What is happening on the agency distribution front?

This week ARC posted their November sales statistics. For those not familiar with ARC, it is the Airline Reporting Corporation and they report airline ticket sales through the travel agency channel (including offline and online agencies).

Here is the top level of what I observe in what has happened this year to date:

  • TOTAL SALES – Total sales in November ($4,057,562,197) was down 24% from October. While we normally see a decline in sales this time of year due to seasonality, but the year over year decline in this case was 20%, which shows how significant the recession impact is on our industry. This decline impacts the airlines themselves, as the agency channel represents not only a higher yield on ticket sales due to higher ticket values, but it is also their only variable cost channel. It also impacts the agencies, due to the fact that many agencies still earn a commission or override compensation based on total sales.
  • TOTAL TRANSACTIONS – Transactions were down in November year over year 19.68%. This trend has a direct impact on ARC themselves (as their compensation is based on transaction processing), but it also signals a direct impact on the GDS companies, as each ticket/transaction represents a multiple of approx 2.2 segments. GDS compensation is generally directly proportionate to the number of segments booked by the travel agency community (both online and offline).
  • DOMESTIC/INTL SPLIT – ARC began reporting domestic and international sales split in 1993, at which time international only represented 24% of all sales. Since commission cuts were instituted at the turn of the century, the percentage of international over domestic has grown dramatically and in November was 45% of all sales. Agents generally earn more on international tickets, so this trend makes total sense.
  • AVERAGE TICKET VALUE – DOMESTIC – The average ticket value in November was $327.34. This is down 5% from October, so we are finally seeing some impact of the decrease in jet fuel. In August, when the price of oil was over $140 per barrel, the average air ticket was $344.27. This is good news for the consumer, but not for an agent that gets paid a % based commission.
  • AVERAGE TICKET VALUE – INTERNATIONAL – The average ticket value in November was $767.94, down 8% from October. The average international ticket price in August was $875.04, so we are seeing relief here as well. This is good news for the consumer, but not for an agent that gets paid a % based commission.
  • NUMBER OF US AGENCIES – Year to date, the number of agencies is down just 2%, with a total of 17834 as of the end of November.
  • SALES PER AGENCY – The November sales per agency is down significantly at $227,518, down 24% from October. Sales per agency has actually been growing year over year, primarily due to the consolidation in the industry (resulting agencies are larger) and also due to the growth of the online agencies.

Please let me know if you have any questions on my observations.

Chicke Fitzgerald

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