IATA

1
IATA

• Distribution
• ? Agency Programme

• Global
• ? 68 offices covering 146 countries

• Montreal/Geneva based

2
AGENCY PROGRAMME

• As old as IATA itself
• Envelopes the world
• Global programmes with regional and country
  differences
• Benefits airlines, agents and consumers
• Includes General Sales Agents
• Based on Principal/Agency Relationship
• Under threat but not insoluble
• Indispensable

3
KEY ELEMENTS

• Accreditation ? Agent gets licence to trade
  and credit facilities
• ? Airlines get a recognised outlet at zero
  cost
• ? A unique code number giving global
  recognition

4
KEY ELEMENTS

• BSP ? Agent gets neutral ticket, reports
  sales, remits net
• ? Airline gets sales reports, remittance and
  data
• ? IATA administers system paid for by
  airlines
• ? Agent can provide travel buyer with
  management system

5
BENEFITS

• Airlines ? Prime distribution system
• ? Low cost, little or nothing to do
• ? Reporting, remitting, data all common
• ? Guaranteed cash flow and Low Bad Debts

Agents ? Licence that adds value ? 1
Agreement for 274 airlines ? 1 set of
documents, 1 remittance ? Gains extended
credit facilities
6
NUMBER OF AGENTS

• PAX CARGOArea 1 11,459 992
• Area 2 37,097 2,565
• Area 3 10,066 1,649 58,622 5,206 63,828
• USA 24,558 1,279 25,837

TOTAL 83,180 6,485 89,665
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SALES BREAKDOWN

• of Total of Total
• Air Turnover Agency Sales Agencies
• 2M or Less 14.2 84.2
• 2M - 5M 8.4 9.6
• 5M - 50M 20.1 5.5
• Greater than 50M 57.2 0.6

8
BSPs

• Total No. 68 No. of Tickets 273,623,171
• No. of Countries 146
• Airlines 349 Value USD 126,028,670,625
• Non Airlines 61 Average Sale USD 345.12

9
BSPs

• Price 0.32 USD per ticket
• Automated tickets 92
• E ticket 6
• Credit Card sales 26
• Defaults 0.04

10
IATA BINDS IT TOGETHER

• Conference and corporate structure produce
  standard rules and agency agreement.
• Coding system applied and recognised globally.
• BSP documents only provided to accredited agents.
• Independent programme administrator.

GIVES
A world-wide network of agency locations forms
the airlines primary (75) distribution system

11
PROBLEMS
WHY?

• a) Airlines have cut or dropped commission.
• b) Agents want partnership not principal/agency
  agreement.
• c) Airlines deliberately making market unstable
  to gain share.
• d) Agents distrust airlines.
• e) Technology is changing customer needs.

Agents blame IATA- cant control your
Members Airlines blame IATA - it moves at the
pace of the slowest
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THE PROBLEM ROOT IS DEEPER
AIRLINES

• Distribution costs keep rising, fares/rates fall.
• Dangerous level of sales by agents (75).
• Fear of commoditisation.
• CRS and Credit Cards - costs.
• Growth of low cost carriers.
• Want more data, agents dont want to give it.
• Leisure has moved to net fares.
• Business Traffic dominated by multiples and
  multinationals.

13
THE PROBLEM ROOT IS DEEPER
AGENTS

• Have had some dialogue and power and want more.
• Believe Airlines dont follow the rules.
• Query value of IATA Licence.
• Seeking redress in law courts or with regulators.
• Believe everything is too one-sided.
• Do Agents act for the Buyer or the Airline.

14
PERCEPTIONS AND FACTS

• 1. Carriers will not support the industry
  programme where it conflicts with their
  interests.
• 2. Carriers want effective and cost-efficient
  distribution.
• 3. Complexity makes an Agent desirable for the
  consumer.
• 4. Carriers need Agents. Agents will continue to
  consolidate.
• 5. Competition and deregulation will continue.
  Net fares will continue to grow. Interlining
  within alliances will grow.

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PERCEPTIONS AND FACTS

• 6. Exclusivity will continue.
• 7. Principal - Agency or Buyer - Seller.
• 8. New channels will continue to grow.
• 9. Airlines still need to co-operate in order to
  compete.
• 10. Neither side wants to throw away the best
  bits (BSP, Single Agreement).

16
A LIFE WITH IATA

• Youre involved
• Re-negotiate the rules
• Global recognition
• Extended credit facilities
• Can sell 274 airline services
• Statistics provided
• Low annual fee

17
A LIFE WITHOUT IATA

• You can lower your standards
• Lower costs to operate
• Specialise in other areas
• Buy your scheduled air tickets

18
CONFERENCE VS CORPORATE GOVERNANCE

• Conference
• Antitrust immunity
• Collective default machinery
• Single Agency Agreement
• Low bad debts
• Agents help set the rules

• Corporate
• Flexibility for airlines
• Speed of action
• Empowers management
• Enter new business
• IATA is no longer the meat in the sandwich
• Is more market driven

19
GOVERNANCE

• Negative Clearance
• 23 plus countries
• Some immediate effects
• What will happen after May
• Dominoes

20
AGENCY REMUNERATION

• 1948 - Advised with each fare
• 1952 - 7.5
• 1953 - 7.0
• 1975 - 8.0
• 1979 - 8.0 Industry Incentive Scheme
• - 8.5 where Incentive Scheme did not work
• 1981 - 9.0
• 1997 - Flat fees introduced in USA
• 2000 - Varies between 5 and 9
• 2002 - Zero base commissions in North America

21
AIRLINES COST INDICES, 1978 - 2000
22
GROWTH
23
THE FUTURE
of Total Air Tickets
of Total Air Bookings
Traveller
Channel
1999
2005
1999
2005
76
85
45
60
Walk In
20
12
Airline Direct
12
14
Phone
2-3
2
Airline Online
18
5
0.5
2-3
Consumer Online
Intranet/ Internet
15
15
0.1
0.1
Corporate Online
8
8
24
DISTRIBUTION CHANNEL MARKET SHARE

• Business Leisure
• Distribution Channel 2001 2002 2001 2002
• Travel Agent 57 59 26 33
• Book Direct 10 15 30 39
• Travel Club 1 1 2 2
• Corporate/Internet 9 9 2 1
• Travel Buyer Interface 16 13 39 23
• Internet Travel Site 6 5 18 10
• Airline Website 9 6 20 11
• Travel Agency Website 1 1 1 2
• Other Method 6 3 1 2

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WHY THE AGENCY PROGRAMME IS IMPORTANT
The Agency Programme

• Is global with regional and country differences
• Benefits airlines, agents and consumers
• Is low cost/high value
• Can operate as a company
• Has agent and airline customers
• Has a future
• Is going to change

26
CHANGES

• Immunity
• Network Agents
• Pan European
• Enhanced BSP Link
• Agency Agreement
• Service Fees

27
BENEFITS

• Low cost
• Global programme with local standards
• Single Agency Agreement
• Recognising where sales originate
• Cash Flow
• Low bad debts
• Quality of data output
• Market reach
• Safe, secure and comfortable

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CONCLUSIONS

• Keep it for as long as possible
• Remains valid but is slow to change
• The BSP is efficient and cost effective
• Airlines need agents
• Complexity makes an agent desirable
• Immunity will not survive
• Technology will not reduce the role of agents
• Effective GDS alternatives do not exist

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• A life with IATA
• Alive with IATA

It is there if you want it