Some corporate agents unfazed by air caps (9/10/2001)

By Jerry Limone - TWCrossroads.com

'The airline industry is losing money hand over fist, and yet ... You can fly across the country for $199 roundtrip.' - Chris Mize McMillan, Bonner Travel Service

Some corporate travel agents are taking a matter-of-fact, business-like approach in dealing with the latest round of airline commission caps.

Art Dahl, president of Northwestern Travel Management in Minneapolis, stressed that his agency's service fees aren't affected by commission reductions.

"Our pricing will be driven by our services, not by what the airlines do. A commission cut is a change in the price of the airline ticket and has nothing to do with our fees," he said.

Dahl added that "most agencies pass commissions on to corporations, so at the end of the day, it's a price increase for the consumer."

Dahl said he suspects that some agencies are using the commission reduction as an excuse to raise their fees and "double up" on corporations.

Chris Mize McMillan, chief executive officer of Bonner Travel Service in Jackson, Miss., also stressed the value of the service her agency provides to travelers.

However, she is critical of the airline industry, which she said is trying to convince the public that agencies are the reason why airlines are stumbling financially.

"The airline industry is losing money hand over fist, and yet they turn around and give their airline tickets away," said McMillan. "You can fly across the country for $199 roundtrip. That doesn't make sense to me."

Danny Hood, president of Atlanta-based WorldTravel BTI, criticized the airlines for capping commissions during an economic downturn, an action that Hood said is unprecedented.

Still, many of WorldTravel BTI's large clients aren't hurt too badly by commission caps, said Hood, because they already have net fare deals (no commissions) or net-net fare deals (no commissions or overrides) with preferred suppliers.

"If a large corporation doesn't have a net or net-net deal in place, they can go to the airline and negotiate one [to help offset lower commissions passed on to the corporation]," Hood said.

Dahl doesn't think airlines are too interested in negotiating a net deal as a means to pass on distribution savings.

"Airlines like to take [distribution savings] to the bottom line," Dahl said. "They capped commissions to satisfy investors. Some companies will be more successful than others in [negotiating a net deal], but it's not going to be automatic and it's not going to be dollar for dollar."

The bottom line for companies that can't negotiate a net deal with an airline is that a decrease in commissions means the corporation pays more for travel management. The fees may not rise, but there is less commission to offset those fees.

When asked if he's worried that corporate customers will gravitate to airline Web sites or online agencies to avoid a cost increase, Dahl said corporations will stick with agencies that provide valuable service.

"If you're the travel manager of a $5 million account, you need to control the cost of travel for your company," Dahl said.

You're negotiating with suppliers and making sure travelers are adhering to the company's policy.

"If you book on [consumer] Web sites, you have little control over what travelers are doing."

Hood said every time there's an increase in travel management costs, there's a "slight spike in the online world."

"What happens is agencies will lose some customers to the mega Web sites," said Hood, "but they come back because of the customer service agencies provide."

For example, Hood said many agencies employ technology that searches for the lowest fare, right up until the day of departure. Also, agencies are more apt to uncover upgrade opportunities than online agencies or airlines, he said.

Besides consolidating travel data and helping travel managers keep employees within policy, Dahl said agencies, most of which provide 24-hour service, are better equipped than airlines and online agencies to uncover alternative travel options when flights are canceled.

"There's value there," Dahl said, "and corporations know it. They vote with their dollars."

"When travelers [who book on line] have a problem and have nowhere to go to, that's when they realize the agency's service was worth something to them," said McMillan.