Cuts spread to foreign carriers

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WASHINGTON -- Airline commission cuts for U.S. agents are spreading to overseas carriers.

El Salvador-based Taca is eliminating base pay May 1, and British Airways is discontinuing its 2-year-old Blue Skies bonus program at the end of May.

Taca, which sent notice of its decision April 22, became the first carrier outside North America to eliminate base pay for U.S. and Canadian agents.

Although British Airways is not changing base pay rates, its decision to drop the bonus plan was based on a discovery that agents might find ominous: Blue Skies participants, as a whole, were performing worse than agents who received lower commissions, an airline official said.

The airline measured performance based on the year-over-year increase in revenue for economy, premium economy and British Airways Holidays.

Blue Skies agents receive 10% uncapped for economy tickets, compared with 5% capped for what BA calls "general sales agents."

For British Airways Holidays, Blue Skies agents receive 15% uncapped compared with 13% uncapped for general sales agents. Many agents getting the higher pay "might have paid lip service that it was making a difference for them, but the reality really wasn't showing through," said Evelyn Clinton, the airline's trade program manager for North America.

"We're in a position where the program really isn't financially viable," she said. "It really isn't translating into any profitable result for us."

A contributor to the Forum on Travel Weekly's Web site offered one possible explanation. He said agencies could book clients at a cheaper price and get more money for themselves by using consolidators.

ASTA president Richard Copland said he doesn't have British Airways' raw data, and its contention could be the "spin" the airline put on its decision.

Copland said agents are adapting to the new environment, but "anytime there's a commission cut, you always have to be concerned. Hopefully, we can get the message across to these people that we can be a very viable, visible entity to help them distribute their product."

British Airways launched Blue Skies in March 2000 as part of a five-tiered system of pay to U.S. agents.

The airline put that system in place when it cut its base commission for economy from 10% to 5%. The airline already was paying 5% for business.

The top tier consists of national agreements with agencies such as American Express and Rosenbluth.

The second tier consists of preferred selling agreements, or PSAs, with large agencies that sell a lot of British Airways tickets.

The third tier was Blue Skies.

The next tier is general sales agents at 5% capped, and that tier remains. So does the lowest tier, under which agents receive a $10 fee per ticket.

To be eligible for Blue Skies, an agency's British Airways booking revenue had to fall between $20,000 and $200,000. More than 50% of the volume had to be in economy or premium economy, with no more than 50% of that business in group sales.

The agencies had to improve their British Airways revenue by 10% year-over-year to remain in the program, although the airline dropped the requirement to 5% for the past year because of Sept. 11.

After the second year, only about 1,000 agents met the requirement, Clinton said.

About 50 of them, she said, will be eligible to sign preferred-seller agreements.

JetBlue moves to zero pay

NEW YORK -- Low-fare, low-cost carrier JetBlue eliminated base commission effective April 25, with the airline's leader maintaining he made the decision because the carrier wasn't being helped by paying more than its competitors.

"As a low-fare carrier, we need to keep our cost structure as low as possible," said chief executive David Neeleman. "When our competitors cut commissions, we took a wait-and-see approach to see if our travel agent bookings increased. Over the last month, travel agency bookings actually decreased as a percentage of our overall business.

"Under these circumstances, we couldn't justify paying the extra expense," he said.

JetBlue has made no secret of its Internet focus since it launched operations in February 2000.

Of its total sales in 2001, 92.6% were booked on its Web site or via its sales department, the company said in a filing with the Securities and Exchange Commission. Only 14% of its sales were booked by agents to whom the airline paid a commission. -- A.C.

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