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SC directive comes as a major blow for travel agents

Source : BUSINESS_STANDARD
Last Updated: Wed, Jan 23, 2013 20:10 hrs

The Supreme Court’s directive will benefit travellers, but will impact travel agents.

Already, many airlines have reduced commission to agents or offer no commission at all. Transaction fee was one of the sources of income for agents, who say profit margins have fallen from seven - eight per cent to five - six per cent. Doing away with transaction fees will further pull down their margins to three - four per cent, says a travel agent.

Iqbal Mulla, president of Travel Agents Association of India, said, “Our legal department is examining the order. How can we service customers and airlines when there is neither a commission nor a transaction fee?” He demanded that the government help in restoration of agents’ commission.

A GoAir spokesperson said, “The ruling is not applicable to us. At GoAir, we believe in complete transparency and value addition to our passengers.” The spokesperson said the only additional charge (Rs 50 ) it collects is to pay third party vendors of electronic services.

Transaction fee was introduced by airlines after they adopted a zero commission policy for travel agents. Air India and Jet Airways had introduced the transaction fee last year after slashing agents’ commission to 1 per cent from the earlier 3 per cent. Under the fee, agents charge customers any amount of their choice and there is no uniformity in it. It can range from Rs 50 to Rs 200 on domestic and Rs 400 to Rs 700 on international tickets.

Both Air India and Jet Airways are trying to increase web sales to reduce distribution costs.

Jet Airways spent Rs 1,261 crore on ticket distribution and sales in 2010-11 and this accounted for 10 per cent of its expenditure, according to its annual report. At a recent interaction with equity analysts, senior Jet executives had said the airline was looking to restructure agents’ commission.

Before reducing the commission to 1 per cent, Air India had spent about Rs 1,000 crore annually on distribution, including agent commission and fees for use of reservation systems and global distribution systems that hold ticket inventories. This is about 6 per cent of the Air India’s annual expense. Over 80 per cent of the airline’s tickets are sold through offline agents and portals.

The DGCA had on December 17, 2012 ordered that no airline would charge transaction fee and "strict action" would be initiated if they continued to do so. The directive of the aviation regulator had come after the issue of transaction fee was raised in the winter session of Parliament, with members demanding its withdrawal. The DGCA circular had then said that the provision in the Aircraft Rules "does not allow any transaction fee as part of air fare. Therefore, if any airline charges transaction fee in violation of rule 135 of the Aircraft Rules, as part of air fare, strict action would be initiated against such airline”.




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