HONG Kong travel consultants have moved past the issue of IATA’s billing and settlement plan following its implementation last July, but the upcoming enforcement of IATA’s central bank guarantee (BG) initiative is the next hurdle to leap.
The central bank guarantee by IATA is meant to replace the existing bilateral bank guarantees between individual airlines and travel agencies that guarantees travel consultants seats on flights while protecting airlines against travel agencies going bust.
IATA’s assistant director of corporate communications for Asia-Pacific, Albert Tjoeng, said the BG scheme will be implemented on January 1 next year.
“The Passenger Agency Conference has passed the resolution for airlines that have bilateral bank guarantees to withdraw them after the local financial criteria has been strengthened. The resolution is effective June 1, 2014. If airlines continue to impose bilateral bank guarantees, they stand the risk of a lower priority when claiming against the bank guarantee held by IATA,” Tjoeng said.
“This means that the airline would risk not being able to claim against the IATA bank guarantee, which is a major source of credit risk protection. Any changes that are being made in the local financial criteria for Hong Kong has to be discussed at APJC Hong Kong. Agents should contact their APJC agent representatives should they have input to submit.”
Nan Hwa (Express) Travel Service, managing director and newly elected chairman of Hong Kong Association of Travel Agents, Jason Shum, said: “IATA is in the process of discussing the ratio of BG based on consultants’ size of business, track record and financial assessment. I reckon this would range from 20 to 100 per cent.”
Arrow Travel, managing director, Tommy Tam, said: “Average ticket sales volume in 2013 was HK$24.8 billion (US$3.2 billion) and the bad debt on air ticket sales is on average less than HK$0.78 million per year, one of the lowest in the world. I personally doubt whether there is a single system that perfectly applies to the globe as business practice varies from place to place.”
However, he added: “It’s not totally bad for operations. Instead of paying BG for different airlines, we may end up with one single payment.”
Happy Star Travel Service, director, Joyce Fung said that it is too early to assess the impact. “It depends because the BG payment is currently offset between airlines and IATA. For instance, if IATA requests a total of US$150,000, I might pay US$100,000 to an airline to guarantee ticket stock, then only settle the balance of US$50,000 with IATA. In future, if IATA takes all payment, it’s still unknown if individual airlines would still ask consultants for separate bank guarantee. This is not known yet.”
