Air NZ commission cut a ‘slap in the face’ for travel agents
Industry says the cut effectively means agents are working for nothing
The travel agent is doing
a lot of extra work because of the capacity
issues. You could argue a lot of that work should
be in the airline’s court.
Travel agents’ frustration at Air New Zealand slashing commissions is mounting as they do more work for the airline for free.
This month, Air New Zealand cut longstanding 3 per cent short-haul commissions for travel to Australia and the Pacific Islands completely and slashed long-haul commissions from 5 per cent to 1 per cent.
The airline has said “adjusting” its commission on international fares was not a decision made lightly, “however remaining competitive is critical to our long-term success and is an important step in our recovery plan”.
But the Travel Agents’ Association of NZ (Taanz) says the move by Air New Zealand — half-owned by Kiwi taxpayers and the beneficiary of more than $2 billion of support during the pandemic — was a slap in the face.
The changes came in at the start of the month and Qantas has also cut commissions, which airlines have whittled away from close to 10 per cent around 20 years ago.
Air New Zealand cut down the role of agents about 10 years ago but had since worked more closely with the trade, until the commission cut.
While agents have benefited from government wage and business support and were paid a small percentage of the close to $700 million in refunds that they won, Air New Zealand has been underwritten as a business that is considered “too important to fail”.
The association’s chief executive, Greg Hamilton, said Air New Zealand was a dominant carrier in a small market and travel agents were disappointed. Many were concerned about the future.
Travel chaos in many parts of the world, and in this country during the recent school holidays, meant agents were doing work for airlines whose call centres were overwhelmed.
Air New Zealand customers have reported waiting hours to get through to its call centre, which is now desperately hiring to plug gaps.
“It is a bit of a slap in the face to the agency community,” said Hamilton. “The travel agent is doing a lot of extra work because of the capacity issues. You could argue a lot of that work should be in the airline’s court, but no travel agents are going to leave the client hanging and often will be doing work absolutely for free.”
The work during the current travel squeeze came after agents put in thousands of hours for nothing to get clients home or win refunds in the emergency stages of the Covid19 pandemic in 2020.
Hamilton questioned whether slashing commissions was a meaningful solution to help fix airline balance sheets, given that very little agency commission was paid throughout 2020 and 2021. It was hard to imagine that the cost of sales
through airlines’ travel agency partners was any more expensive than running call centres, he said.
“It just seems like it’s really unfortunate timing when you’ve got what looks like the national carrier which has acknowledged that it’s really struggling to support [passengers] when they’ve got a really good loyal retail distribution network out there.”
Asked for a response to the Taanz view, Air New Zealand this month resent a media release issued when it announced the cuts last year, saying it didn’t have “anything more to add at this point”.
The airline’s chief customer and sales officer, Leanne Geraghty, said last December that working through the impacts of Covid-19 had been
Greg Hamilton, Travel Agents’
Association of NZ (left)
difficult for the travel industry.
“Looking at where we’ve come from and what we’ve achieved as an industry, we remain optimistic about the future of aviation and the industry itself in Aotearoa. But we know what’s around the corner will look different, and that the way we have operated in the past is no longer sustainable as we recover from the impacts of the pandemic and rebuild,” she said then.
“We look forward to continuing our strong travel agency partnerships as the new travel environment emerges, and we adjust to the changes together.”
Before the pandemic, Air New Zealand had about 40 per cent of international traffic to and from this country and although its own capacity is a long way from being restored, neither is that of rivals.
Some airlines are still paying commission. Asked whether agents will be more inclined to put clients on Air New Zealand’s rivals, Hamilton said that would depend on individual circumstances.
“The agent will do the best thing for the client — if Air New Zealand is the best choice, that’s what they’ll do. But there may be cheaper deals with other carriers. The job of the travel agent is scoping all of them to come up with the best one.”
The evolving model
Hamilton said travel agents were high-volume, low-margin businesses. The cutting of airline commissions had accelerated the move to charge flat fees for the work they do.
These had been applied to corporate travel for years and now were increasingly being charged for leisure journeys.
“The consumer wants the travel industry to be viable also, so in a situation where it can’t collect a commission from an airline such as Air New Zealand, then typically there will be a fee that goes along with it.” Depending on the complexity of travel, he said, fees could range from $100 to about $350.
“People are doing really creative things, acknowledging today an agency gives a consultancy value — like an architect. I know of one agency charging a consultancy fee but then actually refunding it when it gets the booking,” he said.
“We want to give everyone a fair deal and it has to be commercial.”
Hamilton said problems travellers had faced during travel lockdowns, and now with disruption in the aviation system, had proven the worth of traditional agents, especially compared with online travel agents (OTAS).
“There is a lot of empathy, if you like, for the work that travel agents, as humans, do.”
Taanz members also made up one of the most secure parts of the booking chain, with trust accounts, and they were audited.
Before the pandemic, there were about 3500 frontline agents and while that fell to about 1500, numbers had risen to about 2300 as travel takes off.