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Thursday,  February 29, 2024 11:27 AM 

“Outrageous”: Travel advisor says airlines are dropping base fares to avoid paying commissions


“Outrageous”: Travel advisor says airlines are dropping base fares to avoid paying commissions
Jeff Verman, CEO of Plus Travel Group. (Supplied)
Michael Pihach

Michael Pihach is an award-winning journalist with a keen interest in digital storytelling. In addition to PAX, Michael has also written for CBC Life, Ryerson University Magazine, IN Magazine, and DailyXtra.ca. Michael joins PAX after years of working at popular Canadian television shows, such as Steven and Chris, The Goods and The Marilyn Denis Show.

It’s a hot button issue that has been discussed among the travel trade for years.

But one travel advisor is taking what he calls a “serious trend” in the airline business public.

Jeff Verman, CEO of Mississauga, ON-based Plus Travel Group, was featured in a CBC News story last week, airing a grievance towards Air Transat, accusing the airline of dropping its base fares and raising its carrier surcharges to avoid paying commissions to travel advisors.

The story, published Dec. 7, reveals how customers can get an Air Transat round-trip flight from Toronto to Lisbon for as little as $2.

The catch, of course, is that the base fare is $2. On top of that is an air transportation charge of $600, and other taxes and fees, bringing the total price of the flights to $719.85.

In the story, Verman shared a similar low base fare with Air Transat, to the same destination, that his agency booked recently.

In his case, the base fare was $3.50 with an all-in price of $723.59 after the additional charges were added.

Speaking to CBC, Verman called this pricing practice “a deliberate move to pay us less.”

"[Our] service fee alone does not make us profitable. Commission is what we need to be profitable each transaction,” he told the outlet.

Travel advisors get a commission only on base fares, and with Air Transat, the rate is five per cent. On a base fare of $3.50, that amounts to a commission of 18 cents.

"It's insulting," Verman told CBC. "It feels like cheating, that we're being cheated."

A spokesperson from Air Transat provided a comment to CBC, saying that its fare structure aligns with Canadian and global industry standards.

"It is well known that flight prices fluctuate based on supply and demand, and our valued partners and travel industry professionals...understand the competitive and dynamic nature of pricing we provide," airline spokesperson Bernard Côté said. "This results in the best value and highest quality experience for our mutual customers."

PAX reached out to Air Transat for further comment but did not hear back by press time.  

Not even a chocolate bar

In a posting to LinkedIn, Verman notes the “serious trend” of base fares becoming increasingly small compared to the price of a total ticket.

He writes that this has had two advantages for airlines.

Firstly, the ticket cost from the airline seems “very reasonable and small to the consumer,” he says.

And secondly, the airline can pay less commission to the travel agency “that relies on those commissions to survive.”

“This has now reached its ultimate end in the past couple of weeks,” Verman writes, referring to that $3.50 base fare his agency booked.

“The near-zero base fare, which produced a commission of 36 cents [for two tickets], can't even buy a quarter of a chocolate bar,” Verman points out.  

In his post, he calls on airlines to “stop pretending that fuel costs are some kind of special surcharge that needs to be kept alongside the taxes on a flight, rather than as part of the base fare.”

“Let's have honest and transparent pricing for consumers,” he writes, “and let's stop this unfortunate game against travel agencies.”

“Outrageous”

Speaking to PAX over the phone on Monday (Dec. 11), Verman said airlines are “ghettoizing” travel agencies with unfair money-saving practices.

“Airlines have been pushing for this for a long time,” Verman said.

Dropping a base fare to $3.50 is an “extreme case,” he explained. But it’s not just Air Transat that’s doing it.

Verman said he’s also seen unusually-low base fares at Air Canada, too, leading him to suspect that airlines are avoiding fair commissions to travel agents, collectively.

“The more they do this, the less we’re going to earn,” he said.

As seasoned travel advisors know well, this topic is nothing new. Verman said he began complaining about this very issue some 15, 20 years ago when he first entered the travel industry and airlines began lowering commissions. 

Base fares are becoming increasingly small compared to the price of a total ticket, says travel advisor Jeff Verman. (Hanson Lu/Unsplash)

The fact that base fares have now sunken to nearly zero is “outrageous,” he said.

"All distribution costs something," he said. "We’re part of the distribution of airlines." 

The trend comes as travel agencies emerge out of the COVD-19 pandemic with trimmed-down resources and heavy debt loads.

“Businesses are getting crushed,” Verman said. “We’re 50 per cent of what we were pre-COVID. I had to let people go against my will. [My business] has emerged half its size, with debt, and half the ability to pay.”

Three major issues

On the subject, Verman points to three major issues.

For one, he says it’s “deceptive to the public” to suggest that for you can fly to Lisbon from Toronto for $3.50.

“You can’t take a taxi six blocks for $3.50,” he said.

Of course, there’s taxes and airport improvement fees, but what about the additional $600 dollars (for example) that’s added to the total price of a ticket? 

Verman believes this is for fuel, but he wants to know why that charge is looped in with taxes (as opposed to the base fare).

Which raises a second question – what tax implications could arise from this?

“It’s hiding a huge cost,” Verman said. “It would be like me hiding the cost of employees. Why does fuel get treated separately? It has nothing to do with taxes." 

Finally, there’s also something to be said about ensuring fair compensation for travel agencies – an issue that Verman believes has never truly escalated.

“Travel agencies are not represented properly,” he said. “This has been allowed to happen and there’s been no shouting or screaming. It took an extreme case for me to say something.”

Travel agencies – especially the “thousands” of agents who work on commission – are at a disadvantage, he said, “because it’s not like I have the option of raising my fees by $30 to compensate [for the losses].

“We’ll lose business," Verman said.

A fight for fairness

One solution Verman is proposing is that airlines pay a minimum commission per ticket, per round-trip.

“I would propose $15 per segment, $30 per round-trip ticket. I don’t care what they do with the base fare if I have a minimum,” he said.

Verman says he hasn’t been contacted by any airlines directly since speaking out. 

“I’m not here to get revenge. The airlines know this is an issue,” Verman said. “I just want fairness.”

“It’s a straight-forward, black-and-white issue. It’s not a matter of opinion.”


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