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Transition to Zero % Commission is Best Possible Scenario, says
Bernier of Northwest Airlines Early-June 2008
Northwest Airlines notified travel agents of an abolishment of
its agency commission as of May 27.
Jeffrey S. Bernier, Managing Director Japan mentioned in an
interview with Travel Vision that behind the background factor for
the introduction of the 0% agency commission effective from October
this year is the fact that "many travel agents have voiced their
opinions that they would rather prefer a transition to 0 % commission
to a transition to 3% commission, thereby we have chosen the best
possible market scenario."
He added, "I have become aware that it would be difficult for the
travel agents to take countermeasures such as charging service/
transaction fees to their customers, should 3% agency commission
remains payable. We are in such an extremely severe market
environment that we should opt for a positive approach."
The decision reflects, he explained, the opinions from the travel
agents. While Bernier also realizes that "the 0% commission will have
some negative effects in the short run and things will not be easy",
he tries to make a point that the transition to 0% agency commission
is a strategy focusing on the future prospects of the travel market,
citing, "In the long run it should turn out to be a good solution. We
should make every effort to realize a business environment to enable
all of us - airlines, travel agents and customers to enjoy the mutual
benefits.
When United Airlines informed the travel agents of the reduction
of its agency commission from 5% to 3% on May 2, there were already
many remarks regarding the 0% commission. A change of sales strategy
by airlines may bring a change also to the business practices of
travel agents, however.
Commenting on this, Northwest Airlines emphasized that it would
by all means maintain the current relationship with the travel
agents. "We predict that the fares other than the published official
fares account for approximately 80% to 85% of the fares sold in the
present market. Northwest also provides many of these fares to the
market. We believe the travel agents play an important role in the
distribution channel and we would like to continue to sell our
products through our travel agents including simple round trip
fares." "We also want to continue to bolster our lucrative business
travel segment which produces substantial business class traffic,"
said Northwest Airlines.
The airline further mentioned, "Other than selling airplane
seats, travel agents make land arrangements including hotel
reservations and transportation according to the customer needs, thus
the travel agents play a different role from the airlines."
"We'll try to diversify our products in efforts to meet requests
of each travel agent and also enhance sales skills of our sales
representatives. At the same time, we'll try to improve our product
and service that include an expansion and upgrading of our business
class lounges and passenger information service by our Japanese
ground staff at US airports. By so doing, we aim to become the
preferred airline by the travel agents and customers," promised
Bernier of Northwest Airlines.
Eyeing the feasible increase of departure/ arrival slots at the
metropolitan airports in 2010, the airline indicated that all these
points will also be a basis for the strategy for the future expansion
of air travel demand, citing, "It is therefore deemed necessary to
address all the preparations well in advance."
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