VietNamNet Bridge – The information that airlines have raised the airfares for domestic routes is really bad news, not only to passengers who have to pay more money to fly, but also to ticket booking agents and travel firms. Booking agents fear they do not have enough money for deposit, while travel firms dare not book tickets at preferential prices.
On May 16, the national flag air carrier Vietnam Airlines (VNA) officially announced that it will raise the airfares for domestic flights. In fact, VNA is the last airline which announced the airfare increases. Prior to that, Jetstar Pacific (JPA) and Air Mekong announced new airfares already.
Booking agents getting worried stiff about deposit
According to Nguyen Canh Nam, Director of Lam Hong Company, a booking agent of VNA, the lowest airfare increase of five percent is applied to the flights with the distances of between 850 kilometers and 1000 kilometers, while the highest airfare increase of 26.7 percent is applied to the flights with the distance of less than 300 kilometers. As such, the airfare of Vietnam Airlines has increased by 17 percent on average.
Despite the airfare increases, the demand for traveling by air remains very high. Therefore, it is expected that the number of daily passengers on many air routes will not decrease, and air ticket shortages will still occur on peak holidays.
Nam said that the problem is that booking agents will have to increase the deposits, but they will not get higher commissions in accordance with the ticket sales increases.
Nam said that booking agents sign contracts with airlines annually, but they pay deposits according to reporting periods on the 7th, 15th, 23rd and 30th every month.
Booking agents have to estimate the number of tickets to be sold for every reporting period, so that they can calculate how much to deposit (in general, the deposits should be double the number of registered tickets, in case the number of tickets to be sold is higher than the estimated number). Every time, when the booking agent issues a ticket, the airline will immediately deduct from the deposits, even though the booking agent still cannot collect money from clients.
Nam said that all booking agents have to try to collect money as soon as possible. It is easy to ask individual passengers to make payment immediately, while institutional clients, including travel firms, only make payment once or two times a month. In order to retain clients, booking agents have to be resigned to accepting the deferred payment of travel firms. Meanwhile, booking agents have to borrow money from banks to pay to airlines in schedules.
The bank loan interest rates have been increasing sharply. Nam has been told by the banks that the lending interest rate has climbed to 21 percent per annum, and the interest rates would be adjusted every three months. While the lending interest rates and the deposits go up, the commissions do not increase. Therefore, Nam foresees that the profits of booking agents will decrease.
Travel firms dare not take on air tickets at preferential prices
Though airlines say they are offering tickets with diversified prices in order to serve a wide range of passengers. VNA, for example, offers seven different price levels, from K to P classes. The lowest price (P class) is just equal to 41-45 percent of K class tickets.
However, travel firms say that they dare not book air tickets at low prices, because the air tickets are always reserved for the flights at inconvenient time. Therefore, they will have to pay heavy fines if something happens with the travel itineraries.
Travel firms complain that they are facing troubles when having to re-negotiate with travelers about the tour fees. Cao Thi Tuyet Lan, Director of Viettours, fears that the company cannot make profit when organizing tours for big groups of travelers.
Earlier this year, Viettours accepted to organize a tour to Da Nang and Hoi An for a cosmetics company’s group of 200 travelers. In order to get the contract, the travel firm had to accept to provide services with the tour fee equal to the last year’s level. However, the airfare to Da Nang has increased by 20 percent, which has made the tour fee increase.