Australian travel agency stocks have been slammed this morning after Qantas (ASX: QAN) announced it would be cutting front-end commissions for international tickets from 5 per cent to 1 per cent
Flight Centre (ASX: FLT) has seen the sharpest drop at the time of writing, down 5.69 per cent at $14.43, having already lost more than $5 per share from its 12-month high above the $20 mark in March.
Other shares in the sector have also dropped including a 4.47 per cent fall for Webjet (ASX: WEB), a 3.09 per cent decline for Corporate Travel Management (ASX: CTD) and a 5.2 per cent drop for Helloworld Travel (ASX: HLO).
As part of plans to reduce costs, Qantas announced the reduction in commissions would take effect from July 2022, giving the industry time to adapt.
"Travel agents remain an important partner and Qantas will work them on broader revenue opportunities, particularly through technology," Qantas said in its update today.
A Qantas spokesperson confirmed with Business News Australia that the measure only applied to travel agents in Australia, for all international tickets issued in Australia except for trans-Tasman flights.
This could imply very different effects for ASX-listed companies depending on their level of exposure outside Australia. For example, in pre-COVID times Flight Centre derived more than half of its revenue outside Australia-New Zealand, whereas Helloworld generated almost all of its sales within the region.
The Australian Federation of Travel Agents (AFTA) has responded with disappointment to Qantas' decision, having made strong representations to the airline on the pressing need to maintain the status quo given travel agents' primary revenue reliance on international travel and the reality that international travel is unlikely to normalise before mid-2022 at the earliest.
"AFTA on behalf of our members and the consumers we support is very disappointed," the AFTA board said in a statement.
"It's true there has been a gradual global transition to reduce BSP payments but that transition happened in a pre-COVID world.
"The reality of COVID and the ongoing paralysis of international travel until at least mid-2022 puts Australia's travel agents and businesses in a very difficult position."
While the federation of travel agents is grateful Qantas has provided one year's notice for these changes, its board claims the reality is that the ongoing paralysis of international travel to and from Australia has hit travel agents and businesses extremely hard.
"And this is another unwelcome blow," the board said.
"The AFTA Board notes the longstanding relationship Qantas has had with travel agents and businesses and we ask Qantas to work closely with us to optimise benefits for agents as we move forward including on QDP [Qantas Distribution Platform].
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