OP-ED: Commission Caps' Silver Lining

<B> OP-ED: Commission Caps' Silver Lining</B>

By Michael Whitesage

<i>Michael Whitesage is president of PRISM Group Inc., a systems development and consulting firm in Albuquerque, N. M.</i>

Any analysis that comes to the conclusion that commission caps are due to airline greed is overlooking the fact that commission caps are, in part, due to the success of corporate travel managers. In most markets, seven- and three-day fares have disappeared. These are the walk-up fares that business travelers require, since they don't relish spending Saturday night away from home. But they have become rare because more carriers are providing companies with contracted fares. The lesson is simple: If you have a sound travel management program, your travelers fly contracted fares. If not, your travelers fly coach and subsidize your better-managed competitors.

Recognizing that companies have gained control of their travelers, airlines are moving to develop corporate discount programs. A CRS manager recently shared that half of the fares on the CRS will soon be contract fares. The commission cuts were feasible, in part, because agents no longer direct sales. You do.

An airline vice president of sales explained that there are two types of agents: selling agents and distributors. Selling agents direct sales to preferred carriers, like the agents who book you on their favorite airline to Hawaii for vacation. Distributors, on the other hand, fulfill travel orders. These are the business travel agents with whom you have worked so hard to control the choice of airline at the point of sale.

Why should a carrier pay a sales commission, or override for that matter, to a corporate travel agent who is simply processing your travel order? When is the last time you gave a counter worker at Taco Bell a tip?

Therein lies the rub. When airlines give discounted fares to travel managers who can direct sales, there is less reason to pay sales-type commissions or overrides. Business travel agencies have long held that they work for their corporate clients. Their contracts confirm this. The time has arrived for them to earn their income from the customers they serve.

Isn't it ironic that some travel managers have called for boycotts of carriers that have cut commissions? Most of these travel managers operate corporate on-sites and, like some agents, depend upon commission income. These travel managers must be dispelled of the illusion that they are profit centers. They need to sell their companies on their true role: providing service for a cost-effective price.

So what now? Average commissions are down to less than 7 percent. Agency fees are unavoidable.