AGENTS all over the country are now thinking long and hard about how they can cushion the blow of British Airways’ decision to scrap its Performance Reward Scheme.
Although many found it difficult, nigh impossible, to meet the PRS growth targets, at least the scheme gave agents a slim chance to claw back the 2% commission.
Now, for agents who do not have marketing agreements with the national carrier, it’s a case of 7% commission – full stop. End of story. Take it or leave it. By abandoning the PRS, BA has removed any incentive for smaller agents to attempt to increase their business with the airline.
Many had already switched business to other airlines that pay the full commission, and more are expected to take this route now that the PRS has been removed.
Three or four years ago, this might have been more difficult to achieve because, at that time, customers often insisted on flying BA. Today it is a different story.
Agents say their customers are also disillusioned with the UK’s flag carrier, complaining that it has an arrogant attitude, lacks flair and has an apathetic and de-motivated workforce.
Barry de Friend, of Travel the World, in Cockfosters, north London, said:”We had a business traveller in here just last week complaining about BA’s total lack of service and its demoralised cabin crew. Customers have become disenchanted.”
But John Morgan, BA general manager business sales, said:”I think we have now lost that arrogant tag. We are not resting on our laurels, but there are still millions of people who want to travel with BA.”
The strength of BA’s Air Miles programme, and its slot dominance in the UK market, means agents are often unable to switch-sell. Instead, they are being forced to consider the introduction of transaction fees, to make up for the lost commission.
Since Ryanair cut commission from 9% to 7.5% in 1997, many agents – including Thomas Cook, Going Places and Carlson Worldchoice – have charged a fee for selling flights on the low-cost carrier. However, the introduction of fees for BA tickets is not likely to be anywhere near as widespread.
The larger, top-performing agents have no reason to charge fees while they are still incentivised to sell BA through their marketing agreements.
For the independent, one branch agency which doesn’t have a marketing deal, introducing fees is therefore a dangerous game.
Who is going to pay extra for a ticket when there is an agency down the high street that is not charging a fee? Even in the business travel sector – where agents are able to build up closer, longer term relationships with their clients – agents have found it difficult to switch their contracts to management fee.
Corporate clients are largely ignorant about, or simply don’t care about how their agents’ commission earnings are being affected.
Results of an NOP survey, commissioned by Carlson Wagonlit Travel, found only 17% of travel managers knew a great deal about the recent commission cutting trend, while 31% had never heard of it (see chart, left).
If the travel managers of top corporations are not aware of what is happening in the airline/agent relationship, what is the likelihood that the general public will understand why agents need to charge fees? Even if agents manage to justify fees to their clients, introducing this new way of doing business is complex and time consuming.
Agents need to calculate what type of fee they want to introduce and then calculate how much they can feasibly charge.
For business travel agents, this means measuring how much it costs to provide each of the many services they provide. Even if they start now, it could take years for them to make the transformation. Ironically, it is those agents that have moved fastest to management fees that are likely to receive the best marketing deals from BA.