Indian travel agents face harsh reality of fading airline commission

Around 2,000 Indian travel agents and online travel portals have threatened to continue their boycott of Singapore Airlines (SIA) over the carrier’s stance of non-payment of 5 percent commission on ticket sales.

Indian travel agents associations, which include the Travel Agents Federation of India (TAFI), Travel Agents Association of India (TAAI), IATA Agents Association of India (IAAI), among others, claim their stance have resulted in SIA’s sales going down by 80 percent in the last fortnight.

SIA is one of the largest carriers operating into India which includes 12 other international carriers that are now practicing the “zero commission” business model in their distribution network.

“I don’t understand why they are destroying the distribution network to cut costs,” commented Ajay Prakash, national general secretary of TAFI. “Even airlines in developed markets have suffered under the zero-commission regime.”

The next casualty could well be Singapore’s tourism industry, added Prakash. “The travel agents may decide to withdraw its promotion of Singapore as a travel destination if the situation does not improve and Singapore Tourism Board (STB) does not convince SIA to meet our demands. Tourists from India are a key market for Singapore.”

Official figures show about 779,000 Indian tourists traveled to Singapore in 2008. “I am not in the business of protests and boycotts, but everybody realizes travel has slowed down. It’s in no one’s interest to have this boycott.”

Since starting their boycott from December 29, 2008, three full-service Indian carriers – Jet, Kingfisher and Air India – have changed their stance, and agreed to pay a 3 percent commission on total fare sales.

Etihad also has decided to follow the “trend” set by the Indian carriers. The carrier has agreed to offer 3 percent commission on basic fare and fuel surcharge. “We will do the same from March 1, 2009” said Neerja Bhatia, India country manager.

“SIA would rather close the airline than lose in the impasse. Any compromise will be a sign of weakness,” added another travel agent.

Chai Woo Foo, Singapore Airlines general manager for India, says, however, the carrier has not been impacted by the boycott. “There is no change in our zero-commission stance.”

Admitting passenger loads are lower than last year on all routes, Foo continues to be positive about SIA’s passenger load in India.

In a bid to placate and woo back the agents, SIA has agreed, starting next week to give 1.5 – 2 percent “productivity linked bonus” ( PLB) calculated on the basis of yearly sales target that must be met by sales agents.

“But we have clearly said we will only agree to a commission,” said Prakash.”They have tried all kinds of tactics, including creating a rift within our fraternity, but we are tackling that. We are determined not to sell SIA airline tickets.”

Added Pradeep Luylla, vice president of TAFI, once agents makes a breakthrough with SIA in their demands, others including British Airways, Delta, Lufthansa will follow. “Lufthansa’s share is about 30 percent of the European business, so they will fall in line.”

According to Chai, SIA has planned a temporary reduction of of one flight per week from Delhi between January 27 – March 25 and two flights per week from Mumbai between January 27 – March 26. “But this is part of the overall network review to adjust the capacity in the short term to current demand, including flights to Southeast Asia, Australia and Europe.”

SIA maintains the “commission model” is outdated, and many travel agents worldwide including in Singapore have moved on to the “service-fee” based models.

“The key message to those travel agents who think this boycott is having an effect is that they are taking business away from their own community and driving it to our website,” added SIA spokesman Stephen Forshaw. “Not all travel agents are participating in the boycott. We have noticed an increase in sales generated via our website as customers are booking online more now.”