Commissions Cut, Revenues Rise

<B> Commissions Cut, Revenues Rise</B>

By Barbara Cook

The U.S. airline industry has saved as much as $4.3 billion since 1995 by reducing travel agent commissions, the General Accounting Office recently reported to Congress in a review of carrier cost-cutting initiatives that also included expanded use of the Internet for ticket sales and electronic ticketing.

Despite this cutback in travel agent income, industry surveys indicate that total agency revenues continue to rise as the agencies have learned to diversify their products and services to other types of travel-related sales and to levy service fees, GAO said.

The effect on consumers of this shift in distribution costs is difficult to measure, GAO concluded. Although some portion of airlines' cost savings from reduced commissions likely has been passed on to consumers through lower air- fares, especially to leisure travelers, the extent is unknown because the level of fares also is impacted by numerous other factors, such as fuel prices. However, consumers now have new ways to buy tickets while retaining access to agencies for other travel needs, GAO noted.

Airlines generally apply the same ticketing policies to themselves and to travel agencies, GAO said, despite allegations that airlines apply the rules more strictly to travel agencies than to themselves, with the intention of "luring customers away from travel agencies."

While the airlines did admit some "unintentional lapses" on enforcing ticketing rules, they argued that they have a strong financial incentive to enforce their rules, GAO said. "If they did not do so, business passengers would buy the lower-price tickets intended for leisure travelers." The ticketing policies reviewed by GAO were back-to-back ticketing, hidden-city ticketing and refunding nonrefundable tickets.