ChinaTravelNews – China Southern Airlines has announced it will stop its 1% agent commissions for ticketing on June 1, and Air China and China Eastern Airlines are expected to follow suit soon, triggering speculation that the “zero commissions” era for air ticketing is imminent.
Commissions dry up
The four major Chinese carriers have been lowering ticketing commissions gradually within a short period of time, from 3% to 2% and 1% to finally stop paying them altogether.
Air China was the first to lower the commission to 2% in June 2014， after six years of paying 3%. China Southern, Hainan Airlines and China Eastern followed suit in the following month.
Travel agents’ responses to the latest cut are muted, as the move has been widely expected.
Airlines cutting commissions to tighten sales control
In a column published on April 30, TravelDaily China CEO Charlie Li wrote:
“The State-owned Assets Supervision and Administration Commission will require the three major (state-owned) airlines to increase their direct sales ratios in the future. This will be a miraculous feat to pull off given their current situations. However I can foresee that commissions will go down further before this year’s peak season, and carriers will tighten their control of the ticket pricing system. Traditional ticketing agents and B2B platforms will be on the brink of a battle for survival in the coming 12 months, and the airlines’ ability to maintain market control amid OTA price disruption remains to be seen,” he said.
Impact on ticket agents and OTAs
ChinaTravelNews columnist Jiangyun Ning said the elimination of commissions will separate the men from the boys among ticketing agents. “Larger ticketing agencies can expand distribution of low airfare via traditional B2B platforms or new platforms like Qunar. Qunar gains revenue from agents pay-per-click fees’s and air ticketing is its most profitable field. The loss of commissions will cause an exodus of small- and medium-sized agents, and this will also dramatically reduce the pay-per-click fees and hurt Qunar,” he said.
(Reporting by Xianhao Zeng)
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(Translation by David)
