Taking their lead from United Airlines, most major US carriers have slashed travel agent commission rates from 8% to 5%. The cuts have provoked outcry from travel agent groups, already reeling from efforts by the airlines to steer customers towards Internet bookings.

Within days of United's announcement on 7 October that it would cut commissions to 5% and cap them at $50 for a domestic round trip and $100 for international flights, other major carriers followed suit. American Airlines, Continental Airlines, Delta Air Lines, Northwest Airlines and US Airways all announced similar cuts. The majors were not alone in adopting the cuts. Several smaller US carriers, including American Trans Air, America West, Alaska Airlines and Midwest Express were quick to implement similar reductions. United says it expects the cuts to save $150 million a year. Analyst Brian Harris at Salomon Smith Barney estimates the overall annual savings to the industry to be in the region of $750 million.

The American Society of Travel Agents (ASTA) has filed a letter of complaint to the Department of Transportation (DoT), claiming that the commission cuts are designed to "cut agents out of the competition picture". During the summer, ASTA filed a similar angry complaint to the DoT after many major carriers offered their deepest discount tickets via the Internet only. Although Internet sales remain only a small fraction of airline business, and travel agents account for 80% of sales, it is clear that the relationship between the airlines and the agents has changed, with the airlines calling all the shots. The latest cuts have prompted many agents, for the first time, to announce flat rate fees of around $10 a ticket. "Customers are saying to us that they will go to the Internet to avoid these fees, but we have no choice," says one agency.

United has led the way in paring down commission rates, which stood at 10% with no caps just three years ago.

Source: Airline Business