Delta Air Lines' lead in capping travel agent commissions could boost operating results by as much as 15 per cent this year, industry analysts believe.
The caps on domestic commissions still give travel agents 10 per cent on fares under $500 but put a limit of $25 on one-way tickets over $250 and $50 on roundtrip fares over $500.
American, Northwest, United, USAir, Continental, TWA and Alaska have followed Delta's lead in a move which should take a sizeable chunk out of operating expenses even though they do not affect commission overrides - estimated to add 3 per cent to commission costs. American Airlines 1993 commissions amounted to $1.45 billion, or 10 per cent of operating costs.
Uniglobe Travel, one of the US' largest travel agencies, said it whole-heartedly supported the airlines' move. However, Travel Network, the US' second largest travel agency franchise, has launched a lawsuit against Delta, American, Northwest, USAir and TWA, complaining over the unilaterally imposed caps on commissions.
Delta, for its part, says that it is not attempting to lessen its dependence on travel agents for bookings, but only looking to save money. A spokesman says that only 20 per cent of its sales will be affected by the caps, which are part of cost-cutting plans that have targeted $400 million in savings from its marketing programmes. Of that, Delta estimates the caps will achieve up to 25 per cent of the goal, or $100 million.
Such savings potential attracted high praise from Wall Street analysts, where stocks were boosted by some 10 per cent in Northwest's case.
Such savings potential attracted high praise from Wall Street analysts, where stocks were boosted by some 10 per cent in Northwest's case.
Source: Airline Business
