Category: Archive

Travel agents reel after airline ends commissions

February 16, 2011

By Staff Reporter

By Ray O’Hanlon

The Irish travel industry in the U.S. is tightening its belt this week after Aer Lingus announced that it would no longer pay agents a commission on every ticket sold to the public.

The move is a “devastating blow to the Irish travel trade industry,” Barry Twomey of O’Connor’s Fairways travel in New York said.

Aer Lingus said that the scrapping of commissions, which had been trimmed several times in recent years, was a necessary move in the context of cost savings laid out in the airline’s current survival plan.

In a brief press release, Aer Lingus stated that it would “migrate to the zero-based commission structure adopted by other carriers over the past few months.”

The migration will be complete by July 1, the statement indicated.

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“Aer Lingus is committed to a strategy of reducing airfares as we reduce our costs,” Jack Foley, Aer Lingus executive vice president for North America, said in the statement. “This strategy has resulted in our lead in summer fares being $80 lower this year than last year. To accomplish this we must adjust our distribution costs as other have in the industry.

“We will continue to expand our incentive and productivity programs with travel agents that support our strategy of offering the public lower fares and Irish service.”

What exactly that will mean, according to Twomey, is that Aer Lingus can offer written contracts to travel agents who are, or could be, major suppliers of business to the Irish airline.

The move to zero commissions, he said, would particularly affect smaller travel agents who did not deal in bulk ticket sales to Ireland.

The lack of a commission, Twomey indicated, could mean travel agents having to adopt service charges. It would also accelerate the trend toward great specialization with travel agents concentrating on particular markets such as Ireland and Britain.

The move to zero commissions did not come completely out of the blue. Travel agents dealing with the Irish market had been briefed on the plan a couple of months ago, Aer Lingus vice president for sales and marketing, Brian Murphy, said.

Existing sales deals with “preferred” agents would be honored through the end of this year, Murphy said.

Asked what the implications for the travel agent industry would be in the context of zero commission, Murphy said that most people preferred to book their tickets through travel agents or directly from the airline because this allowed them “a comfort zone” to go back to if their plans changed or a problem arose.

“Travel agents have value but they also have to create the value,” Murphy said.

He did not think that the relationship between travel agents and Aer Lingus would drastically change in the light of the zero commission plan.

Up until a few years ago, travel agents could expect commissions as high as 15 percent on tickets sold, but that figure gradually fell in recent years to 8 and then 5 percent.

Other major carriers serving Ireland, Delta and Continental, have also moved to the policy of zero commission.

In the case of Aer Lingus, the move comes at a time when the carrier is facing severe financial difficulties, in part due to the post-9/11 downturn in trans-Atlantic air travel.

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