IATA has decided today to increase the frequency of payments by agents to airlines in Scandinavia from monthly to weekly remittances. This change seriously affects agents’ conditions of business and has no acceptable justification. 

ECTAA strongly deplores that the IATA decision making body of the Passenger Agency Programme, which is a conference composed exclusively of airlines, has not taken consideration of agents’ strong opposition to the increase of remittance frequency to once a week. The change has been pushed through the IATA conference by bypassing normal consultation through the local IATA bodies, which reviews airlines’ and agents’ issues at local level.

IATA and the airlines allege that the change aims at reducing risks related to agents’ default. However the IATA Programme already includes extensive protection mechanisms against agents’ default, notably the requirement that agents comply with strict financial criteria or provide financial security to cover any risk. Today, the level of agents’ default in Scandinavia is in fact very low: 0.02% in 2006. The change in payment terms imposed on top of strict financial criteria is therefore disproportionate.

For agents, the change in payment terms will be extremely harmful as in many cases agents will have to pay the airline before they have received the money from their customer. In Scandinavia, the agents have calculated that the increase in working capital requirement would be €80 million per year with a cost of capital of €4 million per year.

For passengers, the change extends the period where their payments are in airlines’ hands and enjoy no protection against airlines’ default. It should be recalled that whereas agents and tour operators have obligations under the EC Package Travel Directive and under the IATA Programme to provide financial security to cover their default, there is no similar system in place to protect passengers against an air carrier default.

The airlines’ unilateral decision raises serious concerns insofar as IATA airlines are collectively imposing harsher trading conditions to agents with no acceptable justification, while agents and airlines are in competition for the distribution of air tickets. Weekly remittance could be introduced in Germany at the next IATA Conference of June 2008 and the change may be rapidly rolled out throughout Europe.

ECTAA explores all possible means to address this matter, including legal actions. Said ECTAA President, Jan Van Steen: “The unilateral decision to change agents’ payment terms is in stark contrast with the recommendations made by the European competition authorities in the frame of the ECTAA/GEBTA complaint issued in 2002, which invited IATA and IATA airlines to negotiate jointly the requirements to operate as IATA agents and which should respect the principle of proportionality”.

Date of publication: 5 December 2007