A proposal by some airlines to reduce the credit period for travel agencies to a week from the current fortnightly payment cycle is likely to face opposition from the travel agencies in Dubai, according to senior travel company executives.

Airlines in the Gulf have been giving travel agencies credit for a fortnight to remit the money collected from ticket sales. This is executed through a centralised system called the Billing Settlement Plan (BSP), an arm of the International Air Transport Association (Iata).

Leo Fewtrell, General Manager, Dubai Travel and Tour Agents Group (DTTAG) told Emirates Business that at the coming Agency Programme Joint Council (APJC) meeting, the travel trade is likely to oppose the move to reduce the billing cycle.

He said: "Many travel agents fear the time reduction in payment cycle would impose further financial strains at a time they are facing some of the most daunting and challenging times in the history of the business."

Travel agents in the region have had to realign their revenue models after airlines stopped paying a commission on ticket sales. The agents now charge a transaction fee for their services.

"This would put an additional burden on travel agents, especially as the credit given to corporate clients ranges from 15 to 30 days," said Waseem Rahmany, Senior Manager, Al Rais Travel.

He said travel companies would have to review their credit policy as far as corporate clients were concerned.

Dr Majdi Sabri, Regional Vice-President, Middle East and North Africa, Iata, said: "Currently, agents participating in the BSP Gulf Area remit funds to cover airlines sales to Iata every two weeks [typically 1st-15th, 16th-31st]. Iata then settles the money with individual airlines."

He said the level of financial security, such as bank guarantees, and the frequency of remittance by agents are established by the local APJC, a body of 18 with equal representation from airlines and agents.

"Proposals emanating from this group require approval of the global Passenger Conference (PAConf) prior to implementation," he added. The decline in travel and increase in payment defaults have put travel agents in a precarious position.

Dr Sabri said: "The current financial situation of the industry is bringing to the fore some considerations of risk. The risk of agent default is covered by a bank guarantee for the normal business volume over the settlement period."

He said the longer the settlement period, the higher the risk to airlines and the more onerous the bank guarantee requirements. Recently, many BSPs have moved to weekly settlements, including Kuwait.

Fewtrell said: "The argument in favour of the weekly payments is that the bank guarantees given by the travel companies to the airlines, which often runs into millions, would be reduced. However, the travel trade is not convinced."

A group of APJC member agents and airlines investigated if this would be advantageous for the UAE market.

Dr Sabri said: "This will be considered at a forthcoming APJC meeting in early August. Any change would then require the approval of the global PAConf."

He said the Iata simply manages the Agency Programme and implements whatever is agreed at the APJC and approved by PAConf - in line with local laws and government regulations.

"Iata does not take a view on the frequency of remittance. This is a matter between airlines and agents. Settlement periods around the world range from once every three days to monthly payments" he said.