Jet Airways scraps agents' commission to save costs

Jet Airways
Jet Airways will stop paying one per cent basic commission to travel agents in the country from January 1, mirroring a practice followed by global airlines. 

The airline said agents will have the option to levy transaction fee of upto  3.5 per cent of the basic fare and fuel surcharge component in tickets.  Jet will continue to pay the sale-linked productivity bonus to agents.

The move to do away with basic commission will help the airline to reduce its sales and distribution expense (Rs 2533 crore in FY 17) and improve its cash flow. Along with other measures the airline aims to cut down its non-fuel costs by 12-15 per cent.

Agents are paid a basic commission on routine ticket sales and productivity linked bonuses are paid on sales targets. 

Currently, agents deduct the commission component and remit the balance ticket amount to airlines through an International Air Transport Association billing system plan (BSP). For an airline, a commission is thus a cost item. A transaction fee is collected from a passenger. It is included in ticket cost and is reimbursed to the agent. Currently, no-frills airlines including IndiGo, GoAir and SpiceJet allow agents to levy a transaction fee.

The transaction fee levied on tickets will solely at the discretion of the trade partner and the amounts collected on tickets through BSP will be refunded back to agents on a fortnightly basis,” the airline said in its circular last week.

Earlier this year, Emirates slashed agents' travel commission in India from three per cent to one per cent citing volatility in global aviation. Etihad too gives one per cent basic commission, while many European airlines and Singapore Airlines only pay productivity bonus and do not give basic commission.

European airlines have also begun levying fee on tickets booked through global distribution systems that are used by agents. Air France KLM has become the latest airlines to implement a distribution surcharge on GDS sales, joining the likes of British Airways and Lufthansa which announced similar moves earlier this year. The €11 surcharge per one-way segment introduced by Air France-KLM comes into effect on April 1, 2018.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel