Qantas to reduce agent base commissions

[NM]

Media Announcement December 5th 2005

Qantas said today that it would change travel agent's base commissions for tickets sold in Australia from 1st April 2006.

Australian, Trans-Tasman and NZ Domestic commissions will decrease from 1% to zero.

International tickets will attract a base commission of 5% reduced from the current 7% level.

Expect to see the full media release on the news sites shortly.

 

[Mal]

That's gotta please Travel Agents.

Mmm. Wonder which airline they'll recommend to their clients?

 

[N860CR]

I think they already get 0% with DJ and JQ anyway (correct me if I'm wrong). Whenever I've seen a TA do a DJ/JQ booking they just sit on the respective website and enter the clients credit card details.

 

[DPG]

I think they already get 0% with DJ and JQ anyway (correct me if I'm wrong). Whenever I've seen a TA do a DJ/JQ booking they just sit on the respective website and enter the clients credit card details.

I think it depends on which agency. But I know that DJ do pay some commission to agents. JQ definately do not.

It will be interesting to see what agents do as some airlines are offering almost 3 times what QF will...

D P G

 

[NM]

It will be interesting to see what agents do as some airlines are offering almost 3 times what QF will...

D P G

Which airlines are offering almost 3 times QF base commissions? That would be almost 15% commission for international flight, which seems very high to me.

Or are you referring to Domestic flights? Or trans-Tasman flights? I can understand that some trans-Tasman operators may offer commissions, such as EK or TG. But I believe QF's policy is very much in-line with their major competition.

Note this refers to Base Commissions, and I expect there are other incentive payments made to TAs to promote and sell QF fares.

 

[GDSman]

Agency remuneration can be extremely complex and tricky to follow - like airline remuneration this is possibly purposefully so. There is an argument that since airlines commoditised fares by putting them online as combinable one-ways, millions of dollars have been left on the table. In reducing costs many have also reduced revenues.
Base commissions, also known as point of sale commissions, are typically paid by carriers via the BSP (Bank Settlement Plan). Overrides come in several forms and are typically paid based on 'flown revenue' (airlines claim revenue when the sector has been flown rather than when a ticket is issued) or volume targets or other.
Domestic commission is extremely low - but then again it's typically a commodity transaction that can easily be fulfiled across the web. Trans-tasman is counted as domestic by some (QF, NZ, DJ) and international by others (EK). International base commissions vary from 5% up to 13%+. Overrides can add several more % points, but you have to harness significant buying power to tap into them.
The only hope for your favourite travel agent is that they provide a value-add service that you can't easily DIY on the web, such as manage corporate travel consistently, or search out tricky combinations of fares, accomm and tours. Ironically, most research still shows that agents and the web are priced about the same (of course there are isolated exceptions).
Next, they have to charge some form of service fee, whether that's declared on top of a ticket, or as part of the hidden margin they add to a package. If they're not doing either of these, expect to see problems for them within 2 yrs....
Apologies if this is too much detail but sometimes it helps to understand the economics a bit more.

 

[NM]

The only hope for your favourite travel agent is that they provide a value-add service that you can't easily DIY on the web, such as manage corporate travel consistently, or search out tricky combinations of fares, accomm and tours. Ironically, most research still shows that agents and the web are priced about the same (of course there are isolated exceptions).

One such beneficial "service" that I appreciate from our corp travel agent is when it comes to making changes. All I need do it call and say I need to change a certain flight date and they make all the other associated changes for me, such as rental car and hotels booking changes.

But it is common for us to think we won't need such a service and can do it all ourselves on-line. Experience has shown me that for personal leisure travel that is ok. But for business travel I am much more likely to need to make last minute changes and even multiple changes, and the service provided by the TA is invaluable. And for that service they receive a service fee payment.

Next, they have to charge some form of service fee, whether that's declared on top of a ticket, or as part of the hidden margin they add to a package. If they're not doing either of these, expect to see problems for them within 2 yrs....

I totally agree. We have already seen some changes and its only going to move more quickly in the next 2 years. This is not a time I would be opening a small Travel Agency at the local supermarket/mall.

Apologies if this is too much detail but sometimes it helps to understand the economics a bit more.

An excellent post. Its much as I understood, but you put it much more clearly than I could ever communicate.

 

[NM]

An interesting comment from an on-line TA:

Webjet today welcomed the announcement of the Qantas commission cuts which had been anticipated for some time and follows reductions earlier this year.

Commenting further, Webjet managing director, David Clarke said:

There is no surprise in the Qantas announcement and we particularly congratulate Qantas on the substantial lead time (01 April 2006) for its introduction.

The announcement goes on to comment on Webjet's business model assuming that commissions would be eliminated sooner or later etc.

