International airlines to slash travel agents’ commission to 1 per cent
MUMBAI: Almost all international airlines will cut the commission they pay travel agents to just 1% from 3% earlier with effect from April 1, a move that is expected to impact small town agents and lead to an increase in ticket prices.
The latest airline to inform travel agents of this move is Gulf carrier Emirates. “We do understand that this move may require a change in your business model, but we hope that together we will emerge better and bigger,” the airline said in a letter to agents late Monday.
The commission is mandated by the International Air Transport Association (IATA), a global lobbying body of the industry. Most airlines – including India's IATA members Jet Airways and Air India – have in recent months informed agents in India of the cut in their mandated commission from April 1.
One international airline that has not yet written to agents is Cathay Pacific, a person close to the development told ET.
Travel agents said the move will lead to higher ticket prices. “An agent is now getting a lesser commission. They anyway work on very thin margins. They will have no other option, but to get it from passengers now. That will lead to an increase in prices,” said Sunil Kumar, president of Travel Agents Association of India.
An executive at a travel company said smaller agents would be affected more severely. “The industry right now has consolidators or aggregators which sell inventory to agents. The agents sell them to passengers. Consolidators anyway retain only 1% of the total commission (IATA commission plus the productivity linked bonus) and pass on the rest to smaller agents… That will now be impacted,” the person said on condition of anonymity.
Manoj Samuel, executive director of Riya Travels, one of India's biggest brick and-mortar travel agents, said, “This has been an issue for years now.” Airlines have been steadily bringing down agents’ commission in the last several years, partly as part of a move to link it to the productivity of the agents. There is a productivity-linked incentive of about 2% that is still given to agents over and above the fixed commission.
As per IATA’s regulation, travel agents were paid 9% commission till 2000. From 2001 the commission was reduced to 7%. In May 2005, the commission was reduced to 5%.
In November same year, 16 airlines cut the commission to zero, a move followed by others. In December 2008, the commission was rolled back to 3% by Indian carriers Air India, Jet Airways and Kingfisher Airlines, which is now defunct. Subsequently, others followed suit, and now airlines have again reduced it to 1%.
The latest airline to inform travel agents of this move is Gulf carrier Emirates. “We do understand that this move may require a change in your business model, but we hope that together we will emerge better and bigger,” the airline said in a letter to agents late Monday.
The commission is mandated by the International Air Transport Association (IATA), a global lobbying body of the industry. Most airlines – including India's IATA members Jet Airways and Air India – have in recent months informed agents in India of the cut in their mandated commission from April 1. One international airline that has not yet written to agents is Cathay Pacific, a person close to the development told ET.
Travel agents said the move will lead to higher ticket prices. “An agent is now getting a lesser commission. They anyway work on very thin margins. They will have no other option, but to get it from passengers now. That will lead to an increase in prices,” said Sunil Kumar, president of Travel Agents Association of India.
An executive at a travel company said smaller agents would be affected more severely. “The industry right now has consolidators or aggregators which sell inventory to agents. The agents sell them to passengers. Consolidators anyway retain only 1% of the total commission (IATA commission plus the productivity linked bonus) and pass on the rest to smaller agents… That will now be impacted,” the person said on condition of anonymity.
Manoj Samuel, executive director of Riya Travels, one of India's biggest brick and-mortar travel agents, said, “This has been an issue for years now.” Airlines have been steadily bringing down agents’ commission in the last several years, partly as part of a move to link it to the productivity of the agents. There is a productivity-linked incentive of about 2% that is still given to agents over and above the fixed commission.
As per IATA’s regulation, travel agents were paid 9% commission till 2000. From 2001 the commission was reduced to 7%. In May 2005, the commission was reduced to 5%.
In November same year, 16 airlines cut the commission to zero, a move followed by others. In December 2008, the commission was rolled back to 3% by Indian carriers Air India, Jet Airways and Kingfisher Airlines, which is now defunct. Subsequently, others followed suit, and now airlines have again reduced it to 1%.
