Travel agents furious over IATA move; warns it endangers Lankan economy

Friday, 21 June 2013 03:26 -     - {{hitsCtrl.values.hits}}

Until 2005, travel agents in Sri Lanka were trading with the airlines directly by providing individual bank guarantees and were trading with credit periods exceeding 14 days. In 2006, IATA-BSP interposed between the airlines and travel agents and made travel agents provide a common bank guarantee, which facilitated the flow of funds between travel agencies and airlines. IATA-BSP also managed to convince the airlines not to trade with any travel agent which has not obtained the IATA accreditation. Due to this, all travel agents were forced to join IATA-BSP and by the end of 2006, the number of IATA agents increased from 40 to 98. IATA was very well aware that this trend would not continue and from 2007, onwards the number of agents joining IATA reduced as only 19 travel agents joined IATA-BSP from 2007 to 2013. Within a period of one year, IATA-BSP was pressurising the travel agents to reduce the credit period to seven days; however, implementation of same was postponed on several occasions. In 2009, with the agreement of all agents and airlines at a common forum (known as the Executive Council – EC Council) it was proposed that the credit period be reduced from the existing 14 day (twice monthly) settlement to a 10 day (thrice monthly) settlement. With a decision made at an EC Council meeting, the thrice monthly remittance cycle from 1 January 2010 to 31 December 2011 was introduced as an interim measure. Subsequently, in 2013 this was extended until 30 June 2013. The Association has brought to the attention of the state officials and public that the proposals and implementation dates with regard to the BSP settlement were decided at the APJC meetings held and given the circumstances at that time, the representatives of the IATA Agents Association of Sri Lanka (IATA-AASL) and the Travel Agents Association of Sri Lanka (TAASL) had no choice but to agree to the same. At the Agency Programme Joint Council (APJC – previously referred to as EC Council) meeting held on 20 March 2013, the proposal made by IATA-AASL and TAASL to continue with the 10-day settlement plan indefinitely, was taken up for voting and it was unanimously approved with the support of the airlines. This matter was escalated to IATA Singapore and a mail vote was floated (cast by airlines worldwide) and the two associations were informed by IATA Singapore that the mail vote was defeated due to four negative votes and the seven days settlement plan will come to effect from 1 July 2013. IATA-AASL and TAASL addressed this matter with the Director General of the Civil Aviation Authority (DGCA) H.M.C. Nimalsiri and a request was made by DGCA to Deanath Kulatunge, Area Manager – Singapore, Sri Lanka, Malaysia, Maldives and Brunei, to ensure that the prevailing 10-day settlement cycle is continued for payments in the BSP in Sri Lanka. IATA convened the 11th APJC meeting on 12 June 2013 without an agenda, where it was mentioned by the agency representatives that according to IATA rules, the meeting would not be valid without an agenda (forwarded prior to the meeting); however the APJC Secretariat apologised for their oversight and proceeded with the meeting. At the invalid meeting, it had been informed that there is no change to the implementation of the weekly settlement plan (which will come in to effect from 1 July 2013). The agency representatives had inquired on the request made by DGCA requesting to ensure that the prevailing 10-day settlement cycle is continued for payments in the BSP in Sri Lanka and had further stated that the law of the land supersedes all implementation/decisions of IATA. IATA’s response to the above was that DGCA has only made a request and has not imposed a ruling. IATA-AASL and TAASL subsequently sent a letter to DGCA requesting to intervene in this matter as the regulatory body of travel agents in Sri Lanka and DGCA took prompt action and informed the two associations that the request made by them to IATA “is a gentlemen’s understanding that a request of the authority is an order conveyed on a diplomatic note.” Furthermore, DGCA has instructed Rayhan Wanniappa, Deputy Director (Air Transport and Legal Affairs Section) of the Civil Aviation Authority to inform IATA “of the position of Civil Aviation Authority of  Sri Lanka and instruct them to abide by the direction given earlier.” IATA-AASL and TAASL would also like to highlight the following to justify as to why two associations are requesting for the continuance of thrice monthly remittance in Sri Lanka. The average monthly BSP sales figure is 2.8 billon (approximately), out of which the national carrier achieved 30%-35% of the sales volume and the remaining 65%-70% by the foreign carriers (operating in Sri Lanka). When the credit period reduces, a large sum of foreign exchange will go out of the country. This may affect foreign exchange reserves in the country which in turn will have an adverse effect on the economy. Projects/programs pertaining to development, investment, marketing and refurbishment of corporate and State bodies will be affected due to the reduction in the credit period. The travel agents facilitate the largest foreign exchange earner for Sri Lanka, which is the foreign employment traffic sector. The full remittance by Sri Lankans employed overseas will be made when they reach their specific destination. Hence, when the credit period is reduced, the travel agents will find it difficult to manage the ticketing of skilled, semi-skilled and unskilled workers. When this matter was discussed with specific officials, it was pointed out that IATA accredited agents have joined IATA at their own discretion and should have the liberty to withdraw from this membership, at any time as it is similar to joining a club. Withdrawing from the cartel is not a practical solution as it will result in a change in the members’ trading patterns, loss of business as well as retrenchment of its staff and in a bigger picture, a downfall of the travel industry in Sri Lanka. IATA-AASL and TAASL believe that relevant authorities will take the necessary measures to protect the travel industry of Sri Lanka.