E-Ticket Fee Draws Airline Fire

<B> E-Ticket Fee Draws Airline Fire</B>

By Jay Campbell

Galileo and Apollo's new 50 cent fee for electronic tickets, scheduled to kick in on March 1, already has elicited fallout from the airlines.

Northwest Airlines--which recently restructured its Internet commissions from 5 percent to a flat fee of $12.50 for paper tickets and $15 for e-tickets--will pay only $14.50 for e-tickets issued in Apollo, and Continental Airlines will prohibit the issuance of Apollo e-tickets.

Said Steve Cossette, Continental's vice president of distribution planning, "It's not pretty and we regret having to do this, but Continental will not stand idly by and get charged for a product we spent millions on inventing, developing and implementing--and providing free of charge to travel agencies, CRSs and customers."

Continental said that when the fee takes effect, Apollo agencies should issue paper tickets whenever possible. If not, they can access e-tickets by calling Continental directly--admittedly a hassle, for which Continental promised to pay them not only the standard commission, but also an extra $10. As part of the Continental Direct E-Ticket program, the airline will send a check with standard commissions plus the $10 fee every Tuesday beginning March 10.

Continental also plans to pursue the possibility of issuing e-tickets directly to travel agents over the Internet (through a TCP/IP connection), and later to fully integrate the Airline Reporting Corp. system "to keep the agencies' accounting and information systems whole," Cossette said.

Apollo's parent, Galileo International, announced the new e-ticket fee, as well as a general increase in fees charged to the airlines, on Jan. 28. All of the CRSs in recent weeks hiked the fees they charge to airlines, but Galileo was the first to institute an extra fee exclusively for e-tickets.

"This new fee better reflects the value airlines derive from 'paperless' air travel, such as reduced operating expenses and added convenience for them and their customers," according to Michael Foliot, Galileo's senior vice president of marketing and vendor relationships.

In a letter to agency subscribers, Galileo said the company has invested $5 million in developing and implementing the e-ticketing system, only to watch the airlines save as much as $7 per ticket. Galileo said it is initiating the fee to recover that investment without having to bundle the cost into its general pricing structure, which would penalize all carriers, whether they use e-tickets or not.

All airline sources disputed that $7 figure, at least until e-ticket usage increases.

Continental predicted that the fee will drive airlines and agents closer together in an effort to "reduce our mutual dependence on CRSs," Cossette said. "No one seems to understand why Galileo did this. It says it invested heavily in making the service available to travel agencies, but if it and the other CRSs follow through with this, it will cost us tens of millions of dollars over the next few years."

United Airlines director of distribution Sue Fullman doubted Galileo's estimated investment of $5 million, especially since United, the first carrier to develop the product, has spent $3 million on it. United is "considering our options," with regard to the new fee, she said. About half of Galileo's e-ticket volume comes from United.

At Northwest, Al Lenza, vice president of distribution planning, was equally confounded by Galileo's reasoning. "If they're actually pricing it based on supplier value, it would be a first," he said.

Lenza said Northwest has considered Continental's strategy, but doesn't want to risk hurting the development of e-tickets.

Still, he pointed out, "We applaud Continental for doing something and we're mulling our options.