By an Iata-accredited agent who wishes to remain anonymous
How did it come to this? The one-time mutually beneficial relationship between business travel agents and Iata airlines has disintegrated into a mistrusting adversarial situation full of recrimination, accusation and double speak.
The announcement last week that the Agent Joint Programme Committee had voted for fortnightly BSP payments couldn’t have come at a more appropriate time in the calendar.
Turkeys have, in fact, voted for Christmas.
Of course the process was blighted by the options put on the table: do you want to vote for a slow death in 2016? If not then we’ll impose a quicker death in 2015… Hmmm – which is the least worst choice?
But how did it come to this?
Let’s blame Airfasttickets – how lucky for the airlines that their lack of oversight and blasé disregard for something that was obviously not going to work could become the catalyst for wholesale change to the travel business in the UK.
Could it be that down-manning at airlines and the greed of chasing market share blinded them to the fact that selling air tickets at less than they cost was not a sustainable model and at some stage the day of reckoning would come?
Of course they could have put restrictions in place to prevent the losses, but that would have required manpower, thought, consideration and an understanding of the market.
Maybe resources are not in large supply in today’s slimmed down airline world. Far better to apply a sledgehammer to the whole business and in the process penalise agents who are actually following the rules, trading profitably and hanging on to a business model that ain’t actually broke.
So how could it have been done differently?
Well, consider the Far East model, where Iata agents have a monthly ticket stock quota, controlled via the GDS, that allows the airlines to control distribution down to the last ticket, and if an agent is busy with a particular carrier that month, they need to call them up to request additional stock.
This model is tried and tested and works fine. New agents arriving from nowhere with high turnover are unlikely to be offered unlimited credit until they have proved themselves worthy of higher ticket stock.
Equally, the GDS can be used to control actual ticketing. If the airlines are worried about ‘bust-outs’, where a rogue employee logs in from home or turns up at the office at 6.30 on a Friday night and sells tickets until 7.30 the following Monday morning, the GDS can disable ticketing over those times.
But again that would require some thought and consideration from the airlines, which seems to be too difficult when they can use that sledgehammer. Of course the spectre of bust-outs remains with twice monthly payments.
Meantime, what’s happening at the other side of the equation? Are the airlines now proposing to use their new found income to pay their suppliers fortnightly?
Will governments and airports around the world now find that taxes and charges are remitted to them on a fortnightly basis? Will pilots and cabin crew go to fortnightly wages? I don’t think so.
A UK airline boss, one of the silent majority of Iata members, told me that he has no idea why this is being pushed through and that he had no preference one way or the other, and certainly no intention of changing the way his airline works with its suppliers. He’s quite pleased about the positive cash flow impact, though.
Let’s get back to Airfasttickets. It may be politically incorrect to say it, but not all travel agents are created equal. The carriers know this, and if they could be bothered they’d have no difficulty in segregating the market.
Without tarring all OTAs with the same brush, the high-volume zero-fee transactional model with the agent acting as merchant on the credit card sales and racking up huge BSP sales is a little different to the traditional business travel agent selling travel on credit to corporations who buy desks, computers, staples and all their other supplies on credit (talking of which, where’s the list of traditional business travel agents that have defaulted on their BSP over the last few years? Are we solving a problem that doesn’t actually exist?).
Again we’re back to the sledgehammer analogy; why should an airline do the market research and differentiate if it can sweep all of these issues away with a single Iata resolution?
Airlines tell agents that the solution is to transfer all credit accounts to card payment systems. Er… who pays then? The card companies will end up providing credit to corporates in the same way as agents did, but they don’t run charities, so somewhere the merchant fees have to be covered.
Business agents are being pushed further at every client contract renegotiation to lower their transaction costs. When’s the appropriate time to introduce the concept of paying 2% more to use a credit card payment mechanism?
And finally, because by now you either buy this argument or you don’t, what exactly is the AJPC all about?
An Iata constituted body under Resolution 814, the it is constituted of nine agency representatives and nine airline representatives. Interestingly the Iata website confirms the number of UK AJPC carriers as nine then lists them as AA, AF, BA, EK, EY, KL, SQ, UA. Perhaps the ninth prefers to remain anonymous?
Its raison d’etre is to consider aspects of the Iata agency programme and to make recommendations to PAConf. So who is PAConf then?
Well to quote from the Iata site: “The Passenger Agency Conference (also known as ‘PAConf’ or ‘the Conference’) takes action on matters (excluding remuneration levels) relating to the relationships between airlines and recognized passenger sales agents and other intermediaries.”
And membership of PAConf? Open to any Iata airline. No one else, so little likelihood of a vote against better cashflow there.
So what options were on the table at AJPC? Unfortunately we don’t know, as for some reason everyone there operates a draconian confidentiality clause that prohibits discussing the meetings.
How is an agenda constituted and how is debate managed? If the agenda says ‘Item 1 – discussion on more frequent remittance’ and the nine agent representatives around the table say “we don’t want to have that item on the agenda, thanks very much”, what happens next?
Can the agents also suggest their own variation to the agenda? Could they increase the options from the two that appeared to be on the agenda to three?
1 – Weekly remittance (rumour is this was requested by five airlines) 2 – Fortnightly remittance (preferred by three airlines) and a hypothetical option 3 – status quo (apparently one airline on the AJPC was happy with this).
Even with only weekly or fortnightly, how did the process take place? If nine agent representatives vote against the resolution and nine airlines vote for it, does that provide a mandate to take the matter to the PAConf?
Oh yes, I forgot, PAConf is an airline only body that can ultimately write the story, if they reckon its weekly, then weekly it will be and while they’ll doubtless be polite to the whole AJPC concept, they have the ultimate decision-making privilege.
So perhaps the turkeys had little choice, in the end. But if you want to know how they voted, then try to find out who the nine agency representatives were, and ask your friends at the eight airlines identified above. How did it come to this?