The General Services Administration has fired the Davis Travel Agency, hired last March under a $16.4 million contract to provide travel agent-type services to federal workers, because airlines were refusing to honor its tickets.

Davis Travel claims the government was slow in paying its $1.2 million bill, so it was unable to settle accounts with airlines. Ivan Michael Schaeffer, GSA's air transportation director, said federal agencies couldn't pay because they "had not been billed for months."

"We had no choice but to say they violated their contract," Schaeffer said. "We had to provide for the federal traveler with alternative arrangements. The overall program will go on."

Davis Travel was the first firm ever hired by the federal government to provide travel-agent services as a way to save money by centralizing ticket purchases in major cities and using discount procedures. GSA officials figure its experiment with Davis Travel and four other agencies saved them $1 million this year alone.

But Davis Travel, which provided services in the Washington area, Denver and North Carolina, had been skating on thin ice with GSA since June. Officials with the Environmental Protection Agency -- a major user in North Carolina -- reported then that it was having ticketing problems with Davis. GSA has replaced Davis Travel here with Omega World Travel and the Air Transport Association's Scheduled Airline Traffic Office. In Denver, Viking International has taken over.

Footnote: The Defense Department, in an announcement made before GSA canceled Davis Travel's contract, said it would hire Davis Travel to provide similar travel agency services for the U.S. Army Tank-Automotive Command in Warren, Mich. The $1.9 million, one-year contract -- the Pentagon's first to a commercial travel agent -- will begin in October. DOD officials say "we think Davis Travel can perform the work."