Expedia and Travelocity Protests United Airlines' Decision on Commissions
 

URL to full text:
http://biz.yahoo.com/ap/020322/onlin...l_fares_2.html

In short, Travelocity and Expedia are taking steps to punish United Airlines for dropping travel agency commissions in response to other major carriers' decisions. However, United is targeted specifically due to its refusal to compensate Travelocity and Expedia in other ways through sales target and incentive-based programs.

Looks like United is digging its own grave again.

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When once you have tasted flight, you will forever walk the earth with your eyes turned skyward, for there you have been, and there you will always long to return.

- Leonardo da Vinci

united is doing the same to many of its customers so why not the hand that feeds them.They have been saying lets go bankrupt for months now..

Expedia will win this round since United can't afford not to have Expedia not sell their tickets.

As market concentration grows for Expedia and Travelocity (as more mom and pop TA's go out of business), these two powerhouses will only get stronger and will be able to dictate stronger terms from the airlines over time.

This is another example of how the bean counters do not look at the long term consequences of their actions.

A counterpoint.

This is just the first step in airlines replacing per ticket commissions with incentive-based commissions. The corporate travel agencies are going to continue to do business as before for corporate travellers.

Expedia and Travelocity cater primarily to low-fare pleasure/business travel. These new developments give them an incentive to increase the volume of sales with each airline and hence overall so that everyone benefits. Note that these online travel agents were already doing preferential treatment for certain carriers with whom they had promotional arrangements. Why then should others give them commissions for a product that sold itself despite their bias?

Having used Travelocity and Expedia extensively, they are hardly innocent bystanders here in they way they manipulated the availability of seats from different carriers. Sometimes I have had to force a carrier in advanced search to unearth lower prices from that carrier.

I predict that each of these airlines will work out a performance-based system like Northwest. Different airlines are in different negotiation phases.

Airlines with the best routing will still have some power over these online agencies. If these agencies were only able to provide ATA and National fares in their search, they would seriously lose their business.

I have no afficiliation with any airline and fly at the cheapest fares I can get and don't think any airline is a saint. But I also recognize that airlines need to increase their margins now and with the tickets going electronic in most circumstances it makes no sense to support a distribution infrastructure that is rather inefficient in majority of the sales.

Sounds like corporate crying to me...

Is there indication that United is following the incentive-based commission route? In the linked article, action against United by Travelocity and Expedia was due to United's refusal to give them ANY commission, incentive-based or not.

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When once you have tasted flight, you will forever walk the earth with your eyes turned skyward, for there you have been, and there you will always long to return.

- Leonardo da Vinci

Not yet, but I would be very surprised if an agreement is not reached in the few weeks. It is all public posturing at this point. Most likely UA is trying a harder bargain than what Travelocity and Expedia offered.

Note that the airlines have picked a good time to do this bargaining. They have pretty good bookings through the next month (as evidenced by availability and fares through April) and the summer travel booking season is still a little bit away.

They are not going to be hurt during the bargaining period even if it stretches several weeks.

Northwest had postured quite a bit before signing an agreement.

The extra fee imposed by Travelocity and Expedia looks bad on the agencies to an average consumer as if they are trying to price gouge on the routes they want to travel on no matter how much explanation they provide.

As of very early Sunday, the $10 surcharge on Travelocity/Yahoo UA tickets is gone.

Good catch, Frequent Freak. I haven't found any announcements on the subject, though. Did United sign a deal? Or is United actually too powerful to snub in this way for long, even without compensation?

Charles

That's good news - let's see how this latest debacle turns out. I'm calling my travel agent in Boston tomorrow I wanna find out what she thinks of the whole commission elimination thing (need we ask?).




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When once you have tasted flight, you will forever walk the earth with your eyes turned skyward, for there you have been, and there you will always long to return.

- Leonardo da Vinci

My sources say United cut a deal.

Northworst cut a deal after ticket sales on Travelocity went south due to the $10 surcharge. Why pay more?

Which travel agent would be happy with not getting guaranteed money for a product that required no shelf space or store display, no risk of unsold inventory, required no transportation, no need to spend own money for advertising and promotions and essentially sold itself. http://www.flyertalk.com/forum/smile.gif

That is like one setting up a shop with web access to all the mutual fund companies and selling mutual funds to people who walk in and expecting the fund companies to give a guaranteed commision on every mutual fund transaction. All brokerage companies that do this get volume/performance based incentives and depend on value-added services. Why should this be any different?

I think travel agents should either concentrate on any value-add they can provide in managing a traveller's portfolio of certificates, miles, optimizing upgrades and awards, best seat allocation for each flight, travel advise that would otherwise require hours of poring over FT archives, pro-active itinerary management and charge the customers for it or get into the cruise/vacation business where the products are difficult to compare and often difficult to understand.

Nothing against travel agents, just that the world has changed with electronic access and transactions.

I suspect good travel agents will continue to do well.

Just so that I do not come out as entirely for this incentive based system, there is one major problem with it.

It makes it impractical for small local agents to set up shop and make any money on ticket sales since they will be unable to make/satisfy the type of agreements that large agencies do unless they get into a franchise situation.

Too bad because that would have been the best hope for personalized service. But if customers would rather deal with the impersonal web pages and customer service calls to Mexico than pay $10 extra for a ticket, perhaps there is no market for it?

More like, "No life, Frequent Freak". I mean, checking airfares at 1am on a Sunday morning, can't I find something better to do http://www.flyertalk.com/forum/frown.gif