Dear Press Colleagues,

I am very pleased to inform you that the DGCA has issued a directive dated 5th March 2010 wherein they have ruled out zero commission in India and have passed the order to this effect. The order being very long, I am only detailing below the important and operative parts of the same:-

1. “The examination of this subject will remain incomplete without giving due consideration to the impact of the zero commission system on the consumer interest. It appears that this system is detrimental to the consumer interest in more than one way. Firstly, since the zero commission system is loaded with a transaction fee, the consumer has to pay extra money in the form of transaction fee. Secondly, an unscrupulous agent can charge an exorbitant amount as transaction fee from the customer. Thirdly, this system is giving rise to market dominance by some big agents, who are paid hefty amounts by the airlines in the name of productivity. This phenomenon too is not in the interest of the consumer as it reduces competition among agents. Overall, it may be seen that the impact of the zero commission system does not help consumers. The zero commission system coupled with transaction fee (i.e. the net fare model) is not as per law and is devoid of merit from the consumer point of view.”

2. “Further Rule 135(1) requires airlines to determine tariff which by definition includes commission. Rule 135 (2) has been amended recently by the Government vide Notification GSR No. 254(E) dated 16.04.2009 to require airlines to display a ‘single consolidated fare’ and give its break-up also for consumer’s benefit. It is clear that the statutory position under rule 135 clearly requires airlines to determine tariff in accordance with law, including commission payable to agents. The existing law also requires airlines to display total fare & its components. In view of the foregoing, analysis and legal provisions, the named airlines are directed to ensure compliance of existing statutory provisions regarding determination of tariff as per rule 135(1) and display of the fare and the components as per rule 135(2) and (2A).”

3. “It may also be clarified that DGCA has also set up a monitoring mechanism in DGCA to ensure compliance of the provisions of rule 135 by the airlines. However, it is made very clear that as per rules DGCA cannot lay down quantum of commission payable by airlines to agents. It is entirely up to the airlines to take a decision in this regard in consultation with agents taking into account various commercial factors such as the market conditions, the cost of the Agents’ establishments, etc & statutory definition of ‘tariff’. But the commission cannot be replaced by transaction fees.”

Quote
"In simple terms, the DGCA has directed all the airlines that had gone to zero that they must reconsider this decision, and in consultation with agents decide on a commission that has to be paid to us. This has been the fruitful culmination of our long tirade with the airlines and I am proud that we have achieved the desired results we wanted and have created history for the world to follow!!"

VICTORY HAS BEEN ACHIEVED!!
Rajji Rai
President
Travel Agents Association of India