Experts Bite Into Realities, First Up

Zero Commission Regime Considered In New Light

Bhisham Mansukhani - Colombo

The first business session at TAAI's 54th convention wasted no time in facing up the most pertinent issue dogging the Indian travel trade today - the prospect of receding airline commissions and the need for agents to overhaul their vanilla business of ticketing.

Titled ‘Vision 2010:Reality Bytes’, the session featured a panel of international heavyweights alongwith one leading Indian trade luminary. Ashok Fenn, president and CEO, Interglobe Air Transport moderated an engaging session that featured Amanda Harrod, president ASATA, Barry Brown, commercial director, Sri Lankan Airlines, Simon Nowroz, director of markets -Asia, Cendant TDS and Vijay Chadda, COO, BTI Sita.

Reminiscent of a similar session that he moderated at last year's convention in Kolkata, Fenn pondered the future of the typical Indian travel agent who still relied on airline ticketing for 60 to 80 per cent of their revenue. "Agents must specialise into niches and tap newer, more sustainable streams of revenue. The Internet presents a great opportunity in this regard. There are more than 125 million Internet users in India alone, this is one interface that agents need to harness," Fenn commented, taking the opportunity to bring Nowroz into the fray. "In context of what technology and the Internet can do for the agent, we need to understand that technology and related processes are not a unique part of the business anymore. It's regular in so much as it is part of the standard. And while the huge growth levels that have been predicted for the travel trade worldwide is certainly achievable and sustainable, the question is, who is going to get the major share. Most likely, it will be those who innovate. We just cannot replicate a process over a period of time and continue to grow. We must also ask ourselves, with regard to the foreseeable staff crunch, whether we need to prescribed eight million professionals or is there a better way. Some are even raising the critical question as to whether the airlines, hotels and travelers actually need the travel agent. While the answer isn't a negative, the prospect of value and the knowledge of the market place need to be enhanced to keep it that way”, Nowroz said.

Fenn then brought Brown into the fold, raising the question about the benefits of open skies and how were low cost carriers changing the aviation landscape. "As far as open skies are concerned, I think, it has done wonders for international aviation. In many ways, we see ourselves as the national carrier of India.” Speaking of low cost carriers, many of the distinction as least in terms of advantages for these airlines is peeling off. The cost of fuel and aircraft is standard so in effect, on a point-to-point basis, how much do they differ from legacy carriers? The A380 will further flatten the differences since you can pack in almost 800 passengers into a single aircraft, thereby reducing the cost per seat and consequently, the ticket price," Brown said.

Harrod's inputs, in particular, were very keenly received. Harrod was instrumental in South Africa's agent community making the voluntary transition towards a zero commission regime in order to have a business independent of the airline.

"While we had been up in arms against South African Airways when they pushed for commission cuts over the last four years, we began to realize the futility of a slow death and decided to take the initiative in so much as understanding the benefits of nil commissions. We studied the models existing in some of the other markets like the US and then commissioned a cost of services audit, following which we were astounded by the results and then pushed for slashing commissions altogether. Starting May this year, commissions went to zero. The airline ticket price now integrates the airline cost, taxes and our consultancy fees. We wouldn't want things any other way again," Harrod said.

Giving the discussion an Indian perspective, Chadda said he endorsed a zero commission regime and that transparency in transactions was the most desirable approach but that can only be possible if when we are charging a service fee to the customer rather than depend on airlines and then give clients discounts. Also, given the fact that many non-travel companies are diversifying into our industry, he said that level of competition will leave agents no choice.