India: Airline Pay Reinstated But Battles Continue
by Nick Verrastro and Geri Bain |
India’s travel agents have “a lot of work yet to be done to achieve the rightful commissions” from airlines, said Rajii Rai, president of the Travel Agents Association of India (TAAI), after the country’s civil aviation authority ordered airlines to resume paying commissions to agencies.
“There are lot of meetings and consultations with airlines to be held, but the ball has started to roll,” Rai said.
India’s Directorate General of Civil Aviation (DGCA) directed “all the airlines that had gone to zero to reconsider this decision in consultation with agents and decide on a suitable commission that has to be paid to us,” Rai told TAAI members.
“Friends, this has been the fruitful culmination of our long tirade with the airlines and my team and I are proud that we have achieved the desired results we wanted and have created history for the world to follow! It is a victory for all our TAAI members and the industry at large.”
As Travel Market Report previously reported, some airlines had switched to zero commissions to India’s travel agencies in 2008, a move that was fought by the country’s agency industry with street demonstrations, boycotts of airlines and other tactics.
India’s two leading travel agency associations, TAAI and the Travel Agents Federation of India (TAFI) worked hard to get commissions reinstated.
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“TAFI obviously welcomes this decision…we have been protesting the arbitrary reduction in commissions since 2004,” said Ajay Prakash, TAFI’s National General Secretary.
“While we might sympathize with the airlines in their hard times, aviation history has amply demonstrated that the elimination of agency commission is not the panacea for their woes. The US is a prime example – in spite of abolishing commissions in the early 2000’s, more airlines have gone bust in the last 10 years than in the previous 50!” he said.
Prakash noted, “A dealer’s margin, commission, trade discount – call it what you will – is an integral part of the retail trade. That’s the business model for everything from cars, to gasoline, to consumer goods to medications … Why should the airline seat be sold on a different model? Don’t the airlines *need* the agents to sell their inventory?”
“It’s a pity that agents in the US and Europe could not come together when the airlines started the commission cuts. It’s also incredible that the airlines and IATA managed to so easily remove the 9% commission clause from the Passenger Sales Agency Agreement (PSAA) on the grounds that specifying a percentage could be construed as price fixing!”
The DGCA’s new directive reads: “Firstly, since the zero commission system is loaded with a transaction fee, the consumer has to pay extra money. Secondly, an unscrupulous agent can charge an exorbitant amount as a transaction fee from the customer. Thirdly, this system is giving rise to market dominance by some big agents, who are paid hefty amounts by the airlines in the name of productivity. This phenomenon, too, is not in the interest of the consumer as it reduces competition among agents.”
The DGCA leaves it to the airlines and agents to fix the commission percentage.
According to the Directive, “It is entirely up to airlines to take a decision in this regard in consultation with agents. They must take into account various commercial factors such as market conditions, the cost of agents’ establishments, and statutory definition of ‘tariff’. But the commission cannot be replaced by transaction fees.”
Prakash said this will be a win for everyone: “The agent because he/she is assured of a minimum revenue for every ticket sold; the consumer because he/she need not pay a service fee for having a ticket issued; and the airlines because we can finally stop fighting and get back to the business of selling.”
The Directive leaves it to the agents to negotiate a fair compensation from the airlines. However, pointed out Prakash, “The freedom of an agent to negotiate an additional fee for services rendered to the customer does not absolve the airline of the obligation to compensate the agent for services performed on its behalf.”
There’s also another concern, said Prakash. “With the wide publicity being given to the agency commission issue, customers are going to start asking for discounts!”
Most important, though, said Prakash, is that “the DGCA has finally called the bluff of the airlines and of IATA – who refuse to interpret an agreement that they have signed on behalf of the airlines. The PSAA clearly mandates that the agent will perform services on behalf of the airline and that the airline shall remunerate the agent in a manner to be advised from time to time.”
“We asked IATA a simple question: ‘Does zero commission constitute remuneration?’ And the answer we got was ‘We are paid to not interpret the Resolutions.’ What a farce! Thankfully the Indian civil aviation authorities have woken up to the fact that the hegemony of airlines and IATA cannot be absolute.”
