15 June 2009

Do Travel Agents Matter Eh?

In Canada - Yes Sire they do ...

The recent spat over commissions in the vast North of Canada has the Travel Agents - well somewhat in vogue again.

I wont bore with details about the Air Canada and Westjet raise/lower/raise commissions only to make the point that the spat proves that in today's buyer's market the agents are actually very important.

Why? Well if your yield is in the toilet (as it is) it has become an issue of economics for the supply side. Thus the minimal amount that the agents represent in cost compared to the loss of yield actually makes the agents seem like a good deal. For the neighbor to the south, the revenue is off by nearly 30% on only a 6% reduction in passenger numbers (ARC figures for May). That clearly shows that any way to mitigate this drop is good.

What have we seen publicly? Delta introduced 10% on certain routes in the NY market. AC and Westjet settled on 7%. etc etc. So compared to the 10-15% drop in yield for the airlines these commission numbers look actually attractive.

Does this signify that there is a lot of cash awash in the market? Actually when you look behind the numbers we see that the GDSs are still getting wads of cash from the Airlines in GDS transaction costs/fees, commissions are actually rising, the amount of money the publicly traded intermediaries are getting seems to be going north not south. And of course the deals out there for consumers are unheard of.

The airlines are in turmoil and despite the words of wisdom coming from Chairman Willie, we are seeing an about face by the supply side who just 12 months ago still spurned the Agency channel.

So as the pendulum has swung more - let's just take a moment to reflect that there is an opportunity for new found cooperation by the Travel Distribution System as long as people don't get too greedy. That means that the airlines and the user community must continue to look where the costs are and vigorously pursue rooting them out and making the channel(s) more and more efficient. Woe betide anyone who thinks this state of affairs is permanent and they can sit back and sing "Happy Days Are Here Again". Anyone who enables cost reduction in a win win for the suppliers and sellers should be embraced.

But ultimately - this too shall pass. So remember on whose head you trod on the way up. They might just kick you on the way down. As the Emperor Augustus said - Festina Lente - hasten slowly.


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