Northwest to Travel Sites: You're Grounded

Mar 02 2001

So much for the easy livin' in the online travel biz, one of the only consumer e-commerce sectors showing signs of life these days. In an announcement variously described as "terse," "brief" and "very brief," Northwest Airlines announced that it will no longer pay commissions to online travel agencies, effective immediately.

Travelocity fought back by slapping a $10 surcharge on all tickets for flights on Northwest and its partner, KLM Royal Dutch Airlines . Whether these policy changes will hold - and whether the news was expected, mildly surprising or a complete mind-blower - was up for debate in this morning's coverage.

According to Forbes, Northwest's announcement "stunned" Wall Street and at least one analyst, who told writer Mark Lewis there is "no logical answer" for why the airline decided to eliminate commissions online while leaving brick-and-mortar travel agents untouched. Web Travel News seemed far less ruffled by all the commotion. Travelocity and Expedia "appeared unfazed," according to the outlet's Kate Rice, who wrote, "The news was no surprise, as zero commissions was inevitable following steady declines over the past few years."

Several outlets attributed Northwest's decision to a desire to push consumers to its own site, and at least one observer saw this as a potential sign of doom for the online travel agencies. "The biggest danger for Internet travel Web sites right now is that people will go to these sites to shop, and then go to the airlines to buy," said Terry Trippler, an airfare expert for 1travel.com, in the Wall Street Journal. Commenting in the Washington Post's report, another industry prognosticator suggested that the surcharges could make shoppers quit comparison shopping altogether, and this would give airlines even more power to raise prices.

At the moment, Northwest and Travelocity are the only folks taking action in this whole affair, though a report in Newsbytes suggests that Travelocity may blink first and rescind the $10 fee after its stock dove 33 percent yesterday. However, according to Travelocity's hometown Fort Worth Star-Telegram, there is one semi-bright spot here: Other airlines promised not to make similar announcements - for now.

That news must not have made its way to widely quoted analyst Thomas Underwood, who is clearly aiming for Nostradamus-quality forecasts: "It is very likely, in our opinion, that all of the major airlines will either eliminate online commissions in the coming weeks or that Northwest will reinstate its commission. We have no opinion as to which result is more likely." Magic 8-ball, anyone?

Northwest Airlines to Halt Commissions on Web Ticket Sales
Washington Post

Expedia, Travelocity Take Hit Over Commissions
ZDNet

Dog of the Day: Travelocity.com
Forbes

Travelocity Imposes Surcharge On Northwest, KLM Tickets
Wall Street Journal

Travelocity May Withdraw $10 KLM/Northwest Ticket Fee
Newsbytes

Travelocity Shares Fall After Cut in Commissions
Fort Worth Star-Telegram

Northwest Ends Online Commissions, Online Agencies Unfazed
Web Travel News