ACTA “Deeply Concerned & Disappointed” by Air Canada Commission Cuts

The recent decision by Air Canada to cut travel advisor commissions effective July 1 isn’t the death blow it once was, when agencies were much more dependent on the revenues from selling air travel.

But it still hurts.

Suzanne Acton-Gervais, president of the Association of Canadian Travel Advisors (ACTA), says the organization is “deeply concerned and disappointed” by Air Canada’s “significant” reduction in commissions.

“The feedback we are receiving from members across the country is clear: these reductions are substantial and will have a meaningful impact on many travel businesses,” Acton-Gervais said in a statement.

Hammered by fuel costs that have soared since the late February start of the U.S./Israeli war on Iran, Air Canada has positioned the commission cuts as a “difficult decision but a necessary step.” 

The brutal truth is that travel companies of all stripes are always seeking ways to cut costs in a volatile industry prone to external shocks. Travel advisor compensation is frequently a desirable target, despite all the talk of partnership and the importance of the advisor role.

Executives of major companies will often speak glowingly about the supplier/advisor relationship at an industry conference, then tell financial analysts on an earnings call that cutting distribution costs – which includes advisor compensation – is a priority.

Selling air was once the backbone of most travel agencies. A structural shift at the turn of this century marked the beginning of the end of the traditional 10% commission model, and over the past 25 years, travel advisors have had to pivot to find more profitable activities.

Advisors still sell a lot of air tickets, but for most it’s not a part of their business that fully compensates the effort required. 

In a letter from ACTA to Air Canada EVP and Chief Commercial Officer Mark Galardo seen by Travel Market Report Canada, Acton-Gervais said travel advisors still play an important role in generating revenue for the airline – she estimates the cuts affect compensation associated with approximately 25% of Air Canada’s revenues.

“(Travel advisors) generate substantial revenue, acquire and retain customers, promote Air Canada products, and provide support to travellers before, during, and after their journeys. In an increasingly complex travel environment, their role has expanded significantly, yet compensation continues to move in the opposite direction.”

While recognizing that airlines are currently struggling with high fuel costs, ACTA argues that compensation cuts are a recurring issue.

“Our members are particularly concerned that this reduction does not occur in isolation. Many agencies are still absorbing the impact of previous compensation reductions implemented less than a year ago. The cumulative effect of successive reductions, combined with only 30 days’ notice of this latest change, is creating significant pressure on agency business models and raising concerns about the long-term sustainability of the agency-airline partnership.”

For its part, Air Canada says the changes to compensation are designed to help the airline “remain competitive.” AC says it still offers a compelling incentive program through agreements and support platforms like AC&Me.

While Air Canada has not officially detailed the compensation changes publicly, Travel Market Report Canada has seen communications from the airline to retailers that detail several changes, including a reduction in commission on Business Class and Premium Economy tickets. Perhaps the most impactful change is that commission on group bookings will be eliminated July 1, barring any changes before that date. 

Acton-Gervais says ACTA has held two meetings with AC leadership to protest and discuss the new policies, which were announced on June 1 for a July 1 start date.

“While we appreciated the opportunity for open and constructive dialogue, we remain disappointed that no meaningful progress has been made toward addressing the concerns raised by our members,” ACTA’s letter to Air Canada stated. 

“I respectfully request that Air Canada reconsider these changes and conduct a further review of their impact on the travel agency community. We believe there remains an opportunity to identify a more balanced approach that recognizes the value travel agencies and travel advisors deliver while supporting Air Canada’s commercial objectives, including through a more gradual implementation timeline and revisions that would lessen the impact on agency partners.”