Posted on: Saturday, August 18, 2001

American Airlines to cut agents' commission

By Brad Foss
Associated Press

NEW YORK — The parent company of American Airlines yesterday said it would reduce payments to travel agents on domestic tickets costing more than $400 round-trip on American or TWA.

Travel agents said the move — the sixth time since 1995 that commissions have been squeezed — would ultimately result in higher costs for consumers.

The change goes into effect today and other carriers are expected to mimic it.

Fort Worth, Texas-based AMR Corp. said it would still pay travel agents a base commission of 5 percent, but that payments would be capped in the United States at $10 for a one-way ticket and $20 for a round-trip flight, instead of $25 and $50, respectively.

Travel agents based in Canada will be capped at about $9 for one-way tickets and $18 for round-trip, instead of about $23 and $46, respectively.

Richard Copland, president of the American Society of Travel Agents, said travel agents will be forced to make up for the reduced commissions from American by charging clients a higher fee.

Roughly 80 percent of all tickets are sold through travel agents and about 90 percent of them charge transaction fees.

"The traveling public will pay for this," Copland said.

Travel agents earned an unlimited 10 percent commission on domestic and international airfare until Feb. 9 1995, when Delta Air Lines capped their payments at $25 for a one-way ticket and $50 for round-trip airfare. Other airlines followed suit, setting off years of consistent reductions in commissions to travel agents, either by reducing the rate or lowering the cap.

"I think they're about as low as they can go now," said Terry Trippler, an airline analyst at OneTravel.com.

Trippler, who expects other major carriers to follow American's move by early next week, surmised that American initiated lowered commissions to travel agents in an effort to boost the number of consumers that buy tickets over the Internet, a less expensive distribution channel for the industry.

American is also probably looking for ways to cut costs in the wake of its $742 million acquisition this year of bankrupt Trans World Airlines Inc., Trippler said.

With the exception of travel between the United States and Canada, the cap initiated by American does not apply to international travel.

American said it would have no further comment on the action, which was announced in a news release.

Other major carriers also refused to comment.