Emirates’ commission cut gets
Another large international airline has decided to cut its distribution expenses by revising its travel agent commission from the current 3 per cent to 1 per cent. Is it a sign of the things to come?
Travel agents have always supported Emirates in a big way. With this move, Emirates will lose its edge as agents will now move to other airlines. After all, why would anyone want to push a product that doesn’t give them any benefit? The airline has also timed it badly as agents had already committed to a price structure for future bookings beyond April 2017. This abrupt announcement will hurt the agents a lot as the main season starts from April. We are just about recovering from demonetisation. TAAI will write to Emirates on this.
Needless to say, this has come as a rude shock to the accredited travel agents fraternity in India as it is solely their market support that has placed Emirates above the national carrier in the Indian skies. The matter is being discussed with our National Management Committee and a formal request will be sent to Emirates to retract its decision.”
It is unfortunate that Emirates is reducing its commission to agents. We also have RwandAir flying their introductory flights from April to Kigali and beyond and offering agents 8 per cent commission. An adequate commission to agents helps the airlines spread their business and motivates the agent to sell more. Commissions should not only be used to get a foothold in the market but also to maintain and enhance their market share.
Most of the tour operators and outbound agents have been working with Emirates as it has great connectivity. On top of it, the 3 per cent commission was a great attraction. However, now after the commission has gone down, the cost of the package would go up and tour operators would tend to pick up other airlines for their clients. I find it difficult to understand that when most of the airline tickets are sold by ticketing agents and tour operators, why do the airlines do not think that it’s justified in rewarding them with commission?
In the process of distributing air tickets of various airlines, agents incur overheads of managing office, staff, etc. which are increasing every day. In any business, the facilitator/ agent must benefit so that the system works smoothly. Why are the airlines reducing commissions when they are the ones to benefit from the travel agents? Any effort in any business should be appreciated with adequate compensation to take care of the expenses as well as margins. Airlines should extend at least five per cent commission to authorised travel agents who support them.
The decision by Emirates to cut commissions for travel agents from 3 per cent to 1 per cent does not affect us at all. This is to say that when they were offering commissions and incentives, the agents had to do certain amount of business with the airline and meet targets in order to avail the PLB incentives. However, if one goes on to their website and books directly, then as a client too the airline offers a similar percentage of discount. Thus, the cut in commission does not make a difference to the industry.
Airlines should be encouraging their travel agency sales force rather than disarming them. Agents always considered EK as an agentfriendly airline, and we rewarded the airline with load factors from all cities. However, this move brings them on a par with other airlines. This comes at a time when the summer season is about to begin, and when we are already reeling under the Service Tax amendment impact. Coupled with the reduced commission, the web disparity, and direct promotions to the frequent flyers and corporates, the margins of the agents will be drastically hit. I hope they have call centres well-equipped to handle customer calls and complaints.
Emirates is expanding its network fast and already has the largest number of flights, among all international carriers, flying to and from India. All this is because of the support of the travel agents. Agents in India have been marketing, selling, bringing customers and giving credit to them and paying the airline in time. Emirates does not understand that this could negatively impact the business. Three per cent commission on the basic fare is peanuts for Emirates and they will soon realise that travel agents are important for their business. The Indian travel industry, unlike in other nations, gets no support from the government.
We have been working very closely with Emirates for many years. However, reducing its commission from 3 per cent to 1 per cent would affect its business as it would now go to other airlines. However, while reducing the commission of agents, Emirates will be offering reduced fares online, which creates a difference from the prices on the GDS, and would affect our business too. When the customers will go online, they would go for cheaper fares. If we won’t get as much commission as we used to get earlier, we would divert our clients to airlines that offer us decent commission. When Emirates took the decision, they did not consult their trade partners who promoted them for years. Now, there would certainly be a loss of business to them.
It is extremely unfortunate and sad. There is hardly any margin in the travel agent business, and cutting the commission reduces the profitability further. I don’t think it would make any difference to Emirates, because travel is growing and their load factor is increasing from India. In fact, this goes for most of the airlines. However, it would affect the revenue for travel agents, as margins and profitability is going down, and there is not much they can do.
The fact that Emirates has decided to cut agents’ commission is very strange as we had been giving them a lot of business. We don’t quite know or understand why they took such a drastic step – maybe it was due to some internal policies, but anyway it’s not like they were doing us a favour by giving a larger percentage of commission. Yes, Emirates was in general our preferred airline because their commission was more compared to the others but we still did business with all of them. Our business will not be hampered because our options still remain the same.