Can Selling Air Be Profitable? You Bet!

Ten years ago most leisure travel sellers gave up on the idea of making money on air tickets. Although most continued to sell air, and some began charging fees, few believed there would ever be money to make in air again.

Fast forward a few years. Virtuoso launches an air program, then a few years later American Marketing Group, Vacation.com and Ensemble Travel Group launch their air programs. Suddenly, there’s a whole lot of airline money on the table for leisure agencies.

Defining Air Programs

Airline programs operated by agency marketing groups almost always have agreements in place with a varying number of international carriers. These programs usually provide upfront commissions to member agencies booking with partner airlines. Some programs, such as Ensemble Group Travel’s also provide net rates.

At least one of the programs, Virtuoso’s, also has air agreements in place with a much smaller selection of domestic airlines for international routes.

An even fewer number of groups have agreements with domestic airlines for specific domestic routes. Two such groups are Virtuoso and Vacation.com (through its partnership with Uniglobe). These contracts are based on market share movement and provide overrides once certain goals have been achieved, with some net fares available.

The success of these programs is predicated on their use by travel agents. In an interview for the article “Direct Airline Commissions: Reality or Urban Myth,” Bruce Bishins, CEO and president of ARTA Canada, told Travel Market Report that travel agents do not participate in these programs as much as the marketing groups would like them to.

“While it’s easy for the consortium to set the standard and say here’s what our preferred supplier agreement is, it’s very difficult to get the local participating agencies to honor the agreement as often as the consortium might want,” according to Bishins.

Bishins added that it is a real challenge to get travel agents to change their behavior when it comes to booking airlines, particularly because air more than any other travel product is often determined by clients and geographic routing.

When Travel Market Report turned to the marketing group’s themselves to see if this was the case, the messages were mixed. All of the groups TMR spoke with said the majority of member agencies make active use of their programs. Even Ensemble, which has the newest air program, launched this past fall, has already seen at least 50% of its members engage with the program.

“As other forms of business have become somewhat less profitable for agents to sell they’re looking for more and more opportunities to make money,” said Jack Mannix, president and CEO of Ensemble.

According to research by ASTA, approximately 25% of an average agency’s total volume comes from booking air. That’s potentially a lot of money on the table. Even if only a small portion of that is international, when agents can sell business and first class tickets, they can bring in a lot of money.

Roxanne Boryczki, president of AZ Trails Travel told TMR that even if an agent can only sell coach seats on international flights it’s still a four or six or 10% commission that they didn’t have before.

Air Programs Not Front of Mind

Marketing group leaders said their members are actively using the air programs, however several executives TMR spoke with also alluded to the fact that, at least in the beginning, it takes a lot of prodding to get travel sellers actively remembering that an air program is available to them.

“Agents sort of discounted the air side of business in some respects over the past few years just because of the fact that it was not as profitable as it once was when there were commissions on them,” Mannix said.

Jim Osborne, vice president of Virtuoso’s air and specialty products, told Travel Market Report that when he first took over the group’s air program eight years ago, he definitely had to work to overcome agents’ mental attitude of having walked away from air. Virtuoso tackled this challenge with communication and training.

“We built a large database of member e-mails and then contacted agents to ask them if they wanted to receive regular updates about the Virtuoso air program,” he said. Once agents opted in, Osborne and his team began sending regular e-mails, thereby keeping the program, and the preferred airlines, in the front of agents’ minds.

Osborne said he initially encountered some resistance among agents he referred to as “naysayers.” When the program first launched these agents would call in with a route they wanted to book that didn’t fit with Virtuoso’s air program. They’d immediately jump to the conclusion that the Virtuoso air program didn’t work. Osborne and his team had to convince them to give the program more than one chance. Eventually, those agents would call in with a route that fit and for which they got paid a big commission. Afterwards, these same naysayers almost always became the program’s strongest proponents.

Currently, 96% of Virtuoso membership uses the program in one way or another and the demand from agents has increased so much that the air program is now open for agents to call 24/7. On average, he told TMR, 1.5 million ARC tickets a week are processed by Virtuoso’s air program.

Ensemble is still working on building that awareness. Brian Chapin, who heads up Ensemble’s air program said right now the group’s challenge is getting agents to remember the program exists and who the preferred partners are.

“We have to be constantly motivating everybody to be using it and we have to be training them and keeping them posted,” Mannix added.

Boryczki, whose AZ Trail Travel agency is an Ensemble member, is working on training her agents to use the program. She printed out a list of all the preferreds and placed it on all her sellers’ desks so that it is right in front of them and easily available for reference. She said she also sends them “gentle reminders” via e-mail and talks about the program at staff meetings.

According to Vacation.com’s vice president of marketing Stephen McGillivray, marketing groups need to make it clear to their members that they don’t have to grow air volume – something most members might find difficult. Instead they must understand that they simply need to direct what air volume they have to other carriers – the preferreds in the program.

“You’ve got to get into a managed air mentality of figuring out how to move business. Don’t book any airline, book x and y instead.”

According to Mannix, getting this message across isn’t too difficult.

“For decades we’ve been pushing agencies to sell certain preferred suppliers, albeit not necessarily in the air category, so the concept is not new.”

Jim Mazza, COO of Travelsavers (an American Marketing Group company) added that as long as the schedules and fares are comparable to what agents have been selling, or there is a significant reduction in the fare price, it is relatively easy for an agent to sell a preferred air carrier.

Stephanie Turner, president & CEO of Brentwood Travel, an active user of the Ensemble air program, agreed that the final booking must benefit first the client and then the agency, but stressed the importance of keeping such programs front of mind when selling air, or any form of travel for that matter.

“For an agency to survive and thrive, it must find ways to make money and the savvy agents know how to do this and will use the tools at hand.”