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UATP CEO Ralph Kaiser On A Single-Use Virtual Card That Bundles Air, Hotel & Car Into One Payment - 25 November 2015
Business Travel News For six years, Universal Air Travel Plan president and CEO Ralph Kaiser has worked to add hotels and rental cars to its merchant network. What began with a partnership with LaQuinta Inn & Suites in 2010 hadn't gained much traction by 2013, but in August, UATP announced a partnership with corporate payments provider Wex and Delta Air Lines to provide a one-time-use virtual card solution that can package hotel, car rental and air into one payment transaction. Kaiser spoke with BTN's JoAnn DeLuna about that partnership, why airlines should be wary of global distribution systems' reach into the payment sector, and digital wallets.
Since your partnership with Wex and Delta, how much interest have you received from other airlines?
Everyone is interested in it and not just in the U.S., either. It just worked out that Delta was able to work with Wex in the U.S. to launch [in the fourth quarter]. Our issuer base is 33 airlines, and the majority of active issuers who have big corporate programs are interested in this. Anytime the airline talks to a corporate and says, "Hey when you book a flight on us, you can also book your hotel and car rental and we put it all on the same statement for you," they're going to say, "Sure. Why not do it?" They'll all add it. We just need to get it into the market.
The Wex model is a virtual card transaction on the MasterCard network. If you use a UATP number to book the hotel when you book your air, that UATP number will flip to a MasterCard and be processed on the MasterCard [network], but the data and transaction information will go back to Delta for the customer's UATP billing statement.
Does the Wex partnership affect your partnership with virtual payments provider eNett at all?
No. In fact, we always tell all the partners that we're working with multiple companies on multiple fronts to bring solutions to our members, the airlines. We try to be an honest broker for everybody. Unless someone wants to pay us a lot of money, we're not going to do an exclusive deal. We're willing to work with anybody that would like to work with the airlines to bring in corporate non-air and benefit from the UATP customer base of airlines and large corporations.
Wex also partnered with data intelligence company Grasp to launch a virtual card solution, which it claims is free. If it is, why would people use UATP?
I don't understand how they work out the economics … but companies don't do things for free. Compared to how it's traditionally been done and priced, maybe it is free but someone's paying for it somewhere. Our goal for doing this is not because UATP is going to make profits on the Wex deal. It's really to make the product better so airlines can go out in the market and solve problems for corporates.
In July, UATP was exploring ways to process onboard purchases, and in September, you announced integration with card management technology provider Givex. How will that partnership benefit the corporate travel sector?
We have some other gift card providers and programs, too, like Air Canada. The cool thing about Givex is that it's almost like a loyalty program and it can do traditional gift cards, too. But, they also have technology where an airline can reward customers and do things for them. For example, if a traveler is sitting at [the airport] because their flight is delayed. [An airline] can say, "Here's $20 so you can get a sandwich and drink while your flight is delayed." You can put it right on the UATP card through the Givex tool. It's a way to get extra flow revenue through the gift card but also a way to enhance relationships with both corporate and leisure travelers.
There's a lot of attention on the payment sector at the moment. Why is that? How does UATP see its role in the sector?
Virtual card is the hot thing in payment right now. Also, payment has gotten a lot of attention because, over the decades, airlines have been able to rationalize agency commission costs and have reconciled the GDS costs fairly well. GDSs are now getting into payment. Amadeus has a huge payments group, and there's eNett and Travelport. [Travelport president and CEO] Gordon Wilson has said his future is in payments. How many heads of GDSs do you hear saying that? Sabre and Travelport recently partnered. All the money that airlines have rationalized and taken out in GDS and airline IT technology savings—[the GDSs] are now going into payment and trying to extract that value back from airlines. The airlines need to strongly consider who their partners are because airlines are in lawsuits with GDSs on the IT side and now [airlines] are going to start handing out business to the GDSs. [Initially, it might be] cheap, and over time it's going to be very expensive and there will be contract fights. You've got the GDS in your IT, and now they're going to be in your payment. They're getting more and more tentacles into the airlines. Our company is 100 percent owned by airlines, so we're trying to educate airlines on what they may be getting themselves into.
The GDS-airline partnerships are interesting. Who owns the data, who's responsible for keeping the data safe and who's responsible in the case of a data breach?
Two things work in our favor. One, we work in the business sector, so it's commercial data, not private citizen data. Those breaches are significant because it's personal data and liability. Two, we get our data direct from the airlines. We don't go through other third parties, so all the statement data from the corporate traveler comes directly from the booking, the [passenger name record], and it's a direct feed to our system to those billings systems, which is the best data, the best source you can get, and it's the most secure. Of course, we take data privacy and security seriously, but it's the airline's data that we process and put on their billings statements.
Where do you store your data?
We don't really store data, per se. We get data every day in batch transactions. That goes through the acquirer network, which is our proprietary payment network, SITA, an industry-owned tech provider that we run. But we don't store personal private data. We don't have it. We have the PNR Level 3 data that we get, [which includes] the name of the traveler, class of service, city pairs, schedule, time, etc. That's good for travel managers for reconciliation [purposes].
How much data do you want to own?
We don't have a lot of data issues or questions. We provide all the data from the booking back to the corporate travel manager, TMC or corporate customer through their statement. We run our own proprietary invoicing system for airlines, but some also have their own that's built into their revenue-accounting system. But in terms of controlling the data, it's the airlines' and corporate customers' data. We don't do anything with our data except present the customer's data in a way they can use it to manage their travel. We don't sell the data. Some companies aggregate and sell data. Some credit card companies buy data from different sources because they can't get the complete picture in every market. We get it in every market because we're global, we're closed loop and we're directly connected to each airline. We're integrated in all the GDSs, which I love, except when they try to raise airline costs for payment.
How do you stand your ground when the GDSs come into your territory?
Payment competition—whether it's from Amex, MasterCard or Amadeus—is good for the industry. It'll create innovation and lower costs. There are two parts of education to our business. It's not just being careful with whom you partner but also what you're paying for it. How much of your business do you want one entity to control? It's the same reason I don't buy individual stocks because of companies like Enron. You need to spread your risk. You never want to have a concentration of risk in service providers and customers. If an airline gives the reservation system, IT platform, GDS connectivity, payment and website to one company, you have this concentration of risk. Also, how do you negotiate contracts when someone has all that business? Look what Amex does in the U.S. with payment and agency stuff. Airlines are afraid to cross them on one piece because they know they'll suffer on the other. The other part is that we bring alternative payment brands to the airline industry—for example, PayPal. We process the transaction on the back end, but the customer doesn't see it and we don't charge the airline for that [service] because we're owned by airlines. It's part of our service to them. We get a processing fee from anyone who does alternative payments, not the airlines. The GDSs and [payment service providers] will charge the airline. Education is key, as we need to get that message out. If you're using a PSP, we don't think the reconciliation is good and we know that the price isn't as good.
Where is the industry headed?
It's very exciting. The solutions coming out are important not just for the payment industry but for airlines who are the biggest merchants in the world. Everyone wants an airline to accept their form of payment because they're big-ticket items. We're starting to see a bit of consolidation in payments, too, not just in airlines. Again, that's another control thing. If your options go from five to two and one of those two is a GDS, do you really want to put your eggs in one basket? Companies like PayPal are evolving. They were the leader and the first alternative payment brand, and they did really well because they took fraud seriously when others didn't. Mobile payment is coming. Apple is there. That's a sexy brand name. We know what Uber has done in transportation. Uber is a way to pay for a taxi, but you don't care about the form of payment; you care about the service. People don't care what payment is embedded in there.
Some of the criticism I've heard from buyers is that not enough merchants accept mobile wallets like Apple Pay.
I don't know how that will be adopted or not, but Apple revolutionized the way we listen and buy music, and now maybe they'll do the same thing in how we buy things. The other thing on mobile payments is the [International Air Transport Association's]EasyPay. It's going to be a new proprietary form of payment, an e-wallet … a way to move cash more securely and quicker in the IATA [business service provider] network, which is a global network and which we're 100 percent connected to. It's another innovation in the airline industry that may change things.
Bitcoin could be more to airlines than "just an asset" for exchange - 19 October 2015
Bitcoin could be more to airlines than "just an asset" for exchange
Posted by Luke Parker
The airline industry is a complex, dynamic, and very competitive industry operating in a high-volume, low-margin environment. In order to operate profitably the layers of business systems that underpin it require extreme efficiency and precision, in multiple areas such as reservations, inventory, departure control, and ticketing.
A recent industry report, commissioned by global travel industry IT Provider Amadeus, highlighted many opportunities to streamline financial processes. The report, by leading market research consulting firm Frost & Sullivan, claims that accepting the currency bitcoin can help boost airline revenue, but more importantly, integrating blockchain technology could be "revolutionary" for the airline industry.
"Bitcoin could be much more to airline revenue accounting than just an asset that can be exchanged. The technology behind Bitcoin—the Blockchain—is likely to have a far reaching impact on accounting everywhere. It is essentially a single, extremely secure, transparent global ledger. The network, rather than a third party, validates a transaction. This means that friction (and cost) can be reduced across the network."
– Frost & Sullivan
The report explains that while airlines have done an admirable job of running extremely lean flight operations, their current financial processes are the opposite. This is particularly true with revenue accounting, where airline management needs timely, accurate and consistent data. "Existing systems using offline accounting files or incompatible file types sometimes take a day to prepare, a day to submit, and another day to process," states the report.
By integrating bitcoin and the blockchain, transactions would be fast, efficient, and secure. This is in main part due to the open and immutable nature of the blockchain. Every last ticket bought with bitcoin can be tracked by an auditor, through each step of the process, giving them not just a high-integrity total, but an incorruptible paper trail for each payment. Bitcoins' blockchain is also public, so anyone can access with an internet connection, from anywhere in the world.
"As a CFO myself, I am well acquainted with the everyday issues that my peers in companies around the world face: the need for accurate information that strategic decision-making demands and the ever-greater speeds at which this data is required."
– Ana de Pro, Amadeus Chief Financial Officer
Adopting bitcoin payments will also reduce fraud. According to the report, credit cards in particular present major problem for airlines, alongside identity and frequent flyer fraud, and the problem is increasing. "Compared to other industries, airlines have a narrow window of opportunity to identify and eliminate fraud."
"Adapting to new payment methods such as Bitcoin will be a competitive imperative. More fundamentally, Blockchain technology could have a revolutionary impact on accounting by offering a single, secure, transparent global ledger."
While airlines are aware that bitcoin and blockchain can help boost airline revenue, they have been "slow" to adapt to new payment methods, "due to incompatible payment and revenue accounting systems."
However, accepting bitcoin payment is easy for most airlines, thanks to the low-cost global payment network, Universal Air Travel Plan Inc (UATP), which partnered with Bitnet in February. The partnership aims to drive bitcoin adoption within the airline and travel industries, by allowing more than 260 international airlines to accept Bitcoin payments.
"Our partnership will make it easier for UATP's member airlines to accept payments in bitcoin via a lightweight integration that avoids impact to downstream systems and leverages existing UATP reporting and refund interfaces. Bitnet and UATP share the same mission of lowering transaction costs and fraud risk for their clients."
– Akif Khan, Bitnet Vice President of Solutions Strategy
UATP merchants provide 95% of global airline capacity, including many mainstream brands such as British Airways, Lufthansa, Delta Air Lines and Southwest Airlines.
While mainstream airlines have not individually said they would accept bitcoin, the option is clearly available. In the meantime, a small but growing group of airlines and travel merchants have started accepting bitcoin as a method of payments, alongside traditional payment methods such as Visa, Mastercard, and American Express.
Starting the trend, in November 2013, CheapAir announced that it was the first online agency in the world to accept bitcoin as a method of payment for flights. A few months later, the companystarted accepting bitcoin for hotel reservations too.
In that same month, the bitcoin trendsetter and British billionaire, Sir Richard Branson, announcedthat his company Virgin Galactic was accepting bitcoin for its commercial spaceflights aboard SpaceShipTwo.
In June 2014, the leading travel booking website, Expedia, started accepting bitcoin for hotel purchases.
"We're continually looking at ways consumers want to pay for their travel; bitcoin is a great example of how Expedia is investing early in an array of payment options to give our customers and partners more choice in the ways they interact with us." – Michael Gulmann, Vice President, Expedia Global Product
In June 2015 a regional Airline from Mexico, TAR Airlines, announced that it had enabled bitcoin payments. A month later, Latvian airline airBaltic started accepting it too. The latest airline to embrace bitcoin, Polish Airlines LOT, started accepting bitcoin in August.
An independent report by leading accountancy and consultancy firm PricewaterhouseCoopers (PwC), "The 2015 Aviation Trends," suggested that airlines must use "new technology internally to streamline their operations and reduce costs." The report states that in the commercial aviation sector, while airlines struggle to break even almost every other player turns a tidy profit, including airports, airplane manufacturers, jet engine makers, travel agents, and service companies.
"The airline industry is hampered by slim profit margins, forcing carriers to focus on both cost reduction and revenue growth through better customer interactions."
– PricewaterhouseCoopers, 2015 Aviation Trends
The International Air Transport Association (IATA) found that direct costs relating to infrastructure, such as using airports and the infrastructure for managing flight traffic, has increased sharply over the past decade. Inefficiencies causing delays and indirect routes also add to these cost.
While the IATA forecasts that total worldwide airline industry will grow 6.7 percent this year, generating revenue of over $760 billion, or 1 percent of world GDP in 2015, profit margins are still razor thin.
Delays caused by inefficient airspace management in Europe alone will cost the industry $2.9 billion in 2015, as well as generating unnecessary carbon dioxide emissions, states the IATA forecast. The time passengers waste in these delays is a consumer cost worth an estimated $4.7 billion.
The security baked into the bitcoin blockchain can also help airlines with some of their major computer security problems, which they've recently been experiencing with multiple costly access-based problems.
Southwest Airlines experienced service disruptions last week due to 'computer glitches,' and 25 percent of all its flights were delayed, 836 of them at that time. The world's largest airline, American Airlines, experienced 'connectivity issues' last month, delaying 525 flights, and cancelling five.
The current ticketing system is also unsecured, with boarding passes containing a variety of personal and private information. An alarming report from computer security expert Brian Krebs found that anyone, even without any hacking knowledge, could access and control a passenger's entire account, changing seats, cancelling future flights and resetting pins, with just a boarding pass.
"The next time you're thinking of throwing away a used boarding pass with a barcode on it, consider tossing the boarding pass into a document shredder instead."
– Brian Krebs
With a little digging effort online, the passenger's frequent flyer number can also be obtained, as well as personal information on anyone using that frequent flyer number, including the person booking the flights.
With flight delays, cancellations and security risks, just to name a few, customers are understandably unhappy with airlines. A national independent index, the American Customer Satisfaction Index (ACSI), reported that airlines still remain one of the poorest performers, ahead of only internet service, subscription television, and health insurance. An independent report by IBM agrees that airlines consistently ranks very low for customer satisfaction.
The Frost & Sullivan report also suggested that the airline industry could improve their financials by learning from other industries, specifically retail and banking. The players in these industries, including the Swiss mega-bank USB, UK global bank Barclays and Overstock.com, have done plenty of research on blockchain technologies. In time, the airline industry can learn how to benefit from integrating the blockchain into the airline's multiple systems, and potentially change the way consumers think about the airline industry as a whole.
Business Travel News: UATP Partners with WEX - 7 August 2015
Business Travel News: UATP Partners with WEX
UATP has partnered with corporate payments provider WEX to provide UATP clients a one-time use virtual card solution for hotel and car rental. Delta Air Lines is projected to become UATP's launch issuer later this year. "We'll be able to connect through our partner with hotel and car rental so the whole trip can be put on UATP," vice president of marketing and communications Wendy Ward told BTN. In April, Wex expanded its virtual payment offering to 11 currencies for its European customers. UATP also is exploring ways to process onboard purchases, such as gift cards or providing users images of the virtual cards, Ward said. "We're trying to really expand the use of the network, and onboard [purchases] is one that's come up. We're not there yet, but we're thinking about it," she said. "We'll never be a traditional walking card, but if it has something to do with travel, we want to explore it."
