The Brancatelli File
THE ENEMY OF MY ENEMY
IS MY FRIEND
BY JOE BRANCATELLI
March 21, 2002 -- A really brilliant military tactician--von Clausewitz or Lao Tsu or maybe Worf, the morose Klingon from Star Trek--once said that "the enemy of my enemy is my friend."
I began searching for his name the other day after hearing about Delta's decision to eliminate the base commission it pays to travel agents. I was thinking that maybe it's time for business travelers and travel agents to be friends and fight the common enemy.
In case you've been fighting your own private battle on an airport security line while I was vainly thumbing through Bartlett's Familiar Quotations, let me give you a 60-second history on the war between airlines and agents.
Starting about the time the Wright Brothers were first cleared for takeoff--or at least for most of the last two decades--airlines paid travel agents about 10 percent commission on the airline tickets they wrote. From any rational business person's perspective (which, I admit, immediately eliminates most airline executives), the deal was sweet. For just 10 percent of the retail price of your ticket, airlines got a vast network of independent retailers to promote and sell their product. In a world where sane retailers expect a "keystone" markup of 50 percent, travel agents routinely worked for ten.
But in 1995, without a declaration of war, the airlines "capped" the 10 percent commission on a domestic ticket at $50. Suddenly, a travel agent making $150 on your $1,500 roundtrip ticket to Oshkosh or Ottumwa was earning just $50. Agents were naturally furious and frightened, so they went to court and were promptly sold out by their own inept trade group, the American Society of Travel Agents. An out-of-court settlement in 1996 gave the nation's 35,000 agents a pittance--$86 million--and much of that went to the lawyers.
The settlement was a kind of Munich Agreement for travel agents. Rather than appease the airlines, it incited them to further economic violence. In 1997, the airlines reduced commission rates to just 8 percent. In 1999, they cut base commission to 5 percent. Last year, they capped commissions at $10 and $20, fees that didn't even cover an agent's cost of researching and writing a ticket. Last Thursday, Delta informed travel agents that most of them wouldn't get anything for writing a ticket. This week, most of the rest of the mainline carriers followed Delta's lead, and now the airline axis of evil insists that thousands of travel agents work for them for free.
Can you even imagine that? Airlines expect most travel agents to sell their products for free. That is the level of arrogance the mainline carriers have reached. They actually expect people to work for them without compensation.
What's the business traveler's stake in all of this? Well, for one thing, the onslaught of commission cuts forced travel agents to begin charging a service fee every time they wrote a ticket. Fees, of course, are nothing more than ill-disguised fare increases. Bargain-hunting travelers intent on avoiding the fees often turned to the airlines' telephone-reservation lines, to airline Web sites, or to airline-owned sites such as Hotwire and Orbitz. Unfortunately, that emboldened the airlines to reduce travel-agent commissions again and again. That has led to higher service fees and more travelers booking directly with the airlines.
And this is where the real danger lies: Regardless of what you may think about an individual travel agent, the continued existence of independent travel agencies gives us a line of defense against the airlines. The more travel agencies and independent Internet booking engines that fold, the fewer places we have to check one airline's service and prices against the others. The 7-year financial attack on agents has already thinned their ranks. Perhaps as many as 10,000 traditional agencies and independent ticket-booking Websites have shut their real and virtual doors since 1995. If travel agents disappear altogether, we'll all be forced to buy directly from the airlines. And that will give them total control of our business-travel lives.
Think about it, fellow travelers. Virtually alone among producers of goods and services in the United States, airlines already have the right to control the retail price of the product they sell. Fair-trade laws long ago forced Sony to stop dictating the retail price of television sets, barred Levi from telling retailers what to charge for its jeans, and prohibited Samsonite from setting the retail price of its luggage. Nobody can tell your computer reseller how much to charge for the monitor at which you're staring. Yet airlines have the undisputed and federally protected power to dictate the retail price of the seats they sell.
If travel agents and independent Internet booking engines disappear, airlines will also be the sole resource for the product. And if you think prices are too high now, wait until the day American or Delta or Continental dictate retail prices and control the retail-distribution system.
So what do we do? Well, as Benjamin Franklin once said, "We must all hang together or assuredly we shall all hang separately."
I say this: Never, ever, buy directly from an airline. Call their reservation numbers if you like, but make sure you let a travel agent write the ticket. Surf the airline Websites if you choose, but don't buy your tickets there. Buy each and every ticket from a travel agent or an independent Internet booking service.
Will it cost you more? Not really. Yes, the agent may charge you $20 or so to write the ticket. But have you ever considered the value of your time as you waited on hold for 20 or 30 minutes to talk to an airline reservations agent? Do you really want to spend an hour surfing the Net looking for what may or may not be the lowest fare? What's an hour of your time worth?
And, let's be honest: With airline fares changing a million times a day, can you really say that you're better than a good travel agent at ferreting out the best deals?
But even if you dislike or distrust agents, I say put that antagonism aside. Right now, an enemy of our enemy is in danger. We need to make them our friends.
This column originally appeared at JoeSentMe.com
Copyright © 1993-2004 by Joe Brancatelli. All rights reserved.