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| Editorial: As market technology changes |
| Business Standard / New Delhi Nov 24, 2008, 00:13 IST |
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In promising to take up the issue of travel agent commissions in no less a forum than Parliament, the Left parties have displayed yet again their predilection for refusing to understand the impact of technology on business. Travel agents affiliated to the International Air Transport Association (Iata), a body that represents 230 airlines worldwide, are objecting to the withdrawal of a 5 per cent commission that 16 domestic and international airlines operating in India paid on ticket sales. Instead, they have been told to charge customers a transaction fee. The agents, in turn, have decided to boycott ticket sales by these airlines; their case is that the livelihood of over a million people is threatened by the airlines’ decision. This prospect has galvanised the Left; and the chairman of the Parliamentary Standing Committee for Transportation and Tourism’s, Communist Party of India (Marxist)’s Sitaram Yechury, has got involved. “The committee stands in solidarity with the travel agents’ association,” Mr Yechury’s party colleague and trade union leader M K Pandhe told reporters.
This “solidarity” may be understandable, but it reveals ignorance of the dynamics of the travel business. First, agent commissions have increasingly become a thing of the past — in most countries, it is the customer who pays the agent for booking a ticket (if at all). Second, and perhaps more crucially, technology is driving changes in the business, rendering the stand-alone ticketing agent passé as a concept—in the same way that automatic telephone exchanges made the job of telephone operators at exchanges superfluous. If Messrs Yechury, Pandhe and Co. chose to examine the matter in depth, they would discover that booking tickets over the Net — where no commission or transaction fee need be paid — is rapidly gaining ground. Companies are increasingly doing away with travel agents in favour of the convenience and cost-effectiveness of Net purchases. And the trend will accelerate as companies look to pare transaction costs in the current economic slowdown. It is no surprise that if ticketing agents account for 25 per cent of airline bookings, the Net now accounts for 20 per cent.
In other words, commissions or no commissions, ticketing agents would be pretty much out of business in a few years — and this applies to those authorised by Iata as much as those that are not. The larger travel agents have long understood this and most base their margins on providing a package of value-added services — such as planning tours. Smaller ones that saw the way the wind was blowing (and the Pacific Asia Travel Association focused its annual session as far back as 1992 on how the Net would make bucket-shop travel agencies redundant), have adapted or sold out. Those that have not, were threatened long before the airlines’ decision to stop commissions. If large agencies have joined the protests, it is mostly because they hope to protect an easy income stream when business is slow. Few among them earn their bread and butter from ticket commissions and many pass on the benefit to loyal customers. In sum, then, the Left will end up supporting a lost cause without bringing gains to the victims of change. But that is part of its long history.
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