Easier Payments, Less Cheating - 22 July 2015
Easier Payments, Less Cheating
Low Cost & Regional Airlines Magazine
Every business has to make arrangements for easing purchases by customers, while at the same time ensuring customers do not cheat or defraud the business. But with airlines, both challenges are a little tougher. Carriers sell in so many different markets, and payment tools can differ in each. And frausters are a wandering tribe, attracted especially by travel.
To continue reading this article, visit pages 37-40 here.
UATP Receives 'Best Travel Payment Platform USA' Award - 15 May 2015
UATP Receives 'Best Travel Payment Platform USA' Award
Best Travel Payment Platform – USA
The 2015 Business Excellence Awards are all about identifying and honoring the most respected companies and their C-level executives, while recognizing and rewarding outstanding performance, success, innovation and ethics across international business communities.
UATP Interview in Air Transport News - 13 April 2015
UATP Interview in Air Transport News
From Airline Distribution 2015, Athens
Ralph Kaiser, President, CEO and Chairman of the Board, UATPATN: What was UATP's volume in 2014?
RK: 2014 was a great year for UATP. Our charge volume exceeded USD 14 billion which was a new record; we also set a transaction record and continue with double-digit transaction growth for multiple years now. As you know, UATP lowers the cost of payment acceptance, typically 100 basis points less than other card brands and our stats are important because they equate to several hundred million dollars in savings within the industry. At a time when banks and GDS, like Amadeus and Travelport, are getting into payments in order to maximize their own revenue, UATP continues to find ways to lower the cost of acceptance.ATN: What direction do you see the industry going?
RK: I believe that the industry is going to make advancing technology a high priority. Business travelers want expect a better travel experience and have expressed a strong interest in utilizing their mobile technology. More than 81% of travelers carry a smartphone when traveling and most of them expect to be able to manage their travel with those devices. Companies are finally analyzing how differing technology can save time and money, and they will switch providers if they find something that better fits their needs, whether it's an airline app or an expense management system.ATN: What makes UATP unique?
RK: UATP is a strong and secure closed-loop, global Network built solely to support the airline and broader travel industries. We have advanced our corporate charge card program to a complete end-to-end payment platform and information management suite. Our Network is also a robust payment gateway for airlines to accept the varying payments used across the globe, starting with PayPal in 2007 and both Alipay and Bitnet earlier this year. UATP will continue to enhance the Network to benefit further our airline Members.ATN: How does that contribute to overall growth?
RK: It contributes to growth because simply put, UATP evolves as the market changes.ATN: What's new for the Network?
RK: Currently we are in the process of updating our information suites, DataStream and DataMine. We surveyed the airlines and corporate travelers that use the tools to find out what they wanted added to the product and are looking forward to rolling out the improved version later this year. We also just added SilverRail to the Network. This is important because it expands the rail segment of the Network across the globe. For the rest of the year, we plan to strategically grow our alternative forms of payment programs, with new players such as Alipay and Bitnet mentioned earlier, and support our current Issuers so that they can better develop their programs.
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Plastic fantastic: corporate cards - 15 March 2015
Plastic fantastic: corporate cards
Use of corporate cards continues to grow across Asia, with interest in strategic procurement augmenting demand for solutions for more frequent, lower-value payments. Here, we examine the latest developments in the corporate cards market and analyse where – and for whom – they work best.
Corporate cards were first introduced in the early 1990s as a means for organisations to manage employee purchases by pre-authorising them for specific vendors and/or product types, restricting purchases based on contract and transaction types, and giving companies the ability to set daily, weekly and monthly limits and controls. Perhaps most importantly for cost-conscious procurement departments, the corporate card solution offered substantially more control than corporate credit cards while lowering transaction costs. Surveys have suggested that transaction costs can be reduced by as much as 90% compared to traditional accounts payable processes.
While specific data on corporate card usage in Asia is not readily available, market participants claim that their use is growing, primarily as a way of interacting more efficiently with large quantities of low-spend suppliers for travel, entertainment, supplies and other miscellaneous, relatively small-ticket items. Government and other public entities are also using the cards as a means of managing expenses. Visa estimates the value of potential 'cardable' payments in the Asia Pacific region at $12 trillion, with China accounting for $7 trillion of that figure and India a further $1.1 trillion.
According to the company, in the near-term, mature markets such as Australia also represent a significant opportunity for growth, although it also acknowledges that moving payments to cards will require banks and card issuers to develop new, compelling propositions that lead to suppliers preferring card payments over other payment methods.
Diverse backdrop
Since card providers have to comply with local regulations in each market, corporate card solutions vary from country to country – many countries do not permit cross-border issuance of cards, for instance. So which corporates are actually using cards today – and whereabouts in the Asia Pacific region?
Citi's initial set of clients in every geography where it launched a business were subsidiaries of global companies headquartered in North America or EMEA, who were looking for cards that could be used by their growing workforce in Asia. However, as the market matured over the last decade, it has seen increased use of card solutions by local companies as well as growing interest from the public sector, explains Deven Somaya, Director, Regional Wholesale Cards Head Asia Pacific at Citi. "In terms of market maturity, Australia is probably the most developed market in the region and both federal and state governments are heavy users of corporate cards. Other mature markets are New Zealand, Singapore and Hong Kong."
He refers to three key factors that encourage subsidiaries of multinational companies to use corporate cards, the first of which is having visibility into the programme in terms of measurement and control, enabling them to manage their costs and expenses more effectively.
Secondly, increased control of where the company's money is spent. If someone is using petty cash to make payments, those payments can be made to anyone, whereas the card product digitises the transaction and this process enables systemic controls such as merchant blocks and transaction limits to be put in place. Post factor reporting provides a further layer of visibility and the control aspect of self-auditing.
Thirdly, because the transaction is digitised, it can be passed on by the bank to the client in an electronic format which feeds into various systems and saves a lot of manual entry of data, allowing expense management systems to capture data from the individual and enter an ERP system with additional pieces of information attached.
"Various research reports refer to the reduced costs of processing transactions made with corporate cards," says Somaya, adding that multinational companies are increasingly globalising their functions, for example managing procurement globally rather than at regional or even national level. "We are seeing a growing number of shared service centres emerging across Asia which are taking a proactive role in managing indirect spend, whether that is on travel or procurement. Local companies are following suit – while the majority of their expenditure is obviously within the region, they are seeing benefits to using the shared services model."
In the public sector, he describes a 'bandwagon' effect where administrations in South-East Asia are constantly looking at what their neighbours are doing in an attempt to adopt best practice. From a public sentiment perspective, providing increased transparency to the tax payer on how their money is spent is appealing to administrations that have made a commitment to reducing corruption.
According to Somaya, "clients are typically looking for a local solution in each market, but the ability to access consistent reporting and online tools and centralise data remains consistent across all the markets where we provide card services."
When assessing markets with growth potential, Somaya mentions three countries in particular. "India has experienced considerable growth in corporate card usage, initially for travel but increasingly for procurement also. China is an untapped market in terms of the number of multinational and local companies who could potentially use corporate cards, while Indonesia is another country with a growing number of businesses and rapid economic expansion."
Beyond those countries, there are areas where Citi is seeing a centralisation of specific industries – for instance, Thailand is a major hub for online travel agencies, which inevitably generates a considerable volume of card payments. "Companies across Asia are committed to improving the efficiency of their payment solutions and high volume; low value transactions are ideally suited to corporate cards," Somaya concludes.
"In the past, travel management and procurement tended to be managed by different parts of the organisation, but we are seeing increasing consolidation of these functions internally. There is obvious value in using a single provider for all payment services in terms of being able to negotiate more favourable rates."
A corporate perspective
The majority of AirPlus International's clients are subsidiaries of multinational companies whose head offices are located in Europe or the US, although it is also targeting local customers, particularly in mainland China where it works with global Chinese brands. A number of public sector departments in mainland China also use its services. "In addition to Hong Kong and mainland China, our products are available in Malaysia, Thailand, Indonesia, Philippines, Korea, Japan, Australia, Singapore and India," says Michiel Verhaagen, Executive Vice President Sales, AirPlus International. "The growth of economies across Asia Pacific means there is considerable scope for future growth in commercial card services," he believes.
That said, he accepts that many local companies do not fully appreciate the benefits of a commercial cards programme yet. Nevertheless, he is confident that educational initiatives implemented by the various global travel associations is increasing awareness among businesses in the region. "These initiatives have helped to inform these businesses about the benefits of efficient payment and reconciliation process in business travel expenses management and the tools available, including commercial cards. Multinational companies tend to have expense management systems in place, but many local companies have yet to implement similar systems," he says.
Who is using cards?
All kinds of companies sign up for corporate card programmes, from big business to small business and across a range of sectors including professional services, mining and resources and manufacturing – in fact, any company that wants to better understand and manage its expenses stands to benefit from having a corporate card programme. That is the view of Geoff Begg, Vice President, Global Corporate Card, American Express Japan and Asia Pacific, who says multinationals are looking for a card programme which enables them to manage expenses locally, regionally and globally.
"There is strong demand in all countries across the region, although India and China in particular are growing rapidly with the formation and growth of new companies. Some of the larger, more established countries are expanding from traditional travel and entertainment-type corporate cards to commercial cards," notes Begg. He adds that corporate cards are used for all types of travel and entertainment spend from the traditional airline, hotel and restaurant expenses to general retail spend, utilities and even government and insurance spend.
"Companies across Asia are committed to improving the efficiency of their payment solutions and high volume; low value transactions are ideally suited to corporate cards."
Deven Somaya, Director, Regional Wholesale Cards Head Asia Pacific, Citi
"Companies are moving away from per diem payments to employees to corporate cards for greater visibility and control. There is huge growth potential for corporate cards in Asia Pacific as the migration continues away from costly paper based invoicing to fast, efficient electronic payments on corporate cards."
Asian companies with heads of finance or procurement who have worked in North America, Europe or Australia seek out corporate cards as they see them as a simple and proven way to improve bottom line results, says Marj Demmer, General Manager of Cards and Payments at ANZ. "Clients are looking for cards that can be used throughout the world with high rates of acceptance and low or no surcharges. International acceptance is important for business travel, but also when procuring from international suppliers. The more the card can be used, the bigger the working capital, visibility and efficiency gains for the client."
While observing that demand in India is growing rapidly as companies seek greater oversight and control of business expenses, he also acknowledges that card acceptance rates hold back some mature markets such as Japan, where 'cash is king'. "Leading corporate card providers work with travel management companies to bill travel bookings on 'virtual cards', providing enhanced data on staff travel (destinations, travel class, fare type). In mature markets, we are seeing more business-to-business payments shifting from cheque or bank transfers to card."
In the more developed markets, Demmer expects to see a major shift towards more business-to-business and international payments being made by card. "Treasurers and CFOs will lead this push as they seek to improve the working capital position of their businesses and leverage strategic supplier relationships."
Meanwhile, Ralph Kaiser, President and CEO UATP says that in China, large international corporations may have some corporate cards but the adoption rate is still low, although use of a corporate card for air travel is increasing. "There is limited usage in emerging markets (which for the purposes of this article include Vietnam, Malaysia, Philippines, Thailand and Indonesia). Corporations contract directly with the vendor for services, or in some instances deal solely with the treasury management centre which must carry the cash float," says Kaiser.
Clients in developed markets such as Singapore and Hong Kong use international corporate cards that are widely accepted, while in the case of Japan or perhaps Korea, they may be using a domestic product that has limited usage overseas, he adds. "There is an upside in some markets, mainly China and India where domestic corporations are large and successful and are in need of a corporate card solution. In emerging markets, there might be some need but awareness is an issue. Furthermore, the undeveloped infrastructure and high risk of dealing in these markets makes it daunting for networks to issue corporate cards. It has been seen that rates would need to be set at high levels, making international corporate cards uncompetitive compared with direct invoicing or even local bank card solutions."
According to Kaiser, in China and emerging markets, corporate cards are used almost exclusively with some component of travel. "Infrastructure limitations are part of the issue; the other is the demand to use it for procurement. However, we believe there is large growth potential for corporate cards in major markets like India and China in the short term. The opportunity for growth in emerging markets is also significant, albeit on more of a mid to long range outlook. Growth will be focused on the travel segment – it remains to be seen whether corporate cards can build a product for other segments in Asia, or if purchasing cards may become a factor in the future."
A card for all sectors
Kees Kwakernaak, Head of Commercial Cards Asia Pacific, Bank of America Merrill Lynch describes commercial cards as a largely industry-agnostic business. "Simply put, the benefits of travel and entertainment and procurement cards are applicable to all our customers, across all industries. For a number of years we have seen the most robust demand from multinational clients but more recently, local corporates have shown a growing interest in adopting card based solutions. Whilst there are differences across the various markets, the requirement for efficiency, transparency and streamlined processes is universal, which should serve as a sustainable incubator for card adoption in the medium term."
"The growth of economies across Asia Pacific means there is considerable scope for future growth in commercial card services."
Michiel Verhaagen, Executive Vice President Sales, AirPlus International
Demand drivers are fairly consistent, as clients are unilaterally looking at streamlining their procure-to-pay processes to save on cost and to extend payment terms, he continues. "We see strong uptake in traditional travel and entertainment cards where employees are using their commercial cards to book travel, pay for taxis and general on-the-road expenses. Increasingly, we are also seeing a defined trend whereby clients are using cards in conjunction with central travel accounts. This product is an efficient way for clients to pay for their employees' travel."
The potential for ongoing growth in the Asian corporate card market is undeniable, according to Kwakernaak. "Banks in this space have seen a long period of double digit growth in commercial card spend in this region and in our view this will continue for many more years to come. The migration away from alternative payments options (including paper based payments) will continue."
An obvious growth area for corporate cards is in their use as a payment mechanism for line-of-business or supply chain expenses. The 2014 First Data report 'Digitalising B2B Payments to Streamline Supply Chains in Asia' refers to increased use of commercial cards in Singapore for strategic procurement, with increased control and reporting options driving adoption. The firm is seeing increasing demand towards strategic procurement programmes for accounts payable automation and receivable financing for large distribution supply chains. The extent to which clients look for national or regional corporate cards rather than cards that can be used anywhere in the world depends on the business needs for which the programme is rolled out, explains Naveen Gupta, Regional Director Consumer & Commercial Payments, First Data Asia Pacific.
"International acceptance is important for business travel, but also when procuring from international suppliers. The more the card can be used, the bigger the working capital, visibility and efficiency gains for the client."
Marj Demmer, General Manager of Cards and Payments, ANZ
"For employee travel and entertainment expenses, corporates expect the card could be used anywhere in the world but with suitable controls. However, for large procurement programmes or receivable financing, it is expected that usage of cards has a limited ecosystem to avoid unwanted fraud and keep costs below an acceptable threshold."
He describes corporate cards as an excellent instrument for short-term financing and payment execution. "We expect demand in established markets such as Australia and New Zealand to continue to increase and we are also seeing increasing demand for corporate card solutions in emerging markets such as India and China. We project growth for these markets to reach up to 30-40% in the next 12 months."
First Data also believes that the potential ability for commercial cards to transform business-to-business commercial transactions from manual, paper based transactions to more efficient automated processes is an opportunity to boost business productivity, reduce costs and strengthen commercial partnerships across Asia's supply chain.
Despite all the advantages of automated electronic payments, too few companies are utilising digital payment solutions, Gupta concludes. "The reason for the slow uptake of electronic payments is difficult to pinpoint, although we believe that it is partly attributable to the perceived complexity of migrating so many supplier relationships from paper to electronic systems." But as more and more leading corporate treasuries embrace corporate cards, hopefully the myths around the complexity of such programmes can be dispelled.
To view the original article, click here.
Pay As You Go - Business Travel Executive - 1 March 2015
Pay As You Go – Business Travel Executive
Mobile payment solutions have reached a tipping point, but the story deserves more than just a passing wave
BTE March 2015
By:Bryan Yurcan
With the much-hyped launch of Apple Pay late last year, mobile payments have continued to creep closer into the mainstream. According to a report from Business Insider Intelligence, payments made through Apple Pay accounted for between 0.1 and 1.6 percent of transactions at five top retailers in the month following the launch of the feature.
"Considering that the feature can only be used on the new iPhones we think that's indicative of exceptional momentum," the report reads.
Overall, the Business Insider research predicts that US mobile payment volume will grow at a five-year compound annual growth rate of 172 percent. Volume will rise to $818 billion by 2019, or just under 15 percent of total U.S. payment volume, the report predicts.
