outhwest's decision to reduce its 10%
commission rate was probably inevitable. We suspect that the
airline would have done it much sooner had it not been for a 1995
promise to stay at 10% through this year.
To its credit, the airline kept its promise. To its
stockholders' relief, it kept it no longer than necessary. With all
the major U.S. airlines paying 5% and capping commissions at $25
one-way, it seemed anomalous for the industry's low-cost leader to
be paying agents a 10% commission with no cap, particularly when
Southwest gets far less of its business from travel agents than
most airlines do.
Southwest said the 10% rate was no longer "financially prudent,"
especially now that many agencies are charging service fees for
Against these cold, hard, economic facts, agents should salute
Southwest for going to an 8% rate rather than matching the
prevailing 5%. Or should they?
We note that Southwest is the first major airline in the U.S. to
adopt a two-tiered commission structure along the digital divide:
8% for an e-ticket, 5% for paper.
In a sense, Southwest did match the 5% rate, with a three-point
incentive to encourage e-ticketing. Depending on how you look at
it, Southwest will be the first major airline to have a systemwide
commission bonus for issuing e-tickets -- or it will be the first
airline to penalize agents for issuing paper.
Few agents issue paper tickets on Southwest, but there's
something annoying about the way Southwest would shift so much of
the burden to those who do.
Southwest wouldn't dare surcharge its passengers for paper
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But that 5% rate suggests that this airline, ever adept at ducking
costs, expects its fiduciary agents to take a hit and to recoup it
with a service fee should its passengers want paper.
This is one more indication that airlines have come to regard
commissions as an expense to be managed rather than as compensation
for services rendered.