E.U. Continues Moves To Zero Commissions

Two years after the death of travel agent commissions in the United States, the end is approaching in Europe. So far this year, the national carriers of Italy and Spain have moved to nominal payments, joining British Airways in the United Kingdom, KLM in the Netherlands and SAS in Scandinavia, all of which made the switch last year.

Next up is Lufthansa in Germany on Sept. 1, to be followed by SN Brussels in Belgium and Swiss in Switzerland, both on Jan. 1, and Air France in France on April 1, 2005. So quickly is the end coming in Europe that even former Eastern Bloc states are joining in. LOT Polish Airlines cut on May 1 this year, and Czech Airlines will follow in 2005.

Details vary from market to market. Some carriers, such as Alitalia and British Airways, are retaining a 1 percent commission to avoid arguments experienced in Scandinavia over whether the total withdrawal of commission alters the legal relationship between airlines as principals and travel companies as agents. Others are easing themselves out of payments. For example, Iberia has opted for death by a thousand cuts, reducing commission in Spain by 0.5 percent every six months over two years. Air France has reached an even more complicated agreement with French agents that will include a one-off retrospective loyalty payment, plus e1 to e2 per coupon for the first 12 months after swinging the axe.

Whatever the route, the outcome is the same for corporations throughout Europe: the demise of the travel program as a profit center. While smaller companies without dedicated travel managers have been caught unaware, the end of commission is regarded as a non-event by more experienced multinational organizations. "We're not bothered," said Keith Mullineux, regional travel manager EMEA for General Electric. "All of our air deals are net-net. If anything, it is helping us in certain countries where airlines were still paying 7 percent to 9 percent commission and local employees were asking why we didn't use local agencies that offered a 3 percent rebate."

Ilona de March, managing director for TQ3 Germany, said the cuts are providing a wake-up call for companies to reengineer their travel processes, starting with considering online booking tools. "That is one of the first questions clients have been asking," de March said. "They are also asking whether they need to continue with a TMC implant."