Travel agents in the UK could be forced out of business if the International Air Transport Association (Iata) tightens airline payment terms, according to a senior industry source.
Speaking to Travel Weekly, the business owner, who asked to remain anonymous, said forcing agencies and travel management companies (TMCs) to remit weekly or fortnightly instead of monthly would push businesses into insolvency.
The source said: “Many [agencies] will not receive more credit from their bank, so they either go bust or pay additional cost for borrowing or servicing by card. Each of these methods takes profit away from the agency.”
At present, accredited intermediaries pay airlines via Iata’s billing settlement plan (BSP) every four weeks.Cash flow for most TMCs and travel agencies is based on a four-weekly cycle.
A spate of recent defaults, including the collapse of AirFastTickets, left airlines tens of millions of euros out of pocket.
But the source said: “The airlines are ultimately responsible for who they allow to sell tickets. Changing the system will make matters worse and cause more to go broke.”
Martin Warner, a former Carlson Wagonlit Travel executive, oversaw changes in other markets in recent years and predicted airlines would push ahead with change in spite of opposition from the trade.
However, Ken McLeod, corporate director for the Advantage Travel Partnership, said: “The status quo must prevail for the good of our members.”
Warner believes agents should demand changes to Iata resolution 890 as a trade off against a change in payments terms.
The regulation forbids intermediaries from using credit cards to buy and sell flights.
Sources claim major carriers from the Middle East and North America are behind the drive for change.
Etihad is known to oppose change, while Emirates’ vice president for the UK Laurie Berryman told Travel Weekly: “We do not support weekly reporting.”
Another agency owner said: “Moving to weekly remittance means agents have to fund three weeks of credit for their customers”.
The agent said the merchant fee would ultimately be passed onto the customer.
Iata’s APJC will vote on the future of BSP on December 11.