Southwest cancels commissions

Monday, 21 Oct, 2003 0

Southwest Airlines has announced it will no longer pay travel agent commissions as of December 15.

Southwest was the last major US airline paying base commissions to travel agents.

Southwest’s chief executive officer, Jim Parker said: “We waited this long to make the change in our commission policy to give all agencies – large and small ample time to shift their business models to the industry norm of fee-based services.”

The airline said it was making the move to cut costs.
In the third quarter of this year, Southwest’s online bookings generated 55% of its revenue, while travel agency bookings counted for about 15%.

The change will save Southwest about $40 million annually, according to Mr Parker.

Southwest operates 385 Boeing 737s in 58 cities in 30 states. The airline has nearly 2,800 daily departures. It was named the number one airline in the US in May and June of this year for the most passenger boardings in each of those months.

Southwest Airlines Vacations, in an effort to avoid confusion with the airline itself, has announced that it will maintain its current commission structure.

That rate is 10% on bulk air packages booked electronically, and 10% on the land portion and 5% commission on the air portion of published fare vacation packages booked electronically.

The rate is 5% on bookings made through Southwest Airlines Vacations’ call centre.

“The majority of our business continues to come from travel agents and our commitment to our agent partners remains strong,” said Michael Spencer, executive vice president and general manager at The Mark Travel Corporation (operator of Southwest Airlines Vacations).

He added: “By offering a high-quality vacation product that is valuable to customers and a booking mechanism VAX VacationAccess, that is convenient for travel agents, we have positioned travel agent partnerships as a key component of our distribution strategy.”

With VAX, agents can book from any computer with internet access at any time. Agents can also get up-to-the-minute availability, pricing and other information. The Mark Travel Corporation, tour operator for Southwest Airlines Vacations, is headquartered in Orlando.