Industry Power Centers Take Shape

1985 was a pivotal year for travel. Corporate travel structures, in particular, were coalescing around some of the traditional entities the industry still operates through today. 

The timeline that runs through this article cites a number of industry developments that raised my curiosity about 1985, but that curiosity was hard to satisfy. The truth is that the timeline featured here is nearly all that is left in BTN’s archive for 1985, unless there is a box we missed when searching through our storage facility in Rutherford, NJ, where the total oeuvre landed after a quick pandemic-era purge of BTN’s New York office. We will continue to look for these issues, and I’ll keep you updated when we find them. (Same is true for 1986, but we pick up strong in 1987, so don’t worry.)

Let’s take a look at those key points in the timeline that piqued my inner Nancy Drew girl detective instincts.

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Credit: BTN recreated this timeline from a list of industry events compiled by editors of BTN's 1989 fifth anniversary retrospective: Jim Alkon, Jeanette Borzo, Judi Bredemeier, Mary Brisson, Barbara Cook, Richard D'Ambrosio, Shann Davies, Larry Kilman, David McCann, Laura Koss, Don Munro, Imitiaz Muqbil, Jody Oesterreicher, Magdalene Ruzza. Thanks guys!

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First, in January, the U.S. Department of Justice approved the formation of Airlines Reporting Corp. ARC, in many ways, is the successor organization to what was once the Air Traffic Conference, which was the entity that granted travel agencies the authority to sell—and earn commissions on—airline tickets. Prior to 1980, ATC also set those commission rates. A decision by the Civil Aeronautics Board in 1980 determined set commissions were anti-competitive and as of February that year airlines were able set their own commissions with agencies. That rate ultimately landed by 1985 at 10 percent for full-service agencies, but not for corporate travel offices, which were limited to 3 percent.

Second, the National Passenger Traffic Association (precursor to National Business Travel Association and, then of course, today’s GBTA) in May purchased a travel agency to support what was known then as corporate travel offices “to control their own destiny” in terms of selling airline tickets and earning commissions. According to BTN reporters in 1985, NPTA also wanted a seat on ARC's agency advisory board, which would have helped embed corporate travel interests in the new power center. NPTA's agency purchase would have put it in the position of being eligible for such a seat. However, ARC denied NPTA that position with the new organization due to “many airlines long-standing policy not to appoint corporate travel departments as sellers of airline tickets,” according to BTN reporters at the time. 

Third, Continental Airlines in September settled a dispute with Lifeco, which was a specialized travel agency that helped power ticket sales via corporate travel offices. The carrier accused Lifeco of claiming 10 percent commission for corporate travel offices. This was, at the time, the going commission rate set by airlines for authorized full-service travel agencies. Corporate travel offices were generally limited by airlines to 3 percent. Continental backs off from dropping Lifeco as a ticket agent.

Fourth, and also in September, ARC repealed its mandatory agency classification system in a move that upgrades many agencies that were currently classified as ‘in-plants’ to full-service agency status. 

Seriously, what’s going on here?

To be honest, without BTN to help me, it has been pretty hard to figure it out. I found myself rooting around through scholarly journals about government regulation of the travel industry, scraping screens of archived Chicago Tribune articles, leveraging my New York Times subscription for some crumbs there and carefully picking my way though a handful of pretty sketchy old web pages.

What I found were some lawsuits, for sure. More fundamentally, however, we are looking at an industry grappling with the imminent shutdown of the Civil Aeronautics Board coupled with a simultaneous trigger that deregulated, on Jan. 1, 1986, which entities are authorized to sell and earn commissions on airline tickets.  

[Spoiler alert on much of this: Airlines would scrap agent commissions within 10 years, but no one knows that at this point.]

With the sunsetting of the Air Traffic Conference and the formation of Airlines Reporting Corp., there’s an opportunity at hand to exert influence on the way the overall travel industry—particularly as they relate to agencies and corporate travel departments—will develop.

Corporate travel offices as represented by the NPTA see themselves as having been disadvantaged in the commission mix. While these departments are playing a similar role as an agent, when it comes to ticket sales for their organizations, they earn zero to 3 percent commission as limited by the airline community.

