KLM, Swiss To Cut Travel Agency Commissions

KLM Royal Dutch Airlines and Swiss International Air Lines will stop paying base commissions next year to travel agencies. The airlines are the latest to join the global trend toward reworked agency compensation models. In making announcements last week, both cited greater cost transparency for customers, who will pay fees to agencies to replace commissions, and detailed new direct booking fees.

At KLM, the elimination of commissions on Jan. 1, 2005, impacts Dutch travel agencies, following similar moves in the United Kingdom and Scandinavian markets. "It will be up to travel agents to charge their customers a service fee," the carrier said in a statement. "This will give consumers a clear indication of what they are paying for services rendered by travel agents."

In conjunction with the change, KLM said it will offer reduced fares that no longer include €34 (US$41.77) commission payments. Direct bookings with KLM will incur a fee depending on the channel, ranging from €10 (US$12.29) through the carrier's Web site to €45 (US$55.28) through city ticket offices.

The changes at Swiss also take effect Jan. 1, 2005. The carrier said it consulted with the Swiss Federation of Travel Agencies and informed travel agencies in writing. It also said call center and ticket office reservations would incur service fees of CHF50 (US$40.44) per intra-European ticket and CHF80 (US$64.70) per long-haul ticket. Direct bookings through the carrier's Web site will include a service fee of CHF25 (US$20.22), except on the most heavily discounted fares, which will not incur a service fee in order to stay competitive against low-cost carriers.

All major U.S. carriers have eliminated agency base commissions in the domestic market, replacing them with pay-for-performance models. Many other international carriers have taken similar steps. British Airways, for example, now pays only a 1 percent commission, while Lufthansa German Airlines on Sept. 1 completely will eliminate base commissions.

"Within the last two years, similar models have been introduced in the United States and Canada, as well as in Sweden, Denmark, Norway, Finland and Great Britain," Lufthansa said when announcing the changes. "An introduction in 2004 in Italy has been announced, and the home market carriers in Spain, Belgium, the Netherlands and Switzerland are planning to follow in 2005. Already today, in important European markets and North America, net prices are also used for Lufthansa flights. The introduction in Germany is a logical consequence."