TAFI 2006

TAFI sounds industry for reform at landmark convention

TAFI's first annual convention in five years was a clear message to the Indian travel trade that the association has serious conviction to transform the travel agent in his best interest, finds Bhisham Mansukhani

TAFI chose its first annual convention in five years to sound the industry on its intention for reform - the convention's central theme of keeping pace with challenging times. Held in Singapore from February 9 to 12, the annual TAFI convention witnessed an impressive convergence of travel agents (634), airlines and international travel trade associations, all confronting the imperative of change. The convention was inaugurated at the Grand Copthorne Waterfront Hotel which played host to all its business sessions. Captain Pramod Kohli, chairman of the convention committee delivered the welcome address. Chief guest, Alok Prasad, High Commissioner for India in Singapore also addressed the audience as did V K Verma, commercial director Air India, who assured travel agents that the current five per cent agent commission was here to stay.

Session I - The Theme Session: Keeping Pace With Challenging Times

UB Group Chairman, Dr Vijay Mallya

Ours is a company that has launched and sustained international brands. Yet, I believe that the attempts to import effective business processes to India has never really worked. In this regard, I don't think that airlines can merely supplant an inherently western culture of DIY in India. While Kingfisher will go online with a GDS in April, the travel agent will be very important to our business because we recognise the fact that they service our customers who are simply accustomed to it. The Internet alone cannot drive growth in distribution so we have actually increased commissions.

Joseph Borg Olivier, Chairman UFTAA

While for many of us, IATA has hitherto been a crucial factor, there have been those that have consolidated and moved away from accreditation. UFTAA has been monitoring the situation and we find that the current agency programme is too tedious and cumbersome. What began as a 40-page document in 1946 has increased to 200 pages. Who will read all those conditions and further, actually read between the lines. And with dwindling commissions, the incentive is far less. IATA needs to treat the agent as part of its family. If the airlines continue to trim agent commissions, the agent will only owe allegiance to the customer and other travel principals like cruises.

Robert Khoo, COO, NATAS

The travel agent must reexamine his business and we have done that with some success in Singapore. If the airlines are suffering bad times, then the agents will suffer too. Therefore the agents need to attach value to the services they offer and build their business around this approach.

Sunil Chopra, Manager - India, IATA

We realise that there is need to add value to the accreditation and for this we are working with the joint councils to consider the service fee model. IATA sees its role as a facilitator in the tourism value chain and continues to provide a number of benefits like access to credit at relatively low membership fees.

Don Birch, CEO, Abacus

Distribution is becoming increasingly complex and at the same time, each market is distinct. Yet the one common objective that airlines have in all these markets is to optimise distribution costs. Interestingly, while airlines have tried to move away from the GDS model and look at other more direct mediums, hotels are increasingly using the GDS. Customers on the other hand, have also exhibited an interesting trend wherein they are using the online and brick and mortar interface for the same transaction.

Marco Gorin, Marketing Development Director, Asia, Cendant

Consolidation and focus on specific niche is not an option anymore, rather an imperative. For customers, the travel agent rather than the principal is a more reliable source for a good price. Also, this builds customer loyalty for the agent and invariably, the principal. Airlines therefore need to adopt an approach that is relative to each market they operate in, depending on the profile of the clientele. Agents in fact stand to gain from the Internet as they are well-positioned to do so.

Session II - Emerging Trends: Legacy Airlines vis-à-vis low cost carriers and the travel agent of tomorrow

The session saw an interesting mix of legacy and low cost carriers discuss their business model and the agent's relevance to it. The unanimous verdict was one in favour of the agent but with the caveat that the agent had to be mindful of the airline's need to optimise distribution costs.

