Q: One of the most unfair tactics that airlines use against travel agencies is to try to collect on debit memos for debts that are obviously not the fault of the agency. The classic example is hidden-city ticketing: If the client does not give us any indication that he does not plan to travel to the less expensive point beyond his real destination, it is not our fault that the client ends his trip at the more expensive intermediate point, but we get the debit memo. If we don't pay it, the airline threatens to lift our plate, so we end up either paying it or settling for at least a partial payment. What can be done to stop this extortion?
A: In the world outside the U.S., there is a policy against these kinds of debit memos being sent to IATA-appointed agencies. Unfortunately, the IATA policy does not affect U.S. agencies, which have ARC and Iatan appointments.
The basic IATA principle is set forth in IATA Resolution 850m, which states that "an Agent may for reason dispute an [agent debit memo]." The resolution sets forth a specific procedure for dispute, giving the agent at least 14 days to submit a written dispute and requiring the airline to consider the dispute and make a decision about the validity of the debit memo.
There is no equivalent procedural protection in the U.S., where airlines can start plate-lifting as soon as they send a debit memo, and where they do not even have to consider disputes. Indeed, some airlines routinely ignore all disputes, and all major airlines seem to ignore at least some disputes.
Although the IATA resolutions do not set forth specific grounds for disputing debit memos, the IATA Travel Agency Commissioner has published a guide to debit memos that lists a dozen valid grounds for disputing debit memos.
The IATA commissioner does not have jurisdiction to hear debit-memo disputes unless the airline has lifted the agency's plate and the agency "considers its commercial survival is threatened by an IATA member airline's decision preventing it from acting as Agent for, or from issuing Traffic Documents on behalf of, that member," as I noted in my Nov. 14 column, "Outside U.S., IATA offers agents recourse if airline lifts plate." [See ARC response, "A solution in search of a problem."]
However, because agencies frequently ask the commissioner to advise about the validity of debit memos, the commissioner has published a very useful PowerPoint guide to debit memos for agencies and airlines. You can download the guide at www.travel-agency-commissioner.aero (click on "Agency Debit Memos").
Although the guide is not legally binding on airlines, it no doubt reflects IATA policy, as the commissioner is an IATA employee.
According to the commissioner, valid grounds for disputing debit memos include "for charges not imputable to the Agent (e.g. excess baggage) ... and for the passenger's transgression outside Agent's control." So, the hidden-city ticketing example that you gave would clearly come within the scope of what IATA would see as an invalid debit memo.
There is no reason why ARC's board of directors cannot adopt these kinds of policies and amend the ARC Agent Reporting Agreement accordingly. Such action would go a long way toward providing agencies with the fairness that the airline-agency relationship has always lacked.
Mark Pestronk is a Washington-based lawyer specializing in travel law. To submit a question for Legal Briefs, email him at [email protected].