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Rivals likely to follow BA's lead

(29 August 2003)

BRITISH Airways’ move to 1% commission is likely to open a floodgate of copycat moves by rival airlines.

BMI is favourite to follow the flag carrier, having already indicated distribution costs need to come down as part of its ‘Blue Sky’ cost reduction project.

Chief executive Austin Reid has said agents need to understand the commercial environment has changed since the trade received 9% commission. A BMI spokesman said: “We have not made any commitment to change since we reduced commission from 7% to 4%.”

However, a source close to the company said: “It’s not an anti-agent move, it makes commercial sense on BA’s behalf. The operating environment has changed and costs are too high, so it seems a reasonable approach to take and many others are likely to follow.”

Currently, only Flybe and Logan Air offer agents 1% and BA’s Oneworld partner Aer Lingus is going from 4% to 1% today. Other Oneworld partners, including Qantas, Cathay, Iberia and American Airlines, have all denied they will change commission on an alliance-wide initiative, but have refused to commit to their current 4% rates.

Meanwhile, analysts said BA’s move signals the inevitable decline of agents. Independent aviation analyst Chris Tarry said BA had made significant changes in developing its on-line strategy and its ability to compete with no-frills carriers.

Dan Solon, aviation expert with specialists Avmark International, said distribution channels were evolving to reduce human contact. “It is difficult to be optimistic about the general travel agent.”