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IATA picks a fight with agents

The decision of airlines at IATA's Special Passenger Agency Conference to shorten the remittance period for BSP payments in Scandinavia to one week has infuriated agents across Europe

Within hours of the decision, agents in Sweden, Denmark and Norway were talking of legal action and even questioning the point of taking part in future meetings of the Association's Agency Programme Joint Committees (APJC).

Rolf Forsdahl of the Norwegian Travel Trade Association spoke bitterly of how the airlines were "just making fools of us." He also warned that the rest of Europe could also soon be subjected to weekly payments.

The anger is justified as IATA - the International Air Transport Association - seems to have behaved badly throughout.

When Air France and SAS first unveiled their plans to shorten remittance payments from the current one month to one week at a Scandinavian APJC meeting three years ago, agents made their strong opposition clear from the start. Under IATA rules, that should have been enough to stop it. 

But IATA decided to change its procedures (see BTE Analysis November 7:  www.businesstraveleurope.com/features.php?typ=an&id=166 ) in order to push it through at this week's Conference in Singapore.

This decision to introduce fortnightly remittance on July 1, 2008 followed by weekly remittance on January 1, 2010 looks set to cause serious damage to relations between IATA and European agents.

Associations representing agents in Sweden, Denmark and Norway - the countries affected - are first meeting with local competition authorities and next week are likely to decide which of the three countries takes the matter to court.

The matter is almost certain also to go to the EC's competition authorities.

The European agents' association, ECTAA is also seeing whether it can take any legal action against IATA. A spokeswoman for the organisation said it "deplored" the decision calling it "onerous, unjustified and by-passing the agents' opposition."

The agents' anger is not just based on IATA fiddling with its rule book but also the problems the decision is likely to cause.

Mr Lars Thykier, managing director of Denmark's agents' association DRF said it would cost €4.5m a year in lost interest while Mr Forsdahl calculated agents would need €80m to cover the change in cash flow. 

Tomas Olsson, secretary general of the SRF, the Swedish agents' association, said many of the smaller agency could be in trouble as their cash flow would be affected. "Many of them have to lodge a bond with IATA in order to operate and now their credit terms have been made worse by IATA," he said.

IATA seems to have taken its decision because of a fear of agencies which owed airlines money going bankrupt. This has happened in Finland and Germany but is extremely rare in Scandinavia.  Mr Forsdahl said the bankruptcy rate there was around 0.02%, a figure he said any industry would be happy with.

Mr Thykier was more succinct. "The airlines just want their money," he said. The view was echoed by Mr Forsdahl who said: "The truth is that they want control of the cash flow. They know that they can set an agent back by hurting his cash flow."

He also made the point that in the sale of air tickets, airline websites are competitors of agents.

But the saddest thing is that there looks to be a fairly straightforward solution to IATA's fears of agency bankruptcy.
Mike Platt, industry affairs director for HRG, makes the valid point that agents come in different forms, the TMCs, the leisure travel agencies and the tour operators. All operate under different conditions.

TMCS, for example, usually gave clients between 35-45 days to pay which was common in any industry. Lufthansa had recognised these differences in its talks with the German agents' association, DRV and consequently withdrew its plan for weekly payments for further talks.

"They have not recognised this in Scandinavia which is why they have hit the whole lot of agents," he said.

The result is anger and bitterness. Mr Forsdahl said: "What is the point of participating in the APJCs when the airlines can always get their way. It seems to be a waste of time.

"I will not say that we will withdraw from them but we will have discussions. It seems to us the airlines are just making fools of us.
"It is not just the principle. It is also our bread and butter."