Expedia swoops past fee cuts

"We don't work for free," Expedia spokeswoman Suzi LeVine said Thursday. LeVine would not disclose their arrangement with Continental Airlines, which announced Wednesday that it would no longer pay a commission--usually 5 percent of the fare and capped at $10--on Internet airfare.

"There is no material change in what we are being paid by Continental," LeVine said.

A Continental spokesman said the company had no comment.

Al Comeaux, Travelocity's vice president of public relations, had no comment on the issue of the cuts in commission fees, but on Monday said: "We continue to sell Continental flights through our Web site, and we're not charging a fee for Continental flights," adding, "We're a business, and we don't work for free."

Expedia has done this before. In April, a month after Northwest Airlines stopped paying commissions on fares booked over the Internet, Expedia quietly struck a deal that would allow it to continue to be compensated for booking Northwest fares. Terms of that agreement were also undisclosed.

The reason that Continental might be willing to continue paying Expedia a commission is that it can't afford not to, said Lorraine Sileo, an analyst with research group PhoCusWright.

"There's probably only a handful (of Net travel agencies) that make a huge difference to the airlines' business," Sileo said.

With commissions amounting to up to 50 percent of online travel companies' revenue, a widespread acceptance among carriers to cut online commissions would deal a severe blow to companies like Expedia, Travelocity and Orbitz, analysts estimated.

To make up for the lost income, online travel companies are often forced to slap a surcharge on an airline's fares--which cuts into the bargain prices that buyers are looking for online. For example, soon after Northwest and KLM stopped paying commissions, Travelocity imposed a $10 surcharge on Northwest and KLM flights.