India’s Agents Use Activist Tactics to Fight Airlines

On May 7, nearly 3,000 travel agents across India staged a “no ticketing” day to protest airline commission roll-backs, fare disparity and other issues agents see as threatening their economic survival.

The action caused a 45% drop in ticket sales for the day, but India’s agents aren’t stopping there, when it comes to fighting policies that hurt their bottom lines.

“This battle’s not over yet,” said Ajay Prakash, chief executive of Mumbai-based Nomad Travels. Prakash is also immediate past president of the Travel Agents Federation of India and the ex-deputy chairman of the World Travel Agents Associations Alliance.

According to Prakash, 16 international airlines operating in India pay no commission. Others, including Indian carriers, pay a paltry 1% to 5% commission. All the airlines, he added, pay substantial backend productivity-linked incentives of 7% or more.

Prakash discussed his views on the protest and the issues involved – as well as on the role of U.S. agents confronting the same issues. Following is an edited version of his email exchange with Travel Market Report.
 
What were the main issues that sparked the protest?
Prakash: There are three key issues that plague the travel agent fraternity in India today. First, no commissions and a reluctance on the part of individual travelers to pay any service fees. How does the agent make an honest living?

Fare disparity: A number of airlines routinely undercut agency/GDS fares on their websites. That’s bizarre. What other industry functions on the principle ‘beggar thy dealer?’

More than 75% of all international tickets sold in India are sold through travel agents. The airlines, in view of reduced staffing, are in no position to handle any more direct sales.

Finally, IATA intends to shift to a weekly settlement for the first of July, instead of the fortnightly payment system that’s worked well for decades. It’s impossible to get payment from clients, especially corporate clients, in a week. And credit card usage is abysmally low. How’s the agent supposed to manage cash flow?

What impact did the one-day protest have?
Prakash: Airline sales [in India] dropped by close to 45% on May 7. But the bigger impact was on travel agents across India. Even the skeptics who said that agents could not or would not come together were proved wrong.

What’s your view of the airlines’ role in this?
Prakash: Airlines have traditionally played upon the insecurity and conflicting self interests of small- to mid-size agents, often playing them off against the bigger players. So the combination of fear of the competition law [India’s antitrust law] and the lure of fat backend incentives to the bigger agents effectively scuttled any concerted opposition to commission cuts.

A dealer’s commission is part and parcel of every retail trade. What makes the airline business any different? An airline seat is the most perishable commodity in the world; one would think it makes sense to incentivize your reseller.

Do you think U.S. agents could be – or should have been – more proactive in reacting to commission cuts?
Prakash: Unfortunately, U.S. agents could not get together when commission cuts were first imposed on them and the rest of the world is suffering because of that failure.

Sure, business goes on, and travel agents survive, but the net result has been that the consumer pays more. Airlines have not reduced fares as they eliminated commissions, and the traveler now needs to pay a service fee over and above the fares.

Can U.S. agents play a role in supporting their colleagues in India?
Prakash:  It’s probably too late for agents in the U.S. to try and roll the clock back. Nor do they seem to want to do that, since everyone who’s still in business is making money – at the expense of the consumer.

But if we succeed in restoring a fair and equitable agency commission in India, maybe agents across the world – including in the U.S. – might wake up.

What does the future hold for India’s agents? Can they survive economically?
Prakash: As long as there are travelers, travel agents will survive. It’s consumers who get a bum deal since the airlines have effectively palmed off their responsibility.

The director general of Civil Aviation for the government of India, in a pointed letter to airlines, asked a straight question: ‘Why should the passenger be made to pay for something which is the airlines’ responsibility?’ Unfortunately, the matter languishes in the bureaucratic labyrinth.