Did you know that a travel agency needs to get a surety bond, too?
In fact, the Airlines Reporting Corporation (ARC) requires all of its accredited entities to obtain a bond. These entities include:
- ARC-Accredited Agents (also called Ticket Reporting Agents or TRAs)
- Corporate Travel Departments (CTDS)
- Sovereign Entity Agents (SEAs)
- Sovereign Entity Corporate Travel Departments (SECTDs)
So how does this all work?
Let us introduce ARC first.
What is ARC?
The Airlines Reporting Corporation (ARC) is a company which provides air travel intelligence and commerce and handles ticket transaction services between airlines and accredited travel agencies across the United States.
The company is the premier provider of financial and data services to the US travel industry.
The ARC requires all the aforementioned ARC-accredited entities to post a surety bond to ensure any payment collected by a travel agency or ticket reporting department will be sent to the proper airline company. This type of surety bond is called Airline Reporting Bond.
What is an airline reporting bond?
Like all surety bonds, an airline reporting bond works as a financial guarantee between three parties:
- Obligee – in this case, it is the ARC that requires the surety bond.
- Principal – the accredited travel agency or any of the abovementioned entities which need to obtain a bond.
- Surety company – the underwriter of the airline reporting bond.
By posting a bond, the principal promises to act in compliance with the provisions of the Agent Reporting Agreement.
If for any reason a travel agency fails to fulfill its duties (such as forwarding payments to airline carriers), a claim can be filed on the bond.
The surety will cover all amounts owed by the principal to the carriers or ARC for tickets or other valuable materials issued on ARC traffic documents (in both paper and electronic).
What documentation should you use to submit the bond to ARC?
The surety company may provide you an ARC-seal bond form or use its forms that conform to that in the ARC bond form. In all cases, ARC must always have the Original bond in its possession.
How much does an airline reporting bond cost?
The basis of the bond amount you need to post and your financial capabilities will determine the airline reporting bond costs.
For first-time applicants with the Arc, you are required to post a $20,000 bond. After two years, the ARC can set your bond amount between $10,000 and $100,000.
To get bonded, you will have to pay the bond premium (a percentage of the required amount, typically between 1% and 5% for the bonds). So, if you post a $20,000 bond, you will pay between $200 and $1,000.
That said, the bond premium will be influenced by a variety of factors, including your credit score, experience, and overall assets and liquidity. A stronger financial capacity can get you a lower bond premium.
Can you post multiple bonds totaling the full amount required by ARC?
Yes, you can. An agent may provide the required coverage through multiple bonds or multiple letters of credit or multiple cash deposits or any combination thereof.
How long does an airline reporting bond last?
Airline reporting bonds remain valid and must be renewed annually in line with your ARC-accreditation until claimed against or canceled. In case you need to renew, the surety company will notify in advance for you to stay compliant.
The surety, for any reason, has the right to cancel the bond at any time by providing a 30-day written notice to both the principal and obligee.
What are the important fields that require special attention in the bond form?
According to ARC, there fields in your application that entails more specific details. You must enter the correct information otherwise, it will cause delays in your application process.
- Bond number
- Home office agency code number (ARC number) – for approved agents to provide to the surety
- Full legal name of the agency
- Airlines Reporting Corporation as the Obligee
- Correct bond amount
- Name of surety company and original surety seal
- Original signature of the attorney-in-fact.
- Original of power-of-attorney
If you need to know more about airline reporting bonds and how you can obtain one, call Surety Bond Authority at 800-333-7800. Let us help you stay compliant with ARC to continue growing your airline ticket sales.