But while consumers may be more inclined to wave their phones in front of a point-of-sale terminal to buy a venti latte at Starbucks, it still remains to be seen whether mobile technology will be incorporated by-and-large into corporate card programs. Indeed, in much the same way that online booking revolutionized consumer travel but was not as easily integrated into business travel, so too do mobile payments still have some hurdles to clear before they become a standard part of corporate T&E programs. But the tide may slowly be turning.
According to Mary Miklethun, senior vice president of travel payment solutions at U.S. Bank, many of the bank's corporate clients are beginning to ask about mobile payments, albeit as a supplement rather than a replacement for traditional corporate cards.
"They believe it will be more convenient for their employee card holders in certain circumstances; it seems likely that it could incrementally increase spend capture as well," she says. "If you find yourself without your card but you do have your phone, you can still make a purchase. You are bound to capture more transactions that way. Can mobile payments ever completely replace commercial cards? Maybe, but we are a long way from that when you see all that has to happen first."
Miklethun says one reason for the long horizon is the "many moving parts" associated with mobile payments, from merchant acceptance to accommodation of the different mobile devices people use, as well as sorting out which emerging players in the space will rise above others.
While issues such as these may slow adoption of mobile corporate payments, ultimately travel managers will realize that this payment method has advantages that can't be replicated with a plastic corporate card, says Mario Zorn, director of virtual and mobile payment for Airplus.
"Better tracking of expenses and data visibility is just one example of the benefits it will bring," he notes. "Others include more convenience and smarter purchasing choices for travelers, and better process efficiencies and program control for travel managers. Think of mobile payment as a credit card with a keyboard, screen and GPS attached and you start to get some idea of the potential. Here's just one example: you're in a Starbucks around the corner from your office and you go to pay for a coffee with your phone. However, company travel policy says you can't claim for food and beverage bought within three miles of your workplace, so the phone blocks you from using your mobile corporate card."
Zorn also believes that single-use virtual payment numbers, such as AirPlus's A.I.D.A., are taking off fast – and virtual cards and mobile are perfect bedfellows. This is yet another reason mobile payments at the corporate level are poised to soon become more commonplace, he says.
Wendy Ward, VP marketing and communications for UATP, a global payment solution owned and operated by the world's airlines, notes that the concept of virtual account numbers is one that is really gaining steam across the industry.
"UATP has historically been a virtual payments with the majority of our 'cards' being lodged," she says. "This is how we started out in 1936. We are of course though, looking at the importance and demand on the corporate side for both types of payments; we want to make sure to provide our client base what they need and want to conduct business."
UATP, in fact, recently announced a partnership with Bitnet, a Bitcoin payments processing platform, to allow UATP's 260-plus airlines to accept Bitcoin payments, which further illustrates a continuing acceptance of innovative types of payments in the corporate world.
Waving Goodbye to Security?
As with any new technology, there are still security concerns around mobile payments in general. But some say these fears are overblown, and that perception is not reality when it comes to safeguarding the security of mobile payments.
"With the tokenization of the physical card account number into the mobile device and secure transmission of this information to the merchant, mobile payments based on the MasterCard platform will bring added security to the management of account details and transaction information," says Richard Crum, senior vice president, T&E, Global Commercial Payments and Solutions, MasterCard.
Airplus' Zorn agrees, noting that for payments made by waving a mobile device over a Near Field Communication reader, intercepting that NFC signal is exceptionally difficult.
"NFC-enabled payments can also be confirmed with a PIN number," he adds. "And, we believe mobile payments will often be made with virtual card numbers, which are immune to fraud because they are used once only and can be controlled in many other ways. Finally, if there are any problems, travelers can act quicker. One call blocks all card numbers stored in their mobile wallet, and travelers' ability to track spend on their phones means they can detect anything untoward much sooner."
U.S. Bank's Miklethun says mobile can be more secure because of tokenization, in which actual card data is never transmitted in the course of a mobile transaction. Instead, a unique single-use number is assigned, encrypted and used in place of the cardholder's actual credit number. The merchant never gets the real credit card number, they get something that operates as a regular credit card number, but can't be reused if it gets into the wrong hands, she notes.
Kevin Phalen, head of global card and comprehensive payables at Bank of America Merrill Lynch, adds that it will be imperative for corporations to make sure their overarching mobile policies provide the flexibility that's required to support corporate mobile devices for payments and other mobile services.
Streamlined Benefits
In fact, many in the card industry say the benefits this new form of payments will bring to corporate travel far outweigh any possible security issues that may be raised. According to Phalen, mobile technology can greatly improve the efficiency of corporate travelers.
"Mobile devices are an increasingly important extension of how people do business every day, and a payments capability would be the next evolution" he adds. "However, a corporate mobile strategy should include much more than just a payments capability; it should also address data exchange, expense management and document management, such as receipts."
Along those lines, MasterCard's Crum believes that corporations will benefit from an increased ability to capture transaction data that can be used to streamline the expense claim process. "When more of the business travel spend is captured on card and this data is automatically fed into the travelers expense reporting solution, the time required to complete the claim process can be reduced significantly," he adds.
Mobile technology will also allow an organization to capture more spend than before, according to Miklethun. "It may, for example, become easier to support people who wouldn't normally be issued a card, such as consultants and job recruits, if you could save the expense of issuing a card by allowing that person to run charges on a mobile device."
However, she cautions, "A lot would have to happen before that becomes commonplace. Hotels need to have equipment that can read information from a device, to name just one of many back office alignments that need to happen before mobile commercial payments begin happening on a large scale."
Phelan does not believe the back office alignments needed to be made to accommodate mobile payments will pose a very significant problem, especially considering that "a corporate card is the ultimate payment method through the mobile device."
While there may be some hiccups currently with back office compatibility, Miklethun expects this to be resolved in the near term as mobile payment methods become more commonplace among corporate travelers. "It's happening faster on the retail side right now, but we believe the commercial side will catch up rapidly," she says.
"Our expectation is that at least some of the technology around tokenization and mobile payments will become more available on commercial platforms within the next 12 months. It's already starting to rev up. At the White House Cybersecurity Summit [held in February], for example, it was announced that Apple, Visa, MasterCard, Comerica Bank and U.S. Bank have committed to working together to make Apple Pay available for users of federal payment cards, including DirectExpress and GSA SmartPay cards. Expect this effort to pick up steam in the year ahead."
In fact, Crum says MasterCard is actively working with partners and has built a digital enablement platform that card issuers and merchants can leverage to move towards mobile payments while continuing to enable card-based payments as they do today.
In terms of interoperability with travel and finance systems, there's almost no difference from using a plastic card, Airplus' Zorn believes. "The only point we would make is that you are only really going to reap the benefits of mobile payment if you operate an automated expense management system too," he says. "Mobile fuses payment and expense together so closely that they become almost one and the same. That's why travel managers will enjoy better visibility, control and efficiency in a way they can barely conceive today."
Ultimately, Zorn says it is probably inevitable that mobile payments come to corporate travel in a widespread way, in large part thanks to the overwhelming influence of Apple. "There's the Apple Pay factor," he says. "To date, mobile payments have only partially taken hold in the consumer market, mainly because Apple wasn't playing. Now that Apple has come to the table, it will push mobile payments along like never before, and once consumers are using the technology in their private lives they'll want it in their business lives too." ­­ ­­
UATP Partnership with Bitnet News Articles - 19 February 2015
UATP Partnership with Bitnet News Articles
UATP has teamed up with Bitnet as a payment processing partner. This relationship will allow UATP to offer its Network of 260+ airlines the ability to accept bitcoin payments in a simplified manner.
Numerous news articles were produced regarding this partnership:
http://www.coindesk.com/bitcoin-bitnet-260-airlines-uatp/
https://www.cryptocoinsnews.com/planes-trains-bitcoin-uatp-partnership-means-amtrak-260-airlines-can-now-accept-bitcoin/
http://cointelegraph.com/news/113459/new-bitnet-utap-partnership-enables-over-260-airlines-to-accept-bitcoin
http://insidebitcoins.com/news/world-airlines-partner-with-bitnet-to-accept-bitcoin-payments/29777
http://www.marketoracle.co.uk/Article49387.html
http://www.resourceinvestor.com/2015/02/10/all-aboard-bitcoin-may-cover-your-next-vacation?page=1
http://www.pymnts.com/news/2015/bitcoin-takes-flight-with-airline-partnership/#.VNuADi77GQk
http://www.coinbuzz.com/2015/02/11/260-airlines-accepting-bitcoin-soon/
http://www.traveldailymedia.com/218048/airlines-to-start-accepting-bitcoins-with-uatp/
http://newsbtc.com/2015/02/10/bitnet-uatp-work-bring-frequent-flyer-miles-bitcoin-enthusiasts/
http://www.forexnews.com/blog/2015/02/10/bitcoin-closes-217-bitnet-partners-universal-air-travel-plan/
http://rapidnewsnetwork.com/260-airlines-gain-bitcoin-payments-thanks-bitnet-partnership/10059/
http://www.forexminute.com/bitcoin/uatp-partners-bitnet-accepts-bitcoin-customers-54739
http://www.benzinga.com/news/15/02/5230217/bitnet-partnership-opens-up-bitcoin-transactions-for-airlines-but-will-they-use-i
http://www.coinfinance.com/news/business-deal-enables-over-260-airlines-to-accept-bitcoin
http://paymentweek.com/2015-2-12-bitnet-and-utap-announce-partnership-bitcoin-payments-coming-soon-6661/
http://www.economist.com/blogs/gulliver/2015/02/booking-flights-bitcoin
From: Low Cost & Regional Airline Business; Volume 9, July 2014; Payments
New technologies for payments are gaining traction, with 83% of carriers regarding it as a major business priority, but there are still regional differences. Ian Putzger examines the available options.
Come July, there will be some perplexed tourists on London's famous double-decker buses as they scramble to find alternatives to their useless British coinage. Effective from 6 July, cash fares will no longer be accepted on buses in the UK capital. According to Transport for London, the number of passengers using cash has dropped precipitously and, with projected savings of £130 million over nine years, it was decided to phase out this mode of payment. Instead, users will need either an Oyster card, pre-paid ticket or contactless payment card to travel on buses.
Alternative forms of payment (AFOPs) are on the rise. According to the latest Alternative Payments Report from payment and risk services provider WorldPay, AFOPs will account for over half of all transaction methods by 2017.
WorldPay's latest Airline Report, which was released in March, also shows AFOPs gaining ground on traditional forms of payment in the air, although cards are still the most popular payment method. It predicts that the number of airlines offering onboard mobile payments will increase from 5 to 36% in the next two years, also noting that 18% of airlines plan to accept e- wallets onboard by 2016.
Ralph Kaiser, president and chief executive of Universal Air Travel Plan (UATP), the low-cost payment network owned by a number of airlines, notes that technological advances are enabling merchants to offer new AFOPs, giving them better reach and economics to target new customer bases.
UATP has been aggressively extending its own reach. It has established two issuers and universal acceptance by merchants in China and is now seeking to replicate this in India.
"Over the last few years we have signed a dozen or so new issuers and we are busy ramping up those programmes," remarks Kaiser, adding that UATP's AFOP processing programme has experienced exponential growth, "as has our prepaid/gift card programme".
From an airline chief financial officer's point of view, direct bank transfer is one of the best options among AFOPs. It is a much faster way of getting the money, without having to sit on inventory while a slower payment mechanism is coming through, remarks Michael Smith, executive chairman of the Airline and Travel Payments Summit and managing partner in Airline Information. In the Netherlands and Germany this avenue has been exceedingly popular, despite one serious drawback for the shopper: "There is no protection if the airline goes bust," Smith points out.
There are more than 200 AFOPs on the scene today and among them is a fairly large number of e-wallets. Nevertheless, this category has not achieved the penetration rate that many observers had predicted. "With the exception perhaps of China, wallets have not captured the public imagination," says Smith.
In North America PayPal stands head and shoulders above other wallets, or, for that matter, other AFOPs. Laurie Gablehouse, who looks after travel payment strategies at payment service provider GlobalCollect, notes that this market is still heavily geared to credit card use. "PayPal is the only real alternative. We are very limited in our options," she says.
She recalls her previous work with Continental Airlines, which blazed a trail among US carriers implementing Western Union in anticipation of cash generation in some markets. The results were short of expectations. "It did make a difference in some markets, but not in North America," she says.
Given the overall rise of AFOPs, advancing their payment technology is high on many airlines' radar. WorldPay surveyed 68 carriers from around the globe and found that 83% of them viewed improvement and deployment of new payment technology as a major business priority. Nearly one-third (29%) are looking to set up sales via social media within 12 months, reflecting a shift in their perception from a marketing tool towards a sales channel. KLM announced in February that it would allow customers to send fare enquiries for their planned travel dates through social media, to which the airline would respond with a link sent in a private message on Facebook or Twitter; customers could then pick their method of payment and complete the transaction.
"Airlines were never set up to do direct sales. They were never set up to put an identifier on charge X and on charge Y," reflects Smith.
The unbundling of services and the rise of ancillary revenues has added to this complexity, especially if parts of a transaction go awry. "Split payments and partial refunds are a little more difficult to manage," remarks Gablehouse.
"Even on the credit card side ancillary revenues create a challenge," she continues. "For example, you have to decide what appears on a statement. If a purchase consists of five individual elements, do you show one bulk amount or all individual items?"
Jim Davidson, president and chief executive of travel distribution technology provider Farelogix, points out that this complexity is on the rise, with airlines moving further beyond simply competing on schedule and price and towards custom-tailored retail, with an increasingly personalised level of service. To succeed, airlines must transform their technology shops into modernised retail environments. "This requires investment in technology for dynamic pricing, distribution and commerce," he notes.
Adding further to this complexity is the rapid surge in the use of mobile devices to handle transactions. "Outside the first transaction, a lot of communication will be done on mobile devices, probably a tablet or a laptop," Davidson says.
Payment solutions provider, Adyen, reports that globally the use of mobile devices for payments has reached at least 20%, a huge increase from four years ago when many merchants refused to entertain mobile transactions. It describes the travel sector as a segment of business with a disproportionately high share of transactions coming from smartphones and tablets.
WorldPay's Airline Report shows that carrier management has got the message. Its survey found that 71% of carriers see the future of airline payments in the mobile segment and predicts that mobile acceptance on board will rise to 36% over the next two years. Half of the survey's respondents view mobile payments as a way to keep up with competitors, while 45% are looking to them to boost their revenues.
WorldPay concludes that over the next two years, airlines will extend existing mobile services to offer ancillary purchases such as seat upgrades, booking management, onward travel and inflight purchases via mobile phones.
The promise comes with some potential hurdles. Mike Parkinson, WorldPay vice president Airlines, points to increased fraud risk, mobile platform diversity, and integration with current systems and processes as the biggest challenges associated with mobile payment.
"The main challenge with mobile is the failure of uniform mobile acceptance routines," remarks Kaiser. He adds that UATP has issued some mobile apps and has been working with mobile-based AFPs, which should yield some results later this year.
Aligning mobile payment with AFOP mechanisms and the push towards personalised offerings calls for at least some tweaking of the existing IT infrastructure. Gablehouse notes that some mechanisms that require users to get redirected to a different website during the purchasing process are well integrated, but others are not.
"If you go for a mobile phone or a tablet, you do not want to give people four million ways to pay," says Smith. Determining which payment options actually come up on users' screens could be tailored to their individual payment histories, he adds.
The challenges around such issues are adding to the momentum for shifts in the provider landscape. Smith points to alignments like the partnership agreement between GlobalCollect and hybris software, an SAP firm and fast-growing commerce platform provider.
As the use of mobile devices to interact with airlines after the initial booking increases, there is decreasing scope for growth at airport check-in kiosks. The WorldPay Airline Report shows that 40% of the carriers surveyed expect self-service kiosks to be less important in the future.
On the other hand, Gablehouse suggests that kiosks have a lot of untapped potential that could add to airlines' revenue streams. "I would like to see that open up more to local forms of payment," she says. "Passengers could use the kiosk to purchase things they want on board, pre-fund a video or a meal. That is not an option now. Nobody is using their kiosk for these with alternative forms of payment." She adds that duty-free would be another possible channel to benefit from such an option.
