IATA Enters Nepal Scaring Small Travel Agencies

IATA Enters Nepal Scaring Small Travel Agencies
(New Business Age, March 2008)

The scenario of travel agency industry in Nepal is about to take a big change with International Air Transport Association (IATA) entering into this market. Some of the industry analysts claim that the mushrooming and unregulated travel agency industry might finally take a more regulated and systematic shape with the entry of IATA. However, the criteria IATA has set for the travel agencies to get IATA membership have scared many smaller travel agencies. They allege that these criteria are hard for them to fulfil and are rather made for the benefit of larger travel agencies which will not help a healthy growth of the industry.

The point of the small players seems logical on the cursory look. Very few of the travel agencies know what IATA is and why it is here for. Without clarifying the market about its roles and its responsibilities, it seems unfair for IATA to ask all travel agencies to be its member within May 31, 2008. Moreover, the criteria it has set for the travel agencies to be eligible for the membership seems to be hard and some even claim that it is literally robbing them. For instance, the 7% commission that agencies used to get earlier from airlines for each ticket sold is falling down to 5% after the entry of IATA.

While applying for the IATA membership, a travel agency has to translate all the official documents of the organization into English and send it to India along with the draft for the application fee. This work would have been easier had the IATA an office set up here in Kathmandu. Moreover, the application fee is Rs. 13,000, which is non-refundable. Then IATA sends its employees for inspection who check, among other things, whether the agency keeps important documents like passports and tickets in enclosures that have concrete walls.

Another criterion requires the agency to have at least two employees who are equipped with IATA training certificate. For this purpose, IATA provides training facilities to the interested members of travel agencies but the fee charged is hefty. And the small travel agencies have objected strongly to it. “The heavy training fee gives us an impression that IATA is coming here more for profit than for helping to regulate the market,” says Raju Dhakal Managing Director of Sea Link, a travel agency.

According to his argument, if IATA is here for a noble cause, it should provide necessary trainings on a regular basis. “It is wrong to hope that travel agencies can carry out their duties regularly simply with a certificate of training. There are examples of mistakes made in e-ticketing by even large travel agencies that already are members of IATA. This clearly shows that one-time training is not enough,” he adds.

After being selected as the official member of IATA, each travel agency has to give bank guarantee of $10,000 which again is felt quite expensive.

Some people point out that IATA will stop the peculiar practice of smaller travel agencies under which they book the seats way too early and sell them off later in an inflated price. But the managers of smaller travel agencies say that IATA need not bother about this. “If it really wishes, this problem can be solved mutually through Global Distribution System (GDS) and the airline itself. If there is false booking, time limit can be fixed by which if the ticket is not confirmed the booking can be cancelled,” adds Dhakal giving the example of Etihad Air which follows this practice. If rules like this are followed by every airline, chances of such black marketing in tickets can be avoided, he says.

However, there are some positive aspects of IATA as well. “With its entrance, many international airlines have entered Nepal”, says Saugesh Shrestha, Head of Ticketing Department of Shangrila Tours. “It fights for the interests of airlines across the globe, challenging unreasonable rules and charges, holding regulators and governments to account and striving for sensible regulation. IATA’s aim is to help airlines help themselves by simplifying processes and increasing passenger convenience while reducing costs and improving efficiency.”

Though IATA has not run its activities in full fledge in Nepal, its missions and objectives surely will prove beneficial for the travel industry in the long run, view some industry analysts. Once it starts full-fledged operation here, there will be virtually no relationship of travel agencies with airlines. Agencies will have to buy ticket stocks from IATA. Moreover, there will be special tickets made for IATA member airlines where there will be the list of the prices as well. As such, no travel agency can charge price at random, it is hoped.

Another major positive development that IATA will bring would be in credit control. Currently, travel agencies often issue tickets on credit as a result of which there is delay in payment to the airlines. This problem would reduce sharply as travel agencies will have to pay weekly to IATA for issuing tickets. “International identity and world wide connectivity is another positive aspect of being the member of IATA”, says Kamal Magar, who manages the Nepal office of Malaysian Airlines.

Nevertheless some people point out that the benefits that the IATA member travel agencies are getting are not worth the price they have paid for. There are currently 43 IATA member travel agencies operating in Nepal but many of them say that they have not felt even a marginal difference in operation except for the change in billing system and the authorization to book the tickets of Qatar Airways.

It shows that IATA has not been able to win the trust of all the players in Nepal’s travel agency industry. Larger players have already been its members while smaller ones are yet to be convinced of the benefits. “IATA on the long run is good for the country. Since many international airlines are entering into Nepal, we need such global organization to come and regulate the market. However, it should stretch the deadline it has set for travel agencies to be its member. It should realize that small players need some time to get themselves prepared to be its member and during this preparation time, it should disseminate the information regarding what IATA is and how can it make a positive difference to the industry,” says Sudip Shrestha, Assistant Officer of Marcopolo Travels. He adds, “It seems unfair for IATA to impose such a short deadline without making all the players aware about what it is and how can travel agencies benefit after being its member. Since IATA is not yet registered with the Nepal government, it doesn’t even pay any tax and neither does it employ Nepali people, it seems as if it is here to collect small change from the wallets of smaller travel agencies rather than for a noble cause it claims.”

By Bibek Subedi and Manish Bikram Shah