It’s no secret that airline base commissions have dropped and are continuing to drop. In an exclusive chat with Flight Centre Travel Group’s James Kavanagh we find out why commissions aren’t the be all and end all for agent profitability (and sanity).
It was mid-2022. A number of airlines were dropping their base commissions paid to agents to just one percent. And Flight Centre Travel Group’s Skroo Turner was in town to celebrate Flight Centre’s 40th birthday.
Falling commissions didn’t worry him.
“We’ll get it back in other areas,” he said at the time.
But what are these “other areas”? I ask Flight Centre’s Global CEO of Leisure Travel James Kavanagh.
Swings and roundabouts
“The reality of it is our industry has a crisis every seven to 10 years and always comes out better the other side,” he told Karryon.
“If you look at the history of travel from the early 1900s through to the current day it has always been a growth industry with a few blips along the way.
“And when supply and demand normalises there will always be challengers or somebody willing to pay for distribution. So even though you get cuts in one way, it’s often temporary.”
“And it’s made up for in other ways. It’s swings and roundabouts. It always comes back around where the economic flow is positive.”
There’s a variety of different ways that airlines pay the trade, he told Karryon.
There are new channels, he said, such as Qantas talking about ways to pay people through its own Qantas Distribution Platform.
“You’ll hear other airlines doing it through overrides, some will do nett fares that they allow the trade to choose the selling price,” he said.
“Our revenue is not just from our supply chain. It comes from a range of different services that we provide.
“We charge customers depending on the brand. Some of our customers are charged a fee for service. Some hire a Travel Advisor as a concierge fee. And some pay for a Captain’s Pack. So there’s a variety of different revenue lines.”
“Eventually there is a way.”
You can’t do it alone
Throughout the pandemic, Kavanagh says that Flight Centre Travel Group’s ability to stay in touch with its supply chain and “build really, really strong partnerships” allowed it to ”do some really cool stuff with some of the different brands”.
“For example, one of our brands had partnered with one of the major cruise lines and created some incredible offers that were selling holidays out to 2024 and 2025”.
This came off the back of “the strength of our supplier relationships,” he said.
“No doubt we’ve had challenges like everybody, but these relationships allowed us to be a bit more creative about the return of travel.
“Because those relationships are critically important. You can’t do it alone.”
Together in Travel
The travel industry seemed more united at the height of the pandemic than it is now. But as lockdowns lifted and staffing became an issue, the pandemic mantra of ‘we’re all in this together’ got lost as the work piled up.
“I hope that the relationships between agents and our suppliers (namely airlines and hoteliers) return to a respectful and mutually beneficial position,” the owner of Helloworld Travel Rochedale Shopping Centre Tina Pizzoni told Karryon at the beginning of the year.
Tina wasn’t talking about commission. Agents want support from the supply chain. Someone to answer the phones (in a timely manner) when they call.
An airline’s perspective
Having an under-resourced or uncontactable support team serves no one, Air Canada’s General Manager Australia and New Zealand, Vic Naughton, told Karryon.
“Our Sydney-based team is always contactable by email and prides itself on responding to 90% of enquiries within one business day.”
But Naughton also sees the importance of reconnecting with retail partners.
“For some time now I’ve been surprised at how some major airlines no longer seem to appear at industry functions,” he said.
“It’s partly due to a lack of resources, but I think it also reflects a certain disconnect with the wider travel industry, and that’s disappointing because we are all one travel sector.
“As an airline, we are conscious of the need to constantly forge and maintain our connections with the trade. It’s not all about the bottom line, it’s also about contributing to the overall wellbeing and cohesion of the travel industry, and the benefits that flow when we work together.”
