Travel Agents to go out of business

Travel agents in India may soon have to wind up, if airlines implement the 'zero commission' from 1 October 2008, as their revenue comes purely from commissions given by the airline on sale of air tickets.

This may lead to around 97 per cent of these travel agents, who derive their bread and butter from ticket sale commissions, being forced to shut down.

The airlines contend that they are following the current global trend of suspending paying commissions as an emergency cost -cutting measures, as global economic slowdown and the unprecedented rise in fuel prices have made a huge dent in their finances.

Industry analysts estimate that by cutting down on ticket-sale commissions to travel agents, the Indian airline industry will save between Rs1,000 crore and Rs1,500 crore annually.

The airlines now want the travel agents to charge their customers a transaction or service charge instead for their services, as is being done in some countries.
The travel agents' commission has already been reduced to five per cent from the seven per cent earlier.

In a meeting held with the officials of the Travel Agents Federation of India and some leading carriers it was decided that the deadline would be deferred by a month to 1 November 2008.

According to IATA in India, it would be very difficult for airlines to continue operations in the Indian environment, without the sales and support of travel agents as 97 per cent of the total ticket sales and cargo handling comes from travel agents or freight forwarders and the remaining 3 per cent from either direct or online sales.

While IATA has approximately only 3,000 accredited agents, there are nearly 40,000 non-IATA agents. The travel agency segment of the travel industry has a manpower strength of around almost 50,000, nearly all of whom will be affected by the cut back in airline commissions.

The zero commission will also hamper travel agents who give discounts to their clients, as it prevents them from leveraging their rates to remain competitive in the market.

Airline commissions are based on the base price of the ticket and not on the entire value of the ticket, which comprises airport taxes, service tax, etc.

In India, unlike overseas, airline ticket vending machines are almost non-existent.