Canadian travel agents call for bailout after being forced to repay commissions on cancelled vacations
Industry association says travel companies won't refund customers until commissions are repaid
When borders around the world started to close in the spring, travel agents hustled to get their clients home.
Cathy Cordy stayed on hold for 11 hours for one customer, and scrambled to rework file after file and help clients rebook or get travel credits and refunds.
Continued government restrictions and a warning not to leave the country decimated her business, Under The Tuscan Sun Travel.
"I've been working in a negative cash flow since March, so not only have I never worked so hard, but I've never paid to work so hard," the Winnipeg agent said.
"We support 100 per cent the airlines need a bailout, but so do we."
Airlines want commissions repaid before issuing refunds
Now Cordy and thousands of other travel agents across Canada are being hit hard again by struggling companies in the travel industry including airlines and tour companies, which are asking for commissions on cancelled trips to be paid back.
According to the Association of Canadian Independent Travel Advisors, WestJet, for example, sent a written announcement to travel agencies and advisors in November stating that in order for a customer to get a refund on a cancelled trip arranged through a travel agency, any commission received from the booking would have to be repaid first.
The association said if agents don't repay their commissions to the travel companies — usually an advisor's only source of income — customers who booked travel through an agent won't get a refund from the travel company if their trips are cancelled.
"It is impossible for us to pay back money that we do not have because we're not even earning a living, not to mention the fact that it was money that was earned and has been taxed in some cases — because it was paid in 2019 and it's been spent," said Judith Coates, one of the association's founders and a travel advisor based in Orillia, Ont.
Coates said some agents are being asked to repay as much as $50,000 to airlines and tour companies. She said larger commissions are usually earned on trip packages — like destination weddings — not individual flights.
200 Ontario travel agencies shuttered
"So many of our travel advisors went into the Christmas season afraid of spending money on their families for Christmas and afraid of how much money they could spend even for their Christmas dinner, because they knew they didn't have the money and they already [were] maxing out their credit cards," Coates said.
She said about 200 travel agencies in Ontario have closed their doors for good, and there's fear more will be gone forever if the federal government doesn't intervene.
"We know that that's going to multiply over all the provinces and that we're going to see more and more people having to leave the business or even worse, filing for bankruptcy because there's no way they can pay these commission recalls or clawbacks."
Coates said agents' earned commissions are placed in trust accounts, which travel companies are now withdrawing from in order to get back the commissions.
She said if there isn't enough cash in the trust account, the company will take the money out of future bookings, meaning no new money would go to the agent or advisor until they are no longer in the red.
Coates said this means there is little incentive for agents to do any more business with companies they're in the red with.
Cordy said she's paid back $6,000 so far so her clients can get refunds, but she stands to lose as much as $20,000 if all her commissions on her other bookings are recalled.
She said she didn't have the money in the bank to make the repayments that totalled $6,000 and instead used a credit card.
"It's a horrible situation, and some people are taking out loans to pay back their commissions," Cordy said.
"I was asked by one supplier, 'is that not what you can use your [Canada recovery benefit] for?' And I said, our CRB is to be used to put food on the table and pay the bills."
Association wants to hear from transport minister
The association believes airlines and travel companies should treat agent commissions as an operating expense that would potentially be covered by a government bailout of the airline industry.
Coates said another potential solution is federal help similar to the financial support packages and travel reimbursement plans being offered to travel agents in Australia and New Zealand. It said it has met with more than 115 MPs.
"We are seeing that in the hallways of government, it's being talked about," Coates said. "However, we're not hearing from the ministers that we want to hear from. The minister of transport, for example, we're not hearing from him."
Transport Minister Marc Garneau, whose office did not return a request for comment by deadline, has previously said airlines will not get a bailout unless refunds are given to passengers whose flights were cancelled.
Coates said what's missing from that statement is that customers who booked through an agent won't get a refund until their agents repay the commissions they earned.
"We support the option of consumer refunds. We want to see our clients getting a refund," she said.
WestJet spokesperson Morgan Bell said the company is urging the federal government to help the entire travel chain, and added not all tickets are attached to commissions.
"We value the work of our travel agent partners and we are sympathetic to the situation they are facing where lack of government support also continues to hinder their ability to recover."