After months of protests, the travel agent fraternity has finally managed to cut a deal (a good one at that) with the airlines over the commission issue. While Jet Airways and Kingfisher Airlines have agreed to pay a 3% commission to the travel agents, Air India is likely to follow suit soon. ?The national carrier will also most likely give in and reinstate the commission as it would not want agents to favour their competitors?Jet and Kingfisher?in these tough times,? said Rajinder Rai, president, Travel Agents Association of India (TAAI).
In June this year, Air India, Jet and Kingfisher decided to scrap the 5% commission on the air tickets. What started with a dab of Gandhigiri like sending flowers to the airline offices, transformed into a total boycott of sales of air tickets by travel agents across the country. According to industry sources, the daily sale of Jet Airways and JetLite?s tickets had dropped by 50%, from nearly Rs 18 crore to Rs 9 crore, after the boycott by the travel agent bodies. This made Jet and Kingfisher buckle under the pressure as they have already been facing the brunt of the economic meltdown and the recent terror attacks on the country.
While the transaction fee model, which was earlier proposed was outrightly rejected, the 3% commission has been largely accepted by the agents without much ado. Agents are said to have struck a better deal this time. While the earlier 5% commission was only applicable on the base fare, the 3% commission will also include the fuel surcharge along with the base fare. According to Subhash Goyal, president, Stic Travels, the amount is close to what agents were getting earlier.
According to industry experts, this is a much better arrangement as fuel surcharge is a variable component of the airfare. In the event of global fuel prices coming down, the fuel surcharge has also been reduced. However, when oil was at its unprecedented levels, fuel surcharge comprised the majority of an air ticket. With the 3% commission now levied on the base fare along with fuel surcharge, the agents will be paid according to the market dynamics as base fare is fixed by the carrier.
But, the question which many are asking is that why didn?t agents agree for the transaction fee (TF) which was working out much higher than the 5% commission paid to them. In a meeting between the agents and airlines, the TF was decided to be in the range of Rs 350-500 per ticket for domestic travel and between Rs 2,500-10,000 for international tickets. Though some of the agent associations like TAAI and TAFI had earlier agreed to the alternative, they later backed out as their member agents were not ready to embrace the 0% commission regime.
?One of the biggest reasons for transaction fee model falling on its face was the amount decided. Who will pay Rs 10,000 for booking a ticket, or even Rs 350 for a domestic ticket when he/she can book on the airline website without paying that amount,? said head of a leading corporate travel agency who didn?t wish to be named. The problem is not with the model, as it is a globally accepted one, but with the charges, he adds. Rai, of TAFI, offers a completely different view. ?The problem was the cut and pay policy. Airlines wanted us to first deposit the entire amount (including the transaction fee) with them, which would be later reimbursed. This was not acceptable by us and our members,? he said.
Currently, agents get a commission from the airlines and also charge a small fee from the consumer for the service. This service fee from the client varies according to the nature of arrangement with the client. The fact remains that had the transaction fee been levied, the only source of income for the agents would be the fee from the customer. ?The competitiveness of the market would have eventually forced the agents to subsidise the fee further taking a hit in their margins,? said an industry analyst. There are others who opine that it is not right to charge only the consumer for the service as agents are also servicing the airlines. ?In the present market scenario, distribution is the key. Airlines are not only distributing the airline?s product but are also collecting money on their behalf apart from providing the convenience. Why should anyone do that for free?? said Deep Kalra, founder and CEO, Makemytrip.com.
