Air India has turned down the twin requests of travel agents to defer the implementation of weekly remittance plan and accept credit card bookings. But there could be more bad news in store for airline agents. The airline may reduce the three per cent commission it pays to agents on sales to cut down on its distribution costs. Travel agents are objecting to the proposed move as it will impact their business.
At present, Air India spends about Rs 1,000 crore annually on distribution and this includes agent commission and fees for use of reservation systems and global distribution systems that hold ticket inventories. This is about six per cent of the airline's annual expense. Over 80 per cent of the airline’s tickets are sold through offline agents and portals. However, the airline is now trying to increase its web sales to reduce distribution costs.
Travel agents anticipate Jet Airways to reduce commission too. "If Air India reduces commission, we may follow suit,” a Jet Airways source said. Jet Airways spokesperson did not respond to an email query on the subject.
Although Air India has not made a formal proposal on reducing the commission rate, agents have been sounded off about the move. A source said the commission rate may be lowered to one per cent or the airline may even do away with it completely.
An Air India executive said, "Low-cost airlines do not pay commissions to travel agents and do not give 15 day credit period to agents. So, there is nothing revolutionary or unique about airlines not paying commission.''
"We are discussing various issues related to trade relationship with agents, including credit period, remittance, commissions and remuneration,'' he added.
International airlines, like Air France, KLM, British Airways and Lufthansa, do not pay regular commission. Indian low-cost airlines too, do not pay commission and agents charge a transaction fee on bookings on these airlines. Those which give commission include Emirates, Cathay Pacific, Gulf Air and Sri Lankan Airlines, amongst others.
"We have urged the airlines not to reduce commission. This is not a solution as airlines will lose business if commissions are reduced,'' said Travel Agents Association of India (TAAI) president Iqbal Mulla.
An another leading travel agent said, "An agent's role is vital in airline business. An agent will have no incentive or motivation to sell a product if there is no commission.'' Agents also fear loss of business. "If passengers do not find value in buying from us, they will switch to online agents,'' he added.
On Thursday, representatives of TAAI and Travel Agents Federation of India met senior Air India executives. They demanded to defer the implementation of weekly remittance plan. However, the final decision on the bill settlement plan would be taken by all the International Air Transport Association (IATA) member airlines.
At present, travel agents remit ticket sale proceeds to airlines every fortnight through IATA’s billing settlement plan. From June 1, the remittance will have to be done each week.