Travel agents not willing to work with Go First until clarity over refunds, business with low-cost airlines under doubt

Travel agents are not ready to work with Go First which is looking to resume operations

Travel agents are not ready to work with the management of Go First airlines, which has requested the Directorate General of Civil Aviation (DGCA) to allow the resumption of operations, till there is clarity over ticket refunds for flight cancellations.

"One thing is very clear that if they want to resume operations they have to adjust our credit. If they don’t, we will get a stay order and for this, we are doing our homework,” Rajiv Mehra, President, Indian Association of Tour Operators (IATO), told Moneycontrol.

The associations representing travel agents said that they have not yet received clarity on refunds that run into Rs 800-900 crore from the airline, without which they will not support the airline undergoing insolvency.

A Go First spokesperson in a statement to Moneycontrol, said, “All prominent travel agents have supported us in our endeavours and have expressed their willingness to continue partnering with us once we resume operations. The spokesperson added: “We consistently engage with our travel agents, vendors, and various stakeholders, ensuring that they are aligned with our plans and roadmap. We are grateful to all our stakeholders for having faith and standing by us.”

While Go First has been saying that they have refunded the money to the accounts through which bookings were made, travel agents have not received any money, Ajay Prakash, Board of Director, Federation of Associations in Indian Tourism & Hospitality (FAITH) claimed.

Mehra of IATO said they have also written to DGCA regarding the matter of refunds. "They (Go First) are saying they have refunded the money but the money has not come to the travel agent. When I get that money I can give the money back to the travellers," he added.

The airline earlier this week said all refunds for tickets arising out of flight cancellations shall be handled as per (rules) on resumption of services. "We have so far refunded the cancelled PNR (Passenger Name Record) to the mode of payment. Almost 98 percent of the PNR cancelled are booked through the travel agents and we have already credited to travel agents’ IDs. Once flights are allowed to resume, travel agents will have a better ability to refund the money to passengers,” said Kaushik Khona, CEO, Go First, said.

However, travel agents have a different take.

“Till today, I am spending more time explaining to people (travellers) that we have not received any credit from the airline. In this scenario, how are we supposed to work with them if they plan to resume operations? They continued to take bookings one day before they filed for insolvency," said Prakash.

Travel agents work on wafer-thin margins and with the money stuck with Go First, the business has been affected badly, said Jyoti Mayal - Vice Chairperson, FAITH.

"We have been communicating with the government on the matter of refunds that the travel agents are yet to be given. However, there is little help that we have received so far. We as an industry need to review the way we transact business with low-cost airlines. Advance payment is detrimental to our members as every few years we have an airline defaulting," she said.

The money Go First received for bookings was for advance travel bookings so that credit should have been set aside by the airline, said Prakash. "However, this is not the case and our credit is stuck. We have suffered enough and there is no point waiting for it. So we will soon share the measures we plan to take to protect the business of travel agents," he added.

Mayal said that as an association they will be sitting across with low-cost airlines to discuss how business transactions can be done in the future.

Travel agents and their associations are even thinking of not doing business with low-cost airlines due to the Go First issue.

"The airline industry is risky and airlines are failing. The entire industry has come under question mark and has broken the trust. We are not here to fund the airlines but we are stakeholders in the business. Consumers and travel agents should get some protection in case of airline default as they have paid for services which have not been availed," said Prakash.

Mayal said that spends of travel agents for bookings are accounted for in operational costs and there is minimal protection for it. "Travel agents should be protected via insurance on each ticket or fund created by the government to be kept in an escrow account to bring ease of business. We have communicated with the government and have requested them to bring in the correct policies and procedures if they want sustainable unbiased growth in the aviation industry."

The association will soon share a white paper with the government.

The increase in Tax Collected at Source (TCS) from 5 percent to 20 percent for booking foreign holidays is another concern for Indian tour operators. Buying an overseas tour package from an Indian tour operator will attract 20 percent TCS from July 1.

There was no discussion with travel agents or the associations regarding TCS, said Prakash.

"While we know that TCS will be implemented, we are talking to the government regarding a level-playing field as people can make bookings for foreign travel via their credit card, which will not attract 20 percent TCS. If they book foreign holidays through foreign travel agents there is no TCS applicable till Rs 7 lakh. It should be the same for Indian operators as well,” said Prakash.

The government has exempted overseas spending up to Rs 7 lakh through credit cards from TCS.

Mayal said that inbound travel is already impacted because of Go First filing for insolvency and a surge in airfares. "It is only due to G20 meetings that we are seeing (travel) demand."

Mehra said that with TCS coming in, there will be job losses and travel agents will have to shut shop.

"This decision to increase TCS is going to damage the industry on multiple levels. The fact that more than 99 percent of Indian travel agents are micro, small and medium enterprises whose livelihood is based on survival through travel bookings for outbound and domestic travel, this move may leave many travel agents unemployed. The additional tax would have an impact on the cash flow of travellers too," said Mayal.

FAITH has written to the finance and tourism ministries and the Prime Minister over the issue.