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TAAP fighting with airlines for withdrawal of commission cuts

Pakistan travel agents are fighting to reverse their commission levels from five to nine per cent. According to Nishat Mummunka, former Chairperson, Travel Agents Association of Pakistan (TAAP); Pakistan’s national carrier Pakistan International Airlines (PIA), Gulf Air, Qatar Airways, Emirates and Etihad Airways sent out separate circulars on June 30, 2008 announcing reduction of commissions of travel agents on international flights from Pakistan by four per cent from nine per cent, effective July 16, 2008. Apparently, the decision has been taken by the airlines as part of measures to curb auxiliary costs associated with the aviation business in times of rising fuel prices.

“The airlines had reduced our commission without consulting TAAP, causing a loss of billions of rupees in taxes to the National Exchequer. Currently travel agents pay Rs five billion annually to the Federal Board of Revenue (FBR) and after the cut in commission the amount will come down by 50 per cent. Thus, even government stands to lose almost Rs two billion tax annually. We are trying to make the government understand this point and to support us in the drive against airlines,” said Mummunka.

TAAP has threatened the five airlines that it will stop booking their air tickets if they decline to withdraw their decision of reducing commissions of travel agents. The four carriers have followed suit after national carrier PIA cut the commissions of travel agents. “All the Gulf carriers informed that they were ready to reverse commission levels if the national carrier does so,” added Mummunka. The PIA plays a role similar to Air India in India. TAAP will target PIA while taking forward any negotiations or agitations. “Refusal of PIA might lead to a fresh confrontation with TAAP members who have recently come out of a similar confrontation with private carrier Airblue. We have different options on the table,” said Syed Mahmood Hussain Shah, Secretary General, TAAP.

In June this year, Airblue also reduced the commission of travel agents in a bid to distribute the burden of high fuel prices between the airline and its agents. The decision had led to a nationwide boycott of Airblue but the airline did not suffer because of its direct communication with customers through e-ticketing. According to a recent arrangement Airblue has decided to increase its air fare on which the commission of travel agents is calculated. It had earlier lowered the fare and increased fuel surcharge, which had brought down the commission that travel agents earn on the sale of tickets.

By providing an insight into the current scenario, Muhammed Nadeem Sharif, Ex-Chairman, TAAP informed that the airlines are not ready to revert on their decision and are asking for other options. After meetings with the TAAP members and managing committee members, the TAAP forwarded a proposal to the airline which said ‘TAAP suggests that instead of reducing the commission from nine to five per cent, it will be more viable for all of us that you implement zero commission model with a service fee of seven per cent on the total cost of ticket (including non-commissionable portion). The service fee model should be implemented on all classes and the same service fee should reflect on ticket with code and should be charged at all the airlines’ counters across Pakistan.’

Sharif added, “This proposal was appreciated by the airlines and they forwarded it to their head offices for final approval. They are hopeful that the proposal will get a green signal. Due to the positive replies from the airlines, TAAP has withdrawn its earlier plans of protest and "shutter down" all over Pakistan and has decided to wait for the acceptance for the alternate proposal.” But TAAP continued its nation-wide protest for three days against the decision of the airlines in mid-July.

In the last decade and a half, the business of travel agents has not been as lucrative as it was in the 1990s, the major factors being more-money making policies of the airlines, market fares, economic and political condition of the country, discount demanding customers, cut throat competition among airlines and agents. Added Sharif, “Travel agents are providing credit to customers on which they are not earning a single penny. At times they have to borrow money from banks to hand it over to the airlines on which the agents have to pay the interest to the banks. In this scenario, where agents are losing money, the airlines are depriving us of the current nine per cent commission.” Like India, most of the sales for the airlines in Pakistan come from the travel agents.

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