SBA Loans Total Millions

Travel agencies in West have received $6.9 million since 9/11

By: R. Scott Macintosh

The federal government has given more than $24 million to travel agents nationwide to assuage economic damage caused by the 9/11 terrorist attacks and the impact of vast changes in the industry.

The emergency loans, made through the Small Business Administration, have helped save at least 500 travel agency businesses from bankruptcy since 9/11, according to the American Society of Travel Agents.

“We are very proud of this because after Sept. 11, travel agents had nowhere to go for working capital with reasonable rates,” said Barbara O’Hara, ASTA’s vice president for government affairs.

More than 130 travel agencies in Western states received a total of $6.9 million, with California agencies receiving the most funding -- $3.2 million, or about half of the total.

Florida agencies received the most federal assistance, with loans totaling about $3.4 million.

Overall, travel agencies received about 4 percent of all the SBA disaster-relief loans granted since Sept. 11.

The average loan for agencies was about $51,000.

The federal funding totals highlight how hard the 9/11 attacks affected the travel agent industry, already struggling from the end of airline commissions and new technology that has dramatically altered the way travel is bought and sold.

In testimony given in April before a Congressional committee on commerce and trade, Paul Ruden, vice president of legal affairs for ASTA, said an SBA decision to expand the national emergency loan program was a “bright light” for travel agents during an otherwise dismal period in the industry.

Travel agencies first received aid from an expanded national emergency loan program designed to help small businesses affected by the terrorist attacks. When applying for the emergency loans, travel agencies were required to show how they were affected by federal actions that prevented the flow of travel following the attacks, such as the two days that the Federal Aviation Administration shut down air traffic.

ASTA has estimated the loss of travel agency commissions and fees during the four weeks following the attacks to be roughly $1.36 billion. Total losses and operating costs through December 2002 is estimated to be $14.4 billion. More than 300 emergency loans totaling about $13 million were approved after 9/11 for travel agencies that had annual revenues of less than $1 million. “When they opened up the disaster relief nationwide, we were ecstatic,” O’Hara said. “Then we started getting phone calls from our members that the size standard prevented them from getting loans.”

Industry figures have shown that many struggling agencies exceeded the $1 million cap, and many were at risk of closing.

Though the SBA had been reviewing the travel agency industry before 9/11 and was considering a change in the size standard, the attacks accelerated the process.

In testimony given to a Congressional small business committee in February 2002, a travel industry representative cited a 1998 Harris Poll showing that the number of travel agencies with annual revenues of more than $2 million had increased by 46 percent since 1995.

During the same period, agencies with revenues of less than $1 million had decreased by 35 percent.

Fifteen days after the hearings, the SBA increased the size standard to $3 million.

As a result of the new standard, the SBA approved 147 loans to agencies between March and September 2002, for a total of $10.9 million.

It also channeled $1.4 million more to travel agencies than had been issued in the previous year and provided assistance to an additional 29 agencies.