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Dispute Between American Airlines And Travelport

Is collateral damage really necessary?

Dec 12, 2010

The fallout potential from American Airlines’ (AA) dispute with Travelport continues to worry UFTAA. American Airlines’ announced in mid-November that travel agents in 55 countries would from late December be charged a "source premium" on all booking segments over AA services that are made through the Galileo or Worldspan GDS.

Those charges will be recouped by Agency Debit Memos settled through the IATA BSP. They will vary in value considerably from country to country, ranging from US$2 to ten times that amount, per booking segment.

The reaction of UFTAA members most affected by the AA announcement, ranges from dismay to outrage as the cost implications sink in. AA’s reasons were explained by the airline to one of UFTAA’s members, ARTA Canada, at a meeting on December 8. However, while recognizing that all airlines must recoup their costs to stay in business, the travel agent community is uneasy at the above turn of events. Those agents that are committed contractually, either of the GDS operators involved in the dispute, see themselves being placed in an invidious and costly quandary.

Under the rigid IATA BSP rules, a travel agent is bound by strict financial discipline, which IATA enforces vigorously as a matter of principle. Presentation by a BSP Airline of an Agency Debit Memo (ADM) occurs after a ticket sale has been made and the BSP Airline has been paid and, as often as not, it happens after the travel has been completed. In practice, therefore, under the prospective scenario announced by AA a few weeks ago, a recipient of an ADM will either have to summon up the courage to challenge the airline as to the validity of the ADM and engage in a convoluted dispute process, or accept the ADM and try its luck in recouping the surcharge from the customer after the event. Neither prospect is attractive. The hovering menace of being declared in default by IATA, not just in respect of AA but to all BSP Airlines under IATA’s collective disciplinary procedures, is never far from an agent’s thinking.

UFTAA considers that there is something fundamentally wrong here. It fears that the ADM procedure is about to be abused and that the cost for agents of managing the imminent flood of ADMs will be an additional burden put on them through no fault of their own. Many agents see themselves becoming the collateral casualties of a price war in which their only offense will be that, at some time in the past for valid commercial reasons, they signed up with a GDS with which AA now has a quarrel. That calls for a lot of explaining.

UFTAA accordingly sought IATA’s explanation as to its projected part in the above development but so far, has not received it.

UFTAA is now analyzing the legal and commercial implications of the implicit threat of an IATA collective boycott being held over the heads of agents who might elect to resist the threatened ADMs of dubious status. If AA executes its plan, ADMs will rain down on some unfortunate agents who have done nothing wrong and who may well be driven to act desperately at the prospect of trying to recover "source premiums."

There are remedies for disputing ADMs, but they were designed by the industry in the context of correcting agent errors and are geared to settling one-off disagreements, which are the exception rather than the rule. ADMs sent in respect of each ticket issued involving AA, in respect of which no error has been committed by the travel agent, will be a different matter altogether.

UFTAA has a duty to do all in its power to help defend the legitimate interests of its members. The means at travel agents’ disposal include invoking the ADM dispute machinery available under IATA’s own rules. If the dispute mechanism fails through overload, then another possibility would be to turn to the regulatory authorities concerned.

Perhaps things will become clearer when IATA’s response to UFTAA’s November 18 suggestion of a discussion and request for an explanation is received.

Is collateral damage really necessary?
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