American, Delta Join in Cutting Fees to Agents
American and Delta airlines on Tuesday joined United Airlines in reducing commissions travel agents receive for writing tickets--the second round of cuts since February 1995.
United’s commission rates for domestic ticketing fell to 8% from 10%, retaining a $50 cap for a round-trip fare. International commissions also fell to 8% but with no cap on payments.
Travel agents urged other major airlines not to follow United, but Delta and American said they will match the cuts to achieve cost savings of up to $100 million annually. Southwest Airlines said Monday it will not; other major airlines have declined to comment on their plans.
The American Society of Travel Agents, which represents 27,000 travel agents, ran full-page newspaper ads objecting to United’s decision last week to lower the commission rate on tickets for domestic flights.
As consumers begin to balk at rising ticket prices and Wall Street presses for continued earnings growth, airlines are seeking to cut costs by turning to their second-largest expense, the $12 billion spent annually for distribution costs such as travel agent commissions, analysts say.
Meanwhile, shares of Delta Air Lines Inc. and other air carriers slipped Tuesday after Delta said its quarterly earnings would fall short of analysts’ forecasts and last year’s results due to unexpectedly low revenue in domestic travel.
After the market closed Monday, Delta said revenue from international travel was not strong enough to offset domestic weakness, resulting in a year-over-year decline in system unit revenue in August.
Delta also said it expects operating revenue per available seat mile--a measure of performance--to be about 2% lower in the September 1997 quarter.