Offshore ticketing: Why do it?

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n the wake of zero airline commissions, travel agents who never before considered it are looking at having tickets issued abroad in order to share in the commissions that U.S. airlines continue to pay outside the U.S. and Canada.

Until now, the idea seemed rather outre, but even ASTA and ARTA are reviewing the concept as one possible way to help members maximize revenue.

The idea of shopping around for commission deals is not new.

California travel attorney Al Anolik noted it has been common practice for years among consolidators and ethnic travel agencies to ticket in foreign locations where they take advantage of higher pay. Their strategy is to "shop around" for the highest commission or override, he said.

And according to travel attorney Mark Pestronk, there are plenty of places to shop.

He said agents in the Bahamas, Argentina, Brazil and "maybe Chile" are interested in ticketing for American agents. He said the situation is so competitive that South American agencies are getting 15% for their domestic U.S. tickets.

Airlines are "giving away the store" there, he said.

Large travel agency organizations with central reservations operations are particularly well-situated for using their interconnected res systems for moving PNRs around to maximize income, whether by obtaining tickets elsewhere in the U.S. (in "miniconsolidator" deals) or across national boundaries.

And U.S. agents aren't the only ones shopping around. One source said U.K. agencies have used American agencies for ticketing services in order to collect from British Airways.

As reported in the April 15 Travel Weekly, Mark Koffman, owner of Jetset Toorak near Melbourne, Australia, has been ticketing for about a dozen North American agencies, even before the airlines went to zero. Koffman allows the booking agencies to collect most of the commission, minus about two to three percentage points.

Looking ahead

While trade groups are looking at offshore ticketing, individual agents are pursuing the prospect as well, judging by comments appearing on the Forum at Travel Weekly's Web site. Two of them were willing to discuss their situations.

Nancy McKenzie Ross, owner of McKenzie Travel in Vancouver, Wash., said she is pursuing a "promising" relationship with a Mexican agency that, like hers, uses Sabre.

She said that, while she would queue PNRs to the partner agency for ticketing, she would get her segment credits from the vendor.

A few issues make the plan not as smooth as she would like: The agency can accept only American Express but not the bank cards for credit sales, and not all bookings can be handled with e-tickets.

Ross is not ready to move just yet, though.

She said she is seeking further expert advice.

Maryann Carey, an agent at Travel Time in Boca Raton, Fla., has an assignment to look at the pros and cons of an offshore relationship for her firm.

She said her agency's owner also owns three hotels in the Bahamas, and she envisions using an outlet in the Bahamas because of that connection and because the Bahamian currency exchanges with the U.S. dollar at one for one.

She also envisions a res system link that involves emulation, meaning the capability of making a CRT (in Florida, for example) appear to be making its bookings somewhere else (such as the Bahamas). In that case, PNRs would not have to be queued to another agency.

However, based on vendor sources, it is not certain that emulation across national boundaries would be possible in all situations.

Building bridges

However, McKenzie Travel and Travel Time, like any agency, could link their system to the res system of an unrelated agency -- provided they use the same vendor -- so that each agency could access and change the bookings of the other agency.

There is usually a small charge for this; Ross said the Sabre fee would be $25 a month. In some cases, the agencies would have to contact their vendor to make arrangements to "bridge" in this way but one or two vendors allow agencies to control this from their home offices.

With this setup, too, agencies can issue agent, auditor and passenger coupons in different locations. Every document will reflect the ARC or IATA number of the issuing location, which in turn determines the commission.

Vendor sources said they "don't police" interagency bridging. There are many reasons for bridging and "we have no obligation to report to the airlines," one said.

The vendors also are able to track every keystroke, but there is not much reason to do so. The airlines can only see the PNR segments that are relevant to their services but not the history of a booking file, such as whether it was queued to another agency for ticketing.

In response to a question, one vendor added that if carriers ask to see more data, "we don't take lightly our privacy requirements. We often require that this be part of a legal investigation."

Travel attorney Jeff Miller -- who strongly advises against cross-border ticketing -- said airlines would need a court order to get the data, but in his experience, he said, airlines are more likely to make ticket buys to get evidence of their own.

