Travel agent says Air Transat is dropping base fares to as low as $2 to avoid commissions
Can you fly round-trip from Toronto to Lisbon for as little as $2?
No, but it might seem like you could if it weren’t for taxes, fees and other surcharges on an Air Transat booking that CBC Toronto reviewed for next month.
That’s because the base fare for the trip is $2, but the carrier’s air transportation charge is $600, and other taxes and fees bring the all-inclusive price up to $719.85.
A Greater Toronto Area travel agency flagged the toonie base fare after booking similar round-trip flights to the same destination for clients through Air Transat with a base fare of $3.50 and an all-in price of $723.59.
Jeff Verman, CEO of Plus Travel Group, said he believes airlines are dropping base fares and raising carrier surcharges to avoid paying commissions to travel agents.
“This is a deliberate move to pay us less,” Verman said. “[Our] service fee alone does not make us profitable. Commission is what we need to be profitable each transaction.”
Unlike many travel agencies, Verman’s survived the COVID-19 pandemic. But he said his company is about half the size it was before — and it can’t afford to be operating at a loss on bookings, like making a commission of 18 cents on a $3.50 base fare.
Travel agents get commission only on base fares, and with Air Transat, that commission is five per cent.
“It’s insulting,” he said. “It feels like cheating, that we’re being cheated.”
Verman said he doesn’t see base fares quite this low every day, but he told CBC Toronto that his company regularly encounters base fares under $100. In most of those cases, he said, the vast majority of a consumer’s total ticket price is made up of unexplained surcharges from the airline.
Air Transat in line with industry, airline says
CBC Toronto asked Air Transat how its base fares can be so low, what costs are covered by base fares and surcharges for a flight, and whether base fares are dropping to reduce the amount the airline pays in commission to travel agents.
In an emailed statement, a spokesperson didn’t answer those questions but said Air Transat is in line with Canadian and global industry practices, including for its fare structure, and that it displays the total price of its flights.
“It is well known that flight prices fluctuate based on supply and demand, and our valued partners and travel industry professionals … understand the competitive and dynamic nature of pricing we provide,” spokesperson Bernard Côté said. “This results in the best value and highest quality experience for our mutual customers.”
But a travel industry expert said travel agencies “are getting squeezed” on base fare commissions because there are no regulations around what costs can be considered a surcharge, and airlines would prefer to issue tickets themselves.
“It’s the Wild West when it comes to the surcharges,” said John Gradek, a faculty lecturer and co-ordinator of the aviation management program at McGill University in Montreal.
“Surcharges are very much a tool that they’re using to basically drive competitive behaviour, but also driving profitability on the route. [Airlines] would rather increase the surcharges rather than increase the base fare.”
While airlines are required to show customers a clear all-inclusive price for flights, there are no regulations around surcharges. As a result, travel agent Jeff Verman believes Air Transat is shifting costs from its base fares to surcharges to decrease the airline’s commissions to travel agents.
No financial impact on consumers: expert
Despite having an impact on commissions, Gradek said the shift in pricing from the base fare to surcharges doesn’t change much for consumers because the Canadian Transportation Agency has required carriers to provide all-inclusive ticket prices since 2012.
“The bottom line is that you tell a customer what he or she’s going to pay, and then the government says I don’t really care how it’s split up after that,” he said.
But Verman said it should still matter how fares are split. “It’s basically saying to consumers that you’re flying for free, except for the taxes and surcharges etcetera,” he said. “No one believes $3.50 is what the actual fare should be.”
Verman has filed a complaint with the federal Competition Bureau over what he considers misleading pricing. The bureau acknowledged his report.
When it comes to commissions, Verman and another travel agency owner believe the issue could be partially resolved with a minimum commission fee per booking for travel agencies.
“If we’re going to issue a ticket for the airline, we should be compensated for issuing that ticket,” said Rocky Racco, owner of TTI Travel in Toronto.
Gradek said he thinks commissions are headed in the opposite direction.
“[Airlines] don’t want to pay commission … they don’t want to pay incentives. They don’t want to do it,” he said. “They would much rather you booked directly with them.”
