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International airlines to scrap agents' commission
Rumi Dutta in Mumbai |
June 07, 2004 07:49 IST
Travel agents, who are up in arms over a decision by international airlines to cut their commission from 7 per cent to 5 per cent, are in for an even bigger shock. International airlines that fly into India are poised to do away with commissions for them altogether.
West-bound carriers that connect India with Europe and the US include Air-India, British Airways, Delta, Lufthansa, Air France and Swiss Air Lines. Besides, Emirates and Singapore Airlines too fly from India to the West.
In the West, airlines do not pay travel agents commissions. Instead, they pay travel agents a fixed sum based on the volume of ticketing business they do.
That is exactly what they propose to introduce in India as well. The airlines have not formally communicated their decision to eliminate commissions altogether to travel agents, but have sent them feelers on this.
The move has far-reaching implications for travel agents and flyers. First, it will result in flyers getting no fare discounts from travel agents. The traveller's decision to opt for a travel agent will depend purely on the services the agent offers.
Second, small travel agents will either be wiped out or will be reduced to becoming sub-agents for industry bigwigs like Thomas Cook, Kuoni, Raj Travels and Cox & Kings.
The big boys, in turn, will depend more on alternative revenue streams like foreign exchange and insurance. They will also become travel consultants to companies and charge a monthly fee for their services, according to a senior executive at a big travel agency.
Said a leading Mumbai-based travel agent: "The industry will go through a major transformation and agents will become travel consultants, selling tour packages, and not merely be ticketing agents. Unfortunately, the ones who do not accept this reality and continue to have ticketing as their main line of business on a small scale will be wiped out."
Said Lalit Seth, chairman of Raj Travels and founder president of the Travel Agents' Federation of India, which represents the interests of travel agents in the country: "We are well aware of the international airlines' plans to knock off commissions. We have hence started taking corrective measures. Airlines across the globe are losing money and have no choice but to cut distribution costs. We will have to accept it."
The India head of an European carrier who spoke on the condition that he would not be identified cited rising fuel prices and distribution costs as reasons for the decision to eliminate commissions.
He said British Airways had introduced the system of paying a flat fee based on business volume in London, followed by Lufthansa in Germany and Singapore Airlines in Singapore.
Moreover, with international carriers increasing their focus on first and business class passenger traffic from India, the 7 per cent commission can be a significant amount.
For instance, said the senior spokesperson of an international carrier, on the India-US route, the first class fare was close to Rs 400,000. The travel agent's commission at the rate of 7 per cent is Rs 28,000."What does the travel agent do to get that kind of money? Airlines do not earn so much. Why should travel agents, who hardly give any kind of value-added services, earn that much?" he said. Travel agents counter that because of competition a major chunk of the commission is passed on to the consumer.