777Brian

The use of a UA sales upgrade has NO impact on the commision paid to the TA. In your example the TA recieved the FE commision, your payment, and most likely a BE payment as well.

emcampbe

Interesting you bring this up. I was recently at an independant, small store in Toronto, and I was talking with the clerk, somehow credit card fees came up. She got to saying how the fees Visa and MC charge in Canada had been raised, mostly because of a new brand of cards being issued by the banks for their best customers. Cards are kind of like a platinum plus brand, that reward users with even more points/rewards than before.

Her point was that, for the consumer, they were getting more rewards, but the fees for the cardholder are about the same. But the retailer is having their fees raised to cover Visa/MC's extra costs to give out more rewards. The retailer, of course, has no choice as part of their merchant agreement to accept these cards, as its either all Visa/MC's or nothing. This could certainly have an impact on pricing - particularly in the case of small retailers - who don't have the capital to eat the increased fees.

MrAOK

DALLAS (AP)-- United Airlines has caused an uproar among travel agents with plans to force them to the pay credit-card fees when their customers buy tickets with plastic.

http://www.washingtonpost.com/wp-dyn...063002401.html

jhayes_1780

I remember seeing this posted earlier, I just can't seem to find it.

dieselbear

Covered here: http://www.flyertalk.com/forum/unite...t-savings.html

jhayes_1780

Thanks, confirms I am not totally nuts.

UnitedRhapsody

I wrote about this too.

My prediction is that most agents will simply book on united.com - when they do that, United still pays credit card fees but saves ARC and GDS fees (depending on the fare, this can be an even greater savings). Larger agencies with high United volume will likely not be included and will continue to issue tickets on United's merchant accounts. Most FT users who already book online or who book with larger agencies that do a lot of United volume will likely be unaffected.

ConciergeMike

Agents would be charging the fee no matter what, because with the elimination of commissions on nearly all tickets, travel agencies were forced to call them "ticketing service fees". As long as they do ticketing (no matter the channel) they can charge the fee. My mother's agency has some B6 loyalists for clients, and before they were listed in GDS's, she would run the ticketing fee for doing the ticket on B6.com.

Yup, indeed. There are still some commissionable fares out there, but it is a superminority.

SocietyFlyGirl

UA wants some agents and customers to only pay in cash! Surprised I didn't see more about this on FT. Christian Science Monitor article:

In an initially little-noticed step earlier this year, United notified a small number of travel agents that starting July 20 they would be required to buy tickets for their customers with cash rather than through the airline's credit-card system, which has been the industry practice for decades.

Industry analysts and travel agents soon cried foul, saying the move could shift hundreds of millions of dollars in costs from the airline to its passengers and travel agencies. They said it could also leave passengers, who have consumer protections built into their credit-card purchases, with no recourse against United if a flight is canceled and they have trouble getting their money back.

I wonder if this is how United will get around some of the losses and Credit Card Company's requirements for holding money in reserve to cover FT canceled tixs since the loss of the hold ?

tcook052

Yes, they can however .bomb wasn't meant to be used that way and was created to be a direct sales avenue between airline & consumer with all the legalities that entails. A TA stepping in to that process changes the realtionship and in essence, so I was told, assumes the responsibilities by accepting the terms when acting on behalf of the client. Pretending to be the client can also lead to some security snafu's so except in very rare circumstances it's something to be avoided, at least that MHO.

MikeMpls

Surprised nobody's actually put this in context.

By the end of the year UA is expected to have barely enough cash left to cover its mandatory credit card reserves. By offloading the credit card processing to travel agents' merchant accounts, it should also reduce the size of the required reserves.

Meanwhile, the travel agents become liable for any chargebacks resulting from UA's non-performance or sub-par performance on ticketed itineraries.

What a wonderful arrangement! United gets the customers, the travel agents get the liabiities!

More on UA's pending cash squeeze here:
United's only major fund raising lately has involved using spare plane parts as collateral for well under the actual value of the parts.

JerryFF

The relationship between airlines and travel agents is very complicated. To understand it fully, one needs some historical background. Formerly, airlines owned the computer reservation systems (CRS) such as Apollo, Sabre, etc. The airlines used travel agents as a distribution system, that is, as agents to sell their product through the CRS. The airlines paid the travel agents a commission for selling the product. (An important point to keep in mind through all of this is that the cost of the product, the airline ticket, is determined by the airline, not the travel agent. The travel agent is not an independent retailer free to set the cost of the product he/she is selling.)

Then, two things happened. First, the airlines were forced to divest themselves of the CRS's, which became independent companies and began charging the airlines booking fees. That is why some LCCs, such as Southwest, do not generally allow booking through CRS, so that they can avoid the CRS fees.

Second, the airlines began to lower, and eventually eliminate, the commission they pay to the travel agents. As a result, travel agents were forced to implement fees to the client to book their travel - to make up for the loss in commissions. While it is true that airlines still pay some commissions to some travel agencies, this is negotiated on a case by case basis and is mostly on high end international tickets only. These commissions are usually based on the "productivity" of the travel agency, that is, how much volume they book through the CRS on certain routes on a particular airline. There are very few commissions paid on domestic tickets.

Despite the above changes, when a travel agent issues a ticket through a CRS on a credit card, the total value of the ticket is paid directly to the airline, not to the travel agent. That is, in credit card terms, the airline is still the merchant. The travel agent does not receive the money from the client.

Therefore, it seems totally illogical from any business model for the airlines to refuse to pay the credit card fee, since the airline is the merchant who receives the credit card payment. It seems hard for me to understand how the credit card companies would allow the airlines to refuse to pay the cc fee under these circumstances. If the travel agencies are going to have to pay the credit card fee, then they should operate as the merchant, as the independent retailer, not as the agent of the airline, and further, as any other retailer, they should be able to set the price of the product they are selling.

It seems as if two scenarios are likely to occur if this plan of UA goes through. Travel agencies will not be able to absorb the cost of credit card fees. Consider the following calculation. Suppose a client buys a ticket for $500 and pays the travel agency a fee of $35 to issue the ticket. If the cc fee is 3% of the cost of the ticket, the added cost to the airline is $15 on a ticket of $500. On the other hand, if the agency has to pay the cc fee, the agency would have to pay the $15 on a sale where they collect only $35.

That is obviously not a viable scenario. Therefore, either travel agencies will begin booking tickets through the airline website to avoid the credit card charge, or, if the agency continues to book through the CRS, they will be forced to add the cc charge to the fee they currently charge the client.

It may not be obvious, but there is an important value to the airlines to have tickets issued through the CRS. All CRS tickets are processed through a company called ARC, the Airline Reporting Corp. ARC is owned by the airlines and as a result, all of the airlines have access to all of ARC's data. That is, each airline can determine very quickly what their market share is for any route and who their biggest competitors are. They can also tell what percentage of tickets each travel agency issues on each airline on every route. This is extremely valuable marketing information the airlines would lose if agencies switch to booking on the websites.

eclipse_boi

I think the primary purpose of this is to offload the chargeback risk and therefore to lower the related credit card reserves that United has with its credit card acquirer. The downside effect is that it shifts this risk to the small to medium travel agents and increases the costs to consumers since most of the travel agents have no choice but to charge the additional fee to consumers.

sfozrhfco

While UA wants agencies to pay in cash, this could come back to bite them when UA's suppliers start demanding cash up front given UA's pending cash crisis.

planemechanic

Not much chance of that happening. There are many people who would line up to get UA's supplier business.