Airline companies ask IATA travel agents to furnish bank guarantees
In developing economies like Jordan's, clashes between traditional and global business standards crop up with ever-increasing frequency especially given the difficulty of building personal relationships and the higher risks involved in rapid market growth.
A classic collision of this sort has been disturbing the slumber of travel agents and airline companies in Jordan; neither side has slept easy since their joint council decided to make travel agents cough up a hefty bank deposit as a guarantee that airline companies will be paid for all plane tickets sold.
“The decision imposed a bank guarantee equivalent to three reporting periods of 15 days each on all accredited travel agents who sell airline tickets, to guarantee the financial rights of airline companies in case of default on due payments by travel agents,” said George Twal, Country Director-Jordan of the International Air Transport Association (IATA).
Twal added that airline companies represented in the joint council were unanimous in the decision, and all they needed was the agreement of one travel agency representative in the council to achieve a majority decision, two agents voted in favor.
Airline ticket sales in Jordan this year, has already achieved an estimated revenue of JD80 million, while the sum of due payments didn't exceed JD300,000.
This fact raised the question as to why such large bank guarantees — amounting to a maximum of JD260,000 in some cases — are needed since the percentage of unpaid debts proves relatively trivial in comparison to the market revenues.
Twal explained that airline companies are worried specifically because of defaults on minimal payments, “if a travel agent isn't able to make payments on amounts as small as JD5,000 as witnessed in some cases, how would he handle a payment of JD500,000 if it arises” Twal wondered.
He added that such default problems did not start with agents accredited by IATA, who according to Twal, were the only agents who could acquire the Billing and Settlement Plan (BSP) tickets directly from IATA, who act as a local clearing house authorized by airline companies.
“Some of the agents work as wholesalers, they acquire BSP tickets and sell them to other agents that are not registered with IATA. Then those agents often don't pay for the tickets they buy from the IATA agents, which renders IATA agents unable to make the payments due on them to airline companies,” Twal said.
Travel agents argue that airline companies created the problem in the first place, “airline companies give certain agents extra commission under the table, in return, they give them more of their tickets to sell within a specified time period, which is usually too short, this drives the agents to sell the tickets to other smaller agents not accredited by IATA, who sometimes end up not paying for the tickets, thus creating the cash flow problem,” Bishara Sawalha, chairman of the Jordan Society for Travel and Tourism Agents (JSTTA) told the Jordan Times.
Taha Hiari, from the Arab Express Travel Agency, reiterated on the subject saying, “airline companies are like fictional scientists who created a monster that went out of control.”
Hiari introduced another argument by the travel agents, he told the Jordan Times that airline companies should deal with agents who don't prove credible by simply not dealing with them anymore, and not by imposing such guarantees that according to Hiari seem as s “collective punishment on all travel agents.”
On the other hand, airline companies said they aspire to create a more professional business atmosphere, and that they did not aim at punishing anyone, “it is our right to secure our business transactions, therefore, we need guarantees by all agents including trustworthy ones who have been in the market for many years, because one never know what can happen,” Ghada Fanek of Air France told the Jordan Times, she added wondering, “what if this trustworthy agent died?”.
In order to find common ground, an idea to purchase an insurance policy by all travel agents that can guarantee the potential losses of airline companies was presented by IATA.
“The insurance policy would be worth JD1.5 million, virtually covering up to 15 travel agencies by JD100,000 each, therefore, each travel agency that sells more than that amount will have to present bank guarantees to cover the difference,” Twal told the Jordan Times.
He added that this idea was presented at a meeting with representatives of the agencies, in which all parties agreed that agents be given a grace period that ends on Sept. 30 to present the insurance policy, or to present another practical suggestion that could be accepted by airline companies to deal with the situation.
Otherwise Twal said, the bank guarantees decision would have to be implemented.
Travel agents were cautious in welcoming the insurance policy idea, while Sawalha said the JSTTA would take the grace period to consider it, Hiari called it a “civilized solution,” and Saleh Attallah from Haya Travel Agency said he was in favor of the insurance policy idea. ― ( Jordan Times )
By Yacoub Abu Ghosh
© 2000 Mena Report (www.menareport.com)