Southwest Airlines Announces New Travel Agency Commission Policy

Southwest Airlines (NYSE: LUV) today announced that effective Jan. 1, 2001, it will pay an eight percent commission on all Southwest Ticketless transactions issued by traditional travel agencies and five percent commission on all paper ticket transactions issued.

The new commission policy replaces a commitment the airline made to the American Society of Travel Agents (ASTA) in March 1995 to pay agents a ten percent commission on all Southwest tickets issued through Dec. 31, 2000. Currently, Southwest is the only major airline paying a full ten percent commission with no cap to travel agents.

The new policy will pay traditional travel agents (Southwest does not pay commissions for Internet bookings) an eight percent commission. Further, the airline announced that it will pay five percent commission to travel agents who do not utilize the carrier's Ticketless Travel System (except for travel booked through the Southwest Vacations, Meetings, or Groups programs, where the eight percent commission will apply). A cap of $30 on a one-way fare and of $60 on a roundtrip fare will apply to both commission levels. More than 80 percent of Southwest travelers now travel without a ticket, and the Ticketless system allows the carrier to help control costs and continue to offer low fares.

"This was a difficult decision," said Herb Kelleher, Southwest's president, chairman, and CEO. "But we have to remain the low fare policeman on the beat. To keep fares low, we have to look for ways to contain costs and remain competitive."

Many travel agencies now charge their Customers fees for their services, he said, and for Southwest to pay a premium on top of that by paying a full ten percent commission was not financially prudent.

"We highly value our travel agency partners," Kelleher said, "as evidenced by the fact that our new eight percent commission is 60 percent higher than that currently paid by our major airline competitors, and our $30 and $60 caps are 20 percent higher than theirs. Our appreciation for what they bring to the table is further evidenced by our increased commitment with Sabre over the years to aid in agents' overall productivity and our opposition to anti- competitive threats such as Orbitz."

Travel agents continue to be an important distribution network within the travel industry, he said. According to the Travel Industry Association, in the last three years, nearly half of all Americans who traveled used a travel agent to book a flight, hotel room, rental car, or tour.