From the publisher

WITH Singapore Airlines having now joined the rapidly rising tide of carriers announcing cuts to the base commission on fares out of Australia, it's increasingly clear that any travel distributor relying on front-end remuneration for flight sales must urgently change its business model.

By BRUCE Piper

SIA has followed in the footsteps of Cathay Pacific, Hawaiian Airlines, Emirates, American Airlines and of course the Qantas Group – a cohort which in 2019 collectively held more than 46% of total Australian international passenger traffic.

While some travel agency groups have downplayed the impact of the Qantas cuts, noting heavy competition and plenty of opportunities from other commission-paying carriers on key routes out of Australia, the proportion of commissionable seats is rapidly declining as more carriers join the rush to slash agent pay.

Indeed, of the top 10 international carriers operating in Australia in 2019, only Virgin Australia, China Southern, Malaysia Airlines, Qatar Airways and Air New Zealand continue to pay base commission – and Virgin Australia currently doesn’t even fly internationally, while Air NZ has already reduced pay to agents in its home market, with some pundits suggesting Australia could soon follow.

Of course, base commission is just one part of the industry remuneration pie, and if the cuts are matched by increased overrides on the back-end the overall effect will be minimal, at least on groups which have the muscle to negotiate with the airlines and then back up their promises by delivering volume – which is probably why the screams of protest across the industry haven’t been louder.

While there are clearly cogent arguments for carriers to reduce base commission, it has also been somewhat fascinating to observe the knots they have been tying themselves in as they communicate the decision to travel resellers.

Assurances that “the travel agency community in Australia will continue to play an integral role in our distribution strategy” ring somewhat hollow when they come directly after dropping the hammer on long-term business partners who are already at rock bottom after two years of the pandemic.

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