Flight Centre, Singapore Airlines clash on commissions

May 23, 2009
Singapore Democrats

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Steve Creedy
The Australian

An acrimonious dispute between Singapore Airlines and travel giant Flight Centre spilled into the public domain yesterday after the airline warned its frequent flyers the agency was no longer actively selling its fares.

Singapore’s Krisflyer members were warned in an email that they might no longer be able to buy tickets for its flights from Flight Centre, and pointed customers to other travel agencies and its website.

The move came after Flight Centre on Thursday launched a “Turn the Screw on SQ” campaign and told staff it was initiating a “stop sell” on Singapore and its Silkair subsidiary.

While Flight Centre yesterday denied it was at war with Singapore, an internal email obtained by The Weekend Australian told staff on Thursday to attempt to “switch sell” to an alternative preferred carrier all clients who asked for tickets on Singapore Airlines flights. It said Flight Centre would no longer offer Singapore as an airline option to clients, no longer market or promote Singapore Airlines fares and no longer accept information or promotional material from the airline’s representatives.

The dispute stems from demands by Flight Centre for higher incentive payments as part of a deal that gives Singapore preferred status.

These payments are above the standard commission Singapore pays all travel agents and are normally tied to a sales target. One suggestion yesterday was that Flight Centre wanted to boost its incentive commission to 8 per cent but neither side would comment on details.

Singapore confirmed that attempts to conclude the agency incentive agreement for the new financial year had been unsuccessful.

“As Singapore Airlines could not accede to all of Flight Centre’s demands, we understand Singapore Airlines airfares might not be available for purchase through Flight Centre retail outlets in Australia and New Zealand,” said Subhas Menon, SIA regional vice-president, South West Pacific.

“Singapore Airlines has agreements in place with other major consortia. Consequently, Singapore Airlines tickets can be purchased as normal through travel agents, except Flight Centre. We look forward to working with our trade partners in the months ahead to stimulate consumer demand for travel for the benefit of everyone in the industry.”

The push to boost commissions comes as lower fares and falling accommodation costs eat into travel agency profits.

Flight Centre has issued three profit warnings in recent months, and moves by airlines and other travel companies to slash prices mean that percentage-based commissions have shrunk.

The company last month warned that its full-year net profit would fall to between $36 million and $44 million because of $60million in losses from its US-based Liberty Travel business. That compared to a $143 million net profit in 2007-08.

Flight Centre spokesman Haydn Long said yesterday that the travel chain would still sell Singapore seats on request but it was no longer actively promoting the airline.

Mr Long said the travel agency had agreements with about 40 preferred airlines servicing Australia.

http://www.theaustralian.news.com.au/business/story/0,28124,25523595-36418,00.html