I must tip my hat to the travel agents’ associations in India. Their strategy of targeting one airline at a time, has paid handsome dividends.
From a paltry five per cent commission on the basic fare, they have successfully made all the airlines pay three per cent on the gross fare, which includes the fuel surcharges, on domestic fares. Passengers will recognise that very often, fuel surcharges are anywhere from 4 to 10 times greater than the basic fare.
Travel agents represent as much as 85 per cent of the full service airlines’ business. By selectively boycotting one airline at a time, the agents focussed all the hurt on one airline, while still preserving relations by continuing to provide services to their customers, using other airlines. In these days of economic crises, and rabid competition, the “non-boycotted” airlines were happy to benefit from their competitor’s misery.
Like dominoes, each airline folded its negotiation hand. It started with Jet, then Kingfisher, then Paramount, and finally Air India.
In the history of air travel, prior to this action, only agents in Japan have been able to force a roll back of the zero commission regime. I wonder if it is too late for agents in other countries to learn from the Indian strategy. For all of us, regardless of business vertical, we should take lessons. Prior to negotiation, recognise the weaknesses in the opposite party/parties, if possible target one at a time i.e. divide and rule, adopt a strategy that pressures them, but never, ever, compromise your business survival, by pressuring your customers.
After obtaining concessions from the domestic airlines, the travel agents have now focussed their attention on the international carriers. starting with Singapore Airlines.
Following a failure of negotiations (read re-instatement of agency commission), six associations of travel agents today decided not to sell tickets of Singapore Airlines from Monday, December 29, 2008. Later, they have also decided to boycott, Singapore Airlines’ subsidiary, SilkAir from January 1, 2009.
In the case of foreign travel, since the commission is paid only on basic fare, and fuel surcharges do not constitute as significant a component as in the case of domestic travel, the agents are demanding a five per cent commission.
Singapore Airlines, like other foreign airlines, at present, allows travel agents to charge around Rs 1,200 on sale of its tickets as a transaction fee.
A Singapore Airlines spokesperson said travel agents comprised an important element of its business and that it was very much interested in working with them. “Travel agents are getting a transaction fee, around Rs 1,200 per ticket. We think this model is good for the business. The model is working well and we would like to persist with it,” the spokesperson said.
However, having tasted success with their “selective boycott” strategy, the associations are firm in their stand, that they would not settle for anything less, than a five per cent commission.
The senior management of Singapore Airlines has rushed to Singapore for “consulatations” with senior airline management. Stay tuned. I am sure, an announcement from Singapore Airlines, capitulating to the agents, will follow, very shortly. After which it will be the turn of Lufthansa, British Airways, Emirates, and other major foreign carriers.