ATN asked four European carriers to assess the impact of introducing their zero commission policy in the region.
What was the reaction from agents and TMCs when you introduced 0% commission?
Air France: Air France had been talking with travel agency associations about 0% commission for a year. This allowed all parties to find the best arrangements. It is a win-win situation for agents and the airlines and above all for our common customers.
Austrian: It took some time until the travel trade accepted the idea and adapted to it but since then our sales have shown double digit year-on-year growth.
British Airways: There was a mixed reaction, with some agents expressing anger at what they saw as the removal of their income. However, other agents reacted positively as they saw this as a real opportunity to demonstrate how they can add value to their customers and charge a premium. Many agents now tell us they are making more money in the new service-fee environment.
How did you help them adapt?
Air France: With the cooperation of local BSP and IATA organisations, Air France helped agents and TMCs with the technical and commercial aspect of the changes.
Austrian: Together will the European carriers we circulated information through different channels (mail, sales visits, etc) while IATA educated agents on how to implement zero commission.
British Airways: In the UAE we discussed the implications of implementing this new system with the trade associations DTTAG and ATAC. In other countries, we introduced the policy following the removal of commissions by the national carriers.
Lufthansa: We started an early dialogue with travel agents prior to the implementation to ensure a smooth transition and to support them with the changes. We discussed our experience in other markets where Lufthansa had already introduced zero commission.
Have most agents now embraced zero commissions or are some still resistant?
Air France: The agents and TMCs have all embraced 0% commission. It also allows agents to redefine their position in the market based on their excellence and level of service and professionalism.
Austrian: I would not say there was any resistance that affected the relationships or the common interests between airlines and travel agents.
British Airways: Most agents have adapted very well to the new environment and many have thanked BA for taking the 0% commission step. Inevitably, some agents are resistant to change, but I would encourage them to look at how other agents have embraced the new system and the financial benefits they are now enjoying.
Lufthansa: Overall it's business as usual now. We feel that most travel agents have now realised zero commission is the business model that airlines and travel agents are heading towards. There are hardly any agents resisting this change.
What have the ones that have embraced it done to adapt and how has it impacted their businesses positively?
Air France: The commission is replaced by a fee charged by the agents, based on the level of service they provide to the customers. The agents provide their business travellers with a dedicated 24/7 service and also convenient payment policies to meet their corporate clients' needs and expectations. It enables them to optimise their margins by the service fees and other management fees.
British Airways: The most progressive agents I have seen are really starting to understand more about the added value they provide and many are segmenting the services and fees according to that value. For example, managing airline deals and providing travel-related information to corporates are services that can be charged for because they add value.
Lufthansa: Many travel agents had already introduced transaction fees based on production cost - they were charging their clients per transaction (flight reservation, ticket issuance, rebooking fee etc).
To do this, travel agents needed to go into the details of their own operations and formulate price tags for the different services rendered. We get feedback from many travel agents that their overall income has increased after they introduced the transaction model, since a lot of their services were previously rendered to customers free or at a charge less than the production cost.
In addition some travel partners reported that the introduction of zero commission more or less forced them into doing deep analysis resulting in new approaches in their operations, which finally increased their efficiency.
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