Nov 1, 2008

Business - India;Travel agents refuse to levy transaction fee

Seema Sindhu & Anirban Chowdhury


Most travel agents in India have refused to levy the transaction fees of Rs 350-10,000 on air passengers. The transaction fee was recently proposed to them by Indian carriers, in lieu of the 5 per cent commission that will be stopped from November 1.

“We have refused to go ahead with the transaction fees. This will put an unnecessary burden on the customer, thus decreasing demand for travel even more. The modalities under which the transaction fees are to be charged make it very vague for us to understand whether the transaction fees will actually come to us,” said Ajay Prakash, general secretary, Travel Agents Federation of India (TAFI).

On Wednesday, Air India, Jet Airways and Kingfisher Airlines had given a proposal to the travel agents saying that in lieu of the 5 per cent commission that an airline pays to the agent, the agent should now levy a transaction fee between Rs 350 and Rs 10,000 per ticket on passengers. Sources said that until December 2009, the airlines had agreed that the transaction fees would be simultaneously levied by airlines and travel agents and would be thus part of the overall base fare of the ticket, so that the customer sees it as just a normal price increase.

“But the airlines also told us that the transaction fees that we were collecting would have to be deposited with them and they would reimburse it to us at a later date,” said P Sampat of TAFI.

“Also, after December 31, 2009, the airlines might stop levying the transaction fee when the customer buys its from their offices or online. But we would still levy it. The customer would then notice the difference in rates when he buys from an agent and from the airline. He would then stop buying from us,” he added.

Also, even if airlines levy the transaction fees in the current scenario, agents fear whether the amount will be the same. Moreover airlines will incentivise the deals on their website. They fear the system to go the US way where it was implemented few years back and agents were forced to keep higher fee and airlines have lower fares on their own websites.

“On an immediate note, I would say that transaction fee will make our business healthier in terms of revenue, the long-term impact will be clear in a month or so,” says Noel Swain, VP, marketing, Cleartrip.

Online travel business, which is worth $20 billion, might also get hit in long run. As more and more passengers book their tickets online, they will notice the difference in fares between the online travel websites and the airline websites and will prefer the latter which might not charge transaction fees.

In the last quarter, travel industry has seen a slowdown of 15-17 per cent in business. Dhruv Shringi, CEO, Yatra, says: “Though October being a festival month has been normal, there is growing concern post-October season (rising air fares, Jet-Kingfisher alliance).”

Corporate travel has been hit very badly. Aseem Sadana, COO, Isango, says: “Business class travel has been hit badly. Out of MICE (meetings, incentives, conventions and events) category, sales incentive based travel has been least affected. Companies are still keeping their incentive commitments to dealers, as in times of slowdown sales force becomes more important. But in extreme cases, international tours are being turned into domestic tours.”

Incentive based travel comprise 80 per cent of the overall corporate travel. To offset air booking dip, companies will need to look beyond ticket booking to other streams like experiential travel (tours, activities and adventures). The commission on this vertical is more lucrative, 5-10 per cent depending on the volume.

To add to the woes, the Jet-Kingfisher alliance has put agents under more pressure. Travel agents say it will lead to lesser choice for them as well as passengers and the the volume will go down and thus the business.

Bruce Hanna, president and CEO, InterGlobe Technology Quotient, the official distributor of Galileo (a link between travel suppliers and travel agents) in India, says: "While common flier will be left with lesser choice, frequent fliers will get an advantage. Frequent flier points earned from Jet will be applicable to Kingfisher and vice versa. Travel agents will also be under pressure to give additional value on the booking, like hotel, restaurant booking etc.”

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