Travel agents to send a hundred thousand e-mails to Singapore Prime Minister to protest zero commission

The three month old stand-off between travel agents and Singapore Airlines on the zero commission issue shows no signs of abating. Both sides have tried to negotiate but remain apart. If anything, the dispute has entrenched both sides in to their respective stands even further.

In the latest move to pressure the Singapore national carrier, Indian travel agents will send one hundred thousand e-mails tomorrow April 1, to the Singapore Prime Minister Mr. Lee Hsien Loong, and flood his e-mail box to draw his attention to the on-going dispute.

IATA Agents Associates of India (IAAI) President Biji Eapen says

"One lakh e-mails will be sent to the Singapore Prime Minister, , by all IATA travel agencies on April 1. And this is not going to be an April Fool joke. We want to make the Prime Minister aware of the issue as well as seek his intervention in resolving the issue,"

"We have made every effort to make Singapore Airlines understand the issue in perspective and restore the agency commission like domestic air-carriers have done, but to no avail, hence the operation,"

In a move to widen the protest, the travel agents also plan to send 5,000 e-mails every day to the Indian operations heads of the 14 overseas airlines operating in India, who have resorted to zero per cent commission.

I am not sure, and I invite comments from experienced e-mail system administrators, will one hundred thousand e-mails be seen as a "Denial of Service" (DOS) attack, especially tomorrow when the Win32.Conficker worm is expected to go off, putting everyone on maximum alert.

For a background and all articles on this issue click here.

Singapore Airlines has put out a release and FAQ giving their side of the dispute.

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Travel agents to boycott Singapore Airlines

I must tip my hat to the travel agents' associations in India. Their strategy of targeting one airline at a time, has paid handsome dividends.

From a paltry five per cent commission on the basic fare, they have successfully made all the airlines pay three per cent on the gross fare, which includes the fuel surcharges, on domestic fares. Passengers will recognise that very often, fuel surcharges are anywhere from 4 to 10 times greater than the basic fare.

Travel agents represent as much as 85 per cent of the full service airlines' business. By selectively boycotting one airline at a time, the agents focussed all the hurt on one airline, while still preserving relations by continuing to provide services to their customers, using other airlines. In these days of economic crises, and rabid competition, the "non-boycotted" airlines were happy to benefit from their competitor's misery.

Like dominoes, each airline folded its negotiation hand. It started with Jet, then Kingfisher, then Paramount, and finally Air India.

In the history of air travel, prior to this action, only agents in Japan have been able to force a roll back of the zero commission regime. I wonder if it is too late for agents in other countries to learn from the Indian strategy. For all of us, regardless of business vertical, we should take lessons. Prior to negotiation, recognise the weaknesses in the opposite party/parties, if possible target one at a time i.e. divide and rule, adopt a strategy that pressures them, but never, ever, compromise your business survival, by pressuring your customers.

After obtaining concessions from the domestic airlines, the travel agents have now focussed their attention on the international carriers. starting with Singapore Airlines.

Following a failure of negotiations (read re-instatement of agency commission), six associations of travel agents today decided not to sell tickets of Singapore Airlines from Monday, December 29, 2008. Later, they have also decided to boycott, Singapore Airlines' subsidiary, SilkAir from January 1, 2009.

In the case of foreign travel, since the commission is paid only on basic fare, and fuel surcharges do not constitute as significant a component as in the case of domestic travel, the agents are demanding a five per cent commission.

Singapore Airlines, like other foreign airlines, at present, allows travel agents to charge around Rs 1,200 on sale of its tickets as a transaction fee.

A Singapore Airlines spokesperson said travel agents comprised an important element of its business and that it was very much interested in working with them. "Travel agents are getting a transaction fee, around Rs 1,200 per ticket. We think this model is good for the business. The model is working well and we would like to persist with it," the spokesperson said.

However, having tasted success with their "selective boycott" strategy, the associations are firm in their stand, that they would not settle for anything less, than a five per cent commission.

