Low blow

As if you didn't know it already, the average domestic commission rate is in free fall, and it seems clear that it won't be long before the commission structure as we have known it shatters on the rocks below.

According to ARC figures for October, domestic base pay sank to 5.51%, down more than a full percentage point in a year's time and the lowest average rate taken at the point of sale in more than two decades.

In terms of dollars, agents pocketed domestic commissions amounting to $219 million in the month, down a depressing 13% despite the fact that retail sales of $6.29 billion on 141 airlines, three railroads and five other suppliers soared 8% over the previous October.

Worse yet, November's numbers -- which, unlike the October returns, will reflect the full impact of the latest round of pay cuts -- are all but certain to fall even lower.

If it is true, as many maintain, that the airlines aim for nothing less than the dissolution of the travel agency distribution system, the precipitous descent of the domestic pay rate to the 5% level or below could prove the breaking point at which no amount of service fees, accounting tricks or overrides can keep black ink from turning red.

If the question is "How low can you go?" the answer for firms still stubbornly dependent on point-to-point sales might already be: no lower.

More help

In a recent editorial, we gave credit to three airline-owned CRSs that had made moves designed to ease the contractual obligations binding some travel agencies. To that list we want to add Amadeus, which recently boosted segment credits for nonair bookings and offered incentives for agents to move into electronic commerce.

It's not, after all, the end of caps and cuts, but every little bit helps.


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