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I've seen this before: airlines changing compensation and incentive (Sun-Sentinel: American adds $5, $10 fees for buying tickets by phone, at airport counter). But, in their most impressive attempt, the airlines blinked during the ensuing standoff with their primary channel: the travel agents who's commissions were being severely strictured. More recently, the airlines were able (aided in large part by being practically bankrupt and everyone knowing it) to enforce commission changes, which the agents then passed dutifully on to the consumer. This time is different.
American announces that it will charge fees for buying tickets directly from American at the counter or on the phone. It follows Northwest, which announced a similar scheme recently. The difference is that Northwest also charged travel agents; American isn't.
Here's why this change is going to stick (barring the American Society of Travel Agents succeeding in getting an injunction from the Justice Dept.):
1. American's fee addition has the appearance of channel propriety. Agents can't feel threatened for their 50% of American's business. But, the price driver will shift more than the current 30%(!!) of consumers on the Web to the Web. It could reach as high as 40 - 45% without affecting agents. But, that dynamic is unlikely. More likely, as the Web bookings increase in proportion, the number of agent-based bookings will decrease as well. (Of note, many corporate agencies already are paid on a fee for service basis so they will book through the airline's Web interface anyway -- or at least look for cheaper fares there.)
2. A smaller player jumped in first -- to see how it would work out -- and the largest player in the industry followed with a more elegant change.
It will be interesting to see the actual number and the velocity at which consumers abandon the walk-up counter and phone lines. After all, $5 or $10 is not an extraordinary amount of money on a purchase of hundreds of dollars. It would have an impact on so many other services that have settled into status quo statis over the years.
Posted by Grayson at September 3, 2004 07:14 AM