Inside Track: Japan Zeroing Out Agency Commissions

Major airlines on April 1 will end agency commissions for international tickets purchased in Japan. The oncoming zero-commission environment has corporate accounts renegotiating or bidding travel management company contracts as most of the local industry now has to transition to a transaction or management fee payment model. According to FCm Japan executive manager Yasuyuki Mochida, 70 percent of corporate travel relationships primarily operate on the regular commission model, in which corporate accounts do not pay service fees. Since October, American Airlines, Northwest Airlines and Air France-KLM and others went to 0 percent commissions. Next month, home carriers Japan Airlines, All Nippon Airways and foreign carriers, including Delta Air Lines, Continental Airlines and Lufthansa will follow suit. "It's going to be a big adjustment for the Japanese agencies," according to Steve Smith, Japan Airlines' vice president of passenger sales for the Americas. "Culturally, they're just not used to charging for some of these services they provide. That's all being addressed right now and this is going to be quite an adjustment year. What the market will see is the same kind of things that the market saw here. Some agencies will begin to merge, smaller niche agencies will probably either go away or get purchased, and you'll see the big corporate agencies survive as they start to figure out what the optimum value proposition is for them."

Air France-KLM Ready Travelport GDS Surcharge
Air France and KLM plan to impose a E4.50 surcharge for segments booked through the Travelport GDS in the carriers' home markets. A spokesperson said Travelport would "temporarily" shield subscribers when the surcharge goes into effect on June 1 in France and in mid-July in the Netherlands. In the meantime, the Travelport GDS, which operates the Galileo and Worldspan global distribution systems, said it would continue to work toward a new contract with Air France-KLM. The move calls to mind a similar fee Lufthansa initiated last year in dominant markets—a E4.90 per-way surcharge plus value-added tax on fares booked through the Amadeus GDS. After months of absorbing the surcharge on behalf of its customers, Amadeus on Feb. 1 began passing on the charge to clients.

Obama Budget Aims To Raise Airport Security Fees
President Barack Obama's 2010 budget plan proposes to increase passenger fees for airport security. The budget outline proposes to increase in 2012 the $2.50 per-segment Aviation Passenger Security Fee. The budget gives little detail on the increase, but notes the current fee "only captures 36 percent of the cost of aviation security." An increase, the budget outline notes, "will offset costs associated with Transportation Security Administration screening of aviation passengers." The Air Transport Association and other industry associations oppose the move. The budget requires congressional approval before going into effect for the federal government's fiscal year, which begins Oct. 1.

Hilton Selects Site For New Global Headquarters
Hilton Hotels Corp. this month announced it will establish new global headquarters in this year' s third quarter in the Tysons Corner area of McLean, Va. Hilton signed a 10-year lease for about one-third of an 11-story, 323,000-square-foot office building adjacent to the Hilton McLean Tysons Corner.