Here’s the case for bringing back TA commissions!
The world of travel resets to a new order with a remarkable efficiency, that sees businesses spiralling down the cascading nadir of uncertainty. Irrespective of the various efforts to keep the travel eco-system in levels of sanity, the writing on the turbulent wall is loud and clear! ‘The present can ubiquitously brutal and is not a mirage anymore!’
The International Air Transport Association (IATA) updated its analysis of the financial impact of the novel Corona virus (COVID-19) public health emergency on the global air transport industry. IATA now sees 2020 global revenue losses for the passenger business of between $63 billion (in a scenario where COVID-19 is contained in current markets with over 100 cases as of 2 March) and $113 billion (in a scenario with a broader spreading of COVID-19).
CRISIL, the rating agency, which is now owned by Standard and Poor estimates indicate that the Indian aviation industry, for one, will crash-land this fiscal with revenue loss of Rs 24,000–25,000 crore. Airlines will be the worst-affected, contributing more than 70% of the losses, or Rs 17,000 crore, followed by airport operators with Rs 5,000-5,500 crore, and airport retailers (including retail, food and beverages and duty-free) with Rs 1,700-1,800 crore.
To put it mildly, Lockdowns are the new fashion statement to be flaunted amid a pile of ruins! The effect of this eerie locked-up stability has changed dynamics of a world trying quite hard to reach out and discover new life-skills. Technology being thrust down your throats in form of webinars and zooming around gaining itself a new adjective, the world of travel is sure not behind with lakhs of interactions floating around noisily in the Indian airspace. The mere talk of airlines getting to create a flurry of adjustments to receive passengers with imposed social distancing and safety norms has gone viral and orgasmic to say the least!
Eventually, when the aviation world does open up, the airlines has to get back to its realm of stability on and off the skies. The perishable seat has to be found a stable and sustainable partner in form of its distribution eco-system.
Getting used to flying around in the new world order with as IATA lists out – Use of masks and PPE, Physical distancing, Cleaning and disinfection, Covid -19 testing, Antibody testing, Immunity Passports and assisted contact tracing. The party to be a responsible traveller sure gets complicated, but with not much choices around, it would be purely on ‘Grin and bear it!’ basis.
With more airlines going down than ever and hardly a seat sold in the last couple of months, the time is perfect to re-assess, the distribution eco-system. Airlines have long given up the ‘home in the skies’ tagline to a passenger transportation business and maybe smile a little less over the years, but business wise, it has been a no-quarters given, ruthless drive of optimal revenue management mechanisms. The management style based on a revenue management stream has more questions than solutions.
Other industries in the GDP ecosphere like for E.g., manufacturing, where a defined marketing eco-system has existed for over a couple of centuries which till day continue to stay competitive and give value to their distribution chain and consumer alike. Of course, there have been products that have vanished, primarily brought about by inept management or change of consumer needs. In the aviation sector, off late, seldom has an airline closed or have been in trouble because of quality issues. The befallen airlines are world-class products, delivering what it promised and more, today have ceased to exist. We in India, just in the last few years have lost service leaders such as Kingfisher and Jet Airways.
The commercial aviation space is probably the only cog in the Industrial ecosphere that does not pay or reward its partners, i.e., in this case the travel agent, who places at his disposal his marketing system, network and working capital held lieu by corporates. The Travel Agent, who otherwise help sell airline tickets, also is a financier to discerning corporates, who look at it as cheap credit! Globally, the travel agent community is in the Small and Medium scale sector, that has in some form, have by default become a clear-cut investor in the Airline working capital system, albeit, with little or no dividends to show. Passengers, as much as airline wish go direct and book on their sites, will continue to use travel-agents to consult for big ticket purchases or a slightly different iterinary. The recent case of airlines, which were hesitant to refund monies for un-travelled tickets is case-study material!
The airline industry is the only industry that does not wish to pay for the travel agents marketing costs and expects him to mark up a service fee from the passenger. In 2019 alone, over 20 airlines have shut shop permanently. The thought that more airlines have vanished in the present no-commission era than ever before is a scary thought. In a post Covidera, where an airline seat might go expensive, considering the cost overheads attributed to safety measures and social distancing seat obligations; it would be more prudent to get agents on your side to be a sales partner, where an agent would educate on why the passenger needs to invest further in an Airline’s safety protocol program!
Every industry, probably other than some FMCG and Pharmaceuticals have taken a hit and would have bat out of their skins to come out with their bottom lines unscathed. The aviation industry is the only one still stuck to a system, where your distributor (in this case, the humble travel agent) is not compensated. The losses for the aviation industry have been bizarre and humongous to say the least, and the travel agent, the airline’s biggest sales staff is not responsible for even a single paisa out of it. The time is never better to bring in a five year moratorium on the ‘No-Commission’ system of doing business. You might just have more chances to survive in turbulent times. Some additional goodwill never hurt anyone!