Move to reduce Agency Commission by Air India & Jet Airways

Default, IAAI — By on July 17, 2012 at 3:49 pm

Hon. High Court of Kerala issues clear direction to DGCA

Biji Eapen, National President

With a tacit understanding with TAAI and TAFI, Air India as well as Jet Airways worked out a dubious scheme to reduce the commission payable to travel agents from the existing 3 % to 1 % with effect from 16th July 2012.

Bemusing indeed… AI & 9W suggested, TAAI & TAFI agreed vide the minutes of their meeting held on 8th May 2012 – “Both the arrangements i.e Remittance Cycle / Change of remuneration pattern to travel agents will kick off together”. In other words, these Associations sold the Travel Fraternity for 1% commission against so called 10 days payment. ( 1% commission is equal to zero commission)

It started in 2002 with 20 Lakhs minimum bank guarantee. In 2008, “Transaction Fee”. Later, tactfully paved way for “weekly Payment” by holding two consecutive meetings on 12th and 24th Aug 2010 . Now in an high-tech banner – “10 days payment” agreed for 1% commission plus Service Fee…….. Just a few days back , even the cash-strapped Air India had spent millions by sponsoring IIFA awards (International Indian Film Academy) at Singapore. So you can understand who are the beneficiaries and what are the benefits ?
Very interestingly, the commission earned on sale of a ticket by travel agent attracts 12.33% service tax , and hence the commission level of 1% will ultimately lead to negative profit figure.
Charging Service Fee or Transaction Fee for rendering intermediary services on behalf of the Principal – Airline is illegal in India vide DGCA order dated 5th March 2010. Aircraft Act 1934 and Aircraft Rules 1937 defines ‘commission’ as an integral part of ‘FARE’ which is a component of “Tariff”, while IATA Resolution no where mentions anywhere Transaction Fee or Service Fee. The DGCA Order of 5th March 2010 issued in favour of IAAI , regarding quantum of commission , directs the airlines to consult the agents, taking in to account various commercial factors such as the market conditions, the cost of the Agents’ establishments, etc & statutory definition of `tariff’.

In view of the critical situation, IAAI had filed a fresh Writ Petition with the Hon High Court of Kerala at Cochin on 27th June 2012 challenging the decision of AI & 9W to reduce the agents’ commission from 3% to 1%.

Further, foreseeing the long planned dubious cartelization policies adopted by certain airlines operating in India by reducing commission to promote consolidation and monopolization, IAAI has also filed a case withFurther, foreseeing the long planned dubious cartelization policies adopted by certain airlines operating in India by reducing commission to promote consolidation and monopolization, IAAI has also filed a case with Hon.Competition Commission of India on 26th June 2012 ( #35/20120) t Delhiseeking immediate intervention and remedial measures.

Hon. High Court of Kerala puts brakes on the Dubious Scheme to reduce the Travel Agents’ Commission

The Hon’ble High Court being satisfied with the genuineness of the complaint of IAAI on behalf of nearly 3000 IATA Travel Agents, has directed the Respondent No. 1 i.e. DGCA to take a decision based on IAAI letter dated 16th June 2012, before the implementation of reduction of commission scheduled on 16 July 2012.
Extract of Exhibit 8 –IAAI letter dated 16th June 2012 addressed to DGCA :

We had, by our letters dated 23rd April 2012 and 4th May 2012 brought to the notice that of Air India Management that any decision to unilaterally fix payment as service charge other than by way of commission would be contrary to the law governing the issue and requested them not to proceed with any such proposal in the matter till the issues are finally settled in the proceedings pending before the Court. Now that the Air India and Jet Airways have issued the above referred circular intimating change in remuneration to Travel Agents with effect from 16th July 2012 by reducing the standard agency commission offered to the Travel Agents from 3 % on Basic Fare and Fuel Surcharge to 1 % on Basic Fare and Fuel Surcharge on all domestic and International Commissionable Documents / tickets issued in India.

The said decision of Air India and Jet Airways is unilateral, against the interest of the majority of Travel Agents and totally in contradiction to the Order of the DGCA dated 05.03.2010. The proposal to reduce the commission and introduce Transaction fee cannot be acceptable to us under any circumstances and the said reduction of commission is targeted to eliminate the agents remuneration under the pretext of cash-strapped airline. Majority of the Travel agents in India consist of small and medium agents and the said reduction of the commission would affect the majority of those agents. Moreover, we have not been heard or consulted before taking the said decision. Since we are not a party to any of the decision arrived at, it shall not lawfully bind us. It is pertinent to note that the subject matter of payment of commission to Travel Agents by the Airlines is pending consideration before the Hon’ble High Court of Kerala in W.P. ( C ) No. 21908 / 2011 filed by IAAI challenging the order dated 28th July 2011 wherein the DGCA had taken a stand that payment of commission is commercial arrangement and that the DGCA has no role to play and for enforcement of order dated 5.3.2010. Since the issue of commission is the subject matter of the aforementioned Writ Petition, it would not be appropriate at this point of time to take any decision reducing the commission payable. The DGCA, being a statutory authority is bound to interfere in the matter, consider the grievance voiced in this representation and pass appropriate directions to Air India and Jet Airways to keep in abeyance the referred decision to reduce the commission payable till the Hon’ble High Court takes a decision in the issue, and to restore the existing rate of commission payable to travel agents. Unquote: IAAI is very much hopeful that at least now the Concerned Authorities realize the futility of abdicating the responsibility and act decisively to safeguard the rights and interests of the Travel Agents, in line with the true spirit as enshrined in the DGCA order dated 05/03/2010 and ensure that the commission payable to the travel agents is restored to its original level. IAAI is eagerly awaiting the decision of the Director General of Civil Aviation pursuant to the clear direction given by Hon. High Court of Kerala vide its Order dated 3rd July 2012.

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