Webjet Welcomes Qantas Commission Cuts

Webjet today welcomed the announcement of the Qantas commission cuts which had been anticipated for some time and follows reductions earlier this year.

Commenting further, Webjet Managing Director, David Clarke said:

There is no surprise in the Qantas announcement and we particularly congratulate Qantas on the substantial lead time (01 April 2006) for its introduction.

Webjet's business model has always been predicated on the assumption that sooner rather than later traditional commission payments will be essentially eliminated and our business model has already successfully transitioned with a retention of margin during the first quarter of 05/06 which in turn followed substantial commission reduction 1 July 2005 of four percentages points from Qantas on Australian domestic traffic.

The whole travel industry is in a process of transition for service and it is our view that that outcome substantially enhances Webjet's competitive advantage relative to bricks and mortar travel agents where their traditional cost structures are two or three times higher than Webjet's (expressed as a percentage of total transaction value). Webjet's cost structure as we have demonstrated over the last year or so, is largely fixed and as transaction values increase the percentage cost reduces. In a fee for service environment it logically follows that to produce a given net profit margin Webjet's service fees can be commensurately less than traditional agency groups.

Demonstrated values which Webjet provides its customers have never been more relevant and contrary to some competitive commentary in the last 24 hours, Webjet does not bias its sales operation to airlines that pay us the most. We consider that to be a completely unacceptable consumer proposition and indeed in our view consumers increasingly want to be free of agency, consultant, or airline bias and make their travel selections in an informed manner with easy schedule, price comparison and absence of bias, either covert or overt. In addition the real values particularly in a highly competitive domestic environment and increasingly international as well, is obtained by mixing and matching different airlines on different sectors to take advantage of the best fare offers and schedule options.

These are precisely the values which Webjet pre-eminently offers our customers and those values produce an economic and value result which fully supports our fee for service model and is one of the reasons why Webjet's turnover growth has been so spectacular over the last 18 months.

In a longer term sense the progressive elimination of commissions will actually weaken some airlines influence over the retail distribution of travel. In some cases covert agency bias which was historically influenced by airline incentive payments will be reduced and airline choice will have much more to do with the intrinsic values of schedules and fares. Increasingly and very importantly the creative construction of value packs where we are able to construct through our global hotel and car buying operation, major consumer advantages where those products can also through Webjet be purchased online seamlessly and simply, and as a result further strengthen the values we offer our customers.

Webjet will soon be commencing a major national television marketing campaign which will further demonstrate the extent of our market leadership and indelibly underline and reinforce the tremendous power of travel distribution on the internet and we look forward to creatively working with all airlines both domestically and internationally to increase the market share of Webjet and our supply partners.