Eyes on the U.K.


Last month, the European Commission ruled that British Airways' override deals, which rewarded U.K. agencies for year-over-year sales increases, were illegal because of the carrier's dominant position in the U.K. market.

The line was given only a month to rectify matters, so it announced that, on Sept. 1, commissions will rise from the 7% base for all U.K. agencies. (None of the nine or more other carriers paying 7% has matched. As smaller players in the U.K., they can keep their override plans.)

As part of BA's adjustments, agencies without BA override deals get another three points for an effective 10% pay rate. Those with corporate deals (meaning agencies that had override arrangements) get a one-point bonus and other opportunities to earn more but not based on year-over-year sales hikes. This pay plan is described as an interim move, to be good for six months.

Travel Weekly in the U.K. says it is "considered unlikely" that BA will cut pay again next April. Even so, it is not a given that U.K. agents can count on the new pay rate for the long haul.

So, I wonder, should U.S. agents wish for this kind of news? How helpful is it to be whipped about by commission rates that bounce around? What happens to service fees? Do they jump around, too?

Until now, it has seemed like good news when federal agencies concluded, after various studies of overrides, that there was no evidence the extra payments to agencies were harmful to the public.

However, things look a little different after seeing how a ruling that strikes down overrides (from a dominant carrier only) can result in increased pay for lots of travel agencies.

As our columnist Mark Pestronk points out in a recent column, U.S. and European Union antitrust laws are similar. So, imagine what might happen if the EC ruling were applied in U.S. cities where there is a dominant carrier.

The most upbeat scenario would have the Transportation Department look at airline commission practices by hub rather than nationally, for the first time, and it would have the DOT conclude that some overrides are illegal on the grounds that they reinforce the dominant airline's local monopoly.

If higher agency pay and a more level playing field are real possibilities, perhaps it is time for agency groups to reconsider their positions and ask the government to ban overrides where the case can be made, especially if it turns out that the BA 10% solution holds fast.

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