IndiGo to bring back transaction fee

Transaction fee would be applicable on basic fare and fuel surcharge and adjusted against sale or remitted to agents at end of month

IndiGo will allow agents to collect two per cent transaction fee on each ticket, following the Union government’s approval for the levy.

In a communication to agents, the Gurgaon-based low-cost airline said the fee would be applicable on basic fare and fuel surcharge and adjusted against sale or remitted to agents at the end of the month. The fee will be applicable on all sales from Tuesday.

IndiGo’s decision to implement the fee comes in the wake of Civil Aviation Secretary K N Srivastava’s order in September 2013 allowing airlines to include a transaction fee in the fare. In January 2013, the Supreme Court had said a transaction fee could not be collected from passengers in any form until the secretary took a final decision on the issue.

Low-cost airlines do not pay a regular commission to travel agents and had instead introduced a transaction fee that was collected by agents on each transaction. These airlines pay a productivity-related sale incentive each month and on annual sale but there is no regular commission on an ordinary sale. SpiceJet and GoAir are yet to make an announcement on the restoration of transaction fee.

In his order, Srivastava said transaction fee, commission or convenience fee were all the same — payment of remuneration to an intermediary. The order said all these were permissible, if shown as part of the fare, and no sum was collected from consumers over this.

The order also allowed airlines to follow dual pricing (differential fares).

“Price differential can exist between a ticket purchased directly from an airline counter or their website or through its website and through an intermediary,” the aviation secretary’s order said.

The imposition of transaction fee will make buying tickets on airlines’ websites cheaper as it will not include the transaction fee.

This will also boost airlines’ web sales. However, the relief is partial because despite the civil aviation secretary’s observation, airlines collect convenience fee over and above the ticket fare for those paid for with a credit card.

A check of fares for travel next Monday on Mumbai-Delhi route booked through a travel agency login costs about Rs 170 extra than the website. A ticket between Mumbai-Delhi flight booked from an agency login costs Rs 10,507 and one booked from the website costs Rs 10,332. However the actual difference in purchase cost will be lower because convenience fee is collected per passenger.

"IndiGo's decision to allow transaction fee is a stepping stone to restoring agents remuneration. We expect other low cost airlines to follow suit and even Jet Airways may be forced to hike its commission,'' said a travel agent. "Initially IndiGo was considering a flat transaction fee to be collected on all routes but the agents were against a fixed quantum,'' he added.
 
Transaction fee controversy on from 2011

In January 2012, the Supreme Court had said a transaction fee could not be collected from passengers in any form until the civil aviation secretary took a final decision on the issue.

In December 2011, the directorate-general of civil aviation (DGCA) had issued a circular restraining airlines from collecting a transaction fee in the fare, as it was not in consonance with the Aircraft Rules, 1937. The Federation of Indian Airlines petitioned the high court here against the circular and it allowed the airline body to file an appeal with the aviation secretary.

Till it was banned by the apex court, airlines were collecting a transaction fee but this was not included as a part of the fare. A ticket issued by a low-cost airline showed the transaction fee in a separate head.

The fee was collected and retained by travel agents. Air India’s and Jet Airways’ tickets referred to the transaction fee as "other charges''. Travel agents have been charging a separate service fee outside of the ticket to make good the loss following the ban on a transaction fee.

The civil aviation secretary's order said the DGCA could not decide on the amount of the commission which airlines should pay to agents and directed the regulator to monitor implementation.