What’s wrong with Northwest Airlines?

By | August 8th, 1996

Hey, Northwest Airlines. What in the world is wrong with you? When Delta Air Lines capped its travel agency commissions last year, did that look like fun?

It must have. Slicing a few percentage points away from what you pay online retailers, as you did last month, is like sending e-mail to every Internet booking engine with the heading, “Please flame us here at Northwest!” You must like that kind of thing.

Observers from the trenches of interactive travel know better. But that doesn’t change the fact that your actions set a disturbing industry precedent – due in no small part to the scatterbrained logic you’ve used to justify your decision.

Think with me here. Your move is based on the assumption that fewer resources are required to process an order booked through the Internet. That’s a fair guess, even though it doesn’t take into account the time and effort needed to maintain a Web-based interface.

Indeed, a study done by Teleport Travel of Austin confirms that completing an average travel transaction with a live body costs $18, while the machine does it for $3 a pop. But Web servers cost tens of thousands of dollars; CRSs are free to agents if they use them enough.

Here’s where the whole “Internet cap” idea gets troublesome. With this model, we could assign a value not only to the booking mechanism itself but to the kind of ticket that’s booked. For example, ordering a leisure segment would rank as one of most expensive transactions, because it usually requires the most amount of work. A business travel transaction might take less legwork, generally speaking. Booking flights for a meeting or incentive group would probably require even less effort, and so would a straight Internet reservation.

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See where I’m going? Never mind that you’re sucking all the incentive out of building online booking engines. You’re also opening a veritable Pandora’s Box, encouraging the creation of a sliding commission scale that’s got more levels than a pyramid scheme.

So why not be consistent, Northwest? Pare commissions on business travel tickets, for groups, and for incentive travel, because agents don’t work as hard for those tickets. If a booking method emerges in the future that takes even less effort than the Internet? Why, just slash a couple more percentage points from the commission-or, better still, let the agencies pay you for the privilege of booking on your airline.

You know, it almost seems as if you’re trying to discourage Internet bookings altogether. The chilling effect of this strategy should give your carrier a little breathing room to develop its own online technology. Think of all the money you could save then, when you control the point-of-sale in cyberspace.

Before we see this ill-advised strategy to its logical conclusion-an unenforceable multi-leveled schedule for commissions-Northwest should do everyone a favor and eliminate the kickbacks paid to agents entirely. What should commissions be replaced with? I have no idea. I’m a columnist, not a chief executive.