Southwest flies right online

Three cheers for Southwest Airlines!

The no-frills carrier did what no other airline had the courage to do: it stopped paying commissions on ticket sales made through the Internet, online services, cable networks, and other forms of consumer-direct electronic commerce.

Painful as it is may be, the Dallas airline’s decision was necessary for interactive travel, because it suggests there is a better way to sell tickets than through the antiquated, corruption-prone “agent commission” model.

Earlier moves by American Airlines, United Airlines, Northwest Airlines, KLM Royal Dutch Airlines, Continental Airlines, and Delta Air Lines to limit Internet commissions only confused the issue. By quietly imposing caps of $10 or more, they gave agents a false hope that the old system was salvageable.

It isn’t. Just ask George Newsom, president of now-defunct PCTravel, who shuttered his site after the latest round of online commission cuts. “I’m not sure that this is a business that is viable,” Newsom said after closing shop.

Southwest is picking up the baton of leadership from those who dropped it. Delta, the first carrier to cut agency commissions in 1995, probably fumbled the proverbial torch into Kevin Mitchell’s hands at Business Travel Contractors Corp., who was then leading the fight to overhaul the commission structure. Mitchell faded into obscurity and now Southwest is showing the way toward an uncertain future.

Hard to believe that Herb Kelleher’s maverick carrier, a constant thorn in the side of the CRSs, is setting the pace for the travel industry. But then again, for anyone who is familiar with Southwest, it shouldn’t come as a surprise. The legendary “www.iflyswa.com” site was one of the first, and some say is still the best, airline Web site. And an impressive half of the carrier’s tickets are electronic today, giving it the distinction of being the most paperless U.S. airline.

I think the best is yet to come from Love Field. Southwest has promised to maintain the traditional 10 percent commission structure through at least 2000 for bookings made by travel agents. I suspect that on Jan. 1, 2001, the carrier will be the first major airline to eliminate commissions entirely, ushering in a new era of travel distribution.

Unless Southwest drops the baton – and I doubt it will – we should start asking ourselves what will replace the commission system. Is a fee-based order feasible? Not in the leisure market. American Express tested fees for some of its customers in 1995 and met a wall of resistance.

Maybe the industry will switch to a wholesale model, in which airlines sell a block of tickets to agencies at a fixed price and the agents then resell the tickets at a profit. It’s an approach that has worked in other businesses and, with the right incentives, could work for both real and virtual travel agencies.

Either way, there must be something better than what we’ve got now. Perhaps Southwest will show the way.

Christopher Elliott is the author of Scammed: How to Save Your Money and Find Better Service in a World of Schemes, Swindles, and Shady Deals. Critics have called it “eye-opening” and “inspiring” — it’ll “grab your attention and won’t let go.” Order your copy now on Amazon, Barnes & Noble or iTunes.

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