A ROW has erupted between the Kenya Association of Travel Agents (Kata) and the three major international airlines operating in Kenya, after the latter imposed a 25 per cent reduction on commissions payable to travel agents.

The Kenya Airways-KLM alliance and British Airways have slashed commissions paid to travel agents on the sale of air tickets to 6 per cent from 8 per cent, effective April 1. The move will cost travel agents in Kenya Ksh320 million ($4.1 million) annually – or a quarter of their annual income. 

"Unless the government intervenes, most of this money will end up as profit for KLM and BA, to be spent away as taxes and dividends in London and in Amsterdam. The Kenya Revenue Authority will be among the losers here," said Kata chairman Rogers Sylvester.

Mr Sylvester told The EastAfrican that 86 per cent of airline revenue is generated by travel agents. Kata is seeking legal advice.

The commissions were last reduced in 2000, to 8 per cent from 9 per cent. Kata estimates that a gross reduction in revenue of Ksh480 million ($6.2 million) as a consequence of the cumulative 3 per cent reduction will cost the government coffers Ksh144 million ($1.85m) a year in lost revenue at current tax rates. 

Small travel agents are likely to be pushed out of business. "Massive retrenchments loom in travel agencies," said Kata deputy chairman Peter Karanja. 

Kenya Airways has already warned travel agents who deducted an 8 per cent commission on payments due to the airline, instead of the stipulated 6 per cent. Those who fail to pay up the additional debit notes now being raised on the 2 per cent difference will be shut out of the KQ/Galileo distribution system. KQ warned in a letter widely circulated to travel agents, "We shall have no alternative but to collect our Carrier Identification Plate." 

KQ area manager for Eastern Africa Sauda Rajab declined to comment, and the airline's managing director Titus Naikuni who is the company's spokesman, was not immediately available for comment. 

However, British Airways regional manager Ian Petrie said the decision reflects a change in market conditions and is part of the airline’s strategy to manage its cost base. A key element of this is reducing its distribution costs.

KLM regional general manager Pieter de Man said the reduction in commissions by airlines is now a worldwide trend as airlines seek to further reduce their operating costs. "In Uganda, Tanzania and Ethiopia, we are already paying 7 per cent," he said. 

He said commissions are under pressure worldwide, particularly after the increase in the number of low cost carriers. Zero commissions is now the norm in Scandinavia and Germany, with a fixed $10-$15 per-ticket-sold paid as commission in the Netherlands. 

But travel agents in Kenya say their counterparts in South Africa are earning 7 per cent following an agreement between the government of South Africa, travel agents and airlines operating in that region. The government of Rwanda has already enacted a law making it compulsory to pay 9 per cent commission to protect its own travel agents, according to Kata. 

The government asked airlines to put the matter on hold in February, awaiting the implementation of an integrated national transport policy, which was handed over recently to Transport Minister John Michuki. But the three carriers have ignored the directive.

"KQ has chosen to favour its agents in Tanzania and in Australia with a 9 per cent margin, at our expense," said Mr Karanja. 

Kata officials say that, according to the International Air Transport Association's rule 016A, airlines can reduce commissions. But such changes must be approved by the government. "The IATA regulation that lowered commissions from 9 to 8 per cent has never even been approved by the government," Kata argues. 

Mr de Man said airlines were already paying the commercial reservation system operators such as Galileo a lot of money.
 
 

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