Peter Luethi, COO, Jet Airways

Indians are still accustomed to a high degree of service and is something that agents will have to continue providing to them, even with the onset of low-cost carriers. Agents account for more than 93 per cent of Jet Airways’ bookings and I don't think it is any different for low cost carriers. They may enable customers to book on the Internet but even then, most of their volumes will be driven by the travel agent. The low-cost carriers also have a challenge on their hands in India because in terms of operating costs, there is little to pick between them and legacy carriers, and until secondary airports in metro cities are developed, it will be difficult to hold down costs and sustain the current fare levels.

Anil Goyal, Commercial Director, Indian

Airlines are constantly reviewing distribution costs because of rising ATF prices and ground handling charges. To add to the airlines' woes, these charges are higher in India than in South East Asia and the Middle East. Now, distribution costs account for up to 18 per cent of the operating costs and is therefore the focus. This is more so the case with low cost carriers which have already captured 28 per cent of the market. Irrespective of whether and when agent commissions reduce to zero, agents themselves need to focus on reinventing themselves and the associations need to drive this process.

V K Verma, Commercial Director, Air India

In spite of being cautioned about the failed attempts of many legacy carriers to run low-cost subsidiaries, Air India has achieved some success with Air India Express. Singapore Airlines too has been investing in low cost aviation. I think that they both can co-exist and compete because they have their respective strengths. Agents will always be one of the main distributors of airline tickets and the so called DIY traveller may be the only customer profile that the agents stand to lose but with the number of travellers continuously on the rise, this shouldn't really affect the agent.

Paul Daff, Head - Commercial, JetStar

I think both the travel agents and the airlines need to adapt to the changing scenarios. The high costs of fuel and dearth for traffic rights and adequate infrastructure are also factors that need to be considered by both entities. That said, India is a fast growing market for us.

Adel Ali, CEO, Air Arabia

Agent commissions are important and so is the agent airline relationship. However, the two have not been communicating effectively and are instead blaming each other. This has to change if both want a mutual future together. Speaking of LCCs, they can't really operate in the form in India because of infrastructure bottlenecks. They have however, been more profitable than legacy carriers and in 2004, they were the only ones to be profitable in the US while legacy carriers lost US $9 billion.

Session III - The Road Ahead: From Commission to Fee for Service?

Mike Hatton, President WTAAA

Considering the present situation, the way forward in the future may well be to consolidate. If an association with a large membership base were to negotiate rates directly with the airlines, IATA accreditation may be trivial. The agency agreement in its present form may well be irrelevant. Having travelled to some extent in India, I have reason to believe that the service fee concept will not work in India and if airlines insist on thrusting it down the agents' throat, they run the risk of agents giving up IATA accreditation.

Jacqui Timmins - GM, International Sales, Qantas Australia

The relationship we have had with AFTAA has been a love-hate one and while we have had our disagreements, there is no hiding the fact that its members accounted for more than 70 per cent of our sales. So, before the new remuneration package for agents was formalised, Qantas felt the necessity of holding a series of discussions with the agents and invested time and money in re-training and awareness programmes for agents and customers over a period of eight months.

Ajay Prakash - Chairman, Mumbai Chapter, TAFI

While we recognise the mounting cost pressures that airlines face, why are they only concentrating on agent commission. Last year, India witnessed a growth of 17 per cent increase in international traffic and 24 per cent increase in domestic traffic. Mumbai and Delhi alone handled more than 15.6 million passengers. Now, who is servicing them? Online sales remain negligible. Why, then should the agent be the victim. Worse, airlines are flouting a key IATA resolution by not integrating a surcharge within the published fare. It has to be advertised to the client and commissionable to the agent. The airline's policy of quoting same rates to the agent and passenger is also unfortunately unique to our industry.

The open house tackled all the issues allowing for a freewheeling pitch of opinion and engaged the audience. Chopra was cornered with questions about the surcharge on printed fares and B K Ong and Peter Leuthi spoke about the mistrust harboured regarding airlines and assured the agent that they had no intention to take over their business. The role of IATA was questioned, government's role in tourism promotion, and some agents said that the airlines should collect surcharge on their own.