Other than credit cards or cash, frequent flyer cards could offer yet another avenue for payments, both at the airport and during the flight, she continues. "You could put a chip on the card to pre-fund purchases on board."
2014 Business Travel Survey: Payment Firms Turn Page On Tame 2013
By JoAnn DeLuna
The corporate payment sector's 2013 growth in the United States was lackluster, but issuers and card networks feel more optimistic about 2014. The Global Business Travel Association estimated total 2013 business travel activity grew 0.2 percent to 456 million person-trips compared with 2012, while spending grew 4.6 percent to $274 billion. Factors affecting business travel spending levels included a slow economic recovery and the U.S. federal government shutdown and austerity measures.
"If we look at the economies in North America, while they are recovering, it's more slow and steady rather than something more dramatic as everyone was hoping for," said BMO vice president of North American corporate card products, treasury and payment solutions Steve Pedersen.
[Please click here to view the digital edition of the 2014 Business Travel Survey, featuring all charted data, downloadable as a pdf.]
Banks, including BMO and Citibank, distinguished between public- and private-sector performance, with the public sector experiencing the worst of the effects as federal and some state governments continue to focus on cost containment and efficiency. The uncertainty of the U.S. federal government's sequestration spending cuts in particular hindered consumer and corporate confidence and thereby business travel spend, payment officials said.
"We're one of the largest providers [for the U.S. government's payment program], and that portion of the book faced challenges," said Citibank managing director and global head of commercial cards Manish Kohli. "But for the corporate portfolio—despite the weather—we did absolutely well."
Kohli said he's seen request-for-proposals activity during the past 12 months increase by "a factor of 100 percent" as companies look to transform and improve their existing travel programs. Compared with previous years, when some companies were consumed with other internal business priorities, firms now are taking the time to reexamine their programs and sometimes change legacy providers, Kohli explained.
"They're showing a real keenness to improve, and not just as a pricing exercise," Kohli added. "Companies are looking at card programs as avenues to drive more value in terms of process controls and centralization, [meaning] companies are now looking to run their card programs globally and with standard processes, rather than have them run country-by-country with different providers."
UATP in 2014 is set to have its "best year ever," according to vice president of marketing and communications Wendy Ward, and is on target to report more than $14 billion in charge volume this year, up from more than $13 billion in 2013. "People are coming out of their shells from the recession, and business travel is essential to maintaining client base and creating new [clients]," Ward said when asked to what UATP attributed the growth. "Events have also made a comeback and are probably fostering a good number of business travelers as well."
Likewise, Bank of America Merrill Lynch's charge volumes in 2013 were up "pretty significantly" due to new clients' card-use mandates and some existing clients' application of card products for "expanded uses," including meetings, according to BoAML head of global card and comprehensive payables for global transaction services Kevin Phalen.
The bank is not a major player in the public sector. "Our business is probably less affected by some of those [sequestration issues] than other issuers, so I'd say our knockdown effect from that has been relatively low," Phalen said. "Even though the weather presented intermittent issues, we're seeing—in the travel space alone—probably 30 percent growth year over year."
BoAML's investment technology upgrades seems to be paying off, Phalen said, as some bank clients during the past 18 months opted to use T&E commercial, procurement and one-cards for higher-value payments. The card products provide "good data and reconciliation," he added. "Because of the investments we made in technology, it gives [clients] better control and security, and as a result they're willing to utilize cards for higher-value purchases."
Data, Fraud And Security
Toward the end of 2013, a handful of high-profile data breaches—most prominently at U.S. retail giant Target—revealed vulnerabilities in the payment space. While the incidents primarily affected the consumer sector, several hotels were compromised, and hence T&E corporate cards likely were affected, industry experts in May told Business Travel News. The incidents raised questions around the security of the payment sector, including its methods for storing and protecting client data.
"The evolution of big data has meant that there's a new potential repository of information for fraudsters to tap into," said BMO's Pedersen. "The Target incident taught us that we have to be even more diligent on how to protect information."
While chip-and-PIN or EuroPay MasterCard Visa Technology (EMV) would not have protected cardholders from the online or "card-not-present" transactions featured in the recent incidents, issuers and networks said that after the breaches they've had more inquiries from clients about the embedded microchip authenticating solution, which is to become standard by October 2015. The fraud incidents also have encouraged banks to meet or advance their transition, as well as look for alternative fraud-prevention solutions for CNP transactions.
BoAML in April announced that all newly issued U.S. corporate T&E cards will have chip-and-PIN technology. BMO beginning in 2015 also will begin issuing chip-enabled corporate cards for renewed and replacement cards. Citibank already issues all new customers chip cards.
Card networks American Express, MasterCard and Visa in October joined forces to propose a global standard for online shopping meant to enhance security by using a digital "token," instead of personal account information entered by users to process a transaction. The organizations are working with other industry bodies, including banking and payment associations, The Clearing House, the PCI Security Standards Council and EMVCo to further the initiative.
Another tool said to reduce fraud is a one-time-use virtual card. Travel managers can set virtual cards with exact charge amounts for particular vendors during a specified timeframe. Virtual cards can prove particularly useful for infrequent travelers—allowing firms to forego issuing a corporate card with hundreds of dollars in liability—and they also can make reconciliation easier, as all essential information, such as employee identification, vendor and spending amount, is transferred digitally.
While one-time use virtual cards have existed since 2006, companies around the world in recent years more widely have adopted them. BoAML provides the tool in 26 countries and has experienced "double-digit growth in North America and around the globe," according to Phalen. As firms try to use card products in "non-conventional ways," Citibank's Kohli said in the past year he's also noticed "more momentum" in the virtual cards and electronic payments space.
AirPlus, American Express, CSI and JPMorgan Chase also provide virtual card solutions. MasterCard has provided single-use account numbers through its inControl suite since its 2009 acquisition of Ireland-based payment company Orbiscom, and last October began piloting its own virtual card technology. Visa in October 2013 signed with Conferma to provide Visa's European issuing banks the technology to dispense virtual card numbers. UATP can offer a single-use 16-digit virtual card through a partnership with eNett.
U.S. Bank provides virtual cards for lodging spend through a 2012 partnership with Conferma and Sabre, and soon will begin a project for air bookings, U.S. Bank Travel Payment Solutions vice president Mary Miklethun said. "The adoption [of virtual payment] in the market is indicative that [it is] growing and will continue to be an important trend both in terms of how corporate buyers manage their travel spend and also how different suppliers within the travel industry conduct payments between themselves," she said.
Mobile Advances
Issuers and networks have continued to enhance or develop mobile and online platforms, as clients have showed more interest in the products. U.S. Bank in the past 12 months has focused on its mobile offering and plans to launch this year a mobile application for corporate card clients that will be similar to personal online banking, while maintaining "robust security" to protect client data, Miklethun said.
"[Corporate cardholders] will be able to manage their accounts the same way they manage personal accounts today, to see transaction history and sign up for alerts," Miklethun explained. "We've built out a robust roadmap to go over and above to deliver receipt capture, expense caps and the like."
MasterCard last year launched mobile wallet functionality called MasterPass, as well as a mobile application called Smart Data that allows Android, BlackBerry and iOS mobile device users to capture receipts by taking photos with their smartphones. The firm in February 2014 also acquired mobile wallet and on-device software and services provider C-SAM, which MasterCard group head of global T&E products and solutions Richard Crum said would help the payment network develop apps tailored for the T&E space.
Pedersen admitted BMO is "a little behind" the curve on the mobile front. However, the bank has developed a "major initiative" and is making "significant investments" to enhance its online and mobile presence, he said. "Our corporate payments capabilities on the mobile side will also be enhanced."
In a surprise move, the European Union in March 2014 reversed a decision to include commercial cards from the European Union's proposed cap on interchange fees. The proposal affects four-party systems, including MasterCard and Visa, in which payment involves banks as well as the merchant and customer. The cap would reduce to 0.3 percent from 1.5 percent the typical interchange fee on MasterCard and Visa commercial credit cards.
"We feel strongly that the regulation should not include commercial cards for a number of reasons, not the least of which is the corporate and supplier have negotiated prices and have chosen to transact with commercial cards because they see value in this payment form," said Visa senior vice president of global commercial solutions Tad Fordyce.
In response, issuers and payment networks said they have been monitoring the situation and working to educate regulators on the value commercial cards bring to the sector in hopes of reversing the decision. They've also been preparing backup plans if the legislation goes forward as-is.
"There's still a lot of uncertainty on whether that will remain on the books, and even if it does, it's still another two to two-and-a-half years before it will be implemented," said Miklethun. "If it does take affect, it will impact pricing strategies in that region."
This report originally appeared in the May 26, 2014, edition of Business Travel News.
To view the full article on BTN, click here.
Asian Aviation Magazine - NDC angst
IATA has been working to convince travel industry stakeholders of the merits of NDC, but more needs to be done, writes Colin Baker.
IATA has been trying to find common ground with travel industry stakeholders pretty much since the launch of its New Distribution Capability in 2012, and it's still a work in progress if the recent UATP Airline Distribution conference in Singapore is anything to go by.
This was summed up when someone from the audience asked whether travel agencies should engage with IATA or the airlines on NDC. There was muffled laughter around the room, and a clear message from the panellists – go to the airlines direct. That said, progress has been made and the global distribution system (GDS) vendors are now generally giving qualified support.
NDC is based on a change in airline communications from EDIFACT to Extensible Markup Language (XML), designed to make it easier for airlines to communicate with travel agents and to offer elements such as dynamic packaging and merchandising. Big data would enable airlines to have a much better idea of who their passengers were, and what they might and might not be interested in buying.
The problem is that this involves fundamental changes in business relationships within the travel industry.
"There was some confusion when IATA first outlined its thinking, and certainly some industry commentators declared it to be a first step towards enabling airlines to deliver a richer, more customer centric product and fulfilment process which was previously available," says Damian Hickey, vice president, global distribution sales & services, Asia-Pacific at Travelport. He points out that GDSs such as Travelport have in fact already offering the likes of dynamic packaging and merchandising for quite some time.
"With or without NDC, IT providers are already enhancing the merchandising capabilities that airlines are interested in," notes Gianni Pisanello, director, airline distribution marketing, at Amadeus. He adds: "There has been a lot of hype around NOC."
There were also privacy concerns •although one senior Asia-Pacific travel industry official said these were less of a concern in the region.
In January this year, a breakthrough of sorts was achieved with IATA and Open Allies for Airfare Transparency (a coalition of US travel trade organisations) filed a joint motion with the US Department of Transportation (DOT) concerning IATA's Resolution 787 (which dealt with NDC.)
Open Allies agreed to withdraw its opposition to Resolution 787 subject to the implementation of certain conditions – namely IATA's commitment to the core principles regarding anonymous shopping, compatibility of existing data standards with the NOC standard and the voluntary nature of the standard.
"It is proof that IATA has decided to listen to and take on board industry feedback; and address serious concerns that its original approach was anti-competitive, anti-consumer and did not enable transparency or comparison shopping," says Hickey. "It is a positive step towards real progress on the next generation of travel distribution standards that reflect the needs of all stakeholders in the travel supply chain."
However, the travel agent community is still to be convinced, and the message from the UATP event was that IATA needs to do more to engage this part of the travel industry. The general feeling was that the business model for NDC needs to be clarified and that travel agents need to incentives to engage with NDC.
IATA is certainly making efforts to get travel agents onboard. "IATA is working hard to engage and get buy-in from our travel agent partners including inviting them to join the Distribution Data Exchange Working Group (DDXWG) where the technical standards are being developed, as well as through the-Airline Agents Forum and the Passenger Distribution Group Advisory Forum," notes Yanik Hoyles, Head, NDC Programme at IATA.
"Additionally, earlier this year, we created the Airline Distribution Stakeholder Forum with the purpose of driving a common industry perspective on key topics through the inclusion of airlines, agents and technology providers."
Hoyles says, "The airline industry has entered a new era of varied service options designed to let travelers choose how they want to fly. Airlines are able to provide detailed information about products and purchase options on their own websites, and to recognize customer loyalty."
He adds: "However, travel agents, with some exceptions, generally have access only to limited and commoditized airline product information. NOC is intended to close this gap and enable travel agents to have access to the entirety of the airline's offering. As the benefits have become more visible, support for NDC has grown among all elements of the travel value chain."
Pisanello warns that NDC "has to as to be extensively scalable and offer high performance. This will not be limited to providing a simple price but dynamically creating bundled personalised offers. These are not trivial things to consider for airline systems."
To view the article, click here (page 34) or view in pdf.
Orient Aviation Magazine - A budding romance
Tom Ballantyne
Until recently, low-cost carriers (LCCs) would have been aghast at the very suggestion of paying commissions to global distribution systems (GDS) operators. Times have changed. LCCs and GDS are finding common, profitable ground.
When the Asia-Pacific's largest LCC operator, the AirAsia Group, recently announced it had signed a deal that will sell all the carrier's fares and ancillary services via the Travelport global distribution system (GDS, industry watchers agreed the decision was a groundbreaker in the GDS world.
Traditionally, LCCs don't talk to GDS, let alone do business with them. LCCs preferred to market their fares via their own websites or call centres, cutting out the GDS middle man.
Not anymore. Not only is the LCC landscape changing, as it continues to record spectacular growth, but the GDS are re-inventing themselves, with upgraded systems and new products, which have attracted LCCs' mercantile attention.
In recent years, the blinding growth of Asia-Pacific LCCs has brought its own revolution to the GDS industry. It has jolted them out of their complacency and forced them into encouraging LCCs to tap into every distribution channel available, not just their direct marketing channels, to fill the seats their fast expanding fleets are bringing to the market.
As Damian Hickey, vice president distribution, sales and service for Travelport, put it during the recent annual UATP Airline Distribution conference: "I can assure you that every significant low-cost carrier in this part of the world is in active dialogue with us. Previously, we would not have been in these conversations.
"LCCs are hitting a glass ceiling in terms of distribution. They are asking: 'how can I distribute to travel agents in a more effective and efficient way?'"
What changed the game for AirAsia is Travelport's Merchandising Platform, which was launched a year ago. It offers aggregated shopping, but also provides two other critical attributes: ancillary services and Travelport Rich Content and Branding.
The ancillary services component allows travel agents to sell pre-allocated seating, meals and bags, within their existing workflow rather than by booking on an airline website. Travelport Rich Content and Branding enables airlines to market and retail their products more effectively through customization of product display and content.
"The Travelport Merchandising Platform offers us the flexibility to connect to the GDS channel and to distribute our low fares to even more travelers as we expand our offering," said AirAsia group chief executive, Tony Fernandes. The agreement means Travelport-connected agents worldwide will be able to search and book not only competitive fares, but popular ancillaries such as checked-in bags, advanced seat selection and in-flight meals offered by airlines in the AirAsia group. Travelers can compare and book AirAsia and AirAsia X flights alongside those
Although a leader in the Asia-Pacific in integrating GDS into its marketing, AirAsia is not the first budget operator to jump on the GDS bandwagon. Europe's major LCCs, Easyjet and Ryanair, who have been throwing insults at GDS since they began flying, last year opted to use indirect distribution systems to build business. GDS offer easy-to-use, flexible products in the corporate travel market.
Ho Hoong Mau, division head of airline distribution at Asia-Pacific's home-grown GDS, Abacus International, which is partly owned by Sabre, said its LCC business had grown dramatically in the last few years.
"We are getting a lot more flexible in the way we interact with our customers," he told delegates at the UATP conference.
"We have seen LCC business growth of 80% to 100% year-on-year. It's off a low base, but the booking numbers are in the multi-millions on Abacus systems. There are a lot of LCCs coming on board. Part of the reason is they are moving from a pure LCC model to a hybrid model.
"There's a whole bunch of LCCs all over Asia, and from other regions coming into Asia, who are starting to need wider distribution. We are seeing a trend. Very clearly it is a great opportunity for us.
"As we interact with LCCs we realize their considerations are different. We need to remove some of the bells and whistles of traditional GDS content for them."
Ho said because of the large number of aircraft orders by LCCs "they need to have multi-channel distribution to tap every single channel out there… that's a key consideration".
