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IATA says agents should pay airlines weekly

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The International Air Transport Association (IATA) has informed travel agents that they will have to pay the airlines for the tickets they sell on a weekly basis instead of fortnightly as has been the practice.

IATA has planned to implement the revised provision named Billing and Settlement Plan (BSP) or Bank Settlement Plan from June 1, 2013.

Agents said the provision would hurt customers and small travel agents, but that it would help to maintain financial discipline and reduce credit exposure of agents. “So enforcement of the BSP has advantages and disadvantages equally,” they said.

Agents said that corporate clients, NGO/INGOs and government agencies, among others, had been buying air tickets using corporate credit cards and deferring payment for as long as one to two months.

“The new rule will put pressure on agents to collect payment from customers within a week or make payment out of their own pockets,” said Madhusudan Acharya, first vice-president of the Nepal Association of Tour and Travel Agents (NATTA). “The positive part is that the provision will maintain financial discipline, reduce credit exposure of agents and ascertain defaulters.”

IATA said in a press statement that the provision aimed to increase the frequency of payment to improve cash flow for airlines and reduce credit exposure of agents. Currently, there are 162 travel agencies dealing in international airline tickets in Nepal.  According to IATA, the proposal will be submitted to the Passenger Agency Conference (Paconf) for approval after discussion within the Agency Program Joint Council (APJC). The APJC in Nepal consists of seven airlines and seven agents. The move is in line with the practices in a majority of the countries. China and Korea have adopted a three-day billing cycle, according to a source.

As agents are currently required to provide a financial guarantee to IATA for the amount equivalent to a fortnight’s credit period, the revised provision will also reduce their operating costs. The revised provision will also reduce the bank guarantee travel agents have to put up by 50 percent, an airline representative said.

IATA had proposed implementing the provision by June 2012, but agents here had said that they would like to study the practice in neighbouring countries before implementing it in Nepal. “As India is likely to implement the provision by the beginning of 2013, we will do a study whether it is acceptable,” Acharya said.

Some agencies opposing the move said that it hurt small travel agents because they would have to invest their own money if they fail to collect payment from customers who buy tickets on credit. 

IATA stated that at the close of 2009, there were 86 BSPs covering more than 160 countries worldwide, while at the close of 2011, there were 88 BSPs covering 176 countries and territories serving about 400 airlines, with gross sales processed amounting to US$ 249 billion.

source: The Kathmandu Post,23 July 2012