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Northwest makes a 'bold move' with new ticket fees
by Jeff Horwich, Minnesota Public Radio
August 24, 2004

Starting Friday, buying Northwest tickets at the counter or over the phone will carry an additional fee. New fees will also soon go into effect for travel agents who book using certain reservations systems. (MPR Photo/Jeff Horwich)

Starting later this week, Northwest Airlines will make some major changes to some of its ticket fees. The airline says it is following trends established by low-cost carriers like JetBlue and Southwest, which now compete for 70 percent of Northwest's customer base. But the changes are almost certain rub some consumers and travel agents the wrong way.

Eagan, Minn. — With its new fees, Northwest will essentially charge more when travelers buy tickets through more expensive methods: over the phone, in person, and -- in some cases -- through a travel agent.

The fees are used by none of the other largest U.S. airlines. And only a handful of the low-cost airlines operate this way. But Northwest says the changes are inspired by low-cost competition and the low-cost way of doing business.

Tim Griffin, Northwest's Vice President of Marketing and Distribution, says the fees should save the airline $70 million a year. "We think it offers an array of choices that satisfy the spectrum of consumers, and allows us to be more cost-competitive with the successful carriers who are determining the vast majority of the pricing in the country today," Griffin says.

For consumers, the changes have a simple part, and a complicated part. Here's the simple part: Starting Friday, if you buy your ticket from Northwest over the phone, you'll pay an extra $5. If you're one of a small number who buy tickets at the airport, it's an extra $10.

Buying from the Northwest website, NWA.com, has no charge. The same goes, in most cases, for the travel site Orbitz.com, which was founded by Northwest and other major carriers four years ago.

Now on to the complicated part: Most travel agencies book tickets through one of four global distribution systems, or "GDS's," of which the largest is a company called "Sabre." For each ticket a travel agents buys through a GDS, the GDS charges $12.50 to the airline. Northwest paid 180 million dollars in such fees last year.

If it means that the consumers will have to pay more because the airlines are trying to hide an increase in prices, so be it. - Richard Copland, president of the American Society of Travel Agents

But Griffin says that ends next week. "Instead of absorbing 100 percent of the cost as we had been doing, we'll absorb about an average of $5 and bill the travel agency $3.75 for each one-way ticket," says Griffin.

This includes websites like Travelocity.com and Expedia.com, which book primarily through a GDS. Northwest officials are clear they want to drive more traffic to their own websites for consumers and travel agents. Right now Northwest sells just over 16 percent of its tickets at NWA.com. JetBlue, by comparison, sells 75 percent of tickets from its own site.

Northwest did not consult the travel agent community about its decision. Richard Copland, president of the American Society of Travel Agents, calls the additional fees "insulting."

"We're not going to get emotional over it," Copland says. "We'll just do what we have to do. If it means that the consumers will have to pay more because the airlines are trying to hide an increase in prices, so be it."

Travel consultant Terry Trippler calls Northwest's announcement "a major, major move." Tripper says the fees for phone and airport booking are understandable, but he's concerned about the emphasis away from GDS ticketing. Trippler says driving travel agents away from GDS undermines the one tool they know will show them the full-range of Northwest fare options.

"For the consumer choice...we must keep (GDS) there, because it's the only choice where I can go and look and say, 'This is the lowest fare, these are the rules that go with the fare, this is what I have to do to get it,'" Trippler says.

Minnesota travel agent George Wozniak, president of Hobbit Travel, calls the announcement a "bold move," but he is not worried about the change. Wozniak says his agents already use a variety of methods besides GDS to find tickets, and adjusting to the change will not compromise their ability to find the lowest prices.

"Not only won't it affect it, but we won't have a fee we'll have to pass on additionally to the consumer," Wozniak says.

Northwest's new fees may kick off a broader change in the industry. Or, says American Society of Travel Agents president Richard Copland, the airline may be left twisting in the wind. "The interesting thing will be: Will the other airlines follow? If they don't," Copland predicts, "Northwest will have to back off because they won't be competitive in the marketplace."

That sounds familiar. In the past year, Northwest's competitors and occasionally Northwest have sporadically tried to raise ticket prices, only to have the rest of the industry stay behind. Northwest has again stepped out on a limb. If this change sticks, the airline says it's one more step toward turning a profit.

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