A recent Abacus survey of more than 50 LCCs revealed that more than 40% of their competitors were another LCC. "That wasn't the case three years ago. With the levels of competition they are facing, especially in Southeast Asia, they need to maximize their revenue channels," said the GDS.
Gianni Pisanello, director of airline distribution marketing at Amadeus, told the UATP conference the whole LCC situation has never been a technology issue. "What has changed is airlines are reaching a plateau. They are looking for high yield from the business traveler and also to reach new markets.
"They have fantastic targets in terms of growth and they need to tap into the travel agents community to tap that growth. So really it was when were the LCCs ready to participate," he said.
It is a given that the days of a pure LCC are over. Budget airlines and groups of budget airlines are branching out, hybridizing and even entering the full-service sector. Indonesia's Lion Air Group operates an LCC, has a premium carrier, Batik Air, and a joint venture regional airline, Malindo Air. Global leader, Singapore Airlines, which holds significant equity in LCC Tigerair, also owns a regional and long-haul LCC, Scoot. Scoot in turn has recently formed a regional LCC with Thailand's Nok Air.
Analysts conclude the new partnerships between LCCs and GDS reflect the demand for multi-distribution channels to interconnect and sell various brands. Travelport's Hickey said his company's deal with AirAsia is regarded as an important shift in LCC business strategy by many in the industry.
"From a GDS perspective, it also indicates some significant changes within the GDS arena.
For many years, the GDS industry evolved purely because of the complications of distributing travel products.
"We put some very tight restrictions on the way you did business with the indirect channels. When airlines like Ryanair, AirAsia and others are re-entering the GDS arena, it is because the GDS are breaking down those restrictions and making it easier for airlines to do business with them.
"The GDS industry has been criticized, particularly by the LCCs, for being very expensive. It's a fragile industry so costs are very important, but if there is one thing the LCCs detest more than cost its complexity. We certainly made it very complex for LCCs to distribute their products.
"Hopefully, it's a sign that as an industry we are being more flexible. We have a long way to go, but it's a first step."
Hickey has a serious message for all airlines. "Ask not what your GDS can do for you but what you can do for your GDS," he said. "At the end of the day we are a valuable channel. More than $57 billion in revenue goes through the GDS channel," he said.
"My hope is that the airline community will engage with its GDS and work closely with them so you can achieve better value from your indirect channel," he said.
"I hear from airlines: 'I can't sell my Skycouch on the GDS. Well, yes you can. Ask how you can get access to better yield. EasyJet have gone on public record with its accounts and said it has improved yields by 18% after going to the GDS.
"You have to sit down with your GDS and say: How can I do that, how can I get more value? The booking fee becomes less relevant if you are driving that sort of revenue improvement."
UATP Partnership Wins Award in Paybefore Awards Europe 2014
The airberlin Flight Voucher program, a creative three-way partnership between airberlin, UATP and Wirecard International, was named a winner in Paybefore Awards Europe 2014 in the Best Travel Companion category. The airberlin Flight Voucher program is a prepaid/stored value product offering, administered by Wirecard International and routed through airberlin's UATP Network connections, creating a more efficient merchant acceptance process. The voucher program provides a secure alternative payment method for airberlin travelers, while creating an additional revenue stream for UATP and Wirecard.
TTG Asia - Work needed on airline ancillary distribution
Paige Lee Pei Qi, reporting from Airline Distribution 2014, Singapore, March 27, 2014
FULL-SERVICE airlines are flying in to capture a slice of the lucrative ancillary pie as it continues to grow, but kinks in how such products are distributed still need to be ironed out.
According to an analysis by IdeaWorksCompany and CarTrawler, global ancillary revenue is estimated at US$42.6 billion in 2013, up from US$36.1 billion in 2012 and almost double the US$22.6 billion collected in 2010.
Ancillaries will account for six per cent of total airline revenue in 2013, up from 5.4 per cent in 2012, they predicted.
John Chapman, chief commercial officer, Jet Asia Airways, said: "(Full-fledged carriers) have not been that great at offering ancillaries which is something that the LCCs have been doing very well but this has to be our goal if we want to increase our revenue.
"We cannot miss out on the opportunity for additional revenue, but at the same time we do not want to devalue the full product that we already offer. Some ancillary items that we are now looking to offer could be lounge passes, early boarding privileges and exit row seats," he said.
Jay Sorensen, president, IdeaWorksCompany, said: "A la carte activities, such as those linked to fees charged for checked bags, on-board cafes and early boarding privileges, are a big part of the ancillary revenue story."
Noting that Delta Air Lines' "economy comfort seats" are its best-selling ancillary item, Chris Phillips, managing director – distribution strategy, said many travellers are willing to fork out more for extra legroom, a later boarding time and a chance to sit at the front of the plane.
The same analysis reported that slightly more than half of global ancillary revenue is sold to consumers via airline websites, onboard, and increasingly through travel consultants and OTAs.
Despite rising demand for ancillary items, Mario Kriebel, vice president commercial payment solutions, BCD Travel, pointed out that GDSs only offer certain ancillary products at present, resulting in travel consultants having to operate outside of the system.
He cited the example of airport limo pick-up not being available through the GDS. "We definitely need the ability to book these items now because travellers are expecting them already."
Delta Air Lines' Chapman said: "The challenge now is to help differentiate airlines' products in a seamless manner to the travellers."
Alipay Brings Chinese Shoppers to U.S. Markets
In a study by Bain and Company China comprises of one of the fastest growing online markets.
On Nov. 19, 2013 Chinese e-payment company Alipay, International signed a partnership with Universal Air Travel Plan (UATP). Launched in 2004, Alipay is a subsidiary of the Alibaba group – which owns China's largest B2B online marketplace Alibaba.com as well as other marketplaces including taobao.com and tmall.com. UATP is the airline owned payment network accepted by thousands of merchants for air, rail, hotel and travel agency payments.
The Alipay/UATP partnership will allow Chinese consumers to tap into the UATP airline/travel network using a payment method they are comfortable with and used to.
Alipay says that in 2012, it held over 700 million registered accounts in mainland China. Because of their partnership, Alipay Vice President and Chief Architect Jingming Li says that this is the beginning of an increasingly globalized online marketplace.
"Chinese shoppers trust Alipay," Li said. "They are used to us." Li said that because of the partnership, US businesses will have increasingly greater access to Chinese shoppers.
Li said that Alipay has partnered with other US companies before. iherb.com – a nutritional supplements company – recently partnered with Alipay and reported that iHerb's sales on cn.iHerb.com increased 244.52%compared with the prior six-month period and 684.15% compared with the same period a year earlier.
Wendy Ward, the VP of marketing at UATP expressed excitement over the new partnership between UATP and Alipay: "The airlines, our main client-base, will benefit from this with increased traffic and purchases. It's a win-win-win for UATP – Alipay – the US airlines," Ward said.
Businesses interested in partnering with Alipay should contact: alipay@us.alibaba-inc.com
To view the full article, click here.
China's PayPal extends its tentacles into US with big travel partnership
Chinese Internet companies are getting busy in the US.
While Tencent, Alibaba, and UC Web are making big-dollar investments in US startups, successful IPOs for travel portal Qunar and classifieds site 58.com have further improved the prospects for Chinese tech companies going public in the US.
Now, ecommerce giant Alibaba, which is itself expected to soon file to go public, is extending its payments platform, Alipay, in the US.
Today, Alipay, which is roughly equivalent to PayPal, announced a partnership with UATP, a payments service used by most of the world's global airlines and accepted by thousands of merchants for air, rail, hotel, and travel agency payments.
The partnership opens up these travel businesses to the enormous and growing Chinese tourism market. Chinese consumers will be able to book and pay for their travel on international websites using their Alipay accounts. There are 800 million such accounts.
Chief architect of Alipay International Jingming Li says the company, which had noticed that a lot of its members shop directly from US and European websites, has been trying to figure out a way to help Chinese travelers have a smoother experience when going abroad. This deal now puts almost all of the world's major airlines and hotels within Alipay's reach.
The UATP deal comes soon after Alipay forged a similar partnership with American online retaileriHerb, which was announced in September. In an interview with Internet Retailer, iHerb marketing director John McCarthy said the deal had made China one of its top 10 markets.
Such partnerships could bring rich rewards to both Alipay and US ecommerce companies. While Alipay benefits from greater global reach, the American companies suddenly become more accessible to a large and upwardly mobile group of Chinese consumers. In 2012 alone, for instance, Chinese consumers made 83 billion trips out of the country. China is the world's largest spender on tourism, topping $100 billion in travel spending last year, compared to the US and Germany, both of which topped out at around $80 billion. As China's middle class grows, you can expect that travel spend figure to increase along with it.
As Alibaba nears its IPO, expected early next year, there are indications that it has high hopes for Alipay, which is China's third biggest payment platform. Last week, the company announced that it will restructure Alipay's parent company, Zhejiang Alibaba E-Commerce Co, as a new company in which 60 percent of its shares will be offered to new investors, Reuters reported.
It's probably fair to say you'll be hearing a lot more from Alibaba in the weeks leading up to its IPO. That's understandable – there's every chance it will be bigger, and more important, than Twitter's.
Chinese e-commerce giant Alibaba restructures its payments arm
60% of Alipay will be offered to new investors, the rest held by employees.
Alibaba Group, the dominant e-commerce company in China, has restructured its Alipay payments arm, a unit that is taking steps to offer investment products and expand Alipay acceptance internationally.
As part of the restructuring, Alibaba will offer 60% of the shares in Alipay's parent to strategic investors, with the remaining 40% to be owned by Alibaba employees. Alibaba founder and chairman Jack Ma will hold a stake of about 7% in the new entity, Alibaba says. The company being restructured is formally named Zhejiang Alibaba E-Commerce Co. Ltd., but Alibaba refers to it in public document as its Small and Micro Financial Services Group.
Alibaba, which operates the big Chinese online marketplaces Taobao and Tmall, is No. 1 in the Internet Retailer 2013 Asia 500.
Alipay, an online payment service akin to eBay Inc.'s PayPal, is widely used to make purchases in China, principally for making online purchases but also for paying bills and conducting other offline transactions. 800 million Chinese consumers have Alipay accounts, Alibaba says.
Alipay has recently signed up some U.S. e-retailers to accept the Chinese payment system. For example, iHerb Inc., No. 204 in the Internet Retailer Top 500, began accepting Alipay this year, leading to a significant increase insales to China, the e-retailer says.
In another move to expand acceptance, Alipay announced today a deal to make it easier for global airlines, hotels and other travel companies to accept Alipay. The Chinese company has formed an alliance with UATP, a payment network owned by airlines around the world that connects to many travel companies, to enable hotels, railroads, travel agencies to accept Alipay through the UATP Network.
"Alipay is dedicated to meeting the needs of China's vast and growing pool of keen overseas travelers by making it easier for them to pay for air tickets, book hotels, rent cars and make other travel-related purchases online from the world's leading airlines and accredited travel agencies," says Jingming Li, vice president and chief architect of Alipay International.
Alipay deal could open door to more Chinese visitors to Bay Area
China's leading online payment system Alipay announced a partnership Tuesday with airlines and travel agencies that will allow more Chinese travelers to buy plane tickets online without a credit or debit card, potentially setting up the Bay Area for an influx of visitors.
Alipay is the online payment affiliate of China's colossus e-commerce company Alibaba Group, which has offices in Santa Clara. It has joined with UATP, the payments system used by almost every major airline in the world, as well as tens of thousands of hotels, travel agencies and rail systems. The new partnership will allow China's 800 million Alipay account holders to book tickets from airlines such as American Airlines and United Airlines using their Alipay accounts.
The deal removes roadblocks for many Chinese, particularly middle-class and young citizens, trying to fly internationally, and could be a boon for the U.S. tourism industry and the Bay Area, a top destination for Chinese business leaders and entrepreneurs.
China is second only to Japan in the number of trans-Pacific travelers to the U.S. By 2017, China and the U.S. will exchange 5.2 million passengers annually, which represents 6.7 percent year-over-year growth, according to the International Air Transport Association.
San Francisco International Airport receives 73 flights each week from China. That number will jump in June when United begins adding nonstop flights between Chengdu, China's fourth-largest city, and SFO. With the Alipay option, industry experts expect demand for flights to the Bay Area will accelerate.
"The Bay Area is one of the biggest destinations for the Chinese traveler," said Jingming Li, who heads Alipay's international operations from the Santa Clara office.
Until the partnership with UATP, Chinese consumers could not buy directly from a U.S. airline with Alipay. But in China, many consumers can only make online purchases with Alipay — out of a population of 1.4 billion, there are about 318 million credit cards in the country, according to research from Hudson Crossing. The U.S. has about four times that much plastic.
"It's a heavily walled garden when it comes to credit cards," said Henry Harteveldt, travel industry analyst with Hudson Crossing.
PayPal, its U.S. equivalent, is slightly more than one-sixth the size, with about 137 million account holders.
UATP serves about 250 airlines, and each airline will decide whether they want to add Alipay to its website, said spokeswoman Wendy Ward. Li said Alipay could "be up and running" on airline websites in a few months.
China spends more money on tourism abroad than any other country — $102 billion in 2012 — and Chinese travelers account for nearly one out of four new passengers expected to join the growing international travel market by 2016, according to the World Tourism Market and the International Air Transport Association.
The Bay Area has benefitted from much of that travel money. Chinese investors have invested in startups and tech companies, and backed infrastructure such as Hanhai Z-Park in San Jose and a $1.5 billion development near Oakland's Jack London Square.
UATP Exploring Ways To Expand Reach
In an effort to further broaden its reach into non-airline travel categories, payment supplier Universal Air Travel Plan is exploring "multiple solutions to maximize" its network, UATP officials this month told BTN. Possible avenues include partnerships with credit card networks or other suppliers, as well as the continued development of virtual cards.
"We're not currently accepted from a pure UATP network perspective for anything in a broad case as far as hotel and car rentals," said UATP vice president of global sales K. David Holmes. "So we have a challenge there."
One concept, according to Holmes, is partnering with a credit card network provider —MasterCard ,for example—to generate one-time-use card numbers, which would be associated with a particular air transaction to "power a transaction that wouldn't necessarily or traditionally flow over the UATP network," like a hotel booking or rental car reservation.
"We are touring some options to deliver some of these solutions to market," Holmes said. "That would allow us to expand more of the travel experience in that [clients] can bill things centrally, like hotels and car rental, as part of the air travel package which we do initially."
While the company is exploring new connections, it already has partnerships with payment solution eNett International and the La Quinta Inn & Suites hotel chain. Through eNett's Virtual Account Number solution (formerly vNett), UATP can issue single-use, 16-digit virtual cards for clients. Although the partnership has been in place since 2009, UATP has yet to launch a customer for the capability, but still hopes to "bring people onto that platform," said UATP vice president of marketing and communications Wendy Ward.
"We're talking to carriers and corporate subscribers about enabling UATP broader usage over the eNett solution," Holmes said. "Some discussions are ongoing, but we expect to have some of those announcements within 2014."
UATP's partnership with La Quinta allows organizations to centrally bill payments to La Quinta. Walmart in 2010 became the first client to utilize the solution.
UATP is exploring similar relationships with other suppliers. "The last option is looking at those partnerships, whether that's via the eNett platform for the T&E card, or what other partnership opportunities are out there for us to expand the utility of the UATP network from the T&E perspective," Holmes said.
Language Update
Meanwhile UATP this summer added Chinese "passenger name decoding" to its DataStream and DataMine reporting systems, so users can search for tickets by entering a passenger's name in Chinese. "This is great because we have Shandong and China Eastern [airlines] within China that are issuers, and we have Air China as a marketing partner," Ward said.
Additionally, UATP in August began providing online DataMine help screen shots in Portuguese and Spanish.
Latin American Carriers Growing Despite Constraints
Miami – Like carriers in other parts of the world, Latin America's airlines are beset by a bevy of challenges ranging from high fuel costs and taxation to distribution dilemmas and infrastructure that can't keep pace with their growth. Those challenges, however, coincide with the region's booming economic growth, its tremendous influx in foreign investment, its brisk growth in GDP and the number of people in the region living above the poverty line, noted Alex de Gunten, executive director of the Latin American and Caribbean Air Transport Association (ALTA) during a presentation here last month at a UATP conference.
