Commission curse…

IIPM: An intriguing story of growth and envy

This certainly comes as a breather for ticketing agents across the country. Foreign aviation players plying in the Indian market hitherto operated on a zero-commission model, over which a lot of brouhaha was created by agents. However, the latest ruling by the Directorate General of Civil Aviation states that foreign airlines will have to pay commission to the ticketing agents. The decision of the aviation regulator to do away with zero-commission model will benefit around 2,400 agents in the country as international carriers like British Airways, Air France, Lufthansa, et al, will now have to pay 3% commission to ticketing agents. But will it impact the financial standing of these foreign airlines during the current turmoil? “Demand continues to improve, but profitability remains distant. Fares have stabilised, but at profitless levels,” explains Giovanni Bisignani, Director General & CEO, IATA. The new rule implemented will hurt the overall yields and further decline the revenues of international airlines. Out of the total 72 international airlines operating in India; 16 do not pay commission to travel agents. Since close to 85% bookings are done through agents, the reduced revenue per ticket would definitely add to the mounting problems of increasing cost pressures. It gets worse when one looks at the revised loss projection of $9 billion for the current fiscal made by IATA for the global aviation sector. The ruling maybe a blessing for ticketing agents, but is a curse for the airlines.

Ratan Lal Bhagat

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Source : IIPM Editorial, 2010.

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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