Airlines are a strange business. Every other industry in the world pays commissions to salespeople. Car salesmen make a commission. Insurance saleswomen make a commission. Drug salespeople make commissions. Baseball agents make commissions. But travel agents make no commission from airlines for tickets they sell.
Even with this jaw-dropping reality — having thousands of folk paying rent and utility bills, studying about destinations and airline rules and working long hours for nothing to sell their product — isn’t enough for airlines. They actually want travel agents and thus passengers to pay for the right to purchase their airline tickets.
The current chapter in this airline executive fantasy is the move by United Airlines to force a small group of travel agents to pay all credit card fees when passengers book flights on United. Then the agents are expected to send United cash for the airfare. In other words, the travel agents are expected to pay 3 to 5 percent for the privilege of selling tickets for United.
That’s a sweet deal for the airlines and not so good for travel agents and consumers.
The American Society of Travel Agents (ASTA) has been fighting this move in Congress. They have painted this as unfair to consumers who will have their credit card protections eroded, enroute changes to itineraries complicated and will see their prices increase when the credit card fees are added to United’s base airfares.
If United Airlines gets away with this “test,” the other airlines are sure to follow. They have said as much in interviews.
Still, several airline CEOs in April waxed philosophic on shifting distribution costs to the intermediaries that sell their products.
Though he noted, “maybe I’m dreaming here,” American CEO Gerard Arpey envisioned a future “where those folks who are the intermediary between us and our customer have to pay for access to our product rather than us paying them to distribute our product.” Arpey called that shift a “long-term vision,” rather than a near-term reality. Delta CEO Richard Anderson said, “Over time, the industry has to evolve to the model of other industries, where people pay us for our content rather than us paying them to take our content.”
Clearly, top airline CEOs are hallucinating. I’m trying to think of an industry that forces merchants to take their content with no remuneration for the merchant. A world where, let’s say, General Mills tells Wal-Mart that they can buy Cheerios for $3 a box, but that they have to sell it for only $3. They are not allowed to mark it up.
Wal-Mart, obviously, would do without Cheerios. Wal-Mart makes its money by purchasing items for $3 and then selling them for $6. The difference between the wholesale price and the retail price pays for store rent, shopping carts, employee salaries, shelves, refrigerators and utilities.
Heck, an airline ticket, once purchased, doesn’t even really belong to the passenger. The airline keeps control of what they “sold.” The traveler can not sell it, refund it, give it away or even give it back to the airline.
Now, if the airlines are suggesting that travel brokers and individuals be permitted to purchase airline tickets and resell them at any price, I’ll help them fight for that. Just like Delta CEO Richard Anderson opines, I would love the airline world to evolve to the model of other industries. A model that Sears has with Whirlpool, Wal-Mart has with Hershey’s, Safeway has with Kraft, and Coca Cola has with 7-Eleven would certainly free up the economics of airline ticket sales.
Dick, careful what you wish for. I wonder, could it come true?
Naw. Now, I’m the one who is dreaming.
Charlie Leocha is the President of Travelers United. He has been working in Washington, DC, for the past 14 years with Congress, the Department of Transportation, and industry stakeholders on travel issues. He was the first consumer representative to the Advisory Committee for Aviation Consumer Protections appointed by the Secretary of Transportation from 2012 through 2018.
