Since the International Air Transport Association introduced new financial rules on 1st September 2010 all Irish travel agents have been reviewed under them, and of the 126 Irish travel agency head offices reviewed, 11 agencies are now settling their BSP payments weekly, six are settling twice a month, and the remaining 109 are continuing to settle monthly.
Elena Ciuperceanu, IATA’s Manager Passenger Services based in London, told today’s ITAA conference in Seville: “The shock of defaults in the Irish market in 2009 showed that the financial criteria for the Irish market were very weak, and needed immediate review. I will not go into the detail of how very serious the situation was, but compared with six defaults totalling €32,860 in 2008, there were 32 defaults totalling €1,470,895 in 2009 – and of those 32 only two were IATA bonded, all the others having met the financial criteria. While one of them – Slatterys – involved around €400,000, that still meant that the others involved €1 million – much, much higher than in previous years.
“The Agency Joint Council formed a working group in October 2009, with equal representation from airlines and travel agents [ITTN: There were five of each, including Valerie Metcalfe on behalf of ITAA agents]. The group met four times in early 2010 and voted on 4th June to put forward proposals to the IATA Passenger Conference, which voted in favour of them in July 2010, and the new rules came into effect on 1st September 2010.
“The new criteria require monthly payments and no IATA bond for category B1 (net current assets >12% of turnover); monthly, 12% bond OR monthly, joins IATA Trust Fund OR bi-monthly for B2 (>7 <12%); bi-monthly, 8% bond OR bi-monthly, Trust Fund OR weekly for B3 (>0 <7%); and weekly, 4% bond (2% with Trust Fund) for B4 (<0%).
“The fact that only 11 Irish agents are now paying weekly and six bi-monthly shows that the effect of the new financial criteria has not been as great on Irish agents as many had feared. It should also be noted that more and more countries in Europe have made weekly remittance mandatory for all agencies.
“When IATA’s Dublin office was closed 28 travel agency head offices were bonded, and now there are 35 – and some of these are in respect to new agency licences, which must be bonded anyway – so again there has been little change there.
“It is also worth noting that Irish BSP sales in every month from January to September 2011 have been climbing back up to 2008 levels. Volumes are also increasing but are not going so high – which means that tickets are being sold at a higher average value.
New Change Coming
“Travel agents also need to prepare for a new change coming up as of 1st January 2013 in relation to profit before tax.
“Agency accounts must show a profit before tax in at least one year within the last three financial years. This requirement will be applicable to annual accounts falling due for review as from 1st January 2013 onwards. If an agency has not made a profit before tax in any of the three last financial years, and if it meets all the other criteria, it will not be able to settle monthly.”
Agreed Bank Bond Texts
In response to a question as to whether it is possible for an Irish travel agent to be given longer to obtain a bank bond when required than IATA’s 30-day rule (because getting such a bond from an Irish bank can take longer), Elena Ciuperceanu responded: “We can give an extension if we are provided with written confirmation by the bank that a bond will be forthcoming. In the UK the Association of British Banks has validated an agreed IATA text for such bonds.
“However, in Ireland we started such discussions with the Irish Banking Federation in 2009 and, while we have made some text changes, we still haven’t managed to get a final text agreed.
“We have had the situation in Ireland whereby different agents have gone into different branches of the same bank and been charged for their application to be sent for vetting by the legal department in the bank’s head office – probably the same legal department that has already agreed the same wording for other agents.
“We are continuing to pursue an agreed text and hope that this will be forthcoming in the near future.”