Many travel agents in India likely to shut shop

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NEW DELHI – Many travel agents in India, whose revenues come from the commission on selling air tickets, may soon be forced to make an exit from their business.

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NEW DELHI – Many travel agents in India, whose revenues come from the commission on selling air tickets, may soon be forced to make an exit from their business. If industry estimates are be to believed, about 80% of the total travel agents in the country will be left with no options but to call it quits once the airlines stop paying any commissions to booking agents from October 1, 2008.

Airlines have already reduced travel agents’ commissions from 10% to 5% as the airline industry was severely hit by increased ATF prices and overall slowdown of the economy. However, the transition to a zero commission regime will not be very smooth considering that 90% of the airline booking business is still handled by travel agents.

At present, there are about 2,860 International Air Transport Association (IATA) affiliated agents in India and roughly around 40,000 sub IATA agents who purchase tickets from IATA affiliated agents. Once this move comes into force, as many as 35,000 agents and sub-agents will be forced to shut shop.

One of the options that many of the travel agents are looking at is to transform their business model into that of a travel portal. E-commerce, in fact, is the only travel segment, which is notching up good profits despite the slowdown. “Website usage by Indian travellers is climbing up at a satisfactory rate. The trend towards online travel bookings is fast catching up despite a slowdown,” says an indiatimes spokesperson.

Meanwhile, size may become the big differentiator for the survival of travel agents post-October. “Small travel agents are definitely going to close down their operations when airlines stop paying commissions to travel agents. I feel this move will compel over 80% of the travel agents to leave their business,” says George Kutty, chairman, northern region, Travel Agents Federation of India (TAFI). However, big players may survive as they provide many value-added services such as vacation packages and group bookings.

Domestic air travel has registered a steep fall of about 40% during the last one year, according to the TAFI. “In the wake of serial blasts in Bangalore and Ahmedabad, the US appealed to its citizens to avoid travelling to India. This will be yet another blow to the industry and impact international bookings as well” Mr Kutty said.

According to a latest IATA report, passenger demand growth fell to 3.8%, the lowest level since 2003. Passenger load factors too dropped to 77.6%, 1.2 percentage points below the 78.8% recorded for Jun-07. “Unemployent levels will swell drastically as more agents will close down their business as their main source of income will be taken away by airlines” says, Praveen Chugh, national president, TAFI.

Raman Taneja, Flexi Tours adds: “Our earnings are going to drop drastically with this move by the airlines. Agents associated with this business will, therefore, look at other means of income generation.”

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Editor in chief is Linda Hohnholz.