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Trouble in the air for online travel portals

Trouble in the air for online travel portals
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First Published: Wed, Nov 26 2008. 09 42 PM IST
Updated: Wed, Nov 26 2008. 09 42 PM IST
New Delhi: India’s online travel booking portals, the recent beneficiaries of a decision by India’s leading airlines to discontinue with a decades-long practice of offering up to 5% commission to travel agents on each air ticket sold, and a subsequent decision to compensate these agents, are suddenly faced with an uncertain business future after the airline firms did away with a transaction fee on tickets that protected the interests of the agents.
Portals such as Yatra Online Pvt. Ltd, MakeMyTrip (India) Pvt. Ltd and Arzoo.com have seen ticket sales rise 10-20% since 1 November, the day National Avaition Co. of India Ltd, or Nacil, Jet Airways (India) Ltd and Kingfisher Airlines Ltd did away with the travel agent commissions.
To compensate for this, travel agents were allowed to impose a transaction fee ranging from Rs350 on a domestic route to up to Rs10,000 on an international ticket. The airlines levied this fee on tickets bought through their websites. Air travellers started buying tickets through travel portals because they perceived these purchases to be cheaper and transparent.
Nacil, which runs Air India, and Jet Airways on Tuesday removed the transaction fee levied on tickets purchased on their websites, making tickets bought online on their sites cheaper. This also makes it difficult for travel agents to continue charging transaction fee.
Some 15% of tickets bought in India are bought online with the remaining transacted through offline ticket agents.
Two travel agent groups— Travel Agents Federation of India and Travel Agents Association of India—plan to meet airline executives on Friday to discuss the issue of commissions and transaction fees.
An industry expert said airlines will likely suffer in the short term, losing their bulk bookings from agents. “India is not that mature a country where one can completely abolish the commission or transaction fee. People are still dependent on an agent and prefer going to him than online,” said Gurvinder P.S. Arora, senior manager at audit and consulting firm KPMG Advisory Services Pvt. Ltd.
Dhruv Shringi, chief executive and co-founder at Yatra.com, which charges a variable transaction of Rs100-150 on domestic air tickets and Rs350-1,000 on international legs, said: “It’s too early to see how the airlines’ decision to abolish the fee will impact our business but we are watching.”
Makemytrip.com’s CEO Deep Kalra said his firm’s focus “over the next two quarters would be to catalyze the offline-to-online shift”. He added, “A zero commission environment has existed in the US and the UK for some time now and travel agents have moved to a fee-based model in these markets.”
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First Published: Wed, Nov 26 2008. 09 42 PM IST