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Airlines lobby say no to credit ticket sales

BUSINESS
By Dominic Omondi | July 16th 2016
Kenya Airways plane at the JKIA in Nairobi. Photo WILLIS AWANDU

Payments for air travel must be in cash in new changes informed by massive defaults by companies. This is after the International Air Transport Association (IATA), the global umbrella body for airlines, made some changes in its payment cycles requiring air-ticketing agents to remit their money in 15 days.

Initially, air-ticketing agents were permitted up to 30 days to remit their money to IATA making it possible for travelers to book their air-ticket on credit. But this has since changed.

“Effective September 1, 2016, the credit period enjoyed by IATA accredited air-ticketing agents will be reduced to 15 days from the current 30 days,” the Kenya Association of Travel Agents (KATA) told its members in a notice.

The agents who fail to meet the payment deadline will see them declared as defaulters and denied facilities to issue tickets.

The notice, which was signed by KATA CEO Nicanor Sabula, advised corporate entities and government departments to make necessary adjustments as “existing credit terms for air tickets will be discarded in favour of cash payments.”

Fraudulent claims

“Consequently, in order to protect the industry from a crisis arising from potential massive defaults, existing credit terms for air tickets will be discarded in favour of cash payments,” said Sabula.

She also requested passengers to immediately contact their travel agents to discuss payment plans available in the market to avoid disruptions of their travel plans.

It was not very clear why IATA made this drastic move. However, a story carried by Weekend Business last year revealed a scheme by some travel agents to defraud IATA by failing to remit part of the ticketing fees.

According to reports from the Insurance Regulatory Authority (IRA), Saham Insurance paid out Sh239 million to a policyholder in what went down as one of the highest fraudulent claims.

This is after Saham Insurance made the pay-out to IATA, which is the insured organisation. IATA, which had a default insurance cover with Saham, lodged the claim after several agents failed to remit the money.

“They (IATA) expect their accredited agents to get cover to assure them that even if the agent defaults in making the remittances, IATA does not suffer losses,” explained IRA Head Corporate Communications Noella Mutanda, then.

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