04:52 PM
Connect Directly

E-Ticketing Threatens Travel Agents

Airlines eliminate commissions to agents and spruce up Web sites

Citing the growing adoption of the Web for travel reservations, several airlines last week eliminated travel-agency commissions to make online ticketing more attractive.

The move underscores the impact E-commerce can have on traditional business models. The airlines have been slowly cutting commissions for years. But Delta Air Lines Inc. dealt what may be the final blow to travel agencies--and gave a huge vote of confidence to the future of online commerce--when it became the first to eliminate commissions for tickets sold in the United States and Canada. America West, American, American Trans Air, Continental, Northwest, United, and US Airways followed.

Travel PlansThe change will severely affect travel agencies. About half of their revenue comes from airline commissions, says the American Society of Travel Agents, which represents 24,000 travel agencies. The airlines will negotiate performance-based commissions with high-volume travel agencies, but smaller agencies are out of luck. They'll have to offer value-added services such as specialized vacation packages to justify the fees they'll need to impose on customers.

The troubled airlines have no choice but to look for cost-cutting measures. They pay travel agencies up to $25 per ticket in commission and distribution costs. The Web provides a low-cost way for airlines to sell tickets because there are no call-center, travel agency, or printing costs. About a quarter of American's bookings come from the Web. American's site averages 750,000 visitors and 15,000 to 20,000 reservations a day. "We're growing at about 90% year over year," says Scott Hyden, managing director of product management for American Airlines Interactive Marketing. Sales from all online channels total $2 billion.

The airlines will negotiate payments to high-volume travel sites such as Expedia and Travelocity. But these sites are facing pressure from the airlines' own Web sites. All the major airlines are upgrading their Web sites to be more customer friendly, something they need to do to drive more travelers to the Web.

Comment  | 
Print  | 
More Insights
IT's Reputation: What the Data Says
IT's Reputation: What the Data Says
InformationWeek's IT Perception Survey seeks to quantify how IT thinks it's doing versus how the business really views IT's performance in delivering services - and, more important, powering innovation. Our results suggest IT leaders should worry less about whether they're getting enough resources and more about the relationships they have with business unit peers.
Register for InformationWeek Newsletters
White Papers
Current Issue
InformationWeek Must Reads Oct. 21, 2014
InformationWeek's new Must Reads is a compendium of our best recent coverage of digital strategy. Learn why you should learn to embrace DevOps, how to avoid roadblocks for digital projects, what the five steps to API management are, and more.
Twitter Feed
InformationWeek Radio
Archived InformationWeek Radio
A roundup of the top stories and trends on InformationWeek.com
Sponsored Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.