International Air Transport Association member airlines will collectively allow accredited travel agents to pay for tickets with their own payment cards for the first time.
The carriers voted at IATA's Passenger Agency Conference in Geneva last week to amend the association's Resolution 890, which previously prohibited agents from using their own payment cards "in connection with the sale of Members' or Airlines' Traffic Documents to any customer of the agent."
The Beatreported in September that airlines were set to vote on a change after decades of lobbying by the travel industry.
An IATA official said Resolution 890 was amended to allow use of agent-owned cards and alternative transfer mechanisms "if permitted by the airline."
Bilateral agreements between carriers and agents on using agent-owned cards were already possible in theory. Critically, what has changed is that IATA members also voted to create a process called Transparency in Payments to support use of agent-owned cards through its Billing and Settlement Plan clearing system. TIP will allow airlines to understand and approve the costs they face for each form of payment and agent remittance of airline funds.
"No form of remittance is barred by TIP, but travel agents can only use those forms to which an airline has previously given consent," according to an IATA statement. IATA SVP for financial and distribution services Aleks Popovich stated that TIP "provides a pro-competitive framework for bilateral arrangements between airlines and travel agents that will facilitate the introduction of new and innovative payment solutions."
Airlines had been reluctant to allow agent-owned cards because of the uncertainty about how much it would cost them. Merchant fees charged by card providers range from around 1.75 percent to 3 percent, a spread which soon adds up when multiplied across thousands of tickets. While TIP should finally provide transparency, the mechanics of how global distribution systems will display which cards are used by which agencies, and which airlines will accept them, has not yet been explained. IATA said TIP "will be rolled out progressively from March 2018."
One card company executive speaking with The Beat on the condition of anonymity questioned whether TIP would be ready by March. "There is quite a lot of work to do to put it into a usable form," he said. However, he added: "It's a breakthrough. It recognises that credit cards are an effective means of payment. It also recognises that not all cards are the same because some are much more expensive than others."
IATA decided to allow agent-owned cards in return for pushing through full implementation of its New Generation of IATA Settlement Systems strategy to reform BSP. Three of the strategy's four pillars were approved in 2016, but a fourth, Remittance Holding Capacity, went back to the drawing board. RHC caps cash sales through BSP, after which agents must switch to alternative methods.
This time, RHC was approved after IATA responded to agent objections by increasing the cap to 100 percent above the average sales of the three highest reporting periods of the previous year.