Air travel to become more expensive

Domestic air passengers, already reeling under high fares, would now have to fork out more. Travel agents have decided to impose a service charge of Rs 225 from July 16 on customers of full service carriers.

That is because full service carriers such as Air India and Jet Airways are reducing the commission they pay to travel agents and portals from three per cent to one per cent. To make up the loss, agents will charge passengers a service fee.

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Confirming the development, Deep Kalra, founder and chief executive of MakeMyTrip.com, said: "All agents, online and offline, have agreed to charge a service fee of Rs 225 on every customer of full service carriers. This will ensure our overall margins remain the same, despite the cut in commissions."

Agents say even in the international skies, as foreign airlines cut agents' commissions, the difference would be passed on to travellers.

"We will be collecting service charge from passengers. Even Gulf Air is reducing its commission from three per cent to one per cent and Emirates from five to three per cent," said Pradeep Lulla, former president of the Travel Agents Federation of India.

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"However, the impact these changes will have on fares has still not been assessed by the agents."

At present, AI spends Rs 1,000 crore (Rs 10 billion) annually on ticket distribution, which includes agents' commission and fees for use of reservation systems and global distribution systems that hold ticket inventories. This is about six per cent of its annual expense.

Jet Airways spent Rs 1,261 crore (Rs 12.61 billion) on ticket distribution and sales in 2010-11, which accounted for 10 per cent of its expenditure, according to the airline's annual report.

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Low-cost carriers are, however, out of the preview of the new changes because they do not pay commission to agents and, instead, offer them incentives based on volume of tickets sold. As a result, agents charge a transaction fee on bookings in these airlines.

International airlines like Air France-KLM, British Airways and Lufthansa do not pay regular commission. Those who give commission includes Emirates, Cathay Pacific Airw-ays, Gulf Air and Sri Lankan Airlines, among others.