Passive Bookings: An Active Controversy

Is there a solution to the invisible but highly volatile issue of passive bookings? Anindita Chattoapdhyay probes further

The unethical booking controversy has taken centre stage yet again. TAAI members have demanded that GDS companies should block inventory access to non-IATA agents. Each player, namely the airlines, GDS, IATA agents and non-IATA agents are fighting to hold their ground. There is no denying that the electronic distribution, which was barely existent even a decade ago, has emerged as a key tool in the distribution and sale of the airline's product. But automation also has its negative side effect, which has resulted in giving birth to the cancerous growth of passive and fake bookings, which are eating into the already cash-strapped airlines' extra-stretched bottom line.

Airlines cannot control the cost of their booking fees because they do not incur the cost that travel agencies do. Each time a travel agent performs a transaction, which is of making a booking on an airline's flight, the airline pays the cost of that transaction to the GDS vendor. Arguably, the more transactions a travel agency makes, the more revenue an airline would earn from those transactions to offset the booking fee. However, the reality is quite different because all transactions do not result in a ticketed passenger. In fact, often transactions result in not a single seat being sold.

Sample this. If a travel agency makes a booking for one person travelling on two legs, the CRS company counts that as two transactions. If a travel agency makes a booking for a party of two travelling on the same two legs and in the same reservation, they count that as four transactions. Now, if a travel agency books a group of 50 on two legs that becomes 100 transactions. If they cancel that same booking, it's another 100 transactions. If a booking transaction costs Rs 35 and a cancellation transaction costs Rs 10, the transaction would cost the airline Rs 4,500, while generating a net zero passenger. At a time of diminishing returns and spiralling expenses, paying the GDS service providers twice for each segment due to rampant passive bookings and bearing the brunt of fictitious bookings have run the airline revenues dry. According to Lufthansa, its revenue loss went into millions due to GDS abuse.

The Big Fight

Airlines believe that it is the razor-edge competition between the CRS companies in India that is creating the gray areas. In foreign countries, GDS vendors lease the use of their systems to travel agencies and offer productivity incentives that can lower the cost of the lease. However, in India the GDS companies not only install the terminal free of cost but also give incentives to agents for productivity to ensure loyalty because a little swing can tilt the market share heavily as there are very few players in the market. According to airlines, a Delhi agent who often features among the top three productive agents for GDS companies is not even among the first 100 in the BSP list. Translated it means, the agent has not really done any serious transactions for the airlines, but siphoned out the money from their pockets.

GDS providers, in their defence, argue that they are doing whatever possible to eradicate the problem. "In the last financial year we have disconnected agencies to the tune of 400,000 segments because we are working in the interest of airlines," says Seema Luthra, president and CEO of Galileo India. Similarly, Amadeus has blocked reservation access of agents whenever they have discovered that a travel agency has indulged in unethical business practices using Amadeus reservation system. However, airlines are far from satisfied by the actions taken by CRS companies. "GDS providers can find out what is a particular agent's genuine business from the payment made to the BSP. If they evaluate it with the corresponding bookings created by the agent on their side they can identify erring agents," says Bernhard Baeck, country manager, Austrian Airlines.

Hence, discontent airlines have been demanding that non-IATA agents be blocked from using the GDS inventory as a possible solution to curb the malpractice. Trying to fight the abuse of the GDS in their own way British Airways, Air India, KLM-NW last year pulled the plug on the non-IATA accredited GDS users by not accepting any bookings done by them. Other airlines including Austrian, Malaysia, Singapore, Cathay, Air France and Emirates are deliberating on the issue to curtail the ballooning cost. As Baeck says, "We are in favour of barring GDS access to non-IATA agents because it is difficult to track them and make them accountable. We have decided to write to those agents whose segment bookings are more than the actual business done. If we are not satisfied by the reply we will ask the GDS to bar their access to our inventory."

TAAI Talk

Adding fuel to the fire is the cancellation issue. TAAI members, agitated for being penalised by airlines for cancellations made by non-IATA agents, have joined hands with airlines in voicing the same demand. "Non-IATA agents book the tickets on the CRS and get it issued through IATA agents. But in case of a cancellation, they often fail to inform issuing agents on time and we are slapped with debit memos by airlines. The money we cough up results in 8-10 per cent loss of our total business. When non-IATA agents cannot issue tickets why should they be given access to GDS," argues Balbir Mayal, president, TAAI. According to him, passive booking can also be controlled if non-IATA agents are barred from booking because then booking and issuing of the ticket will be done on the same system.

