Reactions to Qantas move
The chief executive of the Australian Federation of Travel Agents, Mike Hatton, said the Qantas move was not a major surprise. He said many travel agents would probably reassess whether they would have to recoup the lost commission by raising service fees charged directly to consumers.
“As with the airlines with fuel charges et cetera, the consumer ends up paying,” he said.
Mr Hatton said many of Australia’s 4500 travel agents had introduced service fees since Qantas started cutting commissions in January. Contrary to fears of serious convulsions in the travel retail industry after Qantas first slashed commissions, Mr Hatton said: “All the evidence that we have is that it’s had no detrimental impact on the distribution network.”
Flight Centre chairman Graham Turner said he did not foresee any impact on his company’s profit outlook. Instead, he warned Qantas could face a backlash from customers and travel retailers if it continued screwing down commissions.
“It’s effectively a price rise for Qantas. It could have an impact on their earnings if they are not careful,” he said. About 10 per cent of Qantas’s $12 billion of annual revenues are generated through Flight Centre’s worldwide network.
“Flight Centre will sell Qantas if it is a competitive product in terms of quality, price and total remuneration or margin to the company.”
“We would insist that any decrease in front-end margins be replaced by other sources of remuneration to ensure customers using Qantas do not suffer from higher prices. Qantas does not operate in a vacuum. Our international experience has shown that airlines that introduce uncompetitive margin structures lose sales and sooner or later reverse their policies.”
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