The senior management of Singapore Airlines has rushed to Singapore for "consulatations" with senior airline management. Stay tuned. I am sure, an announcement from Singapore Airlines, capitulating to the agents, will follow, very shortly. After which it will be the turn of Lufthansa, British Airways, Emirates, and other major foreign carriers.

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Kingfisher restores travel agent commissions

As I had indicated in my earlier story, Kingfisher Airlines announced that it will pay three per cent agency commission to travel agents on gross fare, effective from today. The decision to pay three per cent commission was acknowledged in a fax sent to TAAI office last night. “The airline has also withdrawn Transaction Fee on tickets, which was introduced following the abolition of five per cent commission to travel agents on October 31, 2008,” stated an airline official. Current market conditions and the boycott threat by travel agents are believed to be the two main reasons for the airline agreeing to pay three per cent agency commission.

Earlier, Jet Airways had announced that it will be offering three per cent commission to travel agents on gross fare. The decision came after travel agents boycotted sales of Jet Airways and its Low-Cost Carrier (LCC) JetLite's tickets from December 4, 2008. Industry sources informed that the daily sales of Jet Airways and JetLite's tickets had dropped by 50 per cent, from nearly Rs 18 crore to Rs nine crore, after the boycott by travel agents.

Now the travel agents will target the foreign carriers, using the same, "one-at-a-time" approach. Only 60 of the the approximate 260-70 IATA carriers globally, service India. Of this 60, only 16 airlines have taken the decision to move to the zero commission regime. It is just a matter of time, before they too will revert back to a commission based regime.

I must compliment the travel agents' associations. They have executed a masterful strategy to perfection with superb effectiveness. They have managed to achieve in India the results, only their fellow Japanese agents have managed before; i.e. to reverse the airline’s decision on commission structures. In no other country, have travel agents achieved this result.

The recent development of airlines reversing their decision on zero commissions (ie, Jet and Kingfisher) implemented in November 2008 is a huge victory for the travel agent fraternity. The current agreement of 3% is a boost for agents. Previously they earned 5% on only the basic fare. Now, they will earn 3% on the gross fare, which includes fuel surcharges, which are among the highest components in the total airfare.

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Jet Airways to pay travel agents commission

The travel agents appear to have won Round 1 of the "Zero Commission" battle. Less than four days after the agents decided to boycott Jet Airways and low cost subsidiary JetLite, Jet Airways announced restoration of the travel agents' commissions.

As per the release from Jet Airways,

Recognizing the difficult economic environment for the travel industry as a whole, Jet Airways engaged in a constructive and intensive dialogue with the Travel Agency Associations to find solutions acceptable to the airline and the partners in the travel trade. As a result of this dialogue Jet Airways has agreed to pay three percent commission on gross fare (defined as basic fare plus fuel surcharge) of domestic and international tickets sold in India. The commission scheme will come into effect immediately and will replace the transaction fee model recently introduced.

JetLite will continue with the practice of transaction fee model consistent with the practice adopted by the other Low Cost Carriers (LCC’s).

As I had indicated in my earlier story, the travel agents will next focus on Kingfisher Airlines. Expect a similar announcement from Kingfisher very soon. The big question will be Air India, since Air India controls the bank settlements system that agents rely on to book tickets and settle accounts with all the airlines.

As the Chinese say, may we live in interesting times.

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Business Standard: Calling the airlines bluff

Read a nice article by Anjuli Bhargava in the Business Standard today, about the airlines' ticket prices, the fuel prices, and the politicians. I strongly recommend your reading it.

Ms. Bhargava asks

Can someone enlighten me as to what’s going on? I am referring to this quid pro quo that’s been playing out through the media between the airline industry, the aviation ministry and the government.

Sure I can Ms. Bhargava. We consumers are being taken for a ride. I have written how.

• Click here for all articles about the fuel prices.
  

• Click here for all article about the zero commission issue.
  

• For an analysis on the current crisis in Indian aviation click here.
  

