BA calms fears over low commission
Apr 23, 2007
BRITISH Airways (BA) is to reduce the commission paid to travel agents to 1% from 7%. <b>Suneel Tyagi</b>, the airline’s manager for East Africa, talked to Sylvia Juuko about the changes
BRITISH Airways (BA) is to reduce the commission paid to travel agents to 1% from 7%. Suneel Tyagi, the airline’s manager for East Africa, talked to Sylvia Juuko about the changes
QUESTION: Give us a brief background about British Airways’ tariff structure.
ANSWER: Airlines have been paying agents a percentage commission on their sales. However, the industry has changed with the agents working for their clients rather than for British Airways. With more airlines and increased competition, things are more driven by the client rather than by the airlines. The agents’ income should be based on the services they provide, which should be paid for by their clients.
Agents have expressed concern over these changes. Don’t you think the industry in Africa is different from the industry where it was introduced?
Change is never easy, but in the long-term, it is good for everybody concerned. The client will know what the agents are charging and decide if they feel they are getting value for money. If you go to a doctor or dentist, you know how much you are going to pay and you decide which one you will use because they don’t charge the same fee. The travel trade is not be different. There are more similarities in all these markets than differences. We changed to 1% commission in Zimbabwe in June last year. In South Africa in July 2005, we also changed. In Zambia, we did the same. We are making changes in East Africa. All these markets are similar. It hasn’t affected the agencies. None of them has gone out of business nor have the big agencies eaten up the small ones.
But a change from 7% to1% is not a small one.
They are getting less from us but they will be charging the clients for their expertise. I do not know what the fees structure will look like because it varies from country to country, but the commonality is, a professional body will charge a fee for their services. Nobody would dream of going to a lawyer and getting advice for free. So why do people expect to go to a trained International Air Transportation Agency credited travel agent, get advice on travel plans, accommodation and not pay?
Who is going to regulate this and what impact will it have on the final cost of the ticket?
The price of the ticket won’t change. But there will be an additional cost for the services. The client will regulate the service fee because if agents ask for ridiculous fees, nobody will use them. The agents have been charging fees like when you change the ticket or re-book.
Won’t this drive business directly to British Airways instead of the agents?
There is no evidence of such a scenario in any market so the agents should not worry. We have closed our retail outlets in South Africa, Zimbabwe and Zambia. We will close the Nairobi and Kampala outlets. That is all we are closing. British Airways is still here and nobody is going to lose their jobs because our staff will still man the phones and continue servicing our clients. There are other ways of doing business with British Airways through the travel agents, online and over the telephone. The exercise is about making BA more efficient.
What are the future prospects of the airline industry especially with competition from the budget airlines?
There is a market for the no-frills or low-cost carriers and one for full service carriers like British Airways. Not everybody is totally driven by price. Some people still value service. The no-frills model has proved to be successful on shorter hops rather than the traditional long-haul flights. If you are taking a one-hour flight, you may not worry about getting a free beer or a hot meal, but if you have a 15-hour flight, those things become important. The two models can operate together and they are in a different market.
Does British Airways have plans for the Commonwealth Heads of Government Meeting (CHOGM) that will take place in Uganda in November?
We expect additional demand because of the summit. Our involvement locally will probably be smaller than people would imagine because that will be in-bound traffic into Uganda. Most of that work, decisions about aircraft and flights will be driven by demand from the UK. The biggest beneficiary will be Uganda. The infrastructure investment will stay here.
QUESTION: Give us a brief background about British Airways’ tariff structure.
ANSWER: Airlines have been paying agents a percentage commission on their sales. However, the industry has changed with the agents working for their clients rather than for British Airways. With more airlines and increased competition, things are more driven by the client rather than by the airlines. The agents’ income should be based on the services they provide, which should be paid for by their clients.
Agents have expressed concern over these changes. Don’t you think the industry in Africa is different from the industry where it was introduced?
Change is never easy, but in the long-term, it is good for everybody concerned. The client will know what the agents are charging and decide if they feel they are getting value for money. If you go to a doctor or dentist, you know how much you are going to pay and you decide which one you will use because they don’t charge the same fee. The travel trade is not be different. There are more similarities in all these markets than differences. We changed to 1% commission in Zimbabwe in June last year. In South Africa in July 2005, we also changed. In Zambia, we did the same. We are making changes in East Africa. All these markets are similar. It hasn’t affected the agencies. None of them has gone out of business nor have the big agencies eaten up the small ones.
But a change from 7% to1% is not a small one.
They are getting less from us but they will be charging the clients for their expertise. I do not know what the fees structure will look like because it varies from country to country, but the commonality is, a professional body will charge a fee for their services. Nobody would dream of going to a lawyer and getting advice for free. So why do people expect to go to a trained International Air Transportation Agency credited travel agent, get advice on travel plans, accommodation and not pay?
Who is going to regulate this and what impact will it have on the final cost of the ticket?
The price of the ticket won’t change. But there will be an additional cost for the services. The client will regulate the service fee because if agents ask for ridiculous fees, nobody will use them. The agents have been charging fees like when you change the ticket or re-book.
Won’t this drive business directly to British Airways instead of the agents?
There is no evidence of such a scenario in any market so the agents should not worry. We have closed our retail outlets in South Africa, Zimbabwe and Zambia. We will close the Nairobi and Kampala outlets. That is all we are closing. British Airways is still here and nobody is going to lose their jobs because our staff will still man the phones and continue servicing our clients. There are other ways of doing business with British Airways through the travel agents, online and over the telephone. The exercise is about making BA more efficient.
What are the future prospects of the airline industry especially with competition from the budget airlines?
There is a market for the no-frills or low-cost carriers and one for full service carriers like British Airways. Not everybody is totally driven by price. Some people still value service. The no-frills model has proved to be successful on shorter hops rather than the traditional long-haul flights. If you are taking a one-hour flight, you may not worry about getting a free beer or a hot meal, but if you have a 15-hour flight, those things become important. The two models can operate together and they are in a different market.
Does British Airways have plans for the Commonwealth Heads of Government Meeting (CHOGM) that will take place in Uganda in November?
We expect additional demand because of the summit. Our involvement locally will probably be smaller than people would imagine because that will be in-bound traffic into Uganda. Most of that work, decisions about aircraft and flights will be driven by demand from the UK. The biggest beneficiary will be Uganda. The infrastructure investment will stay here.