Mark Pestronk
Q: I see that ARC is celebrating its 40th anniversary this year. What was there before ARC? How did ARC come about? I know that you have been an attorney in the industry for at least 40 years, so what has changed in that time, and what's your opinion of the changes?
A: Before ARC started up on Jan. 1, 1985, most of the same functions were performed by the Air Traffic Conference of America (ATCA), which was a division of the trade association of U.S. airlines, the Air Transport Association, which is now patriotically called Airlines for America, or A4A.
Following a travel agency's application showing its industry experience and need for the service to be offered, the ATCA appointed the travel agency location, sent it blank stock for writing tickets (mostly by hand) and collected the proceeds from the sale of tickets, most of which were paid for by checks that were deposited by the agency into its bank account and drafted, net of commissions, by the ATCA. The ATCA also fixed airline commissions for domestic airlines, as did IATA for international airlines.
Because of airlines' concerns about being sued for price-fixing of commissions and boycotts of nonappointed travel agencies, U.S. airlines created a separate corporation, ARC, that had no role in setting commissions and liberalized appointment standards for agency headquarters and branches. Then, because of airline competition for travel agency loyalty, commissions generally rose for a decade and the number of agency locations boomed.
However, starting in the mid-1990s, commission caps and cuts, paperless ticketing (i.e., e-tickets) and the rise of the cruise and all-inclusive industries have brought about tremendous changes in what travel agencies want to sell. Many agencies no longer want an ARC appointment, and most don't really need one, as they can obtain airline tickets for clients from a travel agency that has one.
Another key development has been the dramatic shift from payment by check to payment by credit card. Most agencies no longer have to worry about having enough cash in the bank to fund ARC's weekly draft by the fixed deadline. Nor do most have to worry about losing their ARC appointment if they have too many dishonored drafts.
Today, when a prospective client asks me how to establish a travel agency, the subject of ARC rarely comes up. Instead, new entrants are satisfied with obtaining a non-ARC appointment number and then finding out how to get the best commission deals from cruise lines, resorts and tour operators.
ARC has responded to these industry developments by liberalizing its rules and policies so that it is no longer primarily a rigid enforcer; instead, its primary roles appear to be to educate and assist the smaller number of appointed agencies, to welcome new applicants and to collect useful data for sale to industry buyers and sellers. These role changes are commendable, and I would not have predicted that ARC would have been able to make this pivot.