 

[QF WP]

Still reeling from the profit downgrade it issued six weeks ago, Flight Centre copped another clobbering yesterday after Qantas announced it would again slash the commissions it pays to travel agents...

 

[bambbbam2]

I've been dubious on the value of TA's for 95% of bookings for several years. Used to know some people who swear by the Flight Centre model.. I always asked why?

Everyone I know under the age of 60 books all their dom fares, their award flights and most of their international themselves. This is for both DJ and QF.

Perhaps bestflights.com.au have the right idea, set yourself up as an expert in rtw fares and charge a fee for the arrangements.

Sad for the TA's but that seems to be the way commerce is going. I mean we don't pop down to the blacksmiths anymore do we? :roll:

 

[N860CR]

A lot of travel agents add on a "booking fee" now which is generally $30 or so, no doubt more than their commision would have been anyway

 

[QF WP]

I use my own TA now, the Dave Noble variety....

 

[NM]

I use my own TA now, the Dave Noble variety....

And commission is a regular supply of beer when in the same town .

 

[Mal]

An interesting comment from an on-line TA:

Of course Webjet is not concerned. Take a dummy booking on their site:

(My test was Bne-Syd Return on Qantas)

Price Guarantees (click here to expand) $ 4.00
Processing Fee $ 9.85

Maybe fair enough for the $4. It's a guarantee that your flight will price out at that amount when you book it within 30 mins of the quote.

The $9.85 ... well, no comment there.

Now for Flight Centre. There was a quote in today's Australian "http://www.theaustralian.news.com.au/common/story_page/0,5744,17470685%255E643,00.html"

"In a statement to the Australian Stock Exchange late yesterday, Mr Turner warned the national carrier that it could start promoting other airlines at Qantas's expense."

So there may still be backlash from TA's.

 

[Kiwi Flyer]

Now for Flight Centre. There was a quote in today's Australian "http://www.theaustralian.news.com.au/common/story_page/0,5744,17470685%255E643,00.html"

"In a statement to the Australian Stock Exchange late yesterday, Mr Turner warned the national carrier that it could start promoting other airlines at Qantas's expense."

So there may still be backlash from TA's.

They tried that in NZ when a previous round of commission cuts. Problem for the TAs is that both Air NZ and QF reduced commission and 90% of bookings are for domestic or trans-tasman.

 

[GDSman]

Most of the publicly listed travel agents (Flight Centre, Gullivers, Webjet, Jetset, BestFlights etc) on both sides of the Tasman have been fulsome in their praise of QF for giving lots of notice to adapt and/or making strong statements about how this will not impact profitability - for all the obvious reasons.

Commission cuts are seen as inevitable and corporate travel managers are fairly well-insulated by their business models. Leisure has a problem though, and the potential removal of all remuneration is what is upsetting them most....I think agents are more worried/angry about QF's moves to insert JQ in place of QF, the future of wholesaling (currently good commissions via QF Hols but what if it became JQ Hols?) and also JQ distribution via Australia Post.

But on a positive note, the TA's in NZ who learnt to apply fees are now typically more profitable than in the old days of commission. A bit of Darwinian culling which is a bit overdue in Aus.

 

[acampbel]

I've been dubious on the value of TA's for 95% of bookings for several years ..... Everyone I know under the age of 60 books all their dom fares, their award flights and most of their international themselves...

My company instructed us a year ago to make our own domestic bookings on the web, due to changes in commission structures and the fact that we could get exactly the same flights for the same price via the web.

But shortly after this I made 2 booking mistakes in the space of a couple of weeks. The first one was to book myself twice on the same flight (don't ask), and the second was to make a booking a week later than I intended. Fortunately in both cases I realised my mistake straight away, called up Qantas and confessed my incompetence. They sorted it all out and waived the usual amendment fee, but they could have justifiably not done so.

Conversely the last time I planned a complex O/S itinerary it was me that pointed out a fare structure that would avoid an unnecessary SIN-SYD-SIN leg that the travel agent had suggested.

Sometimes I can browse the various web sites and pick and choose the best flights at leisure, and sometimes I am in an enormous rush and would like to tell someone else to do it for me. So in the end I would prefer to use Agents on a case by case basis rather than have a hard and fast domestic/international rule.

Cheers,

AC

 

[Guest]

If only non-registered travel agents could refer business through their website.... I'd be a trillionaire!

5% seems kinda stingy... perhaps this is the end of the offline travel agent?

 

[MD]

5% seems kinda stingy... perhaps this is the end of the offline travel agent?

That 5% was $750 for my TA a few weeks ago - not bad for 15 minutes work. And yes, I know he has overheads, but so do I.