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Rediff News  All News  » Business » Fresh squeeze on air travel agents' margins

Fresh squeeze on air travel agents' margins

April 17, 2012 12:00 IST

Air travelAfter the International Air Transport Association burdened travel agents by shrinking their payment schedule from fortnightly to weekly, Indian carriers are adding to their woes.

Two of the largest airlines, Jet Airways and Air India, have decided to stop absorbing the surcharge on payments by agents made through credit cards.

Both, by not absorbing the surcharge, aim to save Rs 30 crore (Rs 300 million) each annually.

Ironically, Kingfisher Airlines, in a huge financial crisis, has not issued any such order.

"We decided to absorb that charge earlier because that ensured immediate money to us. Now, we have decided not to absorb it and have asked the agents to make that payment, as they also get a 50-day period to make their credit card payments," said a senior AI official, who did not want to be identified.

Likewise, Jet has decided not to absorb the two per cent surcharge from May 1.

Agents make payments to airlines by cheque or credit card. In the latter transaction, money reaches the airline immediately but the clearance of cheques normally takes three to four days.

Recently, IATA told travel agents they'd have to remit ticket sale proceeds to airlines every week, in place of the current fortnightly span.

It has slated the change to take effect from June 1,

even as agents are demanding a deferment in implementation.

The proposed change would substantially change the way airline ticketing business is done in India.

IATA's billing settlement plan is a payment gateway for travel agents.

Twice a month, agents are required to remit to airlines the proceeds from ticket sales.

For instance, if a ticket is sold by an agent between the 1st and 15th of a month, the agent deposits the amount to the airline on the 25th or the 30th of that month.

According to the new plan, for all sales between the 1st and 7th, an agent will have to make payment to the airline on the 15th and so on.

Low-cost airlines such as IndiGo, GoAir and SpiceJet are not members of the BSP.

Agents say they will find a way out by talking to the banks.

"Our payments to airlines are huge and any bank would like to waive the charge for us.

"We are talking to the airlines and also asking them to talk to banks or allow us to talk to them.

"We expect a solution on this soon," said Ajay Prakash, president, Travel Agents Federation of India, which represents half the country's agents.

He said airlines were ready to absorb the surcharge for tickets booked on their websites "but not for us".

"The credit payment is only 10 per cent of their total revenue.

Mihir Mishra in New Delhi