Airlines seek to trim sales costs

[tycoonjack]

Airlines seek to trim sales costs

As the U.S. airline industry fights to stem the flow of blood after a second-quarter loss of $1.4 billion, the major carriers like United Airlines are studying ways to compete against the efficient ticket distribution systems utilized by low-fare rivals JetBlue and Southwest, which managed to turn profits in the quarter.

"United is faced with one big problem in that we are a high-cost carrier," United Airlines President Rono Dutta said during a conference call with analysts.

United, like other high-cost carriers, is accelerating its efforts to reduce the hundreds of millions of dollars it pays to distribute airline tickets. Just last week, the major airlines practically eliminated the base commissions they pay to travel agents, by eliminating payments for international travel based in the United States. Now focus will be on payments the airlines make for bookings made through the major computerized reservations systems.

A study released this week by Global Aviation Associates predicted the airline industry will pay about $2.2 billion in booking fees to the four major providers of reservations systems: Sabre, Worldspan, Galileo and Amadeus. Under the current economic model, airlines pay these companies about $4.36 for every segment of a flight that is booked by a travel agent, according to the study.