But de Gunten also noted that "one out of three flights in the region operates into or out of a congested or overcongested airport. Yes, we are forecasted to grow a lot, but we better do a better job in terms of planning our infrastructure." Referencing airport infrastructure rankings published by the World Economic Forum, he said, "We seem to be going in the wrong direction and this a major concern."
De Gunten also bemoaned fuel costs incurred by the region's airlines. "You would think it would be reasonable given fuel production [around the region]," he said, "but it's not the case."
Segueing into the conference's primary focus, de Gunten added that "there are not many areas where airlines have a little control, or can reduce costs. Distribution is one of them."
But, according to ALTA industry affairs manager Hernan Sznycer, the region's airlines face online and offline distribution challenges. The latter includes high global distribution system costs, travel agency commissions that are "regulated in certain markets" and deficiencies in distributing ancillary services.
Online distribution, meanwhile, presents both obstacles and a huge opportunity. According to Sznycer's presentation, the challenges include a "multiplicity of legislations and regulations," inefficient infrastructure, fraud and relatively low credit card adoption.
Another fact is the relatively low rate of Internet penetration in parts of the region, which means carriers must continue to sell the bulk of their tickets through more expensive offline channels. But the opportunity is in the growth trend. According to PhoCusWright data presented at the conference, the compound annual growth rate for online travel during the past five years was 31 percent, versus 1 percent for offline. "This is a trend that we think will continue," Sznycer said.
Aeromexico senior vice president of revenue management and distribution Ruben Martinez suggested direct connections "could be a solution" and said the airline is "trying to develop solutions for the mobile web." But he added that the region's "legacy carriers" are facing "some delays in IT development."
At another Mexican carrier, Aeromar, chief planning and commercial officer Fabricio Cojuc Wolfowitz explained how, after interline relationships with Aeromexico and Mexicana ended, "the most important thing we did was to rethink the business model in terms of distribution."
Aeromar, he said, is a regional airline that operates 18 50-seat aircraft and primarily serves business travelers. Five years ago it sold 5 percent of its tickets online; today that figure is close to 30 percent. "In spite of restrictions we face with our legacy distribution platform, we believe that could grow rapidly to 50 percent," he said. "So we are putting a lot of focus on finding alternative means of distribution, and we believe we are in a good position to grow revenue and passengers even more."
By David Jonas
Latin America's New Kid On The Block Won't Get Fooled Again
The Beat — a travel business newsletter
Insel Air probably isn't that well-known outside its rather small network in the Caribbean and South America, but the distribution dilemma it faces as it continues to grow is quite familiar. The Curacao-based carrier learned the hard way about what its chief commercial officer described as the double-edged sword of global distribution systems.
Within a year of starting flights in 2006, Insel Air was ready to grow its operation beyond its one 15-seat airplane. "Until that time, the distribution channels that we had were very simple," said Jurgen Lippinkhof, speaking here during a UATP conference. "We had a website and a reservations system which was web-based. That sufficed." But in the context of expansion plans, it became "a different ballgame."
So the startup decided to "invest heavily in distribution systems," including participating in all the major GDSs and developing a Sita-based reservations system. It joined ARC and other Bank Settlement Plans, became a member of the International Air Transport Association and the Latin American and Caribbean Air Transport Association, and implemented various codeshare and other interline agreements. It now operates to 16 destinations in 11 countries, including Charlotte and Miami.
"It's easy to sign a contract with GDSs," Lippinkhof said, "but once everything is in place and you are good to go, you find out about all the costs related. I was kind of surprised to be announced [at the conference] as an expert on distribution systems because we are the new kids on the block and we are just finding out what it actually means to be a part of all those things.
"Being part of GDSs and trying to get your product out to passengers is an expensive hobby," he continued. "Right now, it's about 13 percent of all our costs. That's more than we pay to our employees." (That 13 percent, he said, includes GDS fees, costs related to its own res system, agency commissions and credit card fees.)
And GDS participation isn't just costly for Insel Air. It's also restrictive. "We've also developed our own direct-sell tool that we are trying to promote," Lippinkhof explained. "We find out that the GDSs all want full content. I don't have problems with giving full content. But when I tried to push my own direct-sell tool, I found out that most GDSs do have a clause in their contracts which prevents me from doing that in a successful way and I cannot discriminate among different GDSs. That is basically my main problem with the distribution systems: I cannot give an incentive to our buyers, be they travel agencies, wholesalers or whoever. If I give them an incentive to sell through our own system, most GDSs tell me that I am discriminating against them. When they distribute our product, they are paying fees to the travel agent to use their GDS, and that is an incentive they are paying to their clients to promote their GDS, whereas if I tried to do the same thing, I cannot do it. I think that is an unlevel playing field."
If GDS contracts come with unpalatable terms and conditions, why sign them? "That's why I was surprised to be termed as an expert," Lippinkhof quipped.
But he added that as Insel Air rapidly grew, it needed to broaden its distribution, and GDSs seemed the best way to do it. As such, he said the airline is "very dependent on those GDSs. As a matter of fact, I am very happy with it because we have a very scattered market. In some of our destinations the Internet penetration is 5 percent. Look at Haiti. They are very dependent on the traditional sales channels. They like face-to-face contact. They go through travel agencies. I don't mind paying a fee or commission for that.
"Of course we have legal people looking at the contracts, but we were not fully aware of all the consequences involved," he continued. "We found out and it won't happen again."
With those lessons still fresh, Insel Air currently is attempting renegotiate its GDS contracts "to see if we can come down on the prices that they charge us," Lippinkhof said. "Some GDSs are more willing than the others."
David Jonas with reporting by Jay Campbell
SafetyPay Speaks on Role of Payments at UATP Airline Distribution Conference
Company Vice President Participates in Panel that Addresses the Importance of Payment Strategy to Distribution Success
SafetyPay™, the real time online-banking payment solution that enables consumers to shop from merchants worldwide and pay directly from their bank account in their local currency, was honored to send Vice President of Sales, Sandra Feinberg, to participate as a panel speaker at the 2013 UATP Airline Distribution Conference in Miami, FL recently on April 18th.
Feinberg spoke with six other presenters on how payment strategy can help increase the likelihood of distribution success. Also participating were representatives from Lufthansa AirPlus, Telchar B.V. Payment Fraud Consultancy, WorldPay, GlobalCollect, Southwest Airlines and Delta Air Lines.
The panel's discussion lasted about 45 minutes, and was moderated by K. David Holmes, VP Global Sales for UATP. The speakers presented, discussed and responded to audience questions regarding payments, the largest distribution cost for airlines. They provided information and observations regarding the roles that fraud, credit cards, alternative payments and more play in payment strategies and successful distribution plans.
The panel emphasized the need for a wide-ranging payment strategy that balances customer preference with airline financial requirements. "In many developed and developing markets around the world, the costs and limits of using credit cards are costing airlines high fees and lost business opportunities," said Feinberg. "Airlines need to enable customers to purchase online using real-time bank transfers and even cash to reach a broader market and protect themselves from fees and fraud."
As Distribution Evolves, Agents Will Remain Key, Speakers Say
Despite direct sales, the rise of ancillary products, and the perceived threat of the New Distribution Capability, travel agents will continue to play a key role in airline distribution for the foreseeable future.
That was the consensus of executives who spoke at the UATP Airline Distribution Conference in Miami last week.
Should be rewarded
An Air Canada executive who was instrumental in developing the carrier's merchandising strategy said that "of course" travel agents have a role to play in the sale of airlines' ancillary products.
Moreover, agents "should be rewarded for increasing sales and revenue for the airline" – whether for sales of ancillary products or airline tickets, said Graham Wareham, senior director of distribution and consumer direct, adding: "There's no difference."
Neglected channel
Gianni Cataldo, a senior executive at a technology company that builds merchandising platforms for airlines, said, "We sit down with airlines and look at merchandising on a channel by channel basis." But the agency channel is often neglected, said Cataldo, vice president and general manager for the Americas at Datalex.
"Ironically, the agency is the best opportunity for an upsell" for the airline, he said. "There is definitely a role for the agency to be involved in this mix. Something that can be done easily by the agency might be a challenge for technology."
Impact of NDC on agents
Norm Rose, president of Travel Tech Consulting, noted that some travel management companies are concerned that they will lose revenue if IATA's NDC takes hold.
"We see some ridiculous things in the press about NDC," he said. "All it is, is a standard."
But for decades, the goal of TMCs has been to maintain GDS productivity, he said, "and the person with the best GDS skills was usually the best agent."
That will change, he said.
"We're going to see Nordstrom agents," Rose said, referring to the department store that is famed for personalized service. "What's more personalized than offering ancillary services that meet my needs?"
Watershed event
The light at the end of the tunnel, Rose said, is American's new agreement with Travelport by which the companies will connect via their APIs.
"This is a watershed event, the biggest news in travel distribution," he said. "I'm hopeful this means everyone will participate in this new world."
To the airline audience, he added, "you can't do this without some involvement with the [agency/GDS] channel. It's going to be a multichannel world for some time."
AA Exec Seeks To Shed Light on Direct Connect, NDC
An American Airlines executive sought to clarify the issues of his carrier's direct-connect strategy and to IATA's New Distribution Capability.
At UATP's annual Airline Distribution Conference in Miami, Cory Garner, managing director of sales operations and distribution for American, compared the direct-connect strategy to the introduction of high-definition television a few years ago.
"If you use Verizon or AT&T U-verse, you may remember seeing rolls of multicolored fiber optic cable in your neighborhood," he said. "That's the pipe. You also have to have a box in your house.
"In the airline distribution analogy, Farelogix is the pipe," he said. Farelogix is the developer of application programming interfaces (APIs) for several airlines, including American, Air Canada, Delta and US Airways.
The new pipe offers the ability to be more granular and nimble, Garner said.
Now that American has reached an agreement to link its API with Travelport's in order to distribute richer content to travel agencies, Travelport's subscribers become a "neighborhood" where the airline version of high-def TV is available.
Travelport provides the "box" to agencies in its neighborhood to allow them to display "high-def" content.
Will agents like it?
Garner believes agents will like what they see, given his own excitement the first time he saw what the new connection will enable – fresh content, with real-time pricing.
He said Travelport deserves credit for its forward thinking in this area.
"They've been building around the G2 Switchworks technology [purchased by Travelport in 2008]. Their Universal API is the box. They've been architecting their business for this for a long time."
Garner said he hopes to do more deals like the Travelport arrangement.
Now, about NDC . . .
As for IATA's New Distribution Capability, Garner described it as "nothing more than a language to allow two computers to speak to each other and have an interchange of data."
It's a matter of efficiency, he said. "Many airlines are using the same language. It's not better when you have to learn 12 languages of the world in order to travel."
NDC will permit the display of broader content that can be tailored to customer's needs, Garner said.
'Utter nonsense'
"I don't think NDC changes the competitive dynamic," he said. "The lowest fare is always available if you want to be successful. You need the back of the plane filled too."
In response to arguments that NDC will allow airlines to charge higher prices, Garner said, "I don't know of any airline that thinks this is a free pass to charge higher fares."
Customers can provide their personal details or not, he said, but the notion that airlines will use those details against their customers is "utter nonsense."
"People aren't stupid. The first airline that does that will be the last to get anyone's personal details."
Fear of unknown grows rampant as IATA pushes its NDC initiative
MIAMI — IATA's New Distribution Capability (NDC) has suddenly become the travel industry's bogeyman, with opponents convinced that it will end GDS/agent distribution as we know it, while proponents insist there's nothing under the bed but a benign standards initiative that will bring efficiency to the way computer systems talk to each other.
While NDC is, so far, simply an attempt to define a set of standards, it also has far-ranging implications. And since its actual impact won't be known until it is implemented, a nagging fear of the unknown has grown rampant in some parts of the industry.
IATA describes NDC simply as a "collaborative industry initiative to define a messaging standard that will enable retailing opportunities through the indirect (GDS/travel agent) channel."But opponents smell an airline plot to rid the industry of GDSs and accumulate data on passengers as a means of setting fares and seat availability at the individual level.ASTA simply sees reason for caution."It is a reinvention of the travel agency distribution system," said John Pittman, ASTA's vice president of industry affairs. He called the Society's position on NDC "neutral but not passive."ASTA, he said, continues to ask "probing" questions to determine what NDC could mean for the agency distribution system.On the plus side, he said, NDC could mean an end to the dreaded debit memo. But he also said that IATA's attempt to standardize the language used for direct connections already being built between airlines and distributors such as GDSs, agencies and travel management companies, could complicate interline agreements.And there are other fears.One is that NDC will upend the current economic model under which airlines pay segment fees to GDSs, which in turn pay travel agencies and travel management companies (TMC). Those fees can mean the difference between turning a profit or losing money for TMCs.A second concern is that NDC's authenticating capabilities — revealing to the airline exactly who the traveler is — will mean that carriers will offer passengers fares derived from their past purchasing behavior or from other demographic information rather than offering a full range of fares.Some consumer advocates and travel managers fear that this could mean airlines will not offer any fare on a high-yield flight to a budget passenger, or will offer higher-priced tickets to a passenger living in a ZIP code with a high proportion of passengers who fly business class.NDC's defenders argue that market forces created the current airline distribution model, and those same forces will create the next model.But however the model changes, speakers and delegates attending last week's UATP Airline Distribution Conference in Miami seemed to agree on two points: First, the changes will not take place overnight; and second, they will not be predictable.Moreover, NDC supporters say, some concerns being voiced by opponents exist already and are not unique to NDC or even caused by it.One thing appeared clear at the conference: Despite constant griping by airlines about GDSs, no one believes they will be going away in the foreseeable future for a simple reason: GDSs deliver the airlines' highest-yield passengers, without whom the carriers can't survive.Even American Airlines, which has led the drive for direct connect, an effort seen by many as a way to bypass GDSs, whose fees airlines consider so onerous, is willing to pay the GDSs for those passengers, especially when they are business travelers.Cory Garner, managing director of sales and distribution for American, said TMCs consistently book the airlines' highest-yield passengers, "so it's worthwhile to pay more for TMC volume than for the typical leisure channel selling the lowest fare."Airlines still pay agencies for their sales, though exclusively on a performance basis.Another argument offered by NDC supporters is that the technology will enable agents to sell the airlines' ancillary products and services.Graham Wareham, senior director of distribution and consumer direct sales for Air Canada, said airlines want to display their products on as broad a shelf as possible, and that not only means selling through travel agencies but also making sure agencies have all the information they need about ancillary products."Of course travel agencies have a role in the current environment," Wareham said. "Their relationship with an airline should involve compensation."GDSs have what Jean Charles Odele Gruau, regional director of the Americas for IATA, described as a "privileged position with airlines and travel agencies." He said he sees GDSs as continuing to play a "key role" in the evolution of distribution.To support that assertion, he cited Travelport's recent announcement of a new merchandising platform that enables comparison shopping for ancillaries and fares.
That kind of platform enables airlines to display what they have to offer in the most effective way, he said.
Garner compared NDC to the rollout of high-definition TV, and he compared Farelogix, which is building the pipe connecting American with Travelport, to the trucks that rolled out huge spools of multicolored cable when HDTV first arrived in a neighborhood.
Garner compared the dramatic improvement of HDTV to the enriched content that travel agencies will see with the implementation of NDC.
Though optional, NDC is an initiative to standardize the XML language that airlines use to connect with indirect channels and enable them to display in the GDSs such ancillary services as WiFi and extra-legroom seats far more effectively than they can today.
Addressing fears that a new XML standard is an effort to do an end-run around GDSs, Garner pointed to American's agreement with Travelport. XML is simply about the pipe that delivers information about all the services an airline is selling, he said. The resulting direct connection can be made to a GDS or to a travel agency, Garner said.
Delta Air Lines, which began selling its Economy Comfort seats on Travelport last week, is also using a direct-connect pipe to Travelport. But its pipe is not XML-compatible. Chris Phillips, managing director of distribution strategy for Delta, said that's because XML is still an evolving standard, whereas currently "APIs are easy."
APIs are openings in software code that enable developers to insert their own instructions — in this case, communications links between an airline and a third party.
Delta is also building direct connections to travel retailers, including leisure agencies, Phillips said, adding, "We think agents will be better informed and provide more value to the customer" with direct connections.
