Virgin Atlantic Airways this week launched a new incentive program for U.S.-based travel agencies, replacing standard, percentage-based commissions with flat fees based on "agreed targets," said Chris Rossi, the carrier's vice president of sales and marketing for North America. Specifically, Virgin will compensate partner agencies based on marketshare premiums as well as revenue benchmarks.
"The bottom line is that while we have gone to a zero base, we spent a lot of time coming up with a program that will work," Rossi explained. "We tied in the marketshare element to ensure we don't exclude smaller agents." He added that letters have been sent to Virgin's contracted agency accounts conveying a "business as usual" philosophy. "Nothing will radically change with the way we negotiate with agents, including overrides," Rossi said, "but if the agencies can't live up to targets, we'll have to restructure the program or part ways."
For Virgin's corporate accounts that had agency commissions passed through to them--5 percent for Upper Class bookings and 3 percent for other classes of service--there could be a reduction, Rossi acknowledged. "But the impact will be minimal," he said, "because most corporations, large and small, already have taken this out of the equation."
Virgin concurrently launched a dedicated Web site for the travel agency community. The carrier said numerous agencies already have accessed the site and stated interest in participating in the new compensation program.
Virgin is the latest European carrier to adjust its agency commission program. For U.S. points of sale, Air France, British Airways and Lufthansa German Airlines each no longer pay base commissions. Lufthansa in September also will introduce net pricing in its home market, eliminating agency payments
(BTNonline, Dec. 8, 2003). British Airways last month retreated slightly from its zero commission policy in the United Kingdom and now provides agencies a 1 percent payment. Virgin maintains a standard base commission structure for U.K. agents.