British Airways Cuts In Half Short-Haul Commissions

U.K. travel managers could find their costs increasing after British Airways today announced it will slash short-haul booking payments to travel agents by more than 50 percent. As of June 1, BA will cut the payment for full-fare domestic and European flights from $15.50 to $7 and for discounted tickets from $8.50 to $3.50. The airline ditched the traditional commission system last year in favor of flat booking payments to agents. Long-haul sectors remain unchanged.

The cuts are being made as part of a wide-ranging restructure of the airline, known as Future Size and Shape, to lead it back to profitability. Other measures include scrapping five long-haul and five short-haul routes, as yet unnamed, transferring eight more services from London Gatwick to Heathrow--Abuja, Lagos, Buenos Aires, Mauritius, Bucharest, Kiev, Riga and Zagreb--and cutting an additional 5,800 jobs to the 7,200 announced after Sept. 11. Unions are contemplating industrial action.

U.K. travel managers who have unbundled fee relationships with their travel agents now will have a smaller payment passed on from BA to offset their costs, while those on simple service fees--where the agent retains airline payments--can expect to see these go up. What remains unclear is the extent to which BA will make good this indirect increase through lower fares. The airline has promised to introduce a new short-haul pricing structure from June, "giving business travelers and holiday makers lower fares, greater flexibility and more choice."

General manager of sales for U.K. and Ireland Tiffany Hall would not reveal any details of the new structure, citing restrictions imposed by competition law. However, she did say: "We absolutely recognize that value for money is important, not only for leisure travel but also for business travel."

Hall added that BA is restructuring its short-haul network to deal with the threat of low-cost carriers, which have taken more than a 25 percent share of the ex-U.K. short-haul market. It is basing its new booking payments on the cost of buying tickets online. Travel managers complained that this was unreasonable since they prefer to continue booking offline with good reason. "If we have to start paying extra for traditional offline bookings, we will have to look at how much it costs to use other airlines," said Tony Pilcher, senior group travel manager for HSBC.