Domestic and international airfares are set to rise by 5 per cent beginning October as the travel agents prepare ground to recover 5 per cent commission on the base fare: Amount parted to them by airlines for booking tickets on their distribution systems from consumers.

Domestic carriers Jet Airways [Get Quote] and Air India shot off letters to the travel agents mentioning severance of this commission on Thursday. Kingfisher Airlines is reported to be planning to do the same soon.

The impact of the move would be an additional Rs 200-1000 (based on current ticket cost) plus service charges per ticket on domestic and international sectors adding to the escalating costs of air travel in recent times that has almost made air travel out of reach for a majority of first timers. Airlines have already made six revisions in airfares since the beginning of the year.

Almost 80 per cent of the airline ticket inventory is sold through agents in India. And airlines as a measure of cost cutting are saving on costs given to the agents as commission per ticket. Airlines on domestic distribution system will save Rs 500 crore (Rs 5 billion) from the move. "Every drop is important for us right now," said an airline executive.

The total value of consolidated air tickets issued on an annual basis in India is between Rs 34,000-36,000 crore (Rs 340-360 billion) and if calculated, five per cent commission will amount to Rs 1000 crore (Rs 10 billion) on 60 per cent commissionable basis of Rs 21,600 crore (Rs 216 billion), which both the international and national carriers will save cumulatively.

"The airlines have unilaterally decided to go ahead with ending of the commission, citing global best practices as the reason. The move will hurt the consumer because then we will bargain for a commission on the entire ticket value and not just the base fare value that forms 60 per cent of the ticket value as per the current understanding," said Ajay Prakash, national secretary, Travel Agents Federation of India. Of the said commission, the agents pass on most of it to the customer and that gives them the margins to be competitive and sell tickets at less value.

What Tafi also says is that if agents are forced to fall in line with the global practices then consumers will have to pay for any additional service that the agent provides them like a change in the name on the ticket, cancellation of tickets, rebooking etc, further adding up to the costs.

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