Mumbai: Leading international and domestic airlines could be forced to pay higher commissions on flight tickets and stop attracting passengers with sharply discounted fares if a lobby representing travel agents succeeds in its bid to make the carriers publish what it terms “correct air fares”.
The Travel Agents’ Federation of India, or Tafi, has served a legal notice to most airlines flying into and out of the country for clubbing surcharges for fuel, insurance, security and others under the head of “taxes” instead of “basic fares”, though these are not levies paid to the government.
Taken for a ride? Basic fare for a Mumbai-Singapore-Mumbai flight is Rs17,500, while the total fare after surcharge and taxes is Rs25,471.(Photo: Madhu Kapparath/Mint)
Tafi alleges that the objective behind separating the surcharges from the actual full fare is to stimulate passenger demand and pay lesser commission to travel agents.
For example, the lowest available basic fare for a Mumbai–New York–Mumbai trip is Rs32,000. A passenger would have to pay an additional Rs21,508 towards surcharge and tax, pushing the total to Rs53,508. Of this, the tax component paid to the government could be as low as Rs1,000.
In effect, the agents, who generate about 85% of the business for airlines, are shortchanged as they are entitled to a 5% commission on basic fares, says Tafi, which has about 800 members.
Tafi and another representative body, Travel Agents’ Association of India, have been in discussions with the companies for the past few months to persuade them to bring these surcharges under basic fare. Tafi finally resorted to legal options after the airlines refused to budge.
Airlines started imposing surcharges after 9/11. They started with insurance and security surcharges, but fuel surcharge tops the list now, accounting for at least 70% of the total owing to the increase in jet fuel prices.
“There cannot be a potato surcharge for the increase in prices of that commodity,” said Tafi national general secretary Ajay Prakash. “About 30-40% of the actual basic fare is not commissionable because of this practice.”
A Mumbai-based travel analyst, who did not want to be named, said: “If travel agents win this battle, it will lead to more revenue outflow for airlines as the commission amount will increase.”
The carriers that have been sent notices include Air India, Jet Airways, Lufthansa, British Airways, Singapore Airlines, Qantas, Gulf Air, Austrian Airlines, Ethiopian Airlines, South African Airways, Thai Airways, Cathay Pacific Airways, Virgin Atlantic, Air Canada, Air Mauritius, United Airways, Northwest, KLM, Air France and Kenya Air.
There are exceptions though: Delta Air Lines, Emirates, Qatar Airways and Isreal’s El Al Airlines include the surcharges under basic fares.
Singapore Airlines confirmed it received the legal notice from Tafi, and suggested that it is working at a solution.
“We are taking up the matter through Board of Airline Representatives, or BAR India, to clarify the matter with Tafi. Singapore Airlines values the close relationship with our travel trade partners, and we continue to work together to grow our business together,” said Gunjn Chanana, public relation manager (India) of Singapore Airlines.
BAR is an international body for commercial airlines that includes the state-run National Aviation Co. of India Ltd and Lufthansa German Airlines.
The passenger lobby too has joined the issue. D. Sudhakara Reddy, president and founder of the Air Passenger Association of India, accused the airlines of publishing misleading advertisements on air fares.
“There is an advertisement for a Rs99 ticket, which would be too tempting for a first-time flier. He will feel cheated when he buys the ticket and sees the additional surcharges and taxes. This is clearly unfair trade practice,” he said.
The lowest available Mumbai-London-Mumbai trip costs Rs23,000, but surcharges and taxes would add another Rs12,959 to the total fare.
Similarly, the available basic fare for a Mumbai-Singapore-Mumbai flight is Rs17,500, while the total fare after surcharge and taxes is Rs25,471.