IATA agents face moving from monthly to fortnightly payment of bills or increased requirement for bonding following a sharp downturn in airline revenue.
Payments through IATA’s billing and settlement plan (BSP) in February were half that of a year ago – ringing alarm bills at the air transport association.
IATA UK manager Noel Gilmartin told the Guild of Travel Management Companies’ conference in Dubai: “There is concern we may have a tsunami [among IATA agents] coming at us in August and September. Globally, we are in a place we have not been before. There are two measures at our disposal – increased frequency of remittance and bonding.“
Gilmartin conceded proposals to go before the consultative body on BSP issues, the Agency Programme Joint Council (APJC) – made up of airlines and trade associations and chaired by IATA – would include a move to fortnightly payments.
He also signalled the burden was likely to fall on smaller leisure agents, while major companies can expect more flexibility in their dealings with IATA in place of the current single set of rules for all.
Gilmartin told the GTMC: “We are aware customers on the leisure side are much more likely to pay up front. Therefore it might be appropriate to have increased frequency [of payments] in the leisure model. We are looking at it and will work intensively on this.”
The APJC includes representatives of ABTA and Scottish agents’ association the SPAA as well as the GTMC. It agreed to establish a working party to examine the frequency of payments and bonding of IATA agents on April 30.
But composition of the working party, details of its operation and a timetable for proposals have yet to be agreed.
Gilmartin declined to estimate how long the process might take, but acknowledged the issue is urgent. He told the GTMC: “There is concern that we assess agencies on the previous year’s accounts when the outlook remains so uncertain. We are looking in the rear-view mirror when we do not know the road ahead.”
A sharp downturn in premium passengers and cargo is driving the change. In January, IATA airlines’ premium traffic was down almost 17% worldwide on a year ago and air freight down 23%. “We have not seen a collapse like this in cargo since the Second World War,” said Gilmartin.
That has produced a dramatic fall in airline earnings, with revenue through the IATA BSP in the UK – the third largest in the world and normally worth more than $1 billion a month – down 18% year on year in January and 50% down in February.
Gilmartin pointed out half the 1,281 IATA-accredited agents in the UK currently operate without a bond when up to five a month are defaulting on payments.
Leading companies can expect greater flexibility in their dealings with the association because 80% of IATA revenue is delivered by 140 agents and 50% by the top 30.
Gilmartin said: “We need much tighter relations with this group to understand their needs and how their businesses operate, to allow us to be more flexible.”
He remains optimistic about agreement on increasing the frequency of payments, telling Travel Weekly: “The working party offers an opportunity to explore different models. A degree of flexibility can ease the process if there is mutual goodwill and we can develop understanding.”
But he warned: “If views are entrenched, the alternative is to impose something.”