2017 Debit Memo Updates for Travel Agents

2017 Debit Memo Updates for Travel Agents

Last year, ARC schooled me on everything debit memos (aka ADMs—agent debit memos), and I imparted my knowledge in this handy article you can find here. In that article, we talked about how debit memos can be costly to travel agencies, providing a framework for questions like:

1. What is a debit memo (and why do travel agents cringe when they hear that word)? 
2. What does a debit memo look like?
3. How do debit memos happen and what is a reason code?
4. How do you dispute a debit memo?
5. Why is using GDS so dang risky?

So if that's if that's the kind of big picture overview stuff you're looking for, you can link back to yesteryears of 2016 to find that info!

However, if you're curious about the state of debit memos in 2017, then X marks the spot. You have arrived.

This article will also include a brief—and quite visually pleasing—rundown of how beautiful a reason code can look when it's simplified, tips on settling debit memos with as much ease as possible, and info on why airline carriers . So if that's what you have a hankering for, you're in the right place.

Number Crunching: The Cost of Debit Memos in 2017

Here it is: 2017 offered many good tidings when it came to debit memos. In 2017, ARC reported a projected total of 507,770 debit memos. The number indicates a 4% decrease from 2016 (when there were 528,775 debit memos). This broke the trend of rise in the number of debit memos since 2015. Hurray! 

The silver lining only gets shinier too. Not only did the volume of debit memos decrease, but the overall cost of debit memos declined a whopping 17.7% from 2016 to 2017—from $145,130,885 in 2016 to $119,492,914. Three cheers for less red tape AND for more money in the pockets of travel agents!!!

And there's even more good news too! The ratio of debit memos issued per ticket sold is also going down. In 2017, there was 1 debit memo issued for every 344 tickets sold, an improvement from 2016 when there was 1 debit memo issued for every 305 tickets sold. This also indicates that the overall decrease of debit memos issued is a result of agents booking more tickets. So bravo on the upward trend, travel agents!

Of course there's more, but I thought it'd be snazzier to put the rest of the data together with an infographic. Here is the bounty of joyful debit memo news, infographic style:

The Reason Codes Du Jour

In our previous article on debit memos, we talked a bit about reason codes. The reason codes are just what they sound like: the reason a travel agent receives a debit memo—in other words, how the airline justifies charging you a fine for a ticketing error.

It seems simple enough, but back in the days of yore, some carriers had 500+ reason codes. That's completely bonkers (my view may not reflect those of Host Agency Reviews). But ARC seemed to think it was pretty bonkers too (again, my wording, not theirs), so they developed a Debit Memo Working Group (DMWG) to help reduce the number and streamline these codes across carriers. As of 2017, they had carved the list down to 136 reason codes from 138 in 2016. Amen. 

That may seem like a small difference, but understand that the group also standardizes these codes among EVERY airline that processes payment through ARC. What does that mean? Well it's like a magical transformation to help travel agents understand why they're getting a dang debit memo in the first place. Behold:

When all is said and done, this means that the 200+ participating airlines will have the same reason codes. Not only that, but they'll be much more readable and easier to reference for agents. Thank you, ARC. 

Agent and Carrier Views Diverge on ADM Settlement

There are polarizing views between agents and carriers regarding how debit memos are processed. Travel agents, on the whole have been historically frustrated with the long and tedious process of resolving debit memos. 

According to the IATA site:

"According to an IATA ADM market study, there is an evident gap between the airline and agent perception of the business relationship,' says Amber Wan, IATA’s Manager, ADM Management and Reduction Project.

“Agents consider that the relationship with airlines when managing ADMs is unsatisfactory with an average rating of 4.5 out of 10, while airlines appear to be satisfied overall since 71% rated the relationship higher than 5 and the average rate is 7.” ¹

When it comes down to it, travel agents are more incentivized to reduce the volume of debit memos, since they're a hit to agencies (and a source of income for carriers). 

Settling Debit Memos: A Host Agency and Travel Agent Perspective

So maybe you've gotten debit memos . . . or maybe you even get them with relative frequency. Don't fret. I chatted with a few Nexion reps about tips for preventing and settling debit memos. 

The Travel Agent Perspective

Mike Edic, travel agent and owner of Go Pioneer Travel, on debit memos:

Take Preventative Measures: "If you forget to put a TOUR CODE in a ticket, or you don't cancel out an HX segment soon enough, or if you accidentally have two flights booked for a client for different flights on the same date, [the airline] will debit you. When [agents] change flights, it's better to cancel and rebook in a separate PNR to avoid any debit memos . . . If you dispute it with the airline, you need good documentation that you need to provide to show that you shouldn't have to pay for it. Usually it can take 4-6 weeks to clear up one way or the other. If you don't get it cleared up, you need to get it paid within 30 days."

1. Document, Document, Document: "If you have something odd or out of the norm happen, and you call the airline, document what they told you, who you spoke to, their agent sine and anything else you can put in there to protect yourself." 
2. Talk to the Airline: "Sometimes the airline doesn't understand what happened, and you can explain that it wasn't intentional or that you can show them that what they think happened, didn't happen? (They are people too)"

The Host Perspective

Jackie Friedman, president of Nexion host agency, on debit memos:

Avoiding a Draft Fee: "Depending on the situation, it is highly variable. For instance, if the debit memo was issued because the ticket was charged back by the cardholder, and the memo is paid within ten days of issuance, the agency can prevent an additional $55 draft fee from ARC."

 Timing of Debit Memos:

1. "If the agency disputes the memo it depends on when the airline chooses to review it and respond with their findings."
2. "If the agency submits the memo to the GDS due to an automation issue, it depends on when the GDS has completed their research and responded back to the agency. If the GDS pays the memo it normally happens at the end of that calendar month."
3. "Once the memo is paid it needs to process through the next cycle billing cycle which could take up to two weeks before the airline receives payment."
4. "If you have been erroneously issued a debit memo, it can take a bit longer, because the carrier will need to review the documentation you have provided. (And on that note, make sure you have documentation for your dispute letter.) Make sure you have carefully reviewed why this happened so you can present a strong case for canceling the debit memo."

Other Tips:

1. "The number one thing a travel agent can do when faced with a debit memo is to act promptly. No good can come from waiting. Whether it is responding to a chargeback, or dealing with the fallout of not understanding a carrier’s policies, agents need to deal with this right away."
2. "Agents also shouldn’t forget to involve their host agency so they can get guidance on avoiding future debit memos. By letting their host agency know about the debit memo they can also prevent further complications with the host agency paying the debit memo and charging the agent."

That's a Wrap

What has been your experience with debit memos? Do you get them? Do you have tips to avoid them or settle them relatively quickly? We're curious to hear about it! Let us know in the comments below!

Footnotes

1. Source, "Financial Efficiency through Innovation" ↩