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Air Canada reinstating travel agent commissions with reward for sale of Tango fares

June 5, 2009, MONTREAL, (CP By Ross Marowits) - Air Canada is making a play to regain domestic market share lost to rival WestJet by reinstating some commissions to travel agents as part of the new management's overhaul of decisions that undermined loyalty and reduced sales.


June 5, 2009
By Carey Fredericks

June 5, 2009, MONTREAL, (CP By Ross Marowits) – Air Canada is making a play to regain domestic market share lost to rival WestJet by reinstating some commissions to travel agents as part of the new management's overhaul of decisions that undermined loyalty and reduced sales.

Canada's largest carrier said Thursday it will start paying four per cent commissions effective immediately for Tango no-frills and Jazz service within Canada, the same rate WestJet pays travel agents after lowering the level from nine per cent last week.

However, the Calgary-based carrier's commission applies to the sale of tickets for all WestJet seats and destinations, rather than just the lowest fare within Canada.

Air Canada does not pay commissions on tickets booked in its higher fare classes or on travel to the United States and international flights.

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The cash-strapped airline, which is currently bargaining new labour contracts with its major unions, said the commissions will reward the support of Canadian travel agents.

“This is consistent with the direction of the new Air Canada team to re-engage our travel trade partners,'' chief commercial officer Ben Smith said.

Air Canada created an uproar among travel agents in 2001 when it eliminated the commissions.

The Association of Canadian Travel Agencies said it was pleased that Air Canada was leveraging the strengths of the country's travel agencies.

Air Canada's share of the domestic market fell to 57 per cent as of last fall, compared with 36 per cent for WestJet which aims to capture 45 to 50 per cent of the market within five years.

“This should boost Air Canada's business, absolutely,'' association president David McCaig said in an interview from Vancouver.

“When times are tough it's good to have as many friends as you possibly can,'' said McCaig.

The Canadian Automobile Association also welcomed the new commissions.

“It's a step in the right direction to see carriers getting to be at par with one another for agents,'' said Edyta Zdancewicz, spokeswoman for CAA Travel.

But one small Montreal-based travel owner dismissed Air Canada's move, saying he makes more money from contracts with individual airlines than when he earned at least nine per cent in commissions from domestic, transborder and international fares.

`Air Canada, I only use it when I have to do it. There's a lot of dissatisfaction in the travelling public with Air Canada,'' said Mario, who didn't want to give his surname.

He also complained that fares on Air Canada's website are often lower than what is available to agents through other booking software.

Aviation analyst Jacques Kavafian of Research Capital Corp. said the changes, including the elimination of a $25 fee for passengers booking directly with a call centre, are aimed squarely at stopping the market erosion to WestJet.

“I think there were some stupid decisions made that are being reversed, which is good for the company's image,'' he said in an interview.

“They're trying to basically not nickel and dime passengers anymore and getting closer to what WestJet offers.''

Air Canada has said that up to 60 per cent of its domestic fares are Tango.

On the Toronto Stock Exchange, Air Canada's shares gained five cents, or 3.68 per cent, to close at $1.41 in Thursday trading. Over the last year, the shares have traded between 73 cents and $9.35.