Summary of Key Points
Recently, domestic airlines have completely eliminated the flight segment fees (sales incentives given to agents by airlines) that they pay to OTA platforms (such as Ctrip and Qunar) for domestic flight bookings. However, this has limited impact on OTAs, as their primary revenue comes from other related businesses such as hotels and insurance. The real concern lies with TMCs (travel management companies), which rely heavily on these segment fees for their income. If airlines cut these fees significantly, many smaller TMCs could face bankruptcy. The main motivation behind this move is to reduce costs; airlines have been suffering losses for years due to the pandemic, and there is still room for further reduction in agency fees. In the future, TMCs will either have to raise their service fees and pass the increase on to businesses or transform into value-added services (such as travel policy formulation and cost management) to survive.
Detailed Analysis
1. OTAs are not heavily dependent on flight segment fees
For OTAs, ticket sales are no longer the main source of profit. For example, Ctrip's net commission rate on domestic flights will be less than 1.5% by 2025, while its hotel business generates commissions of 15%-20%, which is a much larger profit margin. The elimination of flight segment fees mainly affects the tickets sold directly by OTAs (about 30% of their total sales), but they have other sources of revenue:
- Technical service fees for managing airline flagship stores on their platforms;
- Traffic generated from ticket sales, which can drive business in related areas such as hotels, airport transfers, and insurance;
- Conversion of customers into members, leading to additional spending.
Therefore, the loss of flight segment fees is not a major blow to OTAs.
2. TMCs are in trouble: Flight segment fees are their lifeline
TMCs earn income from two main sources: service fees charged to businesses and flight segment fees from airlines. For instance, if an OTA charges a business $20 for a domestic one-way ticket and receives $10 from the airline, their total profit is $30. Without these fees, TMCs would see a 33% reduction in revenue. Smaller TMCs are particularly vulnerable, as they rely almost entirely on flight segment fees. If airlines cut these fees, they may go out of business. As a result, TMC professionals are worried that they could be the next target.
3. Airlines are cutting costs aggressively
Airlines have been reducing their reliance on agents since 2015. Post-pandemic, losses have worsened: Air China reported a loss of $1.77 billion, and East China Airlines reported a loss of $1.63 billion in 2025—amounts roughly equal to their agency fees. In 2016, airlines changed the commission structure from a percentage of ticket sales to a fixed fee per ticket, which eliminated many traditional agents. The current cut in flight segment fees is another attempt to reduce costs. Data shows that agency fees accounted for 40% of sales expenses in 2015, but this has dropped to 24%-26% in 2025. Airlines believe there is still room for further reduction, as East China Airlines stated in its financial report that increased sales expenses were due to higher agency fees.
4. TMCs' options: Raise service fees or transform into value-added services
Facing reduced commissions, TMCs must either raise their service fees or switch to value-added services:
- Raise service fees: They can pass the increase on to businesses. For example, some American TMCs charge $15-$20 per ticket after airlines eliminated commissions, and although businesses were initially reluctant, they have gradually accepted this.
- Provide value-added services: TMCs can help businesses with travel management tasks such as setting travel policies, controlling expenses, ensuring employee safety, and analyzing travel data to optimize costs. These services are valuable to businesses, which are willing to pay more for better efficiency and convenience.
American experience shows that cutting commissions does not eliminate TMCs; instead, it forces the industry to evolve. Smaller companies may go out of business, while larger ones survive by providing value-added services. In the future, TMCs will compete based on their ability to help businesses save money and provide better services.
Conclusion
The elimination of flight segment fees is just one step in airlines' efforts to reduce costs. OTAs are less affected, but TMCs must adapt or face extinction. For individual consumers, there may be no immediate change in ticket prices, but business travel expenses could increase due to higher service fees charged by TMCs. For the industry as a whole, this represents a reshuffle: only those TMCs that can offer value-added services will survive, while those that rely solely on commissions will be eliminated.