What is an ARC bond?
Are you planning on starting your own travel agency? If so, you’ll likely want to sell airline tickets to your customers. The Airlines Reporting Corporation (ARC) requires businesses participating in the sales of airline tickets, including travel agents and agencies, to have an ARC bond.
An ARC bond is a form of financial guarantee bond. ARC requires this surety bond to ensure airline carriers get paid. If an airline makes a claim against your ARC bond for non-payment, the surety company holding your bond will investigate the claim. If the surety finds the claim to be valid, they will pay the airline up to the full amount of the bond. The responsibility of repaying the surety in full rests on you as the principal. ARC allows a letter of credit or cash deposit in lieu of an ARC bond.
An ARC bond is required to sell airline tickets.
What is the difference between an ARC bond and a seller of travel bond?
The main difference between an ARC bond and a seller of travel bond is the obligee. The ARC bond protects airline carriers when they don’t receive payment for your airline ticket sales. A seller of travel bond protects the state and your customers if you perform unethical business practices. If your business operates in a state that requires a seller of travel bond, you will need both the ARC bond and seller of travel bond to sell airline tickets.
Seller of travel bonds are required in the following states:
How much does an ARC bond cost?
New applicants must get an ARC bond in the amount of $20,000. Don’t worry, you aren’t required to pay the full bond amount. These bonds typically cost between 1% to 3% ($200 to $600) of the bond amount. The amount you have to pay is based on your personal credit and anyone else that has 10% or greater ownership in your business. Our team will contact you up to 90 days before your annual renewal to keep you compliant with ARC and not disrupt your airline ticket sales. After the first 2 years, the bond amount will depend on your average monthly net cash within the last 12 months. The required bond amount will range between $10,000 - $70,000.
You will need a $20,000 ARC bond for your first 2 years of selling airline tickets. On your third year, you will need an ARC bond in an amount ranging between $10,000 - $70,000.