A seat on the agency advisory board of ARC would allow corporate travel offices to represent their interests and relative buying power in the industry. NPTA's decision to purchase an ARC-authorized travel agency as potential gateway to that board seat makes a lot of sense. But the NPTA agency purchase "fizzles" according to the BTN timeline authors.

The events in September make me think there may have been diminishing reasons for NPTA to purchase an agency. The Continental v. Lifeco suit circles around commission issues. The companies settle the dispute. I can find zero information about the terms of that settlement, but I do know what doesn't happen. Continental stops short of dropping Lifeco as a ticketing agent. 

There could be lots of reasons for this, primarily that the agency sells a lot of tickets and Continental wouldn't have wanted to lose that outlet. Lifeco, afterall, is the 7th largest travel agency in the U.S. in 1985 according to BTN's 1985 Business Travel Survey special issue (the single extant issue from the 1985 archive). And, agencies at the time were selling 75 percent to 80 percent of airlines tickets. There’s no internet, people! 

But also the dispute in play regarding the 10 percent versus 3 percent commission structure is about to become moot. ARC in the same month repeals the agency classification system in a way that clears the in-plant agencies to upgrade to full-service agency status.

I know this feels like it’s really in the weeds. But it’s all a massive change for corporate travel offices—enough of a change that it hits mainstream news. A headline in a decent-size article in The Chicago Tribune reads: Major Firms Ready to Book Air Travel. The Mar. 5, 1985, article interviews a number of corporate travel directors, but one in particular is bullish on turning a profit for their company. 

Allied Corp. corporate travel manager Arlene Macchia estimated the firm would triple their $9 million travel volume (this is 1985) by upgrading the internal department to a full-service agency and opening up the department to book travel for external clients. In addition, she said, the firm would save $800,000. 

Remember, there were lots of changes happening all at once, and six months later, when ARC repeals its classification rules, it might not be necessary to open the operation to outsiders. But the idea might remain tantalizing, given the potential financial upside.

According to a 2015 opinion article in TravelPulse that reminisced about airline commission days, “…at the time many travel agencies got 80 percent of their business from airline sales. And why not? It was good money and it was relatively easy to get.”

Other corporates told the Tribune they were considering the same, including going direct to airlines for their own deals, and turning some profit to help fund rising travel costs in a deregulated market. They said airlines didn’t want to talk about those supplier-direct dealings because the carriers feared retribution from powerful agencies that represented such a lion’s share of their ticket sales. 

These corporate travel offices were beginning to architect programs in ways that have similar outlines to how we talk about architecting programs today, albeit with totally different technology, service and possibly commission ambitions. Indeed, I hear increased rumblings of more companies thinking about how to take control of their technology and data reporting stacks, and there are new models shaping our industry today that hearken to those “supplier-direct” comments from the Chicago Tribune in 1985. 

There will be more familiar shadows as we continue our journey through BTN’s 40 years of business travel industry coverage. I really enjoyed doing the “detective work” to understand how 1985 shaped the industry that we know today—and that we continue to transform today. 

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Elizabeth West is the editorial director of the BTN Group. She has reported on the business travel and meetings industries for 24 years. Beth was editor-in-chief of Meeting News from 2006 to 2008 and director of content solutions for ProMedia Travel from 2008 to 2011, when ProMedia was acquired by Northstar Travel Media and merged with BTN. She became editor-in-chief of BTN in 2015 and editorial director of the BTN Group in 2019. 

Beth collects vintage Nancy Drew novels. She’s always looking for 1930s and 40s hardback editions with intact paper covers. Nancy Drew was a role model who showed her how to be adventurous, unapologetically smart and unafraid to ask questions. ARC CEO Lauri Reishus is also a real-world role model for Beth. And if there are any mistakes in this article regarding ARC, they are completely Beth's, and she invites correction.

[Editor's note: There was a specific error in the original article. ARC never set airline commissions; indeed, the Civil Aeronautics Board in 1980 determined such commercial actions were anti-competitive and released airlines to set their own commissions with agencies. That fact rippled throughout this article. I personally apologize for the error, which I should have caught prior to publication - as it was also clearly stated in my original sources. Thank you to ARC for the correction and for some other instructive history shared via email.]