Beleaguered airlines, weighed down by rising costs, have decided to put the knife into travel agents so that they themselves stay alive.
Airlines to stop 5% commission from Oct 1; many agents could down shutters
AHMEDABAD/KOLKATA/BANGALORE: Beleaguered airlines, weighed down by rising costs, have decided to put the knife into travel agents so that they themselves stay alive.
On Monday, full-service carriers Jet Airways, Kingfisher and state-owned Air India issued letters to the representative bodies of travel agents —- Travel Agents’ Association of India (TAAI) and Travel Agents Federation of India (TAFI) —- saying they will not pay the 5% commission with effect from October 1.
But Kingfisher and Air India said travel agents are free to charge a “transaction fee” from passengers instead, which only makes travel costlier.
Budget airlines such as SpiceJet, Deccan, IndiGo, GoAir and JetLite have not been paying commissions.
A top TAAI official, who did not want to be named, said the move would translate into revenue losses of close to Rs 800-850 crore for travel agents across the country.
“Out of the total international and domestic airline ticket business of Rs 34,000 crore, around 85% is carried out by travel agents. This means that we take care of Rs 28,000 crore airline tickets sold in India. On this, our earning is an average 3% (Rs 800-850 crore), while 2% of our commission is for fuel surcharge and other taxes,” said a TAAI official.
With so much at stake, travel agents are considering protests. “This is a question of our livelihood. We may consider taking a legal opinion,” TAFI president Praveen Chugh said.
There is already a case on a similar issue (when the airlines had slashed the commission from 9% to 5%) pending before the Karnataka High Court.
TAAI chief C V Prasad declined to comment, saying the matter is sub-judice. But Jet Airways chief commercial officer Sudheer Raghavan remained unperturbed. “This is not unprecedented, it is a worldwide practice. We are following what most airlines globally are doing,” Raghavan said.
Do airlines plan to pass on the benefit to passengers? “How can we, when we are still in losses?” Raghavan asked. The TAAI official said the move is a double-edged sword. “I believe losses at airlines will rise because travel agents will now have no incentive to market a specific carrier. The loyalty now switches to passengers and that could damage their business,” he said.
A Kolkata-based agent concurred: “Why should we sell a carrier if we don’t get a commission? After all, we collect fuel surcharge and other taxes from clients on their behalf —- and so rightfully deserve a commission in lieu of this service.” Jitendra Bhargava, executive director (corporate communications), Air India, told DNA Money the decision was arrived at after taking into account all operational costs —- not just fuel prices but distribution costs too.
Smaller travel agents will suffer the most. Agents who promise large volumes of business to airlines will not be hit as they get bonus percentage over commissions, based on individual contracts.
s_nija@dnaindia.net
p_sharma@dnaindia.net
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}