Talking of the zero commission issue. The travel agents have become smart. They have decided to target the airlines one at a time. From yesterday, travel agent, including the online agents, have stopped issuing Jet Airways or JetLite tickets. To ensure maximum impact on Jet, and continued income for themselves, the agents will continue to issue Kingfisher and Air India tickets. Within a week they expect Jet to soften its stand. Then they will go after Kingfisher, and on and on, one airline at a time.

What is the fight all about. Very simple.

Till November 1, all full service airlines used to pay travel agents a 5% commission on the basic fare. This was built in to the cost of the ticket. If you or me, went direct to the airlines' websites and bought the ticket, the airline kept the 5% commission for itself.

On November 1, the airlines stopped the commission and told agents to start charging a "transaction fee" ranging from Rs. 350 to Rs. 10,000, per transaction. The agents are willing to do that, but expect the airlines to charge the same transaction fee from direct customers who go to the airline office or website, so that a price parity is maintained.

The airlines are unwilling to do that. Now that the costs are out in the open, we customers have started complaining. Herein lies the crux of the matter.

It may not be $700 billion as for Wall Street, but we customers are being called on to bail out both the airlines and the travel agents.

And just as a reminder, the fee is per TRANSACTION. i.e. if you change your ticket, or even cancel your ticket, you have to pay the fee again, and again, and again.

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The age of zero commission and zero guarantees

The "Zero Commision" ruckus has been ratcheted up another step, by the travel agents. As per various news reports,

In a move aimed at forcing airlines to revoke their decision to withdraw the five per cent commission, previously built-in to the ticket prices, and paid to the travel agents, over 2,500 travel companies, including IATA travel agents and online travel agencies (OTAs) like Makemytrip, Cleartrip, Yatra and Ezeego, have decided to stop selling Jet Airways and Jetlite tickets from December 4.

The Jet decision was taken at a meeting of the six associations — Travel Agents Federation of India (TAFI), Travel Agents Association of India (TAAI), IATA Agents Association of India (IAAI), Indian Association of Tour Operators (IATO), Association of Domestic Tour Operators in India (ADTOI) and Enterprising Travel Association of India (ETAA) — which cumulatively account for nearly all of the 2,800 IATA agencies, apart from numerous OTAs.

A previous decision by the agents to boycott Kingfisher Airlines and Kingfisher Red, was withdrawn at the last minute.

The three Indian full service airlines and several international carriers stopped paying 5 per cent commission on the ticket prices to travel agents from November 1. The agencies have had around 10 meetings with airlines to make them withdraw their decision but that has not worked. The airlines, in turn, have asked the agents to levy a transaction fee of Rs 350-10,000 per ticket in lieu of the commission.

Like it or not, we are living in an age of "zero guarantees".

Customers are increasingly demanding better value for their money spent. In these hard economic times, my customers are demanding that I cut costs, improve service, and be available to them when they need me. In return I am guaranteed nothing. Just an opportunity to do business, not even the business itself, just the opportunity.

Any entity in business, survives only on the value they add in the supply chain. The day someone or somthing else can improve the value chain, existing links will be re-aligned. It applies equally to professional relationships as products. An employer looses employees the moment the value chain is superseded by another, and vice-versa.

If anything, I am incensed at the airlines, for not lowering their fares by the 5% commission they used to pay the travel agents. In effect, a fare increase has been hoisted on us.

These actions of the travel agents are based on one flawed fundamental premise -- that have the god given right to be protected from the changing business environment.

Over the years, technology has caught up with the agents. Today, customers, are perusing the internet, making phone calls, and obtaining the best value for my money. During this time, most travel agents became air-ticket churning machines, falling in to complacency and sloth, showing an amazing lack of business foresight that borders on outright incompetence.

Most did not bother to live up to their name TRAVEL agents. Air passengers constitute less than 1% of the total passengers who TRAVEL everyday -- in trains, buses, hotels, taxis, and yes, even planes.

As a passenger, I used to call my favourite airline, Singapore Airlines, directly. Choose the routing and make the booking, seating, meals, etc., myself. When all was done, my travel agent would be called in to issue my ticket. I used to take back all but 0.5% of the commission they earned, as a discount.