IATA representatives also denied that NDC would hinder comparison shopping, one of a number of concerns about NDC raised by opponents, particularly by Business Travel Coalition Chairman Kevin Mitchell.
Addressing that concern, Odele Gruau said that under the NDC proposal, airlines would only authenticate travelers who opt to be identified.
"Authentication is optional," he said, comparing it to offers consumers see from Amazon when they allow cookies on their computers.
Odele Gruau said that right now, travelers can be "trapped" on airline websites, entering their frequent flyer numbers and seeing only what that airline has to offer, while NDC means consumers "will receive different airline offers."
Flint said that today, many consumers will first check fares on a site like Kayak and then jump to the airline site to make sure that carrier isn't offering a lower fare there.
"If you're in indirect distribution, this should drive you nuts," Flint said. "The idea of NDC is to close that gap with the indirect channel so you're not necessarily jumping over to the airline site."
Addressing privacy concerns, Flint said that NDC would have no impact on any privacy rules and regulations that already apply to airlines, GDSs and agencies, nor would it require agents to share their customers' information.
Flint said commercial aviation is a hotly competitive industry, and any airline that does not present a full range of fares to its customers will lose market share.
Perry added,"The marketplace enforces discipline."
At least one travel agency is clearly supporting NDC.
"I want to be able to do exactly what the airlines do on their websites," said David LeCompte, president and CEO of Short's Travel, a TMC that also arranges travel for sports teams.
"To have airlines each do their own thing would be chaotic," he said. "To have standards makes total sense. … If I can offer additional services that the consumer or the corporate traveler wants to purchase at the time of sale, it's a win-win-win."
For that reason, he said he was "perplexed" by the widespread opposition to NDC as laid out in Resolution 787, which IATA has filed with the Department of Transportation.
LeCompte acknowledged that selling ancillaries does add steps to the sales process, which some agencies have seen as creating more work. But he said he sees ways to use technology to sell ancillaries efficiently and cost-effectively.
Follow Kate Rice on Twitter @krtravelweekly.
Two airline conferences fly into Miami
Hundreds of people from within the airline distribution and marketing industry converged on Miami this week for two separate conferences to discuss ancillary costs, the growing Latin American market and the new faces in travel.
Nearly 200 people attended the Airline Distribution 2013 conference at the Intercontinental Miami on April 16 for a two day event that brought speakers from airlines, payment firms and technology suppliers to discuss increasing airline revenues and building ancillary opportunities.
Only a few blocks away at the Hyatt Regency Miami, travel marketers from around the nation met for the ATME 2013 Travel Marketing Conference to discuss clinching niche markets and Latin American opportunities.
Wendy Ward, vice president of marketing and communications of Universal Air Travel Plan, which organized the Airline Distribution conference, said the conference delved into the rising costs of running an airline and how to balance that with payment strategies to take advantage of ancillary costs.
"The way the conference runs, we bring in panels to have an open discussion that can be very diverse," she said. "It can be a very interactive forum. We polled the audience in advance to have questions so that it's more than just a speech."
Speakers talked about the benefits of going ala carte – think Spirit Airline's fee choices – or implementing a hybrid solution, she said.
Ilia Kostov, executive VP of global sales and product strategy for Toronto-based GuestLogix, was one of the speakers during the conference.
GuestLogix is one of the reasons why you can charge your credit card during a flight to buy a drink or duty-free item.
The company is looking to change how airlines handle onboard retail services by providing a passenger self-service model integrated with in-flight entertainment.
"Some of these airlines want to monetize their in-flight entertainment by adding an in-flight store front," Kostov said. "So imagine customers browsing destination-related information, shops and services in their seats during a flight."
GuestLogix says it has a 90 percent market share in North America and wants to grow in the Latin America and Asia-Pacific markets.
"We see airlines that can make more money in their food and beverage side by tying in retail techniques like bundling," he said. "So overall they can make more money simply with some smart business practices."
PointsHound
Down the block at the travel marketing conference, Pete Van Dorn, co-founder of travel website PointsHound, watched his partner Chris Boyd present their new idea to an audience of marketers in a competition designed to introduce the new players in the Internet travel industry.
"We had an advantage because we have a live website and were able to share the performance data," he said.
PointsHound is a travel website that links airline frequent flyer programs with hotel bookings. If you plan on flying to Chicago using United Airlines rewards program, you might be able to gain a few more miles if you book a hotel with PointsHound.
"We are really targeting those business travelers that fly year around and are obsessed with building their flyer miles," he said.
The tech company launched its website in late October last year with only a few airlines on board, but has since expanded to 10 loyalty programs including American Airlines and Virgin America.
Van Dorn said the ATME conference was helpful for a newcomer like himself to speak to marketers who can talk intelligently about data-driven marketing.
Business travelers in Miami can look out for PointsHound new promotion that will link hotel loyalty programs with the airlines so that travelers can essentially "double dip" for more points.
Both the ATME and Airline Distribution conference were expected to end on Thursday.
The Nilson Report - Issue 1,006
WorldPay, the 4th largest merchant acquirer worldwide measured and Europe's largest by transactions processed, now offers airline and travel merchants access to UATP through its gateway. UATP is the payment network owned by airlines. It focuses on corporate travel payments. Philip McGriskin is Chief Product Officer at WorldPay, 44 (0)203 246 5627, phillip.mcgriskin@worldpay.com, www.worldpay.com. Ralph Kaiser is CEO at UATP, (202) 626-4087, ralph.kaiser@uatp.com, www.uatp.com.
ALTA: UATP sees opportunities in cash, mobile payments
UATP is partnering with various alternative payment brands and prepping for the emerging mobile payment space, as it expands its suite of payment options for airlines.
The airline-owned network already partners with brands that include PayPal, SafetyPay and UKash to process payments on various airlines websites, says Ralph Kaiser, president and chief executive of UATP, on the sidelines of the Latin American and Caribbean Air Transport Association (ALTA) Airline Leaders Forum 2012 in Panama City.
Airlines that use UATP for these transactions can save on integration costs and simplify payment processing, he says.
Aeromexico and Volaris are already processing payments through PayPal over the UATP network.
UATP plans to go beyond just partnerships and offer cash payments itself to airlines. "What we're going to do is help bring cash to the internet bookings that will really help the airlines [save money] as well, instead of going through [travel] agencies that are more expensive," says Kaiser.
Airlines including AirAsia, JetStar Asia and Malaysia Airlines offer customers who book on their respective websites the option to pay for tickets in cash at local convenience stores.
Mobile payments are another emerging space for UATP. Kaiser says that they are recruiting someone to develop their mobile strategy and plan to "definitely" participate in the space in the future.
"I don't see the mobile technology at the airport yet other than boarding passes but payment will be the next thing," he says. "Some day maybe we'll see [payments] at the airport like at Starbucks where you can pay with your iPhone."
Mobile wallets are common for various small transactions, including convenience store purchases and for monthly bills, in emerging markets including Kenya and Indonesia.
ALTA: Aeromexico sees 'stellar' growth with UATP
Aeromexico has seen "stellar" growth in use of the UATP network by customers since it joined earlier this year, say UATP executives.
Usage has grown by more than 20% month-on-month during the past three months to more than 26,000 transactions during the most recent month, according to the airline-owned network. The airline launched the UATP programme during the second quarter.
"They've done everything right," says Ralph Kaiser, president and chief executive of UATP, on the sidelines of the ALTA Airline Forum 2012 in Panama City. "You have to align everybody inside the airline – sales, distribution, marketing, revenue and accounting – and you have to have a champion who takes it and says this is the product."
Aeromexico offers the UATP products to customers in Brazil, Mexico and the USA, with multi-currency and multi-lingual solutions. It also uses the network's DataStream and DataMine tools.
UATP is talking to "every major airline" in Latin America about joining, says Kaiser. Brazil's Gol as well as Aeromexico are members.
Airlines in the region can save the fees of 3-4% per transaction that they pay to commercial credit card companies when customers book flights by using UATP, according to the network.
Latin American airlines can also take advantage of UATP through its partnerships with alternative payment brands, including PayPal, SafetyPay and UKash. Aeromexico and Volaris are already processing payments through PayPal over the UATP network, says Kaiser.AL
Tackling the F-Word: Credit-Card Fraud that Besets Airlines Now Threatening Loyalty Programs
"There are three things in the world that deserve no mercy: hypocrisy, fraud, and tyranny."
Reverend Frederick W. Robertson, 1816 – 1853.
You might think the above quote is overstating it a little. But last week, after we met with airline, payment and loyalty executives at Airline Information's Airline and Travel Payments Summit (ATPS) for two days of high-level discussions about the current state of our intersecting industries, I'm confident they would put fraud ahead of hypocrisy. This new "f-word" seems to be gaining a tyrannical grip on an entire industry. Finding solutions to its intrusions is paramount if consumers are to feel safe with those companies entrusted with their identities and credit card data.
Fraud, unfortunately, has become all too common when it comes to airlines and payments. In the words of Ralph Kaiser, President and CEO of UATP (Universal Air Travel Plan), is rapidly becoming a "cost of doing business."
Here's one example: In February, 2012, authorities in Missouri sentenced to prison four black-market "travel agents" who managed to bilk several airlines, financial institutions, merchants and individual consumers of over $20 million, using thousands of stolen identities and credit card numbers.
A recent study by payments firm WorldPay, which looked at online booking and payments in the airline industry found that fraudsters are regularly skimming about 1.5% of eCommerce revenues. While 37% of surveyed airlines said fraud levels had remained unchanged, 29% said fraudulent bookings increased over the past year. And airlines in some regions, such as the Middle East, Latin America and parts of Asia, can see fraud levels as high as 3-4% of their revenues.
That's not all. When it comes to credit card fraud, Forbes reported that Mexico and the US have the highest levels, with 44% and 42% of consumers, respectively, saying their cards have been used fraudulently.
Fraud Frequenting Airline Loyalty Programs
And now, according to some of the conference speakers we met with at the ATPS conference, frequent-flyer miles and rewards programs are among the top five targets for fraud.
Considering that loyalty-program membership stands at about 650 million consumers worldwide and is likely to keep growing, it's clear that ever-larger numbers of consumer touch points are emerging fast, everywhere. More touch points mean more ways for companies to engage their customers, but they also mean more points at which consumer information – as well as company revenue – can be compromised.
But conference attendees didn't just talk about problems. They also exchanged ideas about how to combat the fraud that is creeping into the loyalty-program industry, such as:
Strengthening security measures on loyalty program accounts to the level of protection bank and credit-card accounts receive;
Removing frequent-flyer program ID numbers from plane tickets and boarding passes;
And going beyond the usual username/password and implementing device-recognition technology.
We also asked executives from WorldPay to share with us their insights into where our intersecting industries stand on fraud – and where they're likely to go:
Michael Parkinson, VP Airline Sector, WorldPay: "It's been a tough decade for the aviation industry. Not only is it struggling to remain profitable yet competitive in a difficult economic time, but margins have been increasingly squeezed as a result of rising fuel costs, additional taxes and environmental restrictions. Despite this, a significant proportion of airline revenue continues to be lost to fraud.
There is no single measure that will eradicate fraud and at the same time ensure that good orders are not being rejected. Airlines need to assess where the gaps exist in their security defenses and focus on a risk management strategy that combines an assessment of all the key criteria combined with an arsenal of fraud detection tools and a stringent review process."
Returning to this post's opening quote, it would be hypocritical and fraudulent of us to claim that these measures alone will wipe out fraud 100%. It's just not possible. As technologies grow more sophisticated and touch points between consumers and companies increase, there will always be some looking for any weakness to exploit.
But what we can do, with tyrannical intensity, planning and vigor, is work to continue sharing ideas, keeping our minds open to new possibilities so that next generation solutions help keep consumer wallets, virtual and otherwise, shut from those who wish to take what's not rightly theirs.
Ralph Kaiser's complete quote includes the statement that, "fraud is something to be managed."
But wouldn't "mitigated," be a better choice? We think so. Consider this post advice that you can take to the bank. But if those of us in the loyalty and airline industry continue to share ideas, keeping our eyes and minds open, we can fight it and keep it to a minimum, giving our customers more peace of mind and the kind of positive loyalty experience that will keep them coming back for more.
By: Gerrit McGowan, CEO, and Mark Dority, Director of Marketing, KULA Causes
BTN Interview: UATP CEO Ralph Kaiser
To benefit issuers, merchants and corporate customers, Universal Air Travel Plan this year completed a multiyear modernization of the guts of its technology. UATP president, CEO and board chairman Ralph Kaiser said the technology changes were "another big jump forward" for the world's first charge card, which debuted in 1936. "The last such change was when we moved from paper to electronic," he noted. Kaiser recently spoke with Business Travel News payment and expense editor Mary Ann McNulty about the impact of the tech upgrades, new issuers and growth expectations.
What is the impact on your customers of all your tech initiatives—moving to Sita technology, rebuilding your acquirer network and launching the new billing system?
We cut over to Sita technology in May of this year, a little later than we wanted due to a delay, but it was a smooth transition. Earlier we rebuilt our acquirer network, ATCAN, for transactions. We modernized it and leapfrogged from 10-year-old technology to today's technology to provide more options for different types of transactions and points of sale. Now we're fully capable of doing all kinds of mobile, kiosk, onboard and other points of sale transactions. We also built a proprietary billing system called DataStream. It's a turnkey system that allows any air carrier to become a card issuer with no upfront costs. It used to be that airline issuers had to build their own billing system or buy one. Now we give a system to an airline issuer. It's removed a huge barrier to entry to airlines that didn't have the time or funding to build or buy a billing system. They don't pay for it until they start using it—and then on a per transaction basis. They don't pay for setup, implementation or consulting. We do all that. It's multilanguage and multicurrency so it works across borders—meaning that a U.S. carrier could issue cards in another country and it could still be invoiced through their system, and vice versa. It's made a huge difference. All the new carriers and shareholders we've signed in the last two years is because of that system.
Have any of the upgrades impacted corporate reporting?
DataStream is our proprietary reporting system that takes the charge feeds from the Sita system and allows airlines to send statements to their corporate customers. Two other products that go with DataStream—DataMine and DataView—allow travel managers and CFOs to slice and dice the trips to see citypairs, cost centers and Level 3 data in a dashboard format. We studied what was out there, what corporations wanted and created the last two reporting systems.
How many of your issuers are offering the reporting components?
Gol is using DataMine extensively. We launched in beta with a couple carriers in 2011. Now we're in production with El Al, Aeromexico and Etihad. It's going to be online soon with Qatar Airways and Malaysia Airlines.
You launched in China a few years ago. What are you doing there today and what have you learned?
We've been in China three years now and are very happy with the experience. The whole corporate card idea is new to the entire market—to airlines, companies and travelers. We made all the Chinese carriers merchants and worked with GDSs and travel agencies to build the market. UATP has been kind of the first movers in China on this with two issuers—China Eastern and Shandong Airlines. Both are growing in the market and putting corporations on their programs now. AirPlus also has a marketing partnership with AirChina, so in effect there are three airlines involved with the UATP network there. There's a lot of transaction volume, but in China the fares are not as high so the dollar volume is not as high as in the United States and Europe.
What other new markets have you entered this year?
We just launched with Etihad and we're about to launch with Qatar. Those are two premium carriers with very ambitious growth strategies. Again, we're in there at the foundation, building out the base of the market. We just signed Oman Air and Hala travel agency to accept UATP. We expect to see big growth there because unlike the Chinese market, ticket values in the Middle East are significant.
There is a lot of long-haul, premium business travel that goes through the Middle East to Europe, Down Under and even to the United States. If you look at the route maps for Etihad, Qatar and Emirates you can see that they go everywhere now and they're adding new destinations every month. They're trying to make the Middle East—whether Doha, Abu Dhabi or Dubai—more of a hub alternative to the traditional hubs in Europe of Paris, Frankfurt and London. They're trying to move some of the hub traffic to the Middle East and putting a lot of competitive pressure on Europe's big flag carriers such as Air France, Lufthansa and BA.
Where do you see your growth coming from in the next year?
Our biggest market is Europe, Middle East and Africa, and truthfully Europe. We've seen a bit of a slowdown in Europe with the state of the European economy and the eurozone. Our transactions are actually up globally, but some of the volume is depressed because of foreign exchange. The U.S. dollar is appreciating; year-over-year through July, the dollar gained about 14 percent against the euro so that changes our volume numbers. Our volume is flattening out a bit, even though it will still be $13 billion to $14 billion in total.
