Digital Booking Sites

Chinese Booking Sites Fall After Commission Cuts by China Eastern Air

Jul 18, 2014 8:30 am

Skift Take

U.S. travel agencies — both online and off — already know that they can’t count on commissions from airlines. Chinese booking sites should plan for a world where reduced commissions disappear entirely.

— Jason Clampet

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ELong Inc. led a slump in Chinese online travel sites traded in the U.S. on concern commission cuts by the nation’s biggest airlines will crimp their sales.

Elong, whose top shareholder is Expedia Inc., fell 3.6 percent, extending a drop into a fourth day. Qunar Cayman Islands Ltd., controlled by Baidu Inc., slid for a third day and Ctrip.com International Ltd., China’s biggest online travel agency, sank to the lowest level in three weeks. The Bloomberg China-US Equity Index slipped 1 percent to 107.50 as of 12:32 p.m. in New York, its first decline in a week.

China Eastern Airlines Corp. followed bigger competitors in lowering the commissions it pays to domestic ticketing agencies by 1 percentage point to 2 percent, China Business News reported yesterday, citing the airline. The impact of the change will be reflected in the travel sites’ third-quarter results even though the companies said the effect on sales would be limited, according to 86Research Ltd. Air China Ltd. and China Southern Airlines Co. had already notified agencies of the lower fees.

“They all will be impacted because they all have exposure” to the air ticketing business, Jeff Papp, senior analyst at Oberweis Asset Management Inc. in Lisle, Ill., said by e-mail. “Ctrip could be most impacted because they have expectations for some profits this year. This move by airlines needs to force consolidation in the travel sector.”

ETF Drops

Elong’s American depositary receipts slumped to $19.65. Qunar fell to $27.17 and Ctrip slid to $59.10.

The iShares China Large-Cap ETF, the largest Chinese exchange-traded fund in the U.S., declined 1 percent to $38.13, set for the biggest slump in three weeks. The Standard & Poor’s 500 index fell 0.6 percent as a Ukrainian Interior Ministry official said rebels shot down a Malaysian jet carrying 295 people.

The Hang Seng China Enterprises Index slipped 0.1 percent to 10,467.06, sliding for a second day. The Shanghai Composite Index retreated 0.6 percent to 2,055.59, dropping the most in a week.

To contact the reporter on this story: Belinda Cao in New York at lcao4@bloomberg.net. To contact the editors responsible for this story: Nikolaj Gammeltoft at ngammeltoft@bloomberg.net.

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