Industry reaction last week to the first overhaul of ARC’s Agent Reporting Agreement (ARA) in more than a quarter-century was mixed.
Among other things, the changes to the ARA — the contract between travel agencies, airlines and ARC that authorizes agencies to issue airline tickets — will shorten the remittance cycle, authorize a new kind of branch and require agents to periodically report on their ownership status.
“ARC found a fair balance on the major issues that improved on current processes, made the industry more efficient and provided options to address other concerns that were identified that could not be solved through the ARA,” said a Delta Airlines spokesman.
ASTA, a member of the Joint Advisory Board-Agent Reporting Agreement (the ARC agency panel that approved the changes), applauded ARC for “consulting with ASTA and the agency community during its first overhaul of the [agreement] since it was introduced in 1984.”
The Society commended the document for being more “user-friendly” and for being “based on the ‘plain English’ approach to contract writing.”
ASTA said it had conducted a complete analysis of the new agreement and proposed many changes, almost all of which were accepted, including language that will prevent the use of the ARC settlement system to draft agent accounts without their consent.
ASTA also said it was pleased that the new agreement would not mean any change to the current financial requirements (bond, letter of credit or cash deposit) for existing agency location types.
As for language that compresses the bank draft date from 10 days to five, ASTA said the change would provide airlines with access to cash funds earlier but would also enable agencies that participate in ARC’s service fee program to receive compensation from the carriers with access to their cash funds five days earlier.
ARC said approximately 8,000 agencies use its service-fee product, and more than half of ARC agencies receive a payment from ARC each week, rather than owe ARC money to be distributed to airlines.
“Among members asked about this change, 65% said that the draft date change would have either a positive impact or no impact on their businesses,” said John Pittman, ASTA’s vice president for industry affairs and its representative to the advisory board.
Barry Richcreek, owner of Richcreek Vacation Center in Harrisburg, Pa., and one of the smaller agencies on the advisory board, said the 10-day draft was “a long period of time.”
“If somebody’s accepted cash, they should have it in their accounts,” he said. “The draft shouldn’t be an issue.”
Travel industry lawyer Mark Pestronk speculated that moving up the account drafting by five days could hurt small, ethnic agencies paid by personal checks.
“Payment by check on a Saturday will not be deposited until Monday, but ARC will draft four days later, which may well be too early,” Pestronk said.
Overall, Pestronk said other changes to the ARA appeared to be net positives, but he was also one of several members of the industry who expressed the belief that the document is geared overall to the benefit of the airlines.
“ARC exists for the benefit of the airlines,” he said. “As far as the impact on the typical travel agency, there are only two impacts: The agreement is easier to understand, and you have to pay sooner.”
Pestronk said it was too early to tell if the new “Associate Branch” category would help agencies.
“It’s complicated, and we don’t know yet,” he said. “It has to evolve and depends on how the airlines deal with associate branches in terms of commission and overrides,” decisions made by the airlines independently of ARC.
Pestronk added that large corporate agencies have wanted a way to have agencies be associated with them in ARC’s records, “but I think the big agencies would rather have them classified as a branch rather than associate branch.”
“ARC is making a distinction,” he said. “I don’t think that’s necessarily a good thing for agencies, but I’m willing to keep an open mind.”
ARTA President Bruce Bishins also said he feels the agreement favors airlines.
“ARTA has little problem with the broad accreditation policies newly proposed,” he said. “We did find, however, that the so-called ‘modernization’ effort was short on agent rights and long on benefits to carriers.”
Bishins expressed concern about a new part of the agreement requiring agents to consent that “transactional data may be used by Carriers and ARC for processing Transactions and any other lawful purpose.”
“This is one of the underlying ‘under the radar screen’ purposes of the new ARA, giving ARC unfettered license to use agency ticketing data any way ARC sees fit,” Bishins said. “Agents should have the right to opt out. Exposing, selling and potentially interfering with the commercial rights of an agency’s proprietary data should not be allowed.”
Lauri Reishus, ARC’s vice president of operations, responded that the “lawful purpose” requirement of the contract provides “substantial protection to the agent that ARC will not (other than in response to a subpoena or an official law enforcement request) produce any transactional data which would reveal personally identifiable information (e.g., passenger name, credit card number) to any party which is not connected to the actual ticket.”
Bishins also said the reduction in cash settlement from 10 days to five days would not help airlines that are looking to minimize the high costs of processing credit card sales and have been looking for alternatives to credit cards.
“ARC’s move to ratchet down the cash settlement date puts a roadblock in the carriers’ efforts,” he said. “ARC should be doing more to encourage and facilitate wider cash alternatives.”
Several agents said the changes would have no impact on their business.
Richcreek said the ARA was a very positive step and commended ARC for using so much agency input in its overhaul.
He also said that overall, the changes were not monumental.
“If you look at the new one and old one, it’s just basically an update of policies and procedures that meet today’s standards vs. an old, outdated document,” he said. “There is nothing earth-shattering that will make or break somebody’s decision to go into the business or to continue in the business.”
Clarification
ARC also clarified that two new rules it introduced as part of the ARA — allowing agents more than one ARC number at a physical location and being able to move ARC numbers from state to state — are actually updates found in the ARC Industry Agent Handbook.
ARC said that although they are not specified in the ARA, “this body of work collectively is referred as the updated ARA because for the greater agency community, the distinction between what is in the ARA, and what is in the ARC Industry Agent Handbook is not typically made.”
ARC noted, too, that the updated handbook language, like the ARA contract, had also been reviewed and approved by the agent advisory panel.
Follow Johanna Jainchill on Twitter @jjainchilltw.