27 de agosto 2024
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The decision to cancel the bank accounts of the International Air Transport Association (IATA), along with 1,500 other entities, has left travel agencies facing “uncertainty” and “in limbo” regarding the sale of airline tickets. Three sources from the Nicaraguan tourism sector told CONFIDENCIAL that airlines must get involved directly to find a solution and mitigate the damage.
IATA is essentially a professional association of global airlines, whose main roles include ensuring the safety and reliability of global air services, “as well as implementing the Billing Settlement Payment (BSP),” explained Alfredo Gutiérrez, former owner of Viajes Globo, a travel agency affiliated with IATA in Nicaragua.
The suspension of BSP has put travel agencies “in limbo,” said a tourism sector entrepreneur still trying to do business from within Nicaragua. He explained that while the problem started on Friday, the pressure eased over the weekend due to fewer customers, but was expected to pick up again on Monday and during the week when demand increases.
Travel Agencies Awaiting Instructions
As of the morning of Saturday, August 24, travel agency office staff were still in their positions, awaiting guidance, “although Copa and Avianca had already communicated that they would be operating differently,” the entrepreneur said, referring to the decision to sell tickets directly through the websites of both airlines.
“Avianca and Copa told sector entrepreneurs to wait, and that’s what people in the offices are doing—dealing directly with them. The airlines will have to negotiate this: since they are the most affected, they will be the ones to face this situation,” he predicted.
“The main impact is that they can no longer sell on credit. All tickets will have to be paid for immediately and only with cards,” explained a former executive of a tourism company that closed due to the socio-economic crisis triggered in 2018, when the repression of citizen protests ordered by the Daniel Ortega and Rosario Murillo regime resulted in the death of hundreds of citizens.
It is normal for travel agencies' regular clients to purchase tickets and pay for them a few days later with checks or bank transfers. The executive noted that losing this option will add to the many reasons that already make doing business in Nicaragua difficult and could lead to a drastic reduction in sales.
How to Replace a Ticket Sales System?
In addition to handling money, BSP is a system that issues sales reports for travel agencies affiliated with IATA, specifying the amount owed for the relevant sales period. The amounts indicated in the BSP report had to be deposited in a bank account within no more than a week, the former tourism sector entrepreneur noted.
The BSP then redistributes the corresponding payments to each airline based on the sales generated by the agencies. “The BSP is a compensation mechanism that exclusively functions to collect money from agency sales and distribute it to the corresponding airlines. BSP earns no commission, as it is run by IATA itself,” Gutiérrez explained.
While the system once had an office in Managua, it closed at the beginning of the century, transferring operations to Costa Rica, but continued to function thanks to digital technology.
Now, the direct effect of eliminating IATA is the disappearance of the compensation system, as BSP is an exclusive mechanism for collecting sales revenue from various channels for IATA-affiliated airlines, and no bank can hold an account for a legal entity that has been shut down.
Current Solution for Flights in Nicaragua Is Partial
One alternative for agencies is to pay airlines directly at their offices, returning to the pre-1990 mechanism, should the airlines choose to do so.
Although the solution offered by the Colombian and Panamanian airlines provides a fix for travelers with destinations in the Americas, the problem remains unresolved for those requiring connections to distant countries that the airlines operating in Nicaragua do not fly to.
In that case, “travel agencies will have to work on more complex alternatives, which will undoubtedly increase issues with seat confirmation and reservation guarantees,” Gutiérrez explained.
Gutiérrez, who is also a political leader, doubted that "the measure adopted by the Sandinista dictatorship was the result of an error or simple ignorance. I believe it was carefully analyzed and calculated." His theory is that “the regime wants to bring the BSP system under its control so the state can handle collecting from agencies and paying the airlines. I am confident no IATA member airline would accept that change.”
When consulted, the tourism entrepreneur dismissed the idea that the regime could control the BSP, adding that “if they try, everything will fall apart. What they can control, though, is the income (via commissions) earned by tourism businesses, agencies, and tour operators. But they already do that through taxes and the municipal government,” he noted.
This article was published in Spanish in Confidencial and translated by our staff. To get the most relevant news from our English coverage delivered straight to your inbox, subscribe to The Dispatch.