Supporting Mayal's view, Nasrulla Tejani, managing director, Travelpost and a leading consolidator in Mumbai, notes, "The fight is not against the two communities but against the misuse of the CRS system abuse has to stop. Even if a non-IATA agent is generating a booking on his individual CRS, it is the IATA agent's document that is finally being misused. Often we are debited for bookings we have not done. Though I agree that IATA agents also indulge in such heinous deeds, they also bear the subsequent consequences, but this does not happen with sub-agents who make their IATA counterpart pay the price finally."

To Do Or Not To Do

Now the question is can non-IATA agents be legally barred from access to the GDS inventory? As a matter of fact, non-IATA agents worldwide have access to GDS systems and make bookings. Ironically, while IATA agents in India are demanding withdrawal of GDS access to non-IATA agents, IATA gives non-IATA agents TIDS. It is a unique code number allocated to an agency's place of business, thereby, reducing the risk of reservation number duplication or the consequences of invalid or rejected bookings that allows non-IATA agents to access inventory and earn commissions from major airlines, hotels, car rental companies.

According to Luthra, "Legally we cannot take an isolated decision of blocking access to GDS inventory because it is against the global distribution agreement we have with 504 airlines and other service providers like hotels, car rentals etc."

Reacting to Mayal's argument she pointed out that non-IATA agents need GDS access not just to book airline tickets, but to check fares, get visa information, make itineraries, do hotel and car rental bookings. "It's a matter of being conscious and disciplined and non-IATA agents can be educated on the issue of passive booking and cancellation charges. But barring non-IATA agents is not only unethical but would mean extra burden for IATA agents which they will find difficult to handle." she remarks.

Her view finds support from Praveen Chugh, vice president, TAFI who thinks it is necessary that non-IATA agents have connection as they generate around 70 per cent of the business. "When domestic airlines like Jet and Sahara have appointed PSAs who are non-IATA agents and the department of Tourism have approved many non-IATA agents, why can’t they use the CRS? Non-IATA agents are the extended arms of IATA agents who help in procuring visa, transport services, hotel bookings etc. If they are barred access to inventory maximum load of booking will come on IATA agents. To stop passive booking, at the time of issuing a ticket a non-IATA agent must transfer the booking to the IATA agent, who is issuing the ticket, on a live PNR. This procedure will not result in passive booking as it is official as per the IATA and BSP manual," he avers.

Non-IATA agents believe they are being ostracised simply because they are not strong enough. According Karl Dantas, president, Enterprising Travel Agents Association, if the bone of contention is fictitious bookings, then why should non-IATA agents bear the brunt alone when it is common knowledge that malpractices like passive or fictitious bookings are indulged in by travel agents across the board. Questioning the demand of barring non-IATA agents' access to GDS he said, "I support the airlines in taking disciplinary action against erring agents. However a solution to the problem would be to identify the erring agents and isolate them and not bar the entire non-IATA community."

The way out

Whilst a fraction of the industry may opine, that it is not in the best taste to eliminate every non-IATA agent's access to GDS, the question that still looms large is the accountability of such agents if they are allowed to continue such bookings. "There should be a code of ethics in place which should be legally binding for airlines, GDS companies and agents - just like the one we have in Europe," suggests Werner Heesen, GM - South Asia, Lufthansa. Concedes Chugh, "A code of ethics can be a possible solution as that would compel CRS companies to monitor agents strictly and withdraw the GDS system of erring agents." Baeck is in favour of creating an education drive for agents to educate them on ethical use of GDS and airlines joining hands instead of fighting the menace individually. "BAR India is the right forum to come up with a solution," says he.

Putting the onus on airlines and CRS companies, Mayal suggests "Airlines should hold sub-agents responsible for cancellations, or ask them to get accreditation within a stipulated period of time, if CRS companies decide not to bar their access to the inventory."

Luthra, on the other hand, favours creating an entry barrier. "We can create certain qualifiers for smaller agents interested in getting CRS connectivity so that there is greater accountability. We are also outlining various options that TAAI can use to address the problems of non-IATA agents," she opines. The water has risen neck high. However, till industry partners with stake in the issue join hands to get to the root of the problem, a solution is far from sight. Alternately, the industry will have to wait till e-ticketing, which will not require issuing a physical ticket, picks up and more GDS players enter the market creating a healthy competition.