Been there, done that

For some agents, these ticketing games are old hat.

Rob Mellen, now an agent for a California AAA, said he once worked at home as a commissioned agent for a Sacramento agency that tried offshore ticketing beginning soon after the 1995 caps.

The agency first made arrangements in Mexico and later in Panama, and Mellen said, all these transactions were electronic tickets. The agency has since closed -- although not because of offshore ticketing, he added.

And some agents say it's not worth the bother. Beatrice Gutierrez is a Mexican native who owns Bea's Travel in Chula Vista, Calif., just a few miles north of the Mexican border.

To her, the notion of ticketing across the border in Mexico, where the commission is 5%, is "ridiculous ... Why would you want to go across the border for that? The best thing is to not depend on airline tickets any more and provide service and charge for it," Gutierrez said.

Others see it as unethical. Hal Rosenbluth, chairman and chief executive of Philadelphia-based Rosenbluth International, said his agency has the capability to "issue tickets out of a different country every day. I could siphon off certain parts of the business, on certain airlines, and not hurt the agency, but I question the ethics."

Laura Del Rosso contributed to this report.

Some caveats in the offshore mix

By Nadine Godwin

hile a number of agencies and trade groups are enthusiastic about offshore airline ticketing -- or at least believe it's worth a look -- several agents, attorneys and other observers offer a number of reasons to proceed with caution, if at all.

The practice is an attempt to circumvent airline compensation policies for U.S. and Canadian travel agents, and for that reason, some say it's unethical.

Ticketing overseas is not illegal. However, it poses legal and practical pitfalls, leading one source to note that transborder deals and joint ventures are "not for the faint of heart." Here's why:

• If the practice becomes widespread, the airlines are likely to put a stop to it. That would mean any investment in an overseas arrangement would be lost.

• Airlines could also retaliate by canceling incentive agreements with the participating U.S. agencies. One California agent who tried offshore ticketing said the agency had gone public about it and, as a result, it could not get airline overrides or negotiated fares.

Also, in some foreign countries, sources said, agencies have been threatened with loss of commissions by U.S. carriers if they ticket for agencies outside their homelands.

• Depending on the foreign country involved, agents might face a number of hazards. Sources cited theft, poorly trained staff and lack of control over the quality of work.

• Refunds and changes can be especially troublesome, according to the California agent who gave it a try. She said refunds took a long time because "you are counting on a third party to process [them]. It became very difficult to control."

• It might be necessary to provide a bond to protect an overseas partner agency. Mark Koffman, whose Australian Jetset Toorak tickets for about a dozen North American agencies, is considering such a move in the wake of losses suffered when one of those agencies failed after Sept. 11.

• Travel attorney Jeff Miller warned that agencies could face new liabilities; if a client is unhappy with services provided by the offshore agency, responsibility will fall on the U.S. agency.

If that leads to a claim on errors and omissions insurance, Miller said the insurance carrier might not pay.

"It's a total gray area," and if the insurance company says it is fraud, "you would have to prove it is not," Miller said.

• Agencies have to be careful about which business is queued for ticketing offshore. Some frequent flyer programs, for example, do not award miles if the ticket is purchased outside the U.S.

Also, the agency wouldn't want to queue over, for ticketing and reporting elsewhere, PNRs involving airlines with which it or the client has an incentive deal. (On the other hand, sending out the PNRs involving nonpaying airlines would make market-share productivity look better for the paying carriers.)

• IATA applies different fare calculation principles under four different circumstances:

1. SITI (sold inside, ticketed inside the country where travel begins).
2. SITO (sold inside, ticketed outside ... ).
3. SOTI (sold outside, ticketed inside ... ).
4. SOTO (sold outside, ticketed outside ... ).

All res systems are programmed to adjust fares accordingly and to bounce fare codes that don't cross borders. Because of those adjustments, when a PNR is kicked overseas, the fare might change.

If the ticketing agent does not properly identify where a transaction is taking place, one or the other of the agencies could be subject to debit memos, one vendor warned.

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