With reduced commissions from Air Canada coming into effect this week (July 1) industry associations say the cost-cutting move attributed by the airline could hurt the income of thousands of travel advisors.
“While the impact will vary by business, some members have indicated that the changes could have serious implications for the long-term viability of their agencies, particularly where Air Canada represents a substantial portion of their sales,” said ACTA president Suzanne Acton-Gervais.
The group’s thousands of members could see a loss of about a quarter of Air Canada-related revenue as a result, she said.
Brenda Slater, co-founder of the Association of Canadian Independent Travel Advisors, said many of her counterparts have seen Air Canada commissions cut in half to about 4 or 5%, and sometimes lower.
“For them to basically say, well, now we’re only going to give you 3% is a little bit of a smack,” Slater said.
The airline’s move comes after it trimmed its flight schedule and suspended its financial forecast for the year amid a prolonged spike in jet fuel prices caused by the Iran war and the closure of the Strait of Hormuz, a key choke point for about a fifth of the world’s oil supply.
Air Canada has said it will recoup just 50 to 60% of the higher energy costs in its second quarter.
Aviation fuel makes up only part of the picture. Higher costs overall, rising market uncertainty and the advent of artificial intelligence, “which promises to reshape the whole travel ecosystem,” pushed Air Canada to change its commission plan, the Montreal-based company said last week.
“We are under high-cost pressures. Adapting to these changes requires that we manage our costs accordingly,” said airline spokesperson Peter Fitzpatrick, adding, “Our cost of sales through agencies is growing faster than our revenue gain, which is not sustainable.”
Fitzpatrick said the airline could not speculate on whether commission rates might rise as fuel prices come back down.
However, Slater warned of potential unexpected consequences for Air Canada.
“They need to be aware that travel advisers are watching and very careful to pick the suppliers based on who’s going to service our clients the best – and who also is going to support us the best,” she said. “If they’re not going to do that, that’s their choice. But we also have choices.”
Even amid ongoing uncertainty over safe passage through the Persian Gulf, spot rates for aviation fuel have started to decrease, with a framework agreement in place between the United States and Iran.
The average price of jet fuel in North America dropped 23% after the deal was announced versus a month earlier, according to the International Air Transport Association. Though they remain nearly a third higher than a year ago.
Porter Airlines announced it would halve its fuel surcharge on new bookings “as the fuel market has started to normalize.”
The Toronto-based carrier reduced the charge to $20 from $40 on new reward flight bookings, it told VIPorter members in an email.
Meanwhile, Acton-Gervais noted that the burden of lower commissions could fall disproportionately on certain demographics.
“Travel agencies and travel advisers are overwhelmingly small- and medium-sized businesses,” she said. “The majority of travel advisers are women.”
She and Slater sought to stress the value that professionals offer passengers in a world replete with travel disruptions, pointing to risk management and sheer accessibility compared with hard-to-reach customer service representatives at some carriers.
“Now, people are questioning these industry partnerships,” Slater said of her colleagues. “We’re constantly being told that we’re an important partner to them, but it doesn’t seem that way.”
If you enjoyed or found this story useful, we’d appreciate if you would forward it to a colleague or friend who may also enjoy it. If, on the other hand, a friend shared it with you, welcome! You can get all the latest travel news and reviews from Travel Industry by simply clicking HERE.