Amtrak to pay travel agents more

February 23, 1995|By Bloomberg Business News

WASHINGTON -- Amtrak, the national passenger railroad system, said yesterday that it will increase commissions to travel agents in a bid to capture business from air carriers.

Amtrak's increase runs counter to the major airlines' recent moves to cap their standard 10 percent commission at $25 on one-way domestic flights and at $50 on two-way flights.

Washington-based Amtrak said it plans to boost its payment on short-term promotional fares to between 12 percent and 15 percent of a ticket's price, up from 10 percent.

"Amtrak is reviewing its entire travel-agency partnership with an eye toward helping travel agencies and Amtrak earn even more revenue," said Arthur F. McMahon, chief executive of the railroad's intercity business unit.

Mr. McMahon announced the commission increase in a letter to 32 major travel agency organizations, including the 25,000-member American Society of Travel Agents.

Travel agents say the airlines' commission cuts will reduce their revenue and push some out of business. Some agents hope to make up the revenue loss by steering customers away from those carriers paying lower commissions.

Amtrak's commission increase is designed to encourage agents to direct more travelers toward the rail system, said Robert Borella, a spokesman for the railroad.

"We certainly see this as an opportunity to capitalize on something that the airlines have done," he said.

In its fiscal year that ended Sept. 30, travel agents generated 40 percent, or $348.1 million, of Amtrak's passenger-related revenue.

That's an amount "we want to substantially increase," Mr. McMahon said.

The airlines have lost billions in recent years and are looking to slash commissions to reduce their costs.

Amtrak, too, has suffered from losses. Facing a deficit of $200 million this year and trying to stave off a possible shutdown by Congress, Amtrak in December announced plans to discontinue service on a fifth of its routes and cut 5,500 jobs by the end of fiscal 1996.

The Congressional Budget Office said the railroad also needs a large capital infusion to overhaul its rail cars. Amtrak received federal subsidies of $972 million last year.

If Amtrak's experiment with increasing commissions fails, that failure could hasten the railroad's decline by widening the annual deficit.

rTC

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