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Rates likely will rise to offset commissions cut by airlines

If you use a travel agency to book your flights, chances are you?ll pay more now that most major airlines have stopped paying commissions to agents.

Travel agents, many of whom are still on shaky financial footing following the terrorist attacks on New York and Washington, have seen commissions slashed several times in recent years.

Last Friday, Delta Airlines announced an end to commissions for agents for domestic flights. American, Northwest, Continental and USAir, among others, were quick to follow suit. United joined the parade on Wednesday.

We have all thought it was coming, says Travelhost Travel Agency owner Marilyn MacDonald. I've been trying to turn market share to cruises and tours as opposed to airline tickets.

MacDonald has been in the travel industry for 33 years and has operated in the Rogue Valley for 11. She says travelers won't save money in the long run by booking directly through airlines or online.

The average cost per ticket is 6 percent higher on the Internet than through a travel agency, MacDonald says. When you go online, there's no one to tell you that if you travel two hours earlier or a day before that you might get a lower fare. Most consumers are not savvy enough to check dates and times.

MacDonald's chief complaint is that travel agencies stood by the airlines following Sept. 11 and handled most of the customer service, including refunds and re-ticketing.

People couldn't get through to the airlines and couldn't get through to Travelocity, because it has no phone number, she says, referring to an online travel service. We had a fully-staffed office to help the public and airlines. We had a $30,000 loss due to cancellations. We sell $4 million worth of tickets annually and $30,000 is very large amount for an agency this size. We've had very little time to recover and this will be like a coup de grace for small agencies.

The suddenness of the transition bothered Ron Burgess of Burgess Travel and Total Relocation Co. more than the commission elimination.

The most irritating thing to everybody is that all agencies have computer contracts with the airline industry, Burgess says. It's not like we're going to be doing this on June 1, but immediately.

But it doesn't do any good to get upset. You just have to readjust the old business plan. Unfortunately, what's going to happen is that agencies that want to stay in business will have to increase their fees. I've heard in big cities that agencies have increased their fees $50 to $60 per flight arrangement.

He wasn't sure what the figures will convert to in the Rogue Valley.

MacDonald says she will apply a sliding scale, while Jackson Travel will adjust its previous $17.50 fee upward.

Last August, Jackson Travel Vice President Kelly Rasmussen predicted airlines would have a hard time handling the increased phone traffic generated by the elimination of commissions.

I still believe airlines are unprepared to handle what the current distribution system has provided for them, Rasmussen says. The travel agent system produces 80 percent of the airline tickets today.

The airlines closed down service centers going into and out of Sept. 11, laying off droves of employees. Already, the on-hold time to get through to reservation agents is up.

He says the 5 percent commission was an inexpensive overhead compared to what the airlines can expect.

We've seen the shoe drop on the front end and we're waiting to see if American Express or our relations with airlines will allow us to have bigger back-end relations, Rasmussen says. The good news is that they can't do this any more, there's nowhere to go but up.

While business travelers and vacationers will pay more, the airlines will benefit. Agents, by and large, will just be making up lost ground.

Five years ago, there were 29 travel agencies listed in Medford's Yellow Pages. Today, there are 20 and MacDonald expects that number to decline.

I wouldn't be surprised if three or four (agencies) close or they might consolidate.

Kevin Mitchell, chairman of the Business Travel Coalition of Radnor, Pa., told the Wall Street Journal that eliminating domestic commissions will cost business travelers about $400 million in new fees.

I don't think airlines get it, Mitchell says. At a time when they are trying to increase demand, they just put in an across-the-board fare increase.

— Reach reporter at 776-4463 or e-mail business@mailtribune.com

Marilyn MacDonald, owner of Travel Host Agency in Medford, is unhappy that airlines will no longer pay any commission to travel agents for the tickets they sell. - Bob Pennell