The great commission holdouts

With many airlines slashing base commissions payable to travel advisors last month, the aviation-agent relationship has taken a hit. But for the few airlines bucking the trend and maintaining commissions, the bold move appears to be paying off. MYLES STEDMAN investigates these holdouts.

THE beginning of last month was a watershed moment for the Australian travel industry, as a significant number of airlines slashed base commission payable to travel advisors. Many saw the move as an “inconvenient truth” of the future of the travel industry in Australia, with the country’s commission landscape now mirroring the rest of the world. However, others saw it as a cloak-and-dagger attempt from the air sector to turn turtle on agents using the guise of the COVID-19 pandemic and eliminate a legacy arrangement which recognised the uniqueness of the long-haul Australian air market.

Looking through the list of airlines which have cut commission, there are a few names you won’t find, including Air Canada, Air France-KLM, Delta Air Lines, Lufthansa, and Qatar Airways, just to name a small few of the small few. Each member of this eclectic group of holdouts has its own reasons for bucking the trend, but what they each seem to agree upon is, travel advisors deserved to be rewarded for the complex task of handling the logistics of air travel from and to Australia.

Air Canada has focused on building relationships with Australian travel agents, and believes this decision will pay off in the long-run. Image: Air Canada

“We’re relying on agents to support us and educate customers,” Air Canada’s local General Manager Vic Naughton told travelBulletin. “We think at this stage we should be remunerating them accordingly for that.” Naughton added when airlines started cutting commission – right in the middle of the pandemic – the move wasn’t something Air Canada thought it was the right time for. “It wasn’t something that we thought about or agreed with at the time,” he said – and not for the travel advisors nor the airline. AC is now flying from Sydney 10 times per week, which is unprecedented, even prior to the pandemic. Capacity out of Brisbane also reappeared earlier than anticipated; and with some of the most unique selling points in the skies, AC is relying on agents to communicate that appeal to their customers.

“We’re a foreign carrier, and we rely on the support of agents, we need them to help sell us to consumers that may not be as knowledgeable about Canada,” Naughton said. “We have a really good story to tell, we have some great USPs a lot of consumers don’t know about, the best customer journeys in North America, the transit experience, which is far superior to the alternatives through the US; a lot less security checks when you transiting through Vancouver; you don’t have to collect your bags in transit like when you’re going through US airports; you don’t change terminal,” he added.

Also moving large amounts of earth locally is Delta. “When we commit to a market, we go, big,” the airline’s Australian Sales Manager Nicole Bennett said. She told travelBulletin Australia is an “extremely important” market for the airline, predominantly for corporate customers, but for leisure too. DL is increasing its daily Sydney-Los Angeles Airbus A350 service to 10 per week from December, “based purely on demand and our commitment to this market.”

With the kind of work Delta is undertaking in Australia, it was important for it to show commitment above and beyond the level of its peers, and that included maintaining commission. “We knew that was a really small market travelling, but we still wanted to reward those agencies that were still working and trying to try to continue to keep their business alive until the pandemic ended,” Bennett said. “We have great preferred agreements with our agency partners and wanted to support those agency partners coming back.”

The decision saw Delta raise its brand in a market where it hadn’t previously had a large presence. “That really brought us promotion we just couldn’t have bought,” Bennett declared.

“What it also bought us was exposure to channels we may not have had a foot in the door previously, and also exposure to customers who may have been predominantly loyal to another airline that didn’t continue to fly, tried our service because we were continuing to fly, and have never looked back. We would of course like to see support or market share come our way by the fact that we did continue to support travel agents.”

No airline can tell the future of its balance sheet – even a number of the above holdouts did not wish to comment for this story. Even the most optimistic had failed to consider the emergence of a black swan event such as COVID. Whether or not even the few carriers still paying commission in Australia continue to do so is almost entirely up to the future. What is far more certain is the proclivity of agents charging a fee for service.

Delta has made a conscious commitment to the Australian market. Image: Delta Airlines

When that wave does come crashing down on the country’s travel industry and the travelling public, the “holdouts” will be there, Naughton insists. “We have a nugget of information about the transit that the consumer wouldn’t know, and if there is a fee for service, you have to justify that fee, and I think that’s what agents need to look at as well is how they can offer more value to their customers,” he said. An agent in a past life, Naughton agreed his old self would’ve loved to have been able to sell AC product, due to how easily the case can be made for Canada’s flag carrier. “It’s up to them to sell the product,” he added.

Asked whether it had been hard to maintain commissions when many competitors on the brutally competitive Australia-North America route dropped off, Naughton said it had not been. “It hasn’t been hard at all, it’s been quite easy,” he enthused, adding he’s had support from head office in Montreal.

Naughton does anticipate one day in the future, Montreal will knock on his door ask him to make the business case for continuing to pay commission in Australia. By that time, he hopes, the case will have been made for him through sales numbers; and if vocal support is anything to go by, the Air Canada local GM will have no problem making the argument. “We’re getting a lot of praise from travel agents, every event we’re at we’re getting recognition,” he enthused. “At the moment, performance is good…it shows we’re doing the right thing.”

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