In year since airlines slashed commissions, travel agencies passing the buck to consumers
October 1, 1998
Web posted at: 1:10 p.m. EDT (1310 GMT)
(CNN) -- Last fall, almost every major U.S. airline slashed commissions to travel agents. The move brought predictions that some agencies would fail and that customer service would be sacrificed. A year later, some analysts say airlines haven't lived up to their promises to improve service with the savings, and in most cases consumers are footing the bill for what travel agencies have lost.
United Airlines started the movement to cut travel agents' commissions, dropping them from 10 to 8 percent last September. All the major airlines followed United's example -- except Southwest, which continues to pay 10 percent commissions.
Some of the airlines said profits from commission cuts would be used to improve services to flyers. For example, United said it has installed bigger seats, laptop power supplies, in-seat entertainment systems and improved lighting on its planes.
Meanwhile, consumers are making up for the agents' shortfall. A survey by the American Society of Travel Agents (ASTA) found that 64 percent of responding agencies now charge service fees and that most started doing so after major airlines cut agency commissions. The travel agencies charge an average fee of $10.37 for issuing airline tickets, the survey found.
Analyst: Coach class gets stiffed ... again
But an analyst said the airlines' promised improvements don't benefit all flyers.
"I think that we've probably seen that more at the front of the plane, in business- and first-class sections. We've seen very little in the way of improvements in coach," said Chris McGinnis, CNN's business travel consultant.
An ASTA spokesman said airlines are in fact providing fewer services than before the commissions to travel agents were slashed.
"They're providing no more service than they have before. In fact, service levels are falling off appreciably," said Mike Pingrey, who acknowledged that agents have responded to the commission cuts by charging service fees to their customers.
The 506 agencies that responded to the ASTA survey over the summer reported their fees range between $5 and $200. Agencies charge the most for trip planning or research, at a median of $50, followed by $20 fees for cancellations, according to ASTA.
Smaller agencies less likely to charge fees
The survey found that smaller travel agencies were less likely to have begun charging service fees. Fifty-three percent of agencies with sales under $1 million per year charge fees, compared to 68 percent of agencies with sales of $1 million or more.
McGinnis said the travel agencies would have survived -- and even thrived -- after the airlines cut commissions without charging the service fees.
"Sheer volume has made up for the fact that travel agents had to take that cut, so a lot of travel agencies are still doing very well," he said. "As a matter of fact, a lot of them are doing better than they did last year even though they got the cut."
Based on a report from CNN's Business and Travel and Beyond