Airline - travel agent relations: an evaluation of remuneration schemes

• Main Author: Bricel, Robin John
• Language: English
• Published: 2010
• Subjects: Airlines > Rates; Travel agents
• Online Access: http://hdl.handle.net/2429/21417

Travel agents provide an essential range of air travel marketing services which result in large commission expenses for air carriers. Commission expenses have risen to such an extent that air transport analysts and others in Canada have openly criticized remuneration policies now in practice. They have questioned whether the travelling public is receiving a full value for the commissions which travel agents receive; they have cited rising commission expenses as evidence of economic inefficiency within the air travel marketing system. The role which the travel agent plays in the airline industry is described taking into consideration travel agents, air carriers and air passengers. Relevant background information related to the travel agent remuneration issue is presented by describing issues affecting the ability of independent agencies to provide travel services. This thesis approaches the travel agent remuneration problem using policy analysis to select a remuneration scheme which will best satisfy a select list of objectives. The objectives used in the evaluation of remuneration schemes include service objectives such as retaining travel agent impartiality, economic objectives such as implementing the "user pay" philosophy, political objectives such as avoiding obvious cross subsidization of different user groups and "regional development" objectives such as providing adequate service levels to small communities. Description of developments in issue areas including travel agent industry entry requirements, competition for market segments and the introduction of electronic reservations systems to travel agents is presented in order to better understand the likelihood of remuneration schemes achieving objectives. Three basic types of remuneration alternatives, net fare, uniform commission and incentive commission are considered. Both regulated and unregulated incentive commissions are analyzed since their impacts vary significantly. The regulated incentive commission alternative is selected as the optimal travel agent remuneration scheme. The selection of this alternative results in a compromise between the full achievement of the various objectives. Under this alternative, the benefits and costs of regulatory involvement in the setting of remuneration levels are assured. === Business, Sauder School of === Graduate