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The Directorate General of Civil Aviation (DGCA) has reportedly issued a directive that agents will have to stop charging transaction fee and has also asked international carriers to resume their commissions to travel agents in India.

Published: 15 Mar 2010

The Directorate General of Civil Aviation (DGCA) has reportedly issued a directive that agents will have to stop charging transaction fee and has also asked international carriers to resume their commissions to travel agents in India.

“Firstly, since the zero commission system is loaded with a transaction fee, the consumer has to pay extra money. Secondly, an unscrupulous agent can charge an exorbitant amount as transaction fee from the customer. Thirdly, this system is giving rise to market dominance by some big agents, who are paid hefty amounts by the airlines in the name of productivity. This phenomenon, too, is not in the interest of the consumer as it reduces competition among agents,” the directive read.

The DGCA directive ruled out zero commission in India and passed the order to this effect. DGCA has directed all the airlines that had gone to zero commission that they must reconsider this decision, and in consultation with agents decide on a commission that has to be paid to them. As such, the DGCA has left it to the airlines and agents to fix the commission percentage, reported local daily DNA.

“It is entirely up to airlines to take a decision in this regard in consultation with agents. They must take into account various commercial factors such as market conditions, the cost of agents’ establishments, and statutory definition of ‘tariff’. But the commission cannot be replaced by transaction fees,” it said.

Rajji Rai, president of Travel Agents Association of India (TAAI), which spearheaded the campaign against the airlines for their refusal to pay the commission, told The Hindu that “we still have to meet with the airlines to thrash out the commission payable to us. The meeting will happen early next week and we are very comfortable if the commission goes back to pre-November 2008 levels of 5 percent, although the rate has to be negotiated.”

Last year, in an interview with EyeforTravel, Marnix Fruitema, SVP Asia Pacific, Air France KLM, had mentioned that Air France KLM and Northwest introduced “zero” percent commission in India as of 1 November, 2008 and Other airlines have done the same.

“Service fees are not only a way to compensate for the loss of commissions but also generate new revenue streams that guarantee long term profitability. Many agents have expanded their service fee model in terms of amount charged and the number of services for which they charge fees. Fees have increased customer loyalty and satisfaction, as has been demonstrated in other parts of the world,” Fruitema had said.

In-Depth: TAAI’s point of view on commission structure in India