The inability of travel agencies to promptly remit proceeds of air ticket sales to foreign airlines has forced their insurance firm, Leadway Assurance Company Limited, to set fresh hurdles before the agencies, investigations by our correspondent has revealed.
Consequently, each of the over 500 travel companies in the country can no longer sell more than $200,000 worth of tickets, which is over 80 per cent reduction in the $1.2m monthly insurance cover the insurance company used to provide.
Top officials of the agencies said on Wednesday that the development had been affecting the travel business as operators who sold air tickets above the $200,000 monthly ceiling had been passing through strenuous processes in order to provide counter indemnity or bank guarantee to cover the additional sales.
Rising insurance claims occasioned by the non-payment of airline ticket sales proceeds running into billions of naira by travel agencies had threatened the) International Air Transport Association’s Billing Settlement Plan in Nigeria.
IATA is a global trade association comprising over 230 international airlines and representing over 94 per cent of the world’s scheduled international passenger traffic.
The BSP is the global clearing house for all ticket sales by IATA-licensed travel management companies or agencies worldwide.
The IATA BSP scheme was introduced in Nigeria in 2008.
The over 500 licensed travel agents sold $6bn (N948bn) worth of air tickets in 2012, bringing the annual value of the IATA BSP in the country to that amount.
The programme was designed in such a way that a local insurance company would provide financial cover for all IATA licensed travel agencies in the country selling flight tickets of foreign airlines.
Leadway Assurance was the only IATA-appointed local underwriter until last December when two other firms, Industrial General Insurance and Mutual Benefit Assurance, were appointed to join the scheme.
The two companies are expected to be fully involved in the programme in March 2013.
Under the IATA BSP programme, Leadway collects $4 on each ticket sold by a travel agent.
This is the premium for providing Default Insurance Policy or financial cover for the travel agents.
However, default rate became so high sometime last year that Leadway was forced to write the Nigerian Civil Aviation Authority and the National Association of Nigerian Travel Agents, the umbrella body of travel agents in the country, to intervene in the matter.
Unconfirmed sources said the default, which began in 2009, a year after the programme commenced in the country, had now skyrocketed to about 50 per cent of the total premium collected by the underwriter.
Leadway, in a letter to the NCAA, a copy of which was sighted by our correspondent, urged the regulatory authority to intervene in order to preserve the BSP scheme.
The Director-General, NCAA, Dr. Harold Demuren, confirmed that the agency held series of meetings with IATA, NANTA and Leadway officials after it received a letter from the company.
He said, “We held series of meetings with them. We discovered that most of the travel agents, who defaulted, were fake. One of the things we have done was to reduce the reporting time so that the money will not stay with them for too long.
“The IATA BSP programme is a good one because it will provide jobs for our people,”
Sources said NCAA had promised to involve the International Criminal Police Organisation (INTERPOL) to track down some fleeing foreign travel agencies, which absconded with ticket sales proceeds.
However, the National Publicity Secretary, NANTA, Mrs. Ngozi Ngoka, said the association had over the years assisted the airlines to recover sales proceeds that would have otherwise resulted in losses to them.
She said the defaults were caused by technical loopholes in the BSP collection process and that NANTA had enumerated some of the loopholes to IATA with the hope that efforts would be made to close them up.