Travel firms form group to break IATA monopoly

By Ayen Infante

11/12/2008

The United Federation of Travel Agents Associations (UFTAA) hopes to break the monopoly of the International Air Transport Association on the air travel industry by setting up its own group to compete with IATA which is being accused of placing undue financial burdens on travel agencies worldwide.

A resolution passed unanimously during the UFTAA World Congress paved the way for the establishment of an executive group that will set strategies and design a comprehensive plan that will eliminate travel agencies dealings with IATA.

“IATA systematically continued to abuse its dominant position to manipulate the air travel industry to justify its existence and to keep its members’ support to survive and generate commercial revenues,” the resolution said in a statement.

“There is a need to reverse aggressively the recent weakness affecting UFTAA’s universal status causing IATA to impose decisions tailored for the exclusive benefit of airlines at the expense of the travel agencies,” it added.

Newly-elected UFTAA president William Tan of the National Association of Travel Agents Singapore said they expect a breakthrough by the middle of 2009.

“We will have to talk to them first. Most problems can be solved if we sit down and discuss it with them. Negotiations will be on a regional basis,” Tan said.

Foremost on the complaint of the UFTAA is IATA’s Billing and Settlement Plan (BSP) regulations and the dwindling commission received by travel agencies from the airlines.

The BSP allows for a single payment gateway between travel agencies and the airlines. Under the system, IATA provides ticket quotas to each travel agency based on their respective surety bond, bank guarantee, or insurance caps.

Most countries including the Philippines have experienced problems with the system as they are only allowed to issue tickets against 85 percent or lower of their surety bond or bank guarantees. Those on insurance are limited to their average median sales and not their actual insurance coverage.

This means that during peak seasons when bookings are higher, a travel agency will not be able to issue tickets based on the actual demand if they exceed their quotas unless they pay in cash.

Philippine Travel Agencies Association president Jose Clemente III said they fully support the move of UFTAA to look at alternatives beyond IATA and its BSP system.

“We have seen travel agencies in the country stopping operations because of the BSP system.

There is even an instance when a travel agency remitted over P4 million but was still suspended because its payment was P30 short due to an obvious typographical error,” Clemente said.

The BSP is being used in 160 countries and territories. Last year it processed 458 million transactions equivalent to $220 billion.

Meanwhile, Philippine travel agencies complain of dwindling commissions from airlines from a high of nine percent in 1997.

Currently most airlines no longer pay commission to travel agents in their various fare schemes.

Philippine Airlines (PAL) provides the highest commission on some of their airfares at seven percent. Still most of PAL’s airfares, specially the promotional fares are under the zero commission schemes.

Other airlines have similar fare schemes but only provide two to four percent commission to travel agencies.

Travel agencies now augment their income from sale of tickets by charging handling or service fees to their clients.

UFTAA has warned travel agencies to expect commissions to be further reduced to two percent over the next two years.

IATA represents some 240 airlines comprising 94 percent of scheduled international traffic.

UFTAA is the world body that represents and defends the interests of tour operators, travel, and tourism agencies before the governments, suppliers, and other organizations worldwide.

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