As Agents’ Commissions Vanish, Fliers Pay More

Here’s a timely exercise for anyone who has ever bought an airline ticket. Consider how much you would pay someone to make a plane reservation for you: $10? $25? $50? $100?

Then call your travel agent and ask what she or he charges. If you haven’t bought a ticket in the last few weeks, you may be surprised.

Since mid-March, travel agents have increased their service fees, sometimes more than doubling them. And yes, you may be asked to pay $100, the fee one agency charges frequent fliers to book international award travel.

The soaring fees are the most obvious aftershocks of major airlines’ decision last month to end commissions to travel agents. But they’re not the only ones. How and where travelers search for air fare deals, on and off the Internet, is being shaken up by the end of a decades-long way of doing business.

“With the airlines’ decision to eliminate commissions, the landscape of the travel industry has changed forever,” says Richard M. Copland, president of the American Society of Travel Agents, or ASTA.

From March 14 to 22, eight major North American carriers, led by Delta, stopped paying agent commissions, which were typically capped at $20 per round-trip domestic ticket; the airlines had been whittling them down since 1995. Delta said it ended the payments to save money after losing $1 billion last year. Continental, American, Northwest, United, US Airways, America West and Air Canada copied its move. Essentially, the airlines are passing on a cost of doing business to the customer. Alaska, Southwest and some smaller airlines, including JetBlue, Midwest Express, National, Spirit and Vanguard continue to pay commissions as of last week.

Copland promptly denounced Delta’s move as “anticonsumer,” and just as promptly, agents began raising fees. A sampling:

* Ada Brown, owner of Seaside Travel in Long Beach, increased her service fees from $10 per ticket to $25 for domestic and $50 for international tickets, except for airlines that pay commissions. “We think we can make it on $25 per ticket,” she says. Like many agents, she rejiggered her accounting to allow for the lost payments. She charges $50 for domestic and $100 for international travel to book award tickets.

* Travel by Greta in Northridge increased fees by $10 and now charges $40 for tickets costing $400 or less and $50 for tickets of more than $400. “It bothers me to do this,” says Susan Dushane, of Travel by Greta and ASTA’s area director for Southern California and southern Nevada.

* Bob Kern, president of ASTA’s Southern California chapter, used to charge a flat per-ticket fee of $15 at his Los Angeles-based agency, PNR Travel, before increasing fees twice, once in January (after commission cuts in the fall) and again last week. Now they go up to $35 for higher-priced tickets; itinerary changes or refunds cost $50. He worries that “you can only tweak things so much before you start losing customers.”

Rising fees may drive away business and, combined with lost commission revenue, thin the ranks of travel agents. And that could limit consumers’ choices, in one view.

“We’ll lose some travel agents--they’ll go the way of the corner drugstore,” predicts airline expert Terry Trippler, president of Trippler & Associates Inc. in Minneapolis and a former travel agent who left the business in 1985.

Kern of PNR thinks 25% of agencies will fold. “The changes are happening so rapidly that many people cannot cope,” he says.

But in another view, the changes may ultimately benefit consumers by ending a long-standing conflict of interest in the travel industry.

Scott Ahlsmith, vice chairman of the Institute of Certified Travel Agents, which trains and accredits agents, criticizes an “unhealthy schizophrenia” in which agents have traditionally been paid by the airlines through commissions but are expected to act in the interest of travelers. “You become the servant of two masters,” he says.

Besides regular commissions, some larger agencies in certain markets have traditionally received “overrides,” typically 1% to 2% of the ticket price, for steering business to a particular airline, says Bill Maloney, executive vice president and chief operating officer of ASTA. The idea that such payments bias agents to book certain airlines is “not proven,” Maloney says. “There’s a difference between pushing it and bias.”

But some others disagree.

“Many larger agencies ... are in effect dealerships for the airlines,” says Bill McGee, editor of Consumer Reports Travel Letter.

Trippler concedes that when he was an agent, he would book an airline offering him incentives even if another airline offered a somewhat cheaper flight. “If it was $10, $20, $30 [difference], I wouldn’t say a word” to the customer, he says.

In the short run, the new system may not eliminate bias and may even increase it. Several travel agents told me they plan to steer bookings to the handful of airlines that still give commissions. Delta said it would offer “incentive commissions” to some agents, and America West announced a new program that would pay up to 5%--far more than traditional overrides--to agents “in exchange for booking more of their business on America West.” Details of the plans were not available because the airlines that ended commissions declined comment beyond brief written statements.

Experts predict that many travelers will turn to the Internet, where booking is often free or low-cost, cutting into the estimated 75% of tickets that are sold through off-line agents. Travel agent Brown says she will advise customers needing to book several tickets at once to go to the Internet rather than use her services and incur multiple fees.

But the Internet is not always an unbiased source. After the commission cuts, www.expedia.com briefly demoted United to the bottom of its fare searches and omitted prices. And www.travelocity.com as of last week was still charging a $10 fee to book United--and adding it onto the fare so that United’s flights dropped lower on fare searches. Neither Internet site would specify its reasoning, but both actions appeared to be results of disputes over how the sites would be compensated for selling United tickets. Airline-owned www.orbitz.com, which charges airlines a flat fee to sell their tickets, did not change its fare displays or its $5-per-ticket consumer fee in response to the commission cuts, a spokeswoman said.

*

Jane Engle welcomes comments and suggestions but cannot respond individually to letters and calls. Write Travel Insider, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012, or e-mail jane.engle@latimes.com.