Airlines Counter Hall Class Action

Carriers say they paid more in overrides than commissions lost

By: Jerry Chandler

A lawsuit alleging that major airlines conspired to fix commissions and thus drive independent travel agents out of business, has picked up dramatic momentum.

In the wake of Senior U.S. Judge W. Earl Britt’s ruling that the suit now has class action status (News, Sept. 23), major airlines last week filed papers challenging damages agents say they’ve suffered as a result of a series of seven commission cuts and caps over recent years.

The carriers claim the plaintiff’s numbers are wrong because they’re using ARC data that does not include override commissions. Further, the airlines contend they’ve paid out more in overrides since 1997 than agents lost as a result of commission cuts and caps.

The class action ruling may be the most significant development yet in the three-year-old lawsuit. In it, Judge Britt concluded that the “plaintiffs have made a threshold showing that a conspiracy to cut, cap or eliminate travel agents’ base commissions, if proven, would have had a common impact for members of that proposed class.”

The upshot?

“Now, the airlines have a problem,” said Al Anolik, the San Francisco-based attorney representing ARTA, one of the plaintiffs in the suit. “Had the court not certified that we were representative of everybody, then we couldn’t have gone ahead with the suit. It would not have been economically feasible.”

The suit would have remained one in which four travel agents and ARTA would take on what amounted to most of this country’s airline industry. Now, the seeds of the suit planted by North Carolina travel agent Sarah Hall in 1999 appear to have the potential of bearing fruit. That’s because all travel agents in the country are represented in the action.

When Judge Britt certified the action as representing a class of people, Anolik indicated the carriers started to take things far more seriously. Their reaction, he said, was to try to put agents on the defensive as far as damages are concerned arguing that commission overrides paid since 1997 more than made up for base commissions lost.

When ARTA first got word of the airlines’ assertion, “We picked ourselves off the floor from laughing so hard,” said Pat Funk, the association’s vice president of operations. “It just shows that these guys haven’t got a clue.

“More than 55% of the agencies in this country never receive an override commission. Never,” Funk said. “Yeah, the airlines are paying overrides and even some up-front commissions. But they’re paying them to the big agencies.”

Repeated attempts by TravelAge West, to contact airline attorneys, or to get them to go on the record about the suit in general and the overrides vs. base commissions issue in particular were unsuccessful. One attorney, Gary J. Rickner of Ward & Smith in New Bern, N.C., said he couldn’t comment because, “We’re still in litigation.” Rickner is the local representative for Northwest Airlines in the suit. The action is being adjudicated in the U.S. District Court, Eastern District of North Carolina, Southern Division.

ARTA asked its members, ASTA, agency consortia and franchisers “everybody we [could] think of,” said ARTA President John Hawks to fax its attorneys specific financial information to “refute the airlines’ claims.”

ARTA Queries

In a communique labeled “Urgent,” ARTA asked agents to answer the following questions:

" For any and all calendar years that you have records (starting with 2002 and working backward, or as many years as you can go), what did you earn in total compensation from the airlines?

" For each of those years, what did you earn in base commissions from the airlines?

" For each of those years, what did you earn in overrides from the airlines?

" For each of those years, what did you earn in other types of pay and benefits from the airlines (e.g., free tickets AD75s, etc.)?

" Have you seen any important increases in overrides or other types of pay and benefits (but not base commissions) from the airlines in the last few months?

ARTA requested that the information be sent to attorneys no later than Oct. 15.

For now, preparations for what could prove to be a climactic confrontation between this country’s travel agents and its major airlines continues.

The trial is set for April 28, 2003. And although a specific dollar amount that agents could receive should they prevail has yet to be determined, ARTA attorney Anolik said it could be “in the billions.”