Chinese airlines cut commission payments to online agency

BEIJING (Reuters) – Air China and other major Chinese carriers will no longer pay agencies commissions on international tickets, escalating a row over fees with China's largest online agency Ctrip.com International.

China's flagship carrier, Hainan Airlines, Shanghai Airlines and Hong Kong Airlines, have all now announced they will cut fees for international airline tickets sold in China to zero from 1 percent previously.

The joint initiative follows a recent warning by the country's airline regulator against unreasonable airfare price rises during the peak travel season.

Rising business travel and a surge in outbound tourism fuelled by an increasingly wealthy middle class in coastal and inland areas of China is fuelling airline growth, and the carriers are looking to bag more of the profit.

The number of Chinese leisure travellers going overseas topped 100 million in 2014 and foreign travel is tipped to grow another 10 percent in 2016.

Earlier this year, China's biggest carriers withdrew their own- brand sales portals from the Qunar Cayman Islands website due to a dispute over passenger charges.

Qunar, the country's second largest online travel agency which has kept its brand after merging with Ctrip, drew a large following by offering deeply discounted air fares. In its latest annual filing in the United States, Ctrip said airlines have from time to time reduced the commission rates on tickets booked and sold through the firm.

That has "negatively affected" its revenue and there is no guarantee the airlines would continue to have supplier relationships with the firm, Ctrip said.

Ctrip was not mentioned in any of the announcements by the big four airlines. Ctrip and the carriers declined to comment.

Ctrip earns about 38 percent of its revenue from transportation ticketing, which mainly represents revenue from reservations of domestic and international air tickets, railway tickets, and related services.