Jet agrees to pay 3% commission to Travel Agents

In continuation to our coverage of the zero-commissions / transaction fee tussle ongoing in airline distribution, here is the latest.

Business Standard, The Economic Times, LiveMint and Financial Express are all reporting that Jet Airways has given in to the travel agents' demand of moving back to the commission model. According to the reports, Jet Airways will now pay travel agents 3% commission on total fare, as compared to 5% commission on base fare earlier. This might make the actual commission higher than before in some cases !

Kingfisher Airlines is still mulling on when it will move back to the commissions model, and if it does, what %age commission will it offer travel agents. As for the national carrier Air India, it does seem inclined to continue the zero-commissions regime.

We at iXiGO have always believed that travel agents are an integral part of the travel ecosystem - indeed they are still experts at selling high involvement products and acting as travel consultants for all the requirements of a traveler. The survivability of travel agents who were heavily dependant on airline ticketing for their earnings was threatened under a zero-commission regime. This current move is definitely reassuring for their business continuity . Upto 80% of airline bookings come from travel agents, and until that %age balance of direct bookings and indirect bookings does not change, it will be tough to make drastic changes in incentive structures. Our own thoughts are that the latest compromise is a short-term one, and if you are a small travel agent, you definitely need to diversify away from the flights business or hook up with a consolidator with bigger buying power with airlines for your customers' fulfilment.

More than anything else, the bold step of taking commissions to zero is an audacious signal from the airlines to intermediaries that what has happened elsewhere in the world can also happen in India, and we need to be prepared for it. Small/Mid-sized Travel Agents need to look at the time ahead as a "grace period" from airlines to rework their business models and diversify into richer products, because it is just a question of time and the change in ratio of %age of bookings done direct on airlines vs. agents that will determine when the airlines will push zero commissions once again.

Cheers,
The iXiGO Team

PS: Noteworthy is the fact that JetLite will continue on its model of paying no commissions and adding a transaction fee for agents to charge their customers, just like other LCCs !