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Online travel agents cry foul

Some feel a new policy from Northwest and KLM to pay online travel agencies a smaller commission than other agencies is a danger to the fledgling industry.

The online travel community is livid over a plan by Northwest and KLM airlines to cut the agents' commissions for online plane ticket sales, prompting at least one of the companies to boycott the air carriers, CNET has learned.

The agents also object to restrictions that one of them, PCTravel, contends is an "invasion of our clients' personal data."

PCTravel has gone so far as to boycott Northwest. A headline on its Web site reads: "Exclusion of Northwest and KLM.'' It also lists what it terms "unacceptable" restrictions on its ability to offer Northwest flights, concluding: "We will no longer be able to offer flights on Northwest Airlines."

Online ticket agents like PCTravel are worried that other carriers will follow the example of Northwest's new policies and if so stifle the growth of the burgeoning online travel market, cutting into sales and reducing choice for consumers. The American Society of Travel Agents, the trade group for travel agents, also is leery of the practice, calling the airlines' plan "premature and confusing."

Northwest and KLM deny charges that the policy will have a negative affect on the online travel industry.

The dispute reflects the Net's sudden impact on long-established business practices and distribution channels in many industries -- in this case, selling plane tickets through human travel agents. It doesn't affect only the Mom-and-Pop online agencies, either. As reported, companies such as Microsoft and American Express announced a deal just this week that will launch both companies into the online travel market.

Effective Thursday, Northwest and its investor and marketing partner KLM, began paying commissions of 5 percent for bookings made on the Internet or other online services. That's half of the 10 percent that it pays other, traditional travel agencies. Commissions were also capped at $25 round trip for domestic tickets, compared with $50 that the carrier normally pays. International flights are capped at $40 round trip. In addition, the airlines are requiring online agents to provide daily reporting of volume and booking patterns, along with other auditing and approval controls.

PCTravel complained that it was limited to no more than six bookings within a 24-hour period or 20 bookings within a 30-day period, which will make it particularly hard to serve customers that make several reservations with a single credit card.

Northwest and Royal Dutch KLM, an international carrier, said the new policy was warranted because consumers do most of the work when they buy a plane ticket on the Net.

"Online customers handle their own airline selection, itinerary planning, their own pricing and ticketing preferences,'' said Mike Levine, Northwest's executive vice president of marketing in a statement issued on July 17. "These customers have elected to do so without the personal assistance and expertise of a travel agent that others find so valuable.''

Added John Temple, Northwest's vice president of sales: "We believe our commission structure for electronic travel is appropriate to the services provided.''

But online travel agents the airlines are underestimating the costs incurred by online travel agents.

"There is an apparent lack of understanding for the true costs incurred in the development of the PC travel system, the ongoing and incremental costs incurred to provide the service, and the ultimate benefit and cost savings accruing to the airline and travel industry in general,'' said Joe Witherspoon, marketing manager for Internet Travel Network, one of the online agents.

Said Ken Orton, president of Preview Travel: "If somebody suddenly cut your commission by 50 percent on a given day, you wouldn't be happy either.'' Preview Travel, whose investors include US West, America Online, and venture capitalist Kleiner Perkins Caufield & Byers, said it already has spent $1 million building its online travel network. That includes developing the software and buying equipment from Microsoft, Intel, and Sybase. In addition, many of the companies offer full-service travel agencies, including vacation packages, Orton added.

Preview Travel executives will meet with Northwest executives on Monday to discuss the problem.

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