Princess, RCCL join CCL in air-commissions cut


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 cruise capacity.

"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.

Sinking pay.He added, "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 business."

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 some markets.

Vicki Freed, Carnival Cruise Lines' senior vice president for sales and marketing, said contracted air rates are at an all-time high.

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 $469.

"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 cities."

Freed said the commission cut will allow Carnival to adjust its air ticket prices in selected markets, but the cut will not affect cruise prices.


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