Mark Pestronk
Q: The host agency that I operate just negotiated a commission agreement with a foreign carrier. The carrier has sent us a 10-page agreement. I see a few problems in the agreement. Do you find that airlines typically refuse to change such contracts? What are the typical pitfalls in such agreements, and how can we try to change the agreement to avoid them?
A: I find that foreign carrier-agency commission, override, net fare, discount and marketing-assistance contracts are generally poorly written and very one-sided. The carriers fall into two categories: those too arrogant to entertain requested revisions and those that know they need help and welcome it.
The terrible writing, in turn, falls into two categories: The contracts are either drafted by a lawyer who does not understand how reservations, ticketing, payment, settlements or tariff rules work, or they are drafted by a carrier staff that makes key drafting errors such as using different terms to mean the same thing, probably with the intention of not boring the reader.
In the clueless-lawyer category, I recently saw more than one agreement in which the airline, which is an ARC-participating carrier, promised to pay the base commission within 30 days after the passenger traveled.
The drafter apparently had no idea that agencies withhold commissions on cash sales or get paid weekly through the ARC settlement process.
In the "I don't want to bore you" category, I recently reviewed an agreement that imposed various restrictions on the agency in a series of bullet points beginning with "Agency shall not," "Agency must not," "Agency should not" and "Agency will not." To lawyers and judges, the different verbs must have different meanings, but I doubt that the drafter had this intention.
In both categories, here are some typical airline contract clauses that you can try to change.
• The carrier has the right to change commission levels or other benefits at any time, with or without advance notice, even for tickets already issued.
Ideally, the carrier should have no rights to cut commissions during the term, but if it insists on that right, the cut should at least not apply to reservations already made or tickets already issued.
• Deadlines for payment of overrides and other benefits are typically absent from such agreements so that if the carrier delays payment beyond what you think fair, there is nothing you can do about it.
Try to specify deadlines, such as 90 days after the end of each quarter in the case of quarterly override payments.
• The carrier imposes on the agency a duty to indemnify the carrier against passenger claims, even if they arise from the carrier's acts or omissions, and carrier claims arising from the passenger's acts such as point-beyond ticketing done without knowledge of the agency. Try to delete both such clauses.
• The carrier has the right to terminate the agreement without cause on very short notice and immediately if the carrier believes that you are in breach.
Short or no-notice termination can seriously harm your business. Try to get at least 30 days' notice of any termination and try to specify that the carrier will honor all tickets issued before termination.