Corporate customers, are no different. They take discounts in the form of lines of credit, free airline tickets, and other such incentives.

In effect, travel agents were already operating in a "zero commission" regime. The recent actions of the airlines have only formalised the reality.

Despite my suggestions to the contrary, my travel agent never bothered to diversify in to other services. As a passenger, I need to get visas, health and travel insurance, car transportation, hotel accomodation, and a whole host of other allied services. Services for which I would gladly pay for.

As customers today, the same travel agent will gladly squeeze the last drop of blood from his supplier of copier or printer paper, tea/coffee, or other office needs. Do they guarantee the business and survival of their vendor ?

My local bookstore is not insulated from competition by Amazon or Barnes and Noble online, and should Penguin, MacMillan, or any of the other publishers start selling their books online, no one has guaranteed the survival of Amazon or any other sales channel. Similarly, my newspaper vendor is not guaranteed his livelyhood by the numerous newspapers who now publish e-papers for all to read on the internet.

I know that the age of zero commission will hurt many travel agencies, and many of them will perish, but I remind them, the horse buggy perished in the face of the car, and we have a stronger transport system, the ocean liners perished in the face of the inter-continental airplanes, and they adapted and improved.

These travel agents are smart people, and there are opportunities galore, both within and outside the air and travel sector.

I do not know if I would call everything happening today, progress, but it is reality. As much as I do not like saying it, the faster the travel agents face the situation, the better off they will be.

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Air India, Jet, Kingfisher, withdraw transaction fee

India's top three airlines have withdrawn a transaction fee on air tickets effective today for tickets sold through their call centres, websites or offices.

Air India, Jet Airways and Kingfisher Airlines have withdrawn the fee, which ranges from 350 rupees on a domestic economy ticket to 1,200 to 10,000 rupees on first class international tickets.

Earlier this month, airlines had withdrawn the five per cent sales commission, built in to the ticket prices, they used to pay travel agents, and urged the agents to charge "transaction fees" to the customer and make up their income. To ensure parity between prices of tickets bought directly from the airlines and those from travel agents, airlines also levied the "transaction fee", a move, extremely unpopular with the passengers.

As fuel prices have been falling, there is pressure building on the airlines to reduce fares, with Civil Aviation minister Praful Patel calling on airlines to play their part in reviving air travel. This move, while welcome, is sure to have the travel agent community up in arms.

Read additional related articles on this subject.

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Fuel prices reduce, air fares do not

Thanks to the global reduction in crude oil prices, and reductions in Customs duty (in response to desperate pleas by airlines), Aviation Turbine Fuel (ATF) prices in India, have retreated back to earlier levels of 8 months ago.


Today, ATF is priced almost the same as in March 2008, but air fares show no sign of retreating. Airlines had almost doubled their fuel surcharges in June 2008, citing massive increases in ATF prices by the oil companies.

Yet, despite the prices reducing drastically, airlines are following a dangerously greedy business strategy, and refusing to reduce their fuel surcharges. Not only is this impacting the volume of passengers, but it increasingly alienating airlines' supporters, passengers and politicians', alike.

Instead of abating, the short-sighted approach by airlines, is on the increase. From November 1, 2008, all airlines removed the 5% commission they used to pay to travel agents, but have kept the savings, instead of passing it on to our customers. Naturally, the travel agents, are levying additional service charges on the tickets they sell to us. It is a perfectly acceptable situation till this point, but in addition to this indirect fare increase, Jet, Air-India, and Kingfisher are imposing a "transaction fee" on all ticket sales sold by THEM!!!!. In fact the transaction fee will be levied even on refunds or changes!!!

Across the globe, companies are going all out to retain their customers. Airlines in India, seem to be taking their customers and supporters for granted, adding new unreasonable fees, and hoarding their cost savings, instead of sharing it with their customers.

It is little wonder, why passengers continue to desert the skies and take to trains and buses.

