Business Mostly As Usual Despite FAA Reauthorization Bill

Despite the American Society of Travel Advisors’ (ASTA’s) disappointment in the passage of the FAA Reauthorization Bill, most individual travel advisors and agencies will remain unaffected, according to multiple travel agency consortia, host, and franchise executives.

(As a reminder, the refund clause of the FAA Reauthorization Bill only kicks in if a flight is delayed or canceled, and the airline is unable to re-accommodate or the traveler chooses not to be re-accommodated.)

“If you issue airline tickets through a GDS, the airline is the merchant of record,” said Roger Block, president of Travel Leaders Network. “You’ve got no issues, and that’s probably, if I had to guess, 97% of all airline tickets issued…”

Jackie Friedman, president of Nexion and current Chair of ASTA, echoed Block. “If they book air through any one of our platforms and they book it the way 99% of people book air, which is using a customer’s credit card, then the airline is the merchant of record and they have no reason to be concerned.”

“Air is still a critical piece of the value proposition and the revenue opportunity for advisors,” Alex Sharpe, president and CEO of Signature Travel Network, told TMR.

Friedman agreed. “The important thing is that advisors shouldn’t shy away from selling air because of this. If they sell air in the way that most of them do, they are not on the hook.”

Cruise Planners also does not see a need for advisors to stop selling air.

“Cruise Planners advisors are not the merchant of record for air sales, therefore our advisors should not be at risk,” said COO Theresa Scalzitti.

Both Sharpe and Block added that advisors need to make sure the airline is the merchant of record whenever possible.

“We will encourage them to try and have the airline be the merchant as often as possible,” Sharpe added.

“You do have to be careful,” Block said. “Whereas before you didn’t have to worry about it… Just don’t be the merchant of record unless you absolutely have to.”

When are advisors at risk?
Block, Friedman, and Sharpe pointed out that advisors and agencies are typically only the merchant of record on group air bookings (like with incentive and corporate travel) or, in some cases, net bookings, which Block added accounts for “a lot fewer agents” but does could also include advisors and agencies that bundle lots of pieces of a trip, including airfare, into one package with one overall price.

“Anyone who has that kind of model, where they’re packaging together components and they are the merchant of record, they are at risk,” Friedman said.

“That is definitely a potential problem,” Block added.

One option is to keep the airfare out of the bundle and continue to book it through a GDS.

There were three other points of concern Friedman pointed out to TMR.

Firstly, any advisor who sells commissionable air and end up with a client qualifying for a refund, should expect a commission recall.

Similarly, any advisor who marks up discount air (through a consolidator, let’s say), could find themselves owing some part of the money back to the client. Even if the consolidator is the merchant of record, the airline is only paying back what it was paid for the ticket by the consolidator. Clients, however, will expect a refund of the full amount they paid. If the consolidator kept some of that markup and the advisor kept some, who will be responsible for paying it back? The answer to that is still unclear, and therefore represents a risk for advisors.

“Anyone who has that business model, really needs to stop and think what the risks are,” Friedman said.

Finally, advisors who sold a tour/air or cruise/air package in which the air was “included” (for which the supplier [the tour company or the cruise line] will almost always be the merchant of record) but never received exact information for what the value of the airline ticket was worth, could find themselves with some confusion on their hands.

While the advisor won’t be responsible for the actual refund, in order to help their client get a refund (again, only if the client has qualified for a refund under the new rules), they’ll need to know what the price of the air fare actually was.

“Where it gets complicated is if they true cost of the airline ticket is not disclosed,” Friedman said. “The impact for them is dealing with service issues to try and chase it down.”

Standing with ASTA
Because there will be some advisors and agencies put at risk by the new law, albeit a smaller number, the agency groups TMR spoke with all stand with ASTA.

“We stand in support of all travel advisors and hope that the appropriate changes to the language of the bill will be made so that travel advisors do not carry the financial risk when selling air to clients,” Scalzitti said.

“This is a setback,” added Sharpe, “but I am confident we will find ways to work through it while we educate our legislators on these unintended consequences.”

For those advisors who do process credit cards via their own merchant account – thereby becoming the merchant of record – Sharpe added, “ASTA is working hard on ensuring that the expectations for airlines providing refunds through travel advisors is timely, but there is still work to do.”

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