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ARTA Canada Blasts United's Plan to Terminate Agents' Merchant Agreements

June 25, 2009 By: George Dooley

ARTA Canada blasted plans by United Airlines to selectively prohibit U.S. travel agencies from continuing to report and remit sales via the Airlines Reporting Corporation (ARC), the U.S. counterpart to BSP Canada, using United's credit card merchant agreement.

“United's plan is ill-founded, short-sighted, and will cause the agency distribution system to unravel if agencies are to be responsible for getting their own or third-party processing agreements in place," said ARTA Canada president Bruce Bishins.

As of July 20, agencies will not be able to process a GDS transaction or any other transaction reported via ARC where the form of payment is a credit card to be transacted by United, according to ARTA Canada. Instead, agencies will be required to process the client's credit card transaction using the agencies' or some third-party merchant agreement and, thereafter, report the sale to United, via ARC, as a cash sale.

ARTA Canada said it has reviewed the letter to U.S. agencies from United and the Frequently Asked Questions section attached thereto.

"I have been raising this eventuality with travel agents for years, and most recently in 2006, again, when IATA attempted to raise the financial guarantee requirements on agencies, which, as is clear now, was an indicator that the amount of cash to be held and remitted by travel agencies would dramatically increase,” Bishins said.

Bishins, an industry veteran, said he has long-held the view that airlines had yet even more distribution cost reduction plans in the works besides commission elimination, including GDS booking fees and fees for certain content. It was for these very reasons that Bishins proposed that travel agents take a greater role in distribution technology in an effort to keep costs and facilities for all stakeholders balanced and reasonable.

“The handwriting on the wall was even more evident when, in June 2007, ARC planned to offer incentives under its C2C (Credit to Cash) plan for U.S. corporate travel agencies to remit in cash instead of accepting a credit card,” Bishins said.  Bishins raised this issue with travel agencies attending a Toronto meeting in June 2007 of concerned agencies, he also questioned the position of other Canadian associations on the issue.

ARTA Canada said it contacted both Air Canada and WestJet, imploring both carriers to resist any change to the status quo of allowing their merchant agreements to be used by agencies reporting through BSP Canada or through direct sales via a GDS or website. Bishins asked the airlines to assure that if there were any internal reviews or discussions of this matter that ARTA Canada would be consulted so that its views and concerns could be considered.

"I know that the industry will sit back and watch as this development unfolds, however, I can assure you that any carrier going forward with similar plans will contribute to the wholesale demise of the benefits and efficiencies of the agency distribution system," Bishins said. "No agency can afford to bear the costs of credit card processing, let alone, in most cases, even qualify to obtain a processing agreement with a provider.

“Even those agencies which do have credit card merchant agreements in place, and even if such agencies were to agree to process such sales, the credit card processors would likely create onerous thresholds for maximum amounts, hold backs, surety, or even terminate such agreements due to the escalated risks," Bishins said in his communication to Air Canada and WestJet. "Couple this with the increased financial guarantees which ARC and IATA will likely demand for increasing amounts of cash held by agencies and the dismantling of agency distribution and GDS transactions will occur very quickly."

Bishins said ARTA Canada will continue to monitor the situation very closely and consult with its ARTA U.S. counterpart, the Association of Retail Travel Agents.


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