A rollback in the fuel surcharges to March levels, and non-imposition of the ridiculous transaction fees, will bring the passengers back to the skies and improve load factors, which will increase the airlines' incomes. Keep the fares high and passenger numbers will just continue to dwindle, and that, my friends, is the download spiral to oblivion.

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Airlines get relief from Government but make passengers pay Transaction Fee

The battered India airline companies received a lifeline from the government on October 31.

The 5% Customs duty on Aviation Turbine Fuel (ATF) has removed. In addition the government controlled oil marketing companies have announced a price reduction of Rs. 6,000 per kilolitre on ATF.

These two steps, will result in an about 17% reduction in prices, but predictably, airlines have chosen to hoard the price reductions to buttress their shattered financials, and say it is too early to say whether the drop can be passed on to customers in the form of lower air fares.

Adding insult to injury, airlines will force, their customers to start paying the "transaction fee"on air tickets from November 1, 2008. The fee will hike domestic fares by up to Rs. 500 and international travel by up to Rs. 10,000 a ticket. This fee will be payable even on refund tickets.

Please see the tags "Transaction Fee" for articles on this subject.

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Travel agent commission, Calcutta High Court issues status quo order

Krupa Vora of TravelBizMonitor reports, of a significant development, which has national implications. Travel agents will continue to receive commissions on the sale of airline tickets till the Calcutta High Court passes judgement in the suit filed by a TAFI member agent in Kolkata.

The TAFI member agent (plaintiff) filed a suit in Calcutta High Court early last week against National Aviation Company of India Limited (NACIL), International Air Transport Association (IATA) against the abolition of agency commission on the grounds that the IATA Passenger Agency Sales Agreement does not permit an airline to reduce agency commission to zero per cent.

The zero commission regime was to due to be implemented from November 1, 2008.

The High Court, according to industry sources, in its first hearing of the suit (case number: G.A. 3257/2008 and C.S. 197/2008) had passed an order to maintain status quo stating, “Having heard and considered the facts and circumstances of the case, the reduction of remuneration to zero per cent cannot be justified as the term 'Service rendered' postulates payment for work done. Zero per cent contemplates services rendered for free and the rules of IATA do not postulate such a situation. Neither the rules have been amended nor has the agreement been terminated. Therefore, there is no justification for reduction of the commission to zero per cent. Parties are directed to maintain status quo as on date till 30th September 2008.”

At the hearing of the suit yesterday, where according to sources, the airline representatives did not show up, the High Court directed the parties to maintain a status quo till the next hearing.

The date for the next hearing, according to sources is November 5, 2008.

As the plaintiff in his petition had also advised the court that this was a matter affecting numerous IATA agents across the country, the Hon'ble Court, according to sources has, therefore, given leave to all agents interested in the matter to become a party to the suit by making an application to the Court. A newspaper advertisement to this effect will be published shortly in two major dailies. According to sources, in order to become party to the suit an agent will be required to submit an affidavit, stating the same, along with a copy of his/her Agreement signed with IATA.

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Pay travel agent transaction fee even on refunds

TravelBizMonitor has provided a break-up on the Travel Agent Transaction Fee.

As per the decision, travel agents will now charge a Transaction Fee of Rs 350 per ticket on domestic Economy Class, Rs 500 per ticket on domestic Business Class, Rs 2,500 per Economy Class booklet and Rs 3,500 per Business Class booklet. Interestingly, tickets purchased for SAARC, which include Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka will be included under domestic travel. On international tickets, Economy Class that falls under TC1, which includes North and South America, Australia and New Zealand and TC2, which includes Europe, Taiwan, Japan, Korea and Africa and South West Pacific will be charged Rs 2,500 and TC3, which includes Middle East, South East Asia and China will be charged Rs 1,200. On international Business tickets for TC1 and TC2, the charge will be Rs. 5,000 while for TC3 will be Rs 2,000. International First Class tickets will be charged a fee of Rs 10,000 on TC1 and TC2 (Including South West Pacific) and Rs 5,000 on TC3 category.

But what is positively disgusting is that the transaction fee will not be refundable and can be charged over and over again.

