Differential pricing to lift ticket sales through airline websites

Domestic airlines have been trying to maximise web sales as it helps them reduce sales and distribution costs

Civil aviation secretary K N Srivastava’s order on the transaction fee allowing differential pricing might increase ticket sales through airline websites. This will also help airlines reduce sales and distribution expenses.

According to the order, airlines can offer different fares for those who purchase tickets on its website and those booking from agents. This implies passengers buying tickets from agents will have to pay a slightly higher fare, which includes commission or transaction fee. Differential pricing would encourage people to book tickets from airline websites, according to industry sources.

About 80 per cent of airline tickets sold in India are through travel agents and online portals. The rest is sold through airline websites and booking offices. At present, there is hardly any difference between the fares on airline’s website, online portals and global distribution systems used by agents to book tickets.

WHY BUY A TICKET FROM AN AGENT?

• Civil aviation secretary K N Srivastava’s order means passengers buying tickets from agents will have to pay more than those buying through airline websites
• 80% of airline tickets currently sold in India are through travel agents and websites
• There is hardly any difference at present in the fares on airlines' websites, travel portals and global distribution systems used by agents

A Jet Airways spokesperson said the airline was examining the civil aviation secretary's order. No other airline has responded to email queries on the issue. While airlines and passengers may benefit from the move, it is likely to hurt travel agents who are already complaining of reduction in commission and disparity in fares. Currently, Air India and Jet Airways pay one per cent regular commission for domestic ticketing. Low cost airlines collect deposits in advance from large agents and, in turn, provide 1-2 per cent incentive, 1-2 per cent regular commission and a productivity commission. Till it was banned by the Supreme Court, the low-cost airlines tickets use to include a transaction fee of Rs 150 on each ticket, but the same was not included in the airfare.

“Earlier we were airline agents, now we are becoming their (airlines’) competitors,” said a travel agent. A few months ago, Jet Airways agreed in principle to allow agents to use credit cards to book tickets and restore price parity in tickets sold on their website and reservation systems used by agents. But the airline gave no commitment to restore five per cent commission. “Airlines have been taking an anti-agent stance and want to sell to passengers directly. The agents may start charging higher fees for visa processing and other services if they lose business due to differential airfares,” said another agent. In the order issued last week, the civil aviation secretary ruled that the meaning of transaction fee, commission or convenience fee was the same — payment of remuneration to an intermediary..

The order said all these were permissible, if shown as a part of the fare, and no sum was collected from consumers over this. The  order will allow airlines to follow dual pricing   "It is an accepted principle that a passenger should be charged only for the services utilised. Therefore, if he has not availed the services of travel agents, it would not be appropriate to burden with the commission payable to travel agents,'' the order said.

"Although the order is by and large favourable to the agents, it has some negatives. The secretary has given a wrong interpretation that commission, transaction fee, service charge, etc. are all the same. In fact he was not required to state so. Moreover, his interpretation  is not supported by the legal provisions. Both the Aircraft Act 1934 and the Aircraft Rules 1937 provide for commission and commission only. There is no mention there of any other term such as transaction fee, service charge,etc, said Advocate Biju P Raman who represented the IATA Agents Association of India in the matter.