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Zero commission system for UAE travel agents starts
posted on 01/10/2008
All travel agents operating in the UAE will start working under a zero commission system from tomorrow.
Until now agents have received commission of seven per cent of the basic fare from the airlines for each flight booked. But under the new arrangements they will charge passengers a service charge equal to seven per cent of the total price of each booking.
The new system has already been introduced in some European countries and is being rolled out around the world despite opposition from agents in some territories. Three Indian airlines – the National Aviation Company, Jet Airways and Kingfisher – have postponed plans to abolish commission following complaints from agents, and similar protests have been made in a number of African countries.
In the UAE more than 90 per cent of airlines, including Emirates, are adopting the scheme tomorrow and the remaining carriers are expected to follow suit later. Etihad Airways is not switching over immediately but plans to do so on January 1 next year.
Most airlines have advised agents and business partners how to protect their revenues through special training sessions.
Hundreds of travel and tourism companies in the UAE have been preparing to work under the new system. Most agents said they had received a circular from several airlines informing them about ending of the commission era.
"In line with the global market practice and Qatar Airways' network requirements, the pricing and commission structure will be amended effective from October 1, 2008," said Clifford Christopher, Sales Manager of Qatar Airways.
Industry sources in Dubai said large companies with major corporate clients would not be affected much but smaller players would be hit.
"The zero commission policy will not affect big agents which have considerable corporate business," said Mohammed Faiz, Managing Director of Air Choice Travel Services. "Business travellers cannot afford to depend on internet bookings. They need the services of a travel agent 24 hours a day, especially when they are travelling. But small agents will be affected."
He said the system was being introduced at a time when the travel industry around the world was facing a crisis and many travel companies and airlines were on the brink of closure.
"The bank guarantee for travel and tourism companies has been increased and the International Air Transport Association has also jacked up its bank guarantee requirements," he added. "A travel and tourism company in Dubai needs a Dh400,000 bank guarantee while IATA requires a Dh1.4 million bank guarantee before an agent can issue a ticket."
Some agents said they would benefit from zero commission because they would be able to charge seven per cent of the total fare, including taxes, rather than seven per cent of the basic fare under the previous system. Taxes could account for up to half the overall ticket price paid by a passenger, they said.
Sathish Shitut, Cathay Pacific's Sales and Marketing Manager for Oman and the UAE, said: "In view of the structural changes in the commission system, all Cathay Pacific fares will become non-commissionable with effect from October 1, 2008.
"The airline is advising agents to charge a seven per cent service charge on the total cost of air transportation at their own discretion. However, the airlines are particular that the service charge is not reflected on the tickets, but charged separately."
Raymond Korban, Regional General Manager of Etihad, said the carrier would adopt a zero per cent commission policy in respect of all tickets issued in the UAE from January 1, 2009. – Emirates Business 24|7
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