Bleeding Travel Agents
Airline companies in India, facing a combined $2 billion (Rs8,580 crore) loss this fiscal because of high fuel costs and fierce competition, are resorting to steps including cutting down on flights, and have already cut the commission to travel agents from 9% to 5% earlier.
State-owned National Aviation Co. of India Ltd or Nacil, Jet Airways India Ltd and Kingfisher Airlines Ltd. in an effort to cut costs, have decided to scrap the 5% commission on basic fare from 1 October, (which is before taxes and surcharges) that they pay to travel agents. That will dry up the widest revenue stream for agents—about 90% of their business is from airline bookings, mostly for corporate clients.
About 85% of airline bookings in India are done through travel agents, including online agencies such as MakeMyTrip India Pvt. Ltd and Cleartrip Travel Services Pvt. Ltd. Rest is booked directly by passengers. To compensate revenue losses, some travel agents are planning to impose a service charge on the bookings they make. But that will make their services more costly as bookings through airline websites, where there is no service charge, will be cheaper. Travel agents plan to charge Rs100 per passenger for domestic travel and Rs500 for international tickets from October 08.
Changing Dynamics of GDS business
August 2006: Redefining relationships with U.S. based travel management companies, Sabre Travel Network had introduced an optional fee-based program that gives its global distribution subscribers access to full airfare content and immunity from airline service charges. Sources said Sabre's move is the bellwether of new dynamics between GDSs and corporate travel agencies and likely would lead to additional expenses for corporate travel buyers.
Although Sabre would not disclose the new agency payment terms, Sabre CEO Sam Gilliland said they would be "opaque," as they have been with the airlines. As per Sabre Travel Network senior vice president of North America Chris Kroeger, travel management companies in effect will pay Sabre to leverage full content, but still receive incentives, albeit shrinking ones, from the GDS. "Sabre connected agencies that elect not to participate will not have assurance of access to full content," Kroeger said. "It does not put an end to incentives," Kroeger said. "We've been very open as we've talked about this balanced approach that there is a role for incentives." Gilliland has said incentives are coming down and Kroeger concurred.
We will have to wait and watch the strategic developments in India in the near future...