IATA SAFEGUARDS FOR TICKET PAYMENTS PUT IT ON A COLLISION COURSE WITH AGENTS
(Posted 24th October 2014)
IATA’s regional office in Nairobi has appealed to the High Court seeking to squash orders by the Kenyan Competition Authority, which were aimed to stop IATA from compelling licensed travel agents from using the sole insurance company selected by IATA for payment safeguards, which met the criteria of the airlines in case of defaults.
Bank guarantees or insurance bonds are required by the airlines, to ensure payment for tickets sold actually is remitted in full to them, and need to be effective in regard to an insurance company’s ability to meet obligations and the track record of settlements of claims and understandably has IATA been careful on that score.
There have been some spectacular defaults by travel agents in Kenya and Uganda for that matter in the past and in some cases were the insurance companies unwilling or unable to pay the sums required, eventually prompting the airlines to set very tight criteria before approving an insurance company.
Some travel agents, apparently unhappy having to deal with the selected insurer IATA stipulated, filed complaints with the Kenyan Competition Authority, which, without giving IATA an opportunity to be heard, slapped an order on the international airline body to stop the practice. When IATA then attempted to use the regular appeals process it was discovered that the appeals tribunal was not properly constituted and that no chair had been appointed, making it impossible to actually go down that route, leaving IATA no other choice but to go to the High Court.
A source close to the IATA office in Nairobi did confirm that the organisation was still assessing other insurance companies, described as a lengthy process as it was involving a wide range of criteria to be fulfilled before additional insurers could be given the green light to join the scheme. ‘Perhaps some think that the premium charged by a single supplier may be on the high side? But even when other insurers are cleared, the premiums will reflect the risk. Travel agents still have the option though to provide a proper bank guarantee, the insurance scheme is really an alternative to the primary way the airlines would like to safeguard payment for their tickets sold. The sector has consolidated a lot in the past few years and financially weak agents faded away. I don’t think anyone can blame airlines, after some of the defaults in the past, to be strict. You miss a payment under the BSP collection scheme and you are immediately under scrutiny. It is business, pure and simple. If airlines cannot collect ticket sales they go under. BSP was launched to ensure compliance with payment rules and that is all there is to it’ said the source on condition of anonymity.
Be sure you read about the outcome of the case as and when the High Court rules and what thereafter the next steps will be.
