Austrian Airlines Offers Net Fares To Cut Costs - 1996-11-25

<I>Stuttgart </I>- Austrian Airlines will offer corporate clients net fares starting next spring as it seeks to cut back on sales distribution costs.

The Austrian national carrier said it will drop its 9 percent travel agent commissions for business travel bookings and pay only a small commission on leisure travel bookings. Instead, firms will have to pay travel agents a management or transaction fee for travel information, organization and reservation services.

Austrian Airlines hopes the "performance-related" system will save more than than $30 million in distribution costs by 2000.

Speaking at the joint meeting of German, Austrian and Swiss travel managers in Stuttgart earlier this month, AUA sales director Norbert Draskovits said the airline had decided to introduce net rates to help reduce sales distribution costs from 22 percent-of which commissions make up 7.9 percent-to 19 percent of total costs.

"When we introduce net rates, there will be no more commissions or corporate rebates," he said. "We will try to follow demand and supply-large firms will benefit and smaller firms have the disadvantage. I am convinced net rates will come; the question is only when." AUA was still in negotiations with Austrian travel agents on the final structure of the new system, which the airline intends to introduce following formal airline liberalization on April 1.

AUA business travel manager Gerhard Aigner said the airline would negotiate lower rates directly with large companies, while smaller firms would have to pay slightly more or try to get a better deal from a travel agent.

"The service we cover through the travel agents now is no longer worth 9 percent," he said. "The system does not work anymore, and corporate rates are a way forward."

Hedwig Brandl, president of the Austrian Business Travel Association and business travel manager for Austrian bank Creditanstalt, welcomed net fares as a way to save companies work but called for talks between the airline, companies and travel agents on how to make it function.

"I have not yet seen any offers, but I think Austrian firms will try to use this model," she said. "For many firms, the rebate system at present is a lot of work. With a company project, we could reach an agreement for one or two years, for example."

Brandl said the seven-year-old ABTA, which represents 100 Austrian firms as well as 50 travel suppliers, was closely following progress in Germany of the VDR buying group's airfare consolidation program to see whether it could be launched in Austria.

Many Austrian firms are too small to negotiate directly with AUA and so would seek to go through travel agents, Brandl noted. "Agents should be paid according to their service and performance," she said. "Perhaps the AUA move will force agents to think about their new role.