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Unplugged Agent
Kirby's Korner · June 25, 1999

Colleagues have chastised me for failing to point out the obvious when I questioned why travel agents haven't flocked to the Internet to sell tickets and serve their customers.

Why? Simple: Agents can't make any money on the World Wide Web.

This state of affairs is one the airlines would like to see continue and, from the point of view of agents, worsen. As I pointed out before, this lessens the incentive for agents with specialized knowledge to share that information with you and me as we plan vacations or business trips or actually make reservations. And it funnels more money into the segment of the travel industry that needs it the least -- the U.S.-based airlines.

The relationship between airlines and travel agencies in the United States is fascinating. I've watched several industries for years now, both as a writer and an attorney, and I've rarely seen one as dysfunctional as travel.

In most sectors, manufacturers, wholesalers, and retailers may bicker, but they realize they need each other to survive. In travel, despite protestations to the contrary, airlines give the impression they think they can get along fine without those troublesome travel agents.

Four years ago, one major carrier after another moved quickly to cut travel agent commissions to a flat 10 percent on each ticket sold. Since then, we've seen a continuing diminishing of agent commissions, so that most airlines now pay agents an 8 percent commission on each ticket, with a strict -- and low -- "cap" or maximum that hovers around $25 dollars for each round-trip flight within the United States and $50 for each round-trip international flight.

That's why you're probably paying your agent an additional fee each time you buy an airline ticket. It's the only way he or she can turn a profit on your plane travel. In the online world, the situation is much worse. Whether it's a large online agency like Preview Travel or the small mom-and-pop, brick-and-mortar agency down the street, the average commission for each flight processed through the Internet is $10. Some airlines pay slightly more. Southwest Airlines doesn't pay any commission on such sales.

No matter how efficient they are, agencies can't make money off pricing from airlines that is this low. And that's stopped many from hopping aboard what, by all accounts, is one of the most lucrative e-commerce businesses around.

I don't mean to sound like an apologist for agents. Few entered the business to get rich, they get fringe benefits such as free or discounted travel opportunities, and they have other ways of making money. (Ask your agent about "overrides" the next time you're on the phone buying a plane ticket.)

Airlines, for their part, argue that selling travel is a cheaper process over the Internet than it is in the "real" world, and they want a share of the cost savings. (Being only a consumer, I wonder why I shouldn't get some of those savings.)

We may be seeing another change, at least in non-Internet commissions. While most in the travel industry expect commissions to drop even lower, Richard Branson's Virgin Atlantic Airways this week raised commissions on regular seats from 8 percent to 10 percent, eliminating any caps.

Don't hold your breath waiting for this to turn into a trend on the Internet.

David Kirby is the editor of the Interactive Travel Report. You can reach him at dbkirby@pressroom.com.