NEW YORK -- Princess and Royal Caribbean matched Carnival Cruise
Lines' pay cut, reducing air commissions on air/sea bookings from
10% to 5%, effective Sept. 15.
Carnival affiliates Holland America and Windstar had already
matched, which means the reduction now affects more than 80% of
"After a great deal of study we determined that it didn't make
business sense for us to pay commission that the airlines
themselves do not pay," said Princess president Phil Kleweno.
"However, this step in no way diminishes our unwavering commitment
to doing all we can to support the marketing and sales efforts of
our travel agent partners as they continue to grow this
The Royal Caribbean pay cut applies to both the Royal Caribbean
and Celebrity brands.
A spokeswoman for the company said, "We wanted to correct the
imbalance that has existed for some time between what cruise lines
pay agents and what airlines pay agents for [air], which for cruise
operators is a noncore product."
She noted that Royal Caribbean's new air rate "is still
considerably higher than what airlines pay agents" because the
percentage isn't capped.
Joe Hovorka, an analyst with Raymond James & Associates,
said Royal Caribbean could expect to save about $17 million a year
from the commission cut, but he added, "We anticipate some of that
will go back to the consumer" in the form of lower air add-ons in
Vicki Freed, Carnival Cruise Lines' senior vice president for
sales and marketing, said contracted air rates are at an all-time
For example, she cited a $198 fare for a Los Angeles to Tampa,
Fla., flight advertised in the Sept. 6 issue of USA Today.
Carnival's contracted fare for the same flight, she said, is
"All we're trying to do is lessen the gap," said Freed.
Airline revenue management people, she said, "know precisely
where and when the cruise lines need the lift into their port
Freed said the commission cut will allow Carnival to adjust its
air ticket prices in selected markets, but the cut will not affect