Shares of online travel agencies Expedia and Travelocity slumped Thursday after airlines Northwest Airlines and KLM Royal Dutch Airlines jointly said they would eliminate Internet travel commissions.
In a terse release Wednesday, Northwest and KLM said they will eliminate the commissions effective 1 March. Northwest said it was paying Internet sites a commission of 5 percent capped at $10 for every ticket sold. The airlines, however, will keep paying commissions to traditional travel agencies.
If other airlines follow the Northwest and KLM lead, Expedia and Travelocity are expected to respond with ticket surcharges, which would maintain profit margins but could hurt revenue growth, analysts said. Airline ticket sales account for a big chunk of sales for the online travel agencies. Expedia and Travelocity, the largest of those agencies, garner revenue through transactions and advertisements on their respective portals.
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