Corps. Should Get Cap Settlement Share

<H1>Corps. Should Get Cap Settlement Share</H1><B>R</B>eports indicate a settlement of between $77 million and $91 million to be paid by the airlines to travel agents. After legal and administrative costs, a conservative estimate of the amount that may ultimately reach agents might be $60 to $75 million.

If an agency renegotiated its financial arrangement with a corporate client on the basis of reduced airline commission revenue, it is only equitable that the client now receive its fair share of this settlement. At least one agency, Rosenbluth, has taken the initiative and announced that it will pass on its share of the settlement to its clients.

How much might the settlement be worth to a corporation, if its agency is willing to pass through the airlines' payments?

In addition to as-yet-unknown administrative costs, it depends on the specific change in a company's financial arrangement with its agency that resulted from the commission cap.

If we conservatively assume that only $60 million will reach agents' hands after legal and administrative costs, and that it will be prorated to agents on 16 months' (May 1995-August 1996) domestic ARC sales of approximately $64 billion, the result is $937 credit per million dollars of domestic sales. So, at the extreme, if a client with annual domestic sales of $1 million completely absorbed its agency's revenue loss from May 1, 1995 onward, it might be entitled to $1,250 for a 16-month settlement.

Most companies would receive even less than this. Financial arrangements probably did not change until later in 1995, or even 1996. Many agencies shared the loss of revenue with their clients. In some cases, the new post-cap financial formula explicitly takes into account the mix of domestic tickets above and below $500 round trip. And, recall that in the airline price-fixing case, the end result was coupons with small value that were difficult to administer. At least in the current situation, it appears that the settlement will be in cash.

If a company's travel volume is large enough, a share of the cap settlement may be worth pursuing. Management Alternatives is advising its clients that they should estimate what may be due and ask their agencies for it.

John Heilner is a consultant with Stamford, Conn.-based Management Alternatives, a travel management consulting firm.