Tapering air-ticket commissions force agents to diversify

With the commission slab from airlines steadily decreasing, travel agents are looking to diversify their portfolio of services to increase margins.

There are around 2,900 agents in India under the International Air Transport Association (IATA) and around 50,000 non-IATA players. The industry is characterised by mom-and-pop travel agencies that depend on ticketing as their main revenue source.

But with 15 carriers deciding to go to a zero commission regime from October 2008, the agents have been badly hit. Commission from airlines has steadily fallen from a peak of 9% a few years back to 3%, and nil in the case of some carriers.

According to travel industry sources, the Directorate of Civil Aviation (DGCA) is slated to take a final decision on whether commission should be paid to agents and how much, on September 30, 2009.

Currently, 35-odd carriers work on a 5% commission model with agents. Three Indian carriers — Air India, Kingfisher Airlines and Jet Airways — offer 3%

.A travel industry source said, “India is not yet geared up for a zero-commission regime. Almost 85% of the business for carriers is generated by travel agents.”

The agents are now diversifying into other areas to increase their earnings potential.
While some are becoming dedicated franchisees of bigger travel companies, others are getting into railway ticket bookings, expanding forex activities, creating domestic packages etc, all of which offer margins of 10% and above.

Travel Agents Federation of India (Tafi) president Pradeep Lulla, said, “These are tough times. If the livelihood to agents is not sufficient to run the business, they have to diversify into other areas.”

Lulla’s agency, Cupid Travels & Tours, is now creating its own packages for marriages and service apartment bookings. The aim is to target tourists in niche segments and offer value-added products. Lulla’s target segment is high-end corporate travel.

Lulla said that, with the advent of the internet, client demand has also increased. Thus, in a recent development, 2-3 travel agencies are pooling resources to do joint bookings as well.

Kolkata-based Ar-Es Travels has recently become a franchisee of Kuoni and is now selling the travel company’s premium leisure holiday packages in Kolkata.

To help agents to diversify, the Travel Agents Association of India (Taai) is undertaking measures to train its members to graduate to travel consultancy.

Says Rajji Rai, president, Taai, “We are training agents to think out of the box and become self-sufficient - sell car hire, sightseeing tours, travel insurance, cruise, etc. In short, they should become travel consultants.”

C V Prasad, who runs the Hyderabad-based Travel Express, has gone a step further. He, along with two other promoters, has recently set up Iriss or the Integrated Reservation Invoicing & Settlement System.

Iriss brings all services that are not offered under IATA to agents across the country.
Prasad explains: “Agents under IATA are limited to selling tickets of around 270 airlines. Products like hotel bookings, car hire, bus ticketing, entrance tickets to museums, airport transfers etc are not part of the IATA network. Iriss will create a model similar to IATA but bring all products and services not under IATA under one roof. All agents can avail of the network and offer 360 degree solutions to travellers.” Margins here will vary from 10% to 30%.