Tom Magumba
8 April 2008
Kampala — IATA regulations demand that travel agencies make payments for tickets sold out every 15th and 30th of each month, however, most times travellers especially corporate and institutional travellers travel on credit.
There is greater threat now than ever before that the International Air Travel Association could institute stringent conditions on Uganda's travel industry congested with quack and briefcase agencies that have consistently defaulted on fees payments.
Although there are more than 100 purported travel agencies, there are 60 registered members of The Uganda Travel Association - Tugata - with 27 International Air Travel Association - IATA - accredited agents but half of these, according to the Tugata chairman Mr Stephen Mworozi, have defaulted paying even the paltry Shs300,000 annual membership fee for the local body.
As a result the association only collects about Shs5 million out of the expected Shs18 million to run its activities.
"Defaulting is on the raise and this could force IATA to issue punitive measures like bank guarantees which majority [of agencies] cannot meet," Mr Mworozi told Business Power.
Now the association is lobbying the Galileo International franchise in Uganda and Amadeus not to transact business with any travel agency unless accredited by Tugata.
The two franchise companies have computer systems that give airlines, tour operators and travel agents access to all information on worldwide travel, airline schedules and routings enabling them to book flights and hotels or hire cars and other facilities for their passengers. "We want them (defaulters) to be disconnected to neither book or issue tickets to salvage the image the serious agencies," Mr Mworozi said.
It emerged during a stakeholders' annual general meeting recently that the local air travel market is congested yet the revenue does not reflect the numbers.
Although Mr Mworozi declined to name defaulting agencies he said this presents a challenge to industry planners and could compel IATA to tie stringent conditions on agencies in Uganda making business difficult for everyone else.
He said the industry needs to be put to order to achieve a maximum and unified growth ahead of the new global changes in the market. He said the government and its departments and agencies are the biggest credit travel client to all agencies but also does not pay back in time hence making it difficult for cash trapped travel agencies to do smooth business.
"I know of a ministry that has failed to clear an agency $25,000 since 2005," he said. Another reason why companies default is because the Ugandan market does not understand how travel business is operated and also agencies have on several occasions received bounced cheques from clients
IATA regulations demand that travel agencies make payments for tickets sold out every 15th and 30th of each month, however, most times travellers especially corporate and institutional travellers travel on credit. This forces these agencies to borrow money from banks and other sources to pay IATA.
This means that sometimes these agencies are indebted longer periods and therefore unable to consistently meet the IATA obligations.
However some players say this may not offer a long term solution. Mr Albert Ofong the Operations Manager Travel World International said: "This situation compels some agencies to borrow money from banks at an interest which we can't charge clients."
"Some clients do [borrow] it to multiple agencies while investing the money in business but there is no mechanism to establish this," he said.
Mr Ofong said the solution to this would be a credit reference bureau and the use of credit cards so that the agent deals with the bank than an individual or offer credit facilities to trusted clients.
The situation is likely to even get precarious for travel agents with the onslaught of e-ticketing that has seen some airlines cut commissions to zero percent for their agents.
Travel agents must re-invent themselves in the technologically advancing global market place.
IATA has given airlines up to June next year to go 100 percent e-ticketing replacing paper tickets. Subsequently most airlines have begun phasing out commission for agents in a move to encourage the new ticketing scheme.
Kenya Airways (KQ) recently cut commission for its agents in Kenya becoming the first regional carrier to adopt the scheme and both Tanzania and Uganda air travel industry are apparently deemed to track the same route in line with the global trend. KQ's Country Manager Daniel Maundu has previously said the Ugandan market is still fragile and needs a cautious approach.
"It will not happen soon to agencies in Uganda we need more time to prepare industry players," he said.
Mr Mworozi said although a majority of airlines operating in Uganda will continue paying agent commissions, a number are expected to inevitably ditch the system. He downplayed fears among agents about a possible loss of business since they all survive on commissions.
Instead, he said the structure pays them more than the six per cent commission previously paid by the airlines on ticket sales. British Airways is currently offering only one percent to agents.
"We shall without doubt charge consultancy fee like other professional practitioners since there is no commission," said Mr Mworozi.
But this he said must be approached cautiously involving all players agreeing on a specific fee to avoid undercutting.
Mr Otim Emmy General Manager at Nile Travel Services in Jinja explained every sale; the agent may have to make a follow-up call to inform the client or the airline of reservations or confirmation of bookings.
"This is another cost for agents not covered in the commission rate," he said adding that the time wasted on a computer in email transaction and, delivery to the client has been over looked.
Mr Otim noted that the effect on travel agents may depend on how the Ugandan market responds to e-ticketing otherwise a rush would dent business.
Another concern among travel agents is the outcome of online transactions and a client's option of buying direct from the airline sales desk could eat into their business, forcing the collapse of smaller companies.
Mr Otim said that travel agencies are already fortifying themselves with mergers between small and large industry players.
"There already signs of such mergers, several agents are in partnership selling tickets on behalf of bigger players," he said.
Travel agents are also counting on the perception that travellers may not want to spend time on the computer especially with the slow dial-up system, while some want to avoid the hassle of airline counters or probable losses arising out of wrong entries over the net.
According to Mr Emmanuel Okware Managing Director Business and Corporate Travel e-ticketing will bring a new dimension of professionalism that has been lacking in the travel sector. "Customers would enjoy the real value of services they may have been taking for granted," he said.
Travel agents are also counting on the notion that travellers may not want to spend time on the computer especially with the slow dial-up system, while some want to avoid the inconvenience of airline counters or possible losses through wrong entries over the net.
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