“If we allow it to happen, it will”: Advocates address claim that airlines are lowering base fares to avoid commissions

Two of Canada’s leading travel trade advocacy groups are addressing a controversial airline policy that has been practiced for more than two decades after a Mississauga, ON-based travel advisor decided to take his concerns public.

Last week, Jeff Verman, CEO of Plus Travel Group, was featured in a CBC News story, accusing Air Transat of dropping its base fares and raising its carrier surcharges to avoid paying commissions to travel advisors.

The story, published Dec. 7, reveals how Air Transat has been selling some international flights with base fares for as little as $2 while tacking on hundreds of dollars in charges, fees and taxes.

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

Verman told CBC that his agency booked an Air Transat round-trip flight from Toronto to Lisbon for a base fare of $3.50, which came to $723.59 total after all the add-ons.

Travel advisors get a commission only on base fares, and with Air Transat, the rate is five per cent. In Verman’s case, Air Transat’s $3.50 fare produced a commission of just 36 cents [for two tickets].

In the story, Verman called this pricing model “insulting,” and “a deliberate move to pay us less.”

PAX caught up with Verman earlier this week to discuss what he calls a “serious trend” where base fares are becoming increasingly small compared to the price of a total ticket.

It’s an unfair practice that he says is “ghettoizing” travel agencies altogether.

“Airlines have been pushing for this for a long time,” Verman told PAX, stressing how all forms of distribution – which includes travel advisors – have a cost.

Travel advisors "should be compensated"

In a statement to PAX, Wendy Paradis, president of the Association of Canadian Travel Agencies and Travel Advisors (ACTA), said that travel agencies and travel advisors “play an important role in travel distribution in Canada and should be compensated for their efforts.”

She acknowledged that non-commissionable fees (NCFs) have been a travel industry issue for more than twenty years, “and unfortunately, the issue involves all sectors of the industry including air, package tours and cruise bookings.”

NCFs, in particular, have emerged as a key advocacy issue among ACTA members coming out the pandemic, she said.

“While ACTA does not – and legally cannot – negotiate commissions or other commercial terms on behalf of its members, we are dedicated to work with Canadian travel industry retail and supplier leaders on how a ‘best practices’ approach could improve transparency in fare pricing,” Paradis said.

Paradis said discussions between travel industry leaders have taken place “over the past several months.”

“Although we understand NCFs are a complex issue, and often a global issue, it is important that Canadian retail and supplier industry leaders actively work together to unravel this ongoing issue and build a stronger, more transparent travel industry,” Paradis told PAX.

She said ACTA will continue advocacy efforts and engage in open dialogue with members about NCF issues through its advocacy committees and 2024 webinars and town halls.

“You can’t take a taxi six blocks for $3.50"

It’s a known fact that airlines have been lowering commissions with non-commissionable fees since the 1990s.

Why Verman, who has been a travel advisor since 1997, decided to speak out now is because he thinks it’s “outrageous” that airlines are now going to the extreme with base fares that are nearly zero.

Air Transat says its pricing 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 was quoted as saying in CBC’s story. "This results in the best value and highest quality experience for our mutual customers."

Verman, however, has identified several issues with the direction things are going.

It’s “deceptive to the public,” for one, to suggest that someone can fly to Lisbon from Toronto for $3.50, he told PAX.

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

Taxes and airport improvement fees are expected, but what about the hundreds of additional dollars that are added to the total price of a ticket?

Verman assumes that's the cost of fuel, but he wants to know why that particular charge is looped in with taxes as opposed to the base fare.

“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."

The practice puts travel advisors and agencies – especially ones who work on commission – at a huge disadvantage, Verman said.

“It’s not like I have the option of raising my fees by $30 to compensate [for the losses],” he said. “We’ll lose business.”

PAX asked Air Transat about its near-zero base fares, and for clarity on why fuel charges are separated from that price, and the airline declined to comment.

A fight for fairness

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

“Businesses are getting crushed,” Verman told PAX. “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.”

The Association of Canadian Independent Travel Advisors (ACITA), meanwhile, is applauding Verman for speaking out.

“This never-ending battle to be fairly compensated for the work we do on behalf of airlines needs to stop,” said ACITA Co-Founder Brenda Slater of Beyond the Beach. “Imagine what might happen if we stopped using suppliers that don't see the value in what we do. Is this what they want? Do they really want passengers to book direct, to hire more staff, [and pay for] more training, equipment and office space? Have they considered the cost of this in comparison to paying out a fair commission?”

The issue, furthermore, highlights why travel advisors should be charging fees, Slater said.

But service fees should not be a replacement for commissions.

“We still maintain that service fees are an agreement between travel advisors and our clients,” Slater said. “Commission is an agreement between suppliers and travel advisors. What we charge clients for our expertise does not and never will be the business of our suppliers. Period.”

Any supplier that tells a travel advisor to charge a fee is “an insult on so many levels,” Slater added.

“We work on your behalf, saving you revenue…Are they really telling us we have no value?” Slater said.

She says it’s like a restaurant deciding not to pay its waiters and bartenders, and telling them, ‘Well, you get tips. Get more tips from your customers.’”

TravelOnly’s Nancy Wilson, also an ACITA co-founder, agrees.

“We work hard for that revenue and to see [airlines] cut it out in such a way is disappointing,” Wilson told PAX. “If they don’t want to pay commission, then make it zero commission. But don’t try to hide that fact under the guise of a non-commissionable fee.”

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.

“No shouting or screaming”

Complaining about it is one thing, but actually doing something about it is another.

Because airlines have been reducing commissions for so long now, complacency has set in, reducing the probability of travel advisors rallying together to elicit positive change, advocates say.

“This has been allowed to happen and there’s been no shouting or screaming,” Verman told PAX. “It took an extreme case for me to say something.”

Wilson said some travel advisors simply have an “it is what it is” attitude about the subject.

“To which I say, ‘Just because it’s been this way for so long, does that make it right?’’ Wilson said.

She’s urging anyone who feels it’s out of their control to consider the following: “If you worked for an employer who cut your salary in half, I’m confident you would not be okay with that,” she said.

“We cannot get complacent with airlines and suppliers who don’t want to compensate us. If we allow it to happen, it will,” she said.

Wilson is encouraging her fellow travel advisors “to not accept it and demand more.”

“It’s not an easy road,” she said. “But we have a louder voice than many give us credit for.”

Don't miss a single travel story: subscribe to PAX today!  Click here to follow PAX on Facebook.