KLM Goes with Net Fares

Uncategorized June 29 2004 0 Comments

As you likely know, airlines give essentially the same fares to all distribution points, and pay commissions and/or overrides to those fares to travel agencies (in some cases). In Europe, that is beginning to change. Led by a similar move by SAS, KLM is changing to a so-called net fare system in the Netherlands and Scandanavia. A net fare means that KLM does not pay a commission; rather, it subtracts the commission from the fare it gives to a travel agent, allowing the travel agency to mark up the fare whatever it wants. KLM also will charge consumers who buy directly from the airline a fee based on where they make the purchase ($12 for a web booking, up to $55 for an offline booking).

This changes the airline ticket model from a commission-based approach to a wholesale approach, giving distributors more flexibility to compete (or charge whatever service fees they’d like). It’s a significant change, and a way to appease distributors who are getting tired of shrinking commissions.

(editor’s note: Yes, I know, it’s not the funniest or wackiest story in the world, but it’s a new way of doing business and I thought I’d make you choke down your metaphoric brussel sprouts this morning. Carry on.)

Leave a Reply