Around 300 travel agencies in Kuwait stand to lose out on the lucrative travel business, as the International Air Travel Association (IATA) has demanded that they raise their bank guarantees to KD75,000 in order to maintain IATA accreditation and continue issuing tickets.
Over 300 travel offices in Kuwait are likely to be impacted by the IATA decision, which has extended the grace period until the end of August 2019 to raise their bank guarantees or face closure.
IATA-accredited travel agencies are required to provide financial security in the form of a bank guarantee or an insurance bond in order to sell airline tickets and to settle those sales through the Business and Settlement Plan (BSP).
In line with IATA regulations, travel and tourism agencies rely on three methods for insurance coverage — banking insurance, proprietary system of insurance companies, or the new ‘Easy Pay’ method.
The recent exit of a Jordanian insurance company from the travel market has put the agencies in a difficult situation. Though insurance services are available from a French insurance company, the stricter stipulations of the French insurer are not acceptable to many small agencies. Faced with the prospect of blocking such a large sum of money as a bank guarantee, and without any affordable alternative insurance available to them, many small travel agencies may have to close down their business.
According to industry veterans, around 60 percent of travel offices in Kuwait are likely to be shut down due to their inability to put up the required guarantee. They pointed out that the new demand by IATA could jeopardize the travel and tourism sector in the country, with the erring agencies forming nearly 35 percent of the total number of travel agencies in Kuwait.