’s expense, accepting no special discounts or subsidized trips. He welcomes comments and suggestions, but cannot respond individually to letters and calls. Write Travel Insider, Los Angeles Times, Times Mirror Square, Los Angeles 90053 or e-mail chris.reynolds@latimes.com.