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Airlines this month again cut commissions in Japan to 5 percent (from 7 percent) on international bookings and 2 percent (from 5 percent) on domestic air booked online, Carlson Wagonlit Travel officials said last week during a presentation here on the Asia-Pacific market.
Commission reductions first began within the Japanese market in 2001 when carriers cut international commissions to 7 percent from 9 percent, said Hiroyuki Matsumura, a sales manager from the JTB-CWT joint venture that operates in Japan.
"Less than 15 percent of corporate business is handled by travel management companies," said CWT chief operating officer for the Asia-Pacific region Berthold Trenkel. "Eighty-five percent is still handled by in-house or general travel agencies." Local "keiretsus" such as Toyota, Hitachi, Sony and Matsushita own their own agencies, but will likely come under increasing pressure to sell them with the reduced financials, he added. CWT has already "bought a couple of them," he said. "Most travel management company contracts are still structured on the rebate model; there are few true fee contracts," but that too will likely change as commissions go away, he added.
"This will be a crunch for all local and in-house agencies. They're going to lose money this year," Trenkel said. "At the end of the day, you have to be paid by the client. Next year, they will hopefully go from 5 percent to zero."
During a presentation last year at the Association of Corporate Travel Executives' Atlanta conference, consultant Bicky Carlra, recently named group president of TraVision Inc., said he expected commissions in Asia-Pacific to disappear by 2008. Carlra noted that some airlines still are paying base bookings commissions. TMCs are "pretty much" on transaction fees, he said, and although e-ticket use will eventually become the norm, they now account for fewer than 5 percent of tickets issued in the region.
PhoCusWright noted in its "Corporate Travel Distribution: Key Markets" report published in August 2006 that the Asia-Pacific "corporate travel industry will also need to migrate from a commission-based to managed service fee model to gain momentum online ... This open sharing of costs (transparency) is essential in order to show the value proposition of online booking. It is anticipated that India, China and Japan will move toward a managed fee model as consolidation occurs."
While Japan today represents the largest travel market in Asia, China will likely overtake it by 2009, CWT officials said. In 2004, the corporate air market made up about 35 percent of the $19.9 billion air market in Japan. Of this $6.96 billion corporate air market, more than $3.8 billion was domestic and $3.13 billion was international. However, international air traffic is growing at a fast pace and by 2008 is projected to reach $3.99 billion, CWT officials said.
The duopoly of Japan Air Lines and ANA control Japan's large domestic air market, and as much as 40 percent of this traffic is sold directly by the airlines. New entrants Skymark and Starflyer are also in the market, but CWT officials said it's too early to predict their impact.
Growth throughout the entire Asia Pacific region is putting a crunch on seats and prompting some passengers to waitlist on multiple flights, CWT officials said. In response, both ANA and JAL just published new rules that detail when and how they will cancel reservations when they suspect duplicate bookings.
In other developments in market, ANA as of 1 Apr reduced the free luggage allowance on flights to and from the United States and Canada to just 50 pounds (23 kilograms) from 70 pounds (32 kilograms). The airline also published new fuel surcharge schedules.
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