Friday, July 17, 2009

United move could cost consumers $2 billion-16 July, 2009

United Airlines’ move to force some agents to pay credit-card fees when their customers buy tickets with plastic is certainly a “trial balloon” but it raises a question for agents and consumers: will it catch on with other carriers?

“Given the usual herd mentality in the industry starting way back when commissions were reduced and carrying forward to today's myriad of baggage, mileage redemption and call center fees, it would not be surprising to see this play out in a broader way,” says PhoCusWright Connect.

Business travelers may be the ultimate losers in the latest scuffle between airlines and travel agents over credit card fees, writes David Grossman in USA Today.

Some travel agents and corporate travel managers believe this is only the beginning. "It is going to be a fee that will be passed on to all travel agencies eventually," said Randy Limbacher, president of Canyon Creek Travel American Express.

Michelle De Costa, the global travel manager for Sapient Corporation, recalled that when Delta Air Lines became the first carrier to cut commissioners, others immediately followed.

"They are going to do it with some select agencies that probably don't sell a lot of United and just see what the marketplace will bear,” he said.

If all airlines adopt this policy in the U.S. it could represent a cost shift in excess of $2 billion from airlines to travel agencies, according to Paul Ruden, senior vice president for legal and industry affairs for the American Society of Travel Agents.

Agents are upset about the move and vehemently complain it is an effort to shift business costs onto their backs.

United, the nation’s third largest airline, sent notices to some travel agents saying that as of July 20, they must pay the credit-card fee when leisure or corporate customers buy tickets with credit cards.

It’s no surprise that United wants to cut costs since it lost $382 million in this year’s first quarter. Some airline analysts rank it behind only US Airways for the greatest risk of bankruptcy.
The fee proposal has drawn opposition from the American Society of Travel Agents and the Business Travel Coalition, whose leaders say they will ask federal and state officials to investigate for possible collusion if other airlines follow United’s lead.

Agent Chris Russo said United’s goal might be to shift more ticket sales to its own Web site -- obviously a long-standing airline goal.

“We look at this as a very large threat to our ability to compete at selling airline tickets,” Russo told the AP. “We are their largest distribution system, but we’re also the one they think costs them the most money.”

Report by David Wilkening
Post a Comment