It has also been decided that the Transaction Fee will not be refundable and will be retained by travel agents, even when a ticket is processed for refund. The agents can charge a fee over and above the cancellation charges for any modification or cancellation. The airlines will also charge the same Transaction Fee at the City Traffic Office, Airport Traffic Office and the website.

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Air passengers to pay yet another fee

The air transport cartel is at it, again. In all too familiar theme, we passengers must get ready to pay one more "fee".

Readers will recall that airlines decided to scrap travel agent commissions, in India, effective October 31, 2008. This move by the airlines, created an uproar in the industry and led to strikes and protests. Presently, airlines pay 5% of the base fare as sales commission on tickets issued by travel agents, without any charge to passengers.

According to the Deccan Chronicle, airlines and travel agents have mutually decided to add a new component, to be called a "transaction fee", which would be a minimum of Rs 350 for domestic and maximum of Rs 10,000 for international tickets, which will replace the existing commission.

The transaction fee will be euphemistically reflected as “other charges” on the ticket. This is over and above, other fees and surcharges like fuel surcharge, air traffic congestion surcharge, user development fee, and passenger service fee, already charged to passengers.

God forbid, the airlines defile the holy altar of "low air fares" and incorporate all these charges, which make up almost 75% of the total cost of the ticket, in to their fares.

Reportedly, the transaction fee will be at least Rs 350 on domestic air tickets for the economy class, and Rs 500 for business class.

The fee on international air tickets will be Rs 1,200-2,400 (economy), Rs 2,000-5,000 (business) and Rs 5,000-10,000 (for first class tickets). These charges will be uniform across airlines, including low-cost carriers such as SpiceJet, Indigo, Kingfisher Red, etc.

At a time when everyone is cutting back on expenses, with this new arrangement, travel agents will earn double of what they are getting right now, all for no additional effort, and all of it, on us, passengers' backs.

If you think you can avoid this mutual back-scratching "fleece the passenger party", and book directly from the airlines' websites or offices, think again. Air tickets booked through airline websites or their offices will also attract the transaction fee, and conveniently, this fee will be earned by the airline. Oh what joy. The competition which allows me to differentiate between good and bad travel agents, and enables me to demand value for money service, is simply overwhelming.

I wonder why is Mr. Patel asking for tax relief on aviation fuel ? By asking their passengers to needlessly pay even more, the air transport industry in India, seems to have already overcome this perfect storm of slowing demand coupled with rising costs.

See related story "Travel agents need to earn their income"

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Indian Travel Agents need to EARN their income

From October 1, 2008, airlines in India are going to stop paying commissions on their tickets sales by travel agents.

Travel agents are understandably incensed. Until about a year ago they used to earn 9% commission, which was dropped to 5%, and in another 2 months, will drop to 0.

Industry experts say most small agents will shut shop, while the bigger ones will earn special bonuses, instead of commission, from airlines, which will get increased, even further, thanks to the smaller agents closing down.

The various travel agents' associations, whose members account for 85% of tickets sold, have threatened to stop selling air tickets, which will impact the Rs. 33,000 Crore airline industry in India.

For many smart customers, travel agents were already operating in the Zero Commission regime, since we would take back the commission, in the form of discounts.

Painful as it is, it is time for travel agents in India, to start walking the extra mile to earn their commissions. As a customer I do not need to pay 5% to a travel agent to just do an online booking that I can do myself. In most mature markets, travel agents receive no commission from the airline, and charge service fees, which demands the provision of value addded services.

For many years, I have been telling my travel agent friends that they need to provide services commensurate with their commissions. Start providing holistic travel related services. Hotels, car rentals, visa and passport services, travel insurance, travel advice, and tours, are just some of the areas they must look at.

Online travel agents, such as Ezeego1.com, Cleartrip.com, Yatra.com and Makemytrip.com have already started finding alternative sources of revenue. Some these agents have less than 30% of their total revenues coming from airline bookings.

Agents who develop skills and offer services that help the customer find better deals, and an easier travel experience, will survive, others will just disappear in to history.

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