Airlines, most notably United and American, have engaged in something of a commissions war over the past two years. United's commissions jumped 43.4% on a year-over-year basis during the first half of this year following American's commissions jump of 34% during 2017. Aviation editor Robert Silk spoke with American senior vice president of global sales and distribution Alison Taylor about the reasons for these jumps and about how long travel agents can expect the good times to continue.
Q: After last year's generous increase in commission payouts, American slowed the growth during the first half of this year, but it was still strong at 9%. To what can travel agents attribute the jump?
A: Really, all of this is a reaction to the marketplace. We want to make sure that we are competitive and that we remain front of mind with our travel agents. As you know, our increases have actually not been as substantial as others' this year. We will continue to be highly competitive.
Q: Where have the payout bumps come from? Has it been higher commission rates or more frequent commissions?
A: We like to look at it more holistically. The 34% is obviously broad. For example, globally we've increased commissions as a reaction to our competitors, who had increased. What we did is to make sure that our agencies that were providing us with great market share were rewarded for that loyalty and were rewarded globally, not just when they booked for North America. As you know, we're a global airline. We wanted to make sure that in Latin America, Asia-Pacific, Europe, that we were also very competitive. We also started working with our luxury travel agents and retail agents. This was a new initiative in 2017 that we are still phasing in. Luxury agents who book our premium cabins, who book cruises in Europe, the Caribbean, etc., these are important retail agents for us with the new strategy, and it's really paying off for us.
Q: Can you provide details as to what you're doing for luxury agents that you weren't doing before? Are the added commissions exclusively for premium bookings or are they awarded more broadly than that?
A: Depending on the market, some of them are point-of-sale-driven, and others are for certain routes we needed more attention on and to make sure we are working on people's booking behavior, as well, with our partners. Some of them are also in coach. As you know, we've launched premium economy. We do our commissions by segments, as well.
Q: When you talk about routes that you needed to put more attention on, are you mainly talking about routes that have a lot of competition?
A: Yes. Some of them were the highly competitive routes. Others were the new routes that we wanted attention on. And also, of course, some were for our summer destination bookings. As you know, each summer we announce attractive destinations for people to spend their holidays.
For example, Prague, Budapest and Venice that we had this year, and for next year we've added Dublin; Munich; Bologna, Italy; and Dubrovnik, Croatia.
Q: Are these mainly front-end commissions?
A: We do a combination, and we always prefer the back-end, which are, of course, attached to performance. We think that's important, and our partners agree.
Q: Recently, an agent who usually sells coach tickets for leisure flyers reached out to tell me that she isn't benefiting from this commissions surge. Does that ring true?
A: It would depend on an agency's performance with us. We like to reward loyalty and market share, and we like to do it on a long-term basis. If they're a loyal agent with us and we're working with them, then yes, they would have seen an increase in commissions.
Q: Do you expect to see the trend of growing commissions flatten out, or will agents continue to enjoy a boom?
A: We will continue to react if a competitor makes a move on commissions.