Consumers to See Higher Travel Costs

Consumers and companies braced for higher travel costs Friday amid forecasts that other carriers will follow Delta Air Lines Inc. and stop paying commissions to travel agents. But some analysts said consumers would benefit from the change.

The end of commissions means many travel agents will levy higher fees for booking consumers’ airline reservations, raising travelers’ costs, industry officials and travel lobby groups said. Most agents already charge fees because the airlines had been slashing commissions for the last several years.

With most carriers expected to match Delta and eliminate base commissions in coming weeks, travelers face “a price increase brought on by the airlines,” said Thom Nulty, president of Navigant International, a major travel services concern.

In turn, that will drive more travelers to the Internet, where the airlines and third-party firms such as Travelocity.com Inc., Expedia Inc. and Hotwire are battling for reservations. That’s one of the airlines’ goals because it’s cheaper for them to distribute tickets via the Web than through travel agencies.

Ending basic commissions could save the U.S. airline industry about $1 billion a year, Salomon Smith Barney analyst Brian Harris said in a bulletin Friday. And the growing use of Internet bookings helps keep downward pressure on airline ticket prices, analysts say.

“It will accelerate the online penetration” of the travel business, said Karl Peterson, chief executive of Hotwire, whose founders include six major airlines. The Internet’s share of the airline reservations market is “in the low teens,” but that will grow sharply, he added.

Travel agencies, which still handle the bulk of airline tickets, put a brave face on the prospective loss of commissions.

“We have to refocus our efforts, because travel is not the same anymore,” said Sally Feldman, who runs Fly Away Travel Agency in Riverside.

Scott Shadrick, president of TraveLeaders in Irvine, said agents no longer have to fret about when the airlines will next cut their commissions. “There’s nothing to take away from us now,” he said.

But Mark Ray, a managing director for John Hancock Financial Services in Boston, said the change “will be a net benefit for consumers” because they’ll be able to choose between using a travel agent--and paying a fee for help--or trying to get a cheaper seat themselves by using the Internet. He likened it to the banking industry, in which consumers can get free checking accounts if they always use automated teller machines, or pay a fee to get help from a bank employee.

Investors, however, didn’t signal that they expect big gains for Internet travel firms, and share prices of the publicly traded firms finished mixed Friday.

Businesses already were using more online booking and other lower-cost services provided by travel agencies to weather the recession “and we expect that activity to accelerate” if the airlines scrap the agents’ commissions, said Melissa Abernathy, a spokeswoman for American Express Co., a corporate travel manager.

Nulty said Navigant--which handles about $6 billion of clients’ travel arrangements annually--and many others like it charge a set fee for their services. But they also give the airlines’ commissions back to clients, helping customers offset part of their travel costs.

Now, corporations won’t get that savings because the airlines won’t be paying commissions, Nulty said. “I’m hearing concern from customers because the airlines are imposing a price increase on them and they don’t like it,” he said. “Even though it’s only $20 per ticket or whatever, it’s $20 more than they would like to spend.”

Some agencies said they expect corporate customers will demand renegotiated contracts.

“I’d even expect some companies to start trying to book their own trips, either by phone or over the Internet, just to avoid the larger fees,” said Wido Schaefer, president of the 11-office TravelStore agency in Southern California.