GOVERNMENT and corporate travel
agencies could be forced to
drastically overhaul their business
models if Iata’s plans to increase
agencies’ remittance frequencies as
part of phase two of its changes to the
Local Financial Criteria (LFC) for BSP ZA
become a reality.
During Asata’s recent regional
meetings, Iata outlined the second
phase of its new LFC implementation.
The first phase of the LFC was
implemented in February last year and
saw travel agents paying minimum
financial security amounts of R160 000
for weekly remittance, R250 000 for
fortnightly remittance and R500 000
for monthly remittance. As part of the
second phase, Iata wants to do away
with monthly remittance frequencies.
“Increasing remittance frequency
lowers the risk amount for travel agents,
thus also reducing Financial Security
requirements,” says Janaurieu D’Sa,
area manager Southern Africa of Iata.
“This has been a long time coming,”
says Janet Aldworth, md of Sure
Voyager Travel in Durban. She says
when Iata introduced the minimum
guarantee during the first phase of the
LFC last year, the expectation was that
it would force the market to go over to a
weekly remittance.
Dinesh Naidoo, group operations
director of SWG, agrees and says
his company switched to fortnightly
remittance as this considerably reduced
the company’s Iata guarantee.
However, industry players say if the
change is implemented it will drastically
change how both corporate and
government travel agents do business.
“The motivation to retain 30-day
remittance with Iata is so that travel
agents can accommodate their own
billing with their corporate clients,” says
Otto de Vries, Asata ceo. He adds
that most corporates and government
accounts expect a 30-day account with
their travel agents.
Government agencies will likely
be hardest hit. Sailesh Parbhu, md
of XL Nexus Travel, says scrapping
the monthly remittance would have
a huge impact on agencies working
on government accounts as it would
considerably reduce the TMC’s cash
flow.
According to Sailesh, travel agencies
would have to make significant changes
to their business models. They might
have to look at increasing their service
fees and invest in a more robust backoffice
that allows for more frequent
invoicing.
TMCs would also need to educate
government departments on the
advantage of using corporate lodge
credit cards, he says. The use of credit
cards by government departments
would alleviate any frustrations with late
payments and would also allow travel
agents to remit more frequently.
The Agency Programme Joint Council
(APJC) will meet on March 31 to
discuss the proposed changes. “I’m
not surprised that Iata wants to tighten
the screws, but I would be surprised if
members of the APJC would approve
this proposal,” says David Pegg, md of
Sure Viva Travels.
Janet, who is a member of the
APJC, says Iata has thrown
a rock in the pond with its
announcement and that the
majority of travel agents in
the APJC would need to agree
on Iata’s proposal, which is
unlikely to happen.
She also says a financial
model with only weekly or
fortnightly remittance is not
unheard of. “Australia has
been on daily remittance for
years,” she says, adding that
most, if not all, corporates in
Australia work with lodge or
credit cards.
Aside from the increase in
remittance frequency, Iata
also wants to look at removing
financial security discounts
and using Resolution 800f as
a guideline, review both the
financial ratios and financial
security calculation.
The proposed changes
could be approved at the next
PaConf in October and if not,
the one following, in March.
