Wednesday, December 06, 2017

Jet Airways scraps agents' commission to save costs

Mumbai: 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.
05/12/17 Aneesh Phadnis/Business Standard