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