There has been considerable interest in recent weeks over Singapore Airlines’ decision to continue pursuing reforms to the commission structure for airline tickets sold by travel agents, even after some other airlines backed down in the face of pressure from industry pressure groups.

I wanted to explain to you, our customers, why we are pursuing these reforms.

Around the world, the way customers buy airline tickets has been changing.  Airline call centers and the internet provide you a direct way of buying a ticket.  On the other hand, travel agents still provide a valuable service in assisting customers who prefer to make all their arrangements at once: hotels, tours, car hire, visas, transfers and the like.  You have more choice now than you did only a few years ago.

Travel agents are professionals at what they do.  Customers of any service business expect to pay fees for the service in line with the choice and value of the services delivered.

The old way of simply paying a travel agent a percentage of the ticket as a fee, irrespective of the service they provide you is not the way the travel industry around the world is moving.  Agents overseas are recovering their costs by charging service fees on the sale of tickets based on the level of service they provide.

It may not be visible to you, but you actually pay more for your tickets so airlines can pay travel agents. 

Why should a travel agent who merely sells you a ticket with no additional service earn the same as a travel agent who provides you full service options?  Singapore Airlines believes you – the customer – should be the judge of the service you wish to buy.  If you want simple service, you can choose a travel agent that levies a basic fee for a basic service.  If you want an agent to handle all your requirements, including visas and accommodation, you expect to pay more for that if it’s done well.

Service fees are the most transparent way of you deciding the service you want to buy.  And they help us bring cheaper fares into the market; because we are no longer charging you to pay excessive commissions to agents for service, whether they provide it or not, and whether you want it or not!

Travel agents that offer their customers great service have nothing to fear from service fees – they may well earn more, as customers pay for better services.  The only travel agents threatened by service fees are those who fear having to justify the service they provide to their customers.

At Singapore Airlines, we are committed to a transparent fee structure so our customers know what they’re buying.  It is in the interests of the consumer that transparent pricing be implemented in India, as it has been elsewhere in the world.  And that means the ability to make air fares more competitive.

We want to continue our discussions with the travel agents about these changes, and the other incentives we would put into place, in addition to service fees, to help them.  Some travel agents agree with us, but they are now being targeted by industry pressure groups to not serve our customers.

At Singapore Airlines, what matters to us is that we continue to provide you – our Indian customers – with great service at affordable prices.  Service fees don’t threaten that – if anything, they make affordable prices sustainable into the future as you decide who you pay, and how much, for the services you buy!

                                                - Mr. C.W. Foo, General Manager India, Singapore Airlines

1. What is a transaction fee all about?
    It is a service-based fee levied by agencies for the services provided. Travel agents are free to determine what is the appropriate fee for the type of services they provide to their customers, and set those fees independently of the airline.  Agents who want to provide a basic 'book and ticket' service would charge lower fees compared to an agent who also arranges visas, airport-hotel transfers, accommodation and other travel needs. Importantly, it means the customer gets more choice.

2. How is it different from the commission model?
   Under the commission model, the airline pays the agent a fixed percentage of the basic fare, irrespective of the services provided by the agent to the customer. The agent who provides a better level of service receives the same amount as one who provides a basic service. This is an outdated model and many travel markets worldwide have moved away from this, in favour of service-fee based models.

3. Why is Singapore Airlines implementing the transaction fee model?
   Singapore Airlines believes the transaction fee model works best in a service industry. It allows agencies to differentiate themselves by the services they provide, and in the process increases choice for the customer.

4. Is there a transaction fee levied in case a ticket is book directly from Singapore Airlines?
   Yes, there is a transaction fee levied for ticket is booked directly from Singapore Airlines ticket offices.  For internet-based transactions, however, no transaction fee is levied, since Singapore Airlines website is essentially a self-service tool.

5. Is the transaction fee an established business practice? What is the model followed by Singapore Airlines in other countries?
   The move toward service-based fees for travel agents is not new, and has occurred in many places in the world.  In Singapore, for example, agents have been earning service-based/transaction fees for some years.  Similarly, in the USA, the largest aviation market in the world, and in Europe, this has been practiced for several years. 

6. There have been reports about the transaction fee model being unfavorable for the travel industry. Is this true?
    The transaction fee model encourages agencies to increase the types of services offered to the customer. It stimulates competition and in the process results in better services for the traveler.  In the longer term, it is better for the travel industry.

The transaction fee model has been implemented by several agencies in India for some years with great success.  These agencies took the opportunity to move to a service fee model when the commission was reduced in stages from 9% to 5%. Over the years, it has allowed these agencies to differentiate themselves and establish a firm presence in the market, providing passengers with a comprehensive range of services.

7. Will the transaction fee model result in higher prices for passengers?
    On the contrary, by moving to the transaction fee model, Singapore Airlines is even better placed to provide more attractive deals for its passengers.  Furthermore, several established agencies have already moved to the transaction fee model in India, and this has not resulted in higher prices for customers. Instead, it has resulted in increased transparency, choice, and a better level of service for passengers.