Companies

Air China cuts agents' commission on overseas flights 2 percentage points

(Agencies)
Updated: 2010-07-07 14:50

A security personnel walks past an Air China Boeing 737-300 plane at Hongqiao Airport in Shanghai on January 18, 2010. [Agencies]

Air China Ltd reduced the commission paid to travel agents for sales on overseas flights by 2 percentage points to pare selling costs, but said it hasn't reduced the amount of commissions it pays to agents for sale of tickets aboard domestic flights.

Related readings:  Air China completes one year of safety in Hubei  Air China to buy 20 Boeing planes for $1.398b

The commission given for sales of domestic tickets has remained unchanged at 3 percent, Wang Kai, a manager at Air China's investor relations department, said today by telephone.

The carrier did reduce commissions paid for sales of tickets for international flights by 2 percentage points in June, Wang said.

The change was made last month, Wang said today by phone, without elaborating on the new rate.

Online travel agents Ctrip.com International Ltd and eLong Inc, which both get 100 percent of their sales in China, plunged in New York yesterday after Goldman Sachs Group Inc said that China's big three carriers had reduced commissions. Worldwide, airlines have cut commissions and boosted ticket sales via their own websites to reduce expenses.

"This trend will continue as there are too many sales channels," Hu Fajin, Air China's senior manager for e-commerce, said today at an aviation conference in Beijing. Online travel agents may eventually have to charge customers, he said.

China Eastern Airline Corp spokesman Li Jiang declined to comment. China Southern Airline Co Board Secretary Xie Bing didn't answer calls to his mobile phone. China Southern and China Eastern are the nation's two biggest carriers.

Jane Sun, chief financial officer at Ctrip.com, couldn't be reached for comments at her office. No one was immediately available for comment in eLong's media relations department.

Ctrip.com declined 14 percent yesterday in New York to $32.81, the biggest drop since December 2008. eLong, part-owned by Expedia Inc, fell 8.4 percent to $12.

Commission rates will decline by about two percentage points to around 3 percent of ticket prices, Goldman Sachs said in a note to clients, citing Chinese media.

"It's expected for airlines to cut commissions under today's cost pressure," said Wang Liqun, general manager of marketing and commerce at Beijing-based China United Airlines said in Beijing. "An aggressive projection is that there won't be any more agents in two years."