We're seeing a lot more transactions in Asia and China. One of our new issuers, Aeromexico, has a very big program expanded beyond just the Mexican market. We expect to see growth in the Middle East, and the U.S. market continues to be strong with the merged United and Continental programs, Delta post-merger with Northwest, US Airways and American.
About three years ago your board approved a plan to add hotel and car rental merchants to your network. What's the update on that?
Initially we launched for LaQuinta, Wal-mart and American Airlines as the issuer—to prove the concept. It's worked well and there is volume with those groups. We haven't pursued a global, all-in hotel strategy. As difficult as airline system integration is, we found that integration with hotel payment systems is much worse. They're far more fragmented; there are a lot of different types of transactions and multiple transactions in one booking. We weighted that investment against corporate demand and right now we don't have a huge corporate demand for it.
A lot of corporations are willing to put air on UATP and then have another T&E product for non-air. In the case of AirPlus, they combine their own MasterCard and Visa offering with a UATP offering for one consolidated statement. We're looking at doing similar things with outside providers that would bring in a hotel or car rental transaction to a UATP bill through co-mingling of data. It would be a virtual transaction and would appear as a UATP transaction on the bill. And we're looking at just having a third-party provider take data from another card and funneling it to our statements. … taking the non-air spend and the air spend and combining it on one statement as an offering to enhance the UATP card.
If any airline or company comes to us and says, 'We need to have Marriott or Hilton for our corporate customers,' we'll certainly do that. But we don't just want to build it and hope people take advantage of it. We want to see some demand. We have so many other positive things going on; we need to rank what will be best for the ownership group and the network.
To view the article on Business Travel News, click here
Airlines think they are merchandising, but UATP conference speakers beg to differ
News from Travel Technology Update: For several years, airlines have yearned to adopt "merchandising," a term that is applied indiscriminately to everything from fare families to checked-bag fees. Depending on who is doing the talking, they are held back by their own systems, which don't easily accommodate innovations in how products are sold, or by the global distribution systems, which some airlines accuse of dragging their feet on investment in new technology.
But Montie Brewer, former chief executive officer of Air Canada, adds another reason that airlines are held back: When it comes to merchandising, they haven't got a clue. "Airlines are terrible merchandisers," he said. "They don't even know what the word means."
Brewer, who participated in a panel discussion of merchandising at the UATP Airline Distribution Conference in Madrid, said airlines "are so far into the Dark Ages about what we are really selling." The key factor, he said, is that "they see it as a revenue stream instead of differentiation."
When Air Canada unbundled its fares and created a set of fare families in 2003, it was looking for a way to match fares with a spate of new low-cost carriers and still maintain its full-service status, he said. "We had to get the customer's trust back, matching the fares with the low-cost carriers, and still add value," Brewer said.
The branded fare families each had a set of attributes that could be modified to a certain extent. The Tango family was the price leader, and if passengers agreed to not check bags, they could get a further discount of C$10 each way.
Changing the airline mindset to merchandising mode is easier said than done, Farelogix chief executive Jim Davidson said. "If you are selling a commodity product, you don't suddenly wake up one morning and say, 'Hey, it's not a commodity product,'" he said. "They've built systems that are good at selling commodities. When the rust comes off, they don't know what's going to happen."
He agreed that airlines have a lot to learn about merchandising. "Some airlines may be heading down the wrong path, thinking of bag fees as ancillary revenue," he said. "They're not tuning into what the customer needs and how important the customer is."
Aidan Brogan, senior vice president global sales at Datalex, said airlines are missing out on untold numbers of opportunities to give customers what they really want. They could, for example, work with other companies to package the real essentials of a trip.
"Yesterday, I parked my car at the airport," he said. "Then I went to Starbucks. But the airline only got the air fare."
By Michele McDonald
To view the article, click here
UATP Distribution 2012 - panel highlights
At UATP's Distribution 2012 in Madrid, I moderated two timely panels for our industry. The first covered Ancillary Revenue. The second panel covered the role of travel agencies and how they are responding to the pressure from airlines on distribution costs.
The Ancillary debate went into a couple of very interesting areas. The first centered on how payments play a critical part in ancillary sales, because airlines have decided to retail various non-ticket items without taking into account that getting paid for them cost-effectively is challenging globally. The discussion included everything from onboard sales, with Richard Cushing from GuestLogix explaining some of the solutions they have deployed to facilitate onboard payments, to how eNett with its virtual credit cards is helping airlines generate additional revenues. The second area of this discussion, articulated by Montie Brewer, the former Air Canada CEO who led that airline to increase ancillary sales, was that that the industry needs to move away from a tactical focus on ancillaries and see the bigger picture of commoditisation. This view stuck a note with several airlines in the room, who joined the debate, stressing that they were aiming to have their product tailored to the needs of their customers and trying to move away from commoditisation.
The second panel covered the role of travel agencies and how they are responding to the pressure from airlines on distribution costs. Both ARC and IATA BSP gave excellent insights into how agency volume is continuing to grow. Despite direct distribution, there remains a crucial role for travel agencies given that they still account for around 50% of airline sales. Innovation was a key theme of this panel, stressed by David LeCompte, CEO of Short's Travel Management, he was echoed by Michel Durrieu from CWT who said that we had to get back to looking at things through the customers' eyes. Innovations discussed ranged from enabling travellers to file their expenses using smartphones to better handling with technology the inevitable mass travel disruptions, such as the recent ash clouds and weather.
Both panels raised a number of key issues that the industry needs to tackle, such as working in partnership with distribution channels, including travel agencies, and focusing on customers to avoid commoditisation and the race-to-the-bottom in terms of airfares. Clearly these are issues that are going to be debated and discussed for some time to come, including at Airlines Information's Mega Event & Airline Merchandising Conference to take place in San Diego in November. It's now open for registration at www.FFP-AMC.com.
Delta Won't Push Direct Connect, Exec Says
Delta Air Lines will not force direction connections on travel management companies, Chris Phillips, Delta's managing director of distribution strategy, said.
"We are very respectful of how they want to do business, and we don't want to disrupt that. Direct connect makes it harder for them," Phillips said in a panel discussion at UATP's Airline Distribution 2012 Conference in Madrid.
Although he did not name names, Phillips clearly was seeking to differentiate Delta's approach to distribution from that of American Airlines, which has pushed its direct-connect strategy aggressively.
Working with Farelogix
But like American, Delta has been working with Farelogix on delivering its differentiated content to travel agencies. Phillips, however, views Farelogix not as a direct connection but as "another GDS."
Farelogix provides a platform on which airline content can be aggregated, eliminating the need for travel management companies to connect directly with individual airlines to access their ancillary products.
Traditional GDSs are "still working on a broad basis, while we are working to decommoditize ourselves," Phillips said. "Our product is very different in terms of the onboard experience."
In addition, he said, Delta wants to deepen its relationship with passengers. "We want to know who they are, not just what kind of traveler they are," he said.
Controlling content is key
But Delta is not seeking to bypass the travel agent, he said.
"We are less focused on 'owning the customer.' We just want to control our content and how it gets to the customer."
Nor is its primary goal to bypass GDSs, Phillips said.
GDSs moving slowly
The carrier does, in fact, want to distribute its content through the GDSs, but GDS companies are not moving quickly enough to make that happen, he said. "We also think it can be done more cheaply than it is today."
Although traditional GDS companies have made some progress in their ability to display ancillary products, they still cannot react quickly to new innovations, Phillips said.
GDS shortcomings
As an example, he said, Delta recently introduced Basic Economy on flights between Detroit and Fort Lauderdale, Fort Myers, Orlando and Tampa.
Phillips told Travel Market Report that the typical screen used by travel agents cannot deliver the information about the fare that passengers need.
Basic Economy is an E fare that is completely nonrefundable and non-changeable. Advance seat assignments are not available, even for Medallion passengers; seats are assigned at check-in. Passengers still get full Medallion qualifying miles and upgrades. Currently, roundtrip fares are about $12 to $15 cheaper than the lowest regular economy fare.
"We want them to know what they're getting," he said. "We don't want them to be surprised when they can't get an advance seat assignment."
Still using green screens
Although newer agency desktops provide graphical user interfaces that can display more information than the typical green screen, they also offer the option of using cryptic commands on a green screen emulator. "You walk into any agency and they're using the green screen," Phillips said.
by Michèle McDonald
Ralph Kaiser, CEO, UATP Interview
UATP Program Launched by Shandong Airlines
Commercial Payments International
Shandong Airlines has launched a UATP-based corporate travel program, offering corporates its UATP accounts for corporate travel spend. Shandong Airlines will use YeePay's e-payment services to complete the payment solution, enabling it provide its account holders with air travel activity reporting.
To view this article, click here.
UATP's 75th Anniversary – 2011
Malaysia Airlines Signed as a Universal Air Travel Plan Shareholder
BusinessTravelNews.com
Malaysia Airlines signed as a Universal Air Travel Plan shareholder and "in the near future" plans to issue the card . "As growing our corporate market share is a strategic initiative for improving our yields and load factors for profitability, we are partnering UATP to help us achieve this objective," according to Amin Khan, the airline's executive vice president of commercial strategy.
Airline distribution model 'broken'
Tom Ballantyne, Orient Aviation
The present day airline distribution system, according to Jim Davidson, president of Miami-based Farelogix, which sells direct connection distribution technology, is dysfunctional.
"I don't care whether it's an airline website, a travel agency or corporate booking tool … the model is void of value and is broken," he told delegates at an airline distribution conference organized by U.S.-based corporate credit card major, Universal Air Travel Plan (UATP).
"We are not keeping up with the rest of retail and consumer marketing when you look at distribution. We froze ourselves about 10 years ago when the internet came upon us."
In his keynote address to the conference, held in Hong Kong in March, Davidson was pulling no punches. Airlines, he said, were spending hundreds of millions of dollars on their websites to enhance the experience of their customers yet on average 50% or more of airline tickets were generated outside the their control.
"In this part of the world [Asia] and Europe it is sometimes 70% of tickets are generated outside your control. That does not seem correct. They are generated through travel agencies, corporate booking tools or online travel agencies (OTAs).
The problem, according to Davidson is that GDSs – such as Amadeus, Sabre, Travelport and Galileo – do not have interoperability.
"In other words, they don't talk to each other easily. So if you're an airline or a large travel agency and you want to connect to those GDSs, you have to do that four times because they are each closed systems built on technology that made sense at the time … but which has now become a costly burden, not only for the GDS, but for the airlines, the travel agents and the market place," he said.
Davidson added that integration was the key. "It is probably one of the easiest and most overlooked elements of our distribution process. We all tend to think that closed systems are the way we keep customers, but honestly that thinking died about 30 years ago and we don't know it yet.
"We have to wake up because closed systems do not work when you talk about integrating a travel experience [for a passenger] from the time they think about having to plan a trip to the time they get home."
To continue reading the article, Click Here.
UATP Selects SITA Technology For Expanding Merchant Network
News article from Business Travel Executive. To view the article, click here.
UATP (Universal Air Travel Plan) has selected SITA to provide a next-generation authorization and settlement infrastructure, as well as hosting and customer support services, for its low-cost payment network. The agreement incorporates Horizon Payment Services which is a key component of Horizon, SITA's next-generation passenger management system.
Updating UATP's infrastructure with SITA technology will facilitate the company's planned expansion to hotel and car rental merchants, as well as its reach into alternative forms of payment processing, says Ralph Kaiser, UATP's president and CEO. UATP's connectivity reaches over 95 percent of the world's airline passenger-carrying capacity and provides low-cost alternatives to expensive credit card and merchant service fees. Airlines can completely avoid credit card fees if their corporate clients purchase tickets on the airline that issued their UATP card.
SITA's new technology will replace UATP's existing infrastructure, which has been in place since 2000 and was provided by multiple suppliers.
Etihad Airways will begin issuing the Universal Air Travel Plan
Etihad Airways will begin issuing the Universal Air Travel Plan corporate payment offering , the United Arab Emirates-based carrier announced on Wednesday.
The 25 Most Influential Executives Of The Business Travel Industry Of 2010
This report appeared in the Jan. 24, 2011, edition of Business Travel News.
The 25 Most Influential Executives of 2010 is Business Travel News' 26th consecutive annual effort to identify the executives who most directly drove those changes, who forced the industry to take notice of and react to their decisions. The list of those executives is not a ranking; BTN is not measuring their relative influence against one another. An appearance on this list is not necessarily an honor; influence, after all, can be perceived positively or negatively, and this list over the years has hosted its share of disrupters alongside its visionaries and innovators.
Developing this list—the first compiled under the aegis of BTN's new parent, the Business Travel Media Group—began last autumn with multiple solicitations for nominations from the industry, of which we received quite a few. Director of research and media strategy David Meyer and BTN editors vetted each nominee, in many cases speaking directly with the person, to better identify and assess their impact on the industry. The list was finalized during a lengthy and occasionally raucous mid-December meeting of the entire Business Travel Media Group editorial staff. As always, measuring influence is a most inexact science, and we hope you let us know with which executives' inclusion you agree and those you think have been overlooked.
Business Travel News thanks all those who participated in creating this list including everyone who pitched a nominee to those who participated in the vetting process.
UATP Seeking Hotels To Join As Merchants
This report appeared in the Oct. 11, 2010, edition of Business Travel News.
By Jay Boehmer
Universal Air Travel Plan is ramping up its efforts to secure more hotels as merchants in its centralized payment network, embarking on a plan to use merchant acquirers to supplement individual direct deals with hotel chains.
The airline-owned corporate payment system this year secured La Quinta as its first merchant in the hotel space, thanks in part to efforts by mutual client Walmart. "What we need to do and what we're working on is to have ubiquitous acceptance," said UATP president and CEO Ralph Kaiser. "It's great that La Quinta is in the field, but it's weird to tell your customer, go ahead and use this on one chain, but otherwise you can't. They're used to having a card with acceptance everywhere."
While Kaiser said UATP would continue to directly discuss acceptance with major hotel chains like Hilton, Marriott and Starwood, he said using merchant acquirers—with which the payment company already has entered discussions—would more quickly fill the gaps in acceptance in the fragmented hotel industry.
"I would prefer to use direct connects with big chains," Kaiser said, "but there is so much franchising in the hotel industry, so it would be like if we signed a deal with Delta and had to go each one of their cities and negotiate a separate agreement. It just makes a lot more sense to do acquiring." Kaiser said it's on his agenda to secure a merchant acquirer agreement by the end of the year.
The UATP network long has prided itself on being a low-cost payment option, dealing directly with airlines and offering minimal merchant fees. Using merchant acquirers puts another party in the chain and another hand in the pot, but Kaiser said UATP still could preserve its economic value proposition to users. Kaiser noted UATP has gone the merchant acquirer route to gain travel agency acceptance.
Kaiser said UATP would need to bring value to corporate clients to use UATP for hotel payment, be that better economics or better reporting.
Though some companies like Walmart have embraced the concept, David Hillman, principal of corporate travel management consultancy Consulting Strategies, said the applicability of centralized hotel payment is limited in the corporate market, and other options already exist.
"If one wants to pay a hotel centrally, one can do it now with any card, whether it's an individual card or a purchasing card or a meetings card," Hillman said. "What this would do for UATP, it might give them additional scope in terms of the use of UATP, but it still doesn't catch up to the other guys with respect to the merchant networks they all have—whether that's Visa or MasterCard or American Express."
Still, at least one company has expressed its interest in expanding its usage of UATP for hotels, as Walmart said it would embrace further merchant acceptance, noting that using UATP for hotels has shifted its invoicing process from a paper-based system to an automated one.
"Prior to the automation, we were just manually paying invoices that came from the hotel," Walmart senior manager of corporate travel Mary Sharp said. "We would get the invoice and ensure its accuracy, and it was very time-consuming to do that. This was far more sustainable for us." Sharp said the process with La Quinta and UATP "provides a secure loop for us from reservation to payment."
Noting the centralized UATP hotel payment could replace instances of direct billing and invoicing, Kaiser said, "Even in a direct invoice situation between a company and a hotel, it's better for everyone to move onto a card platform. I thought adding a merchant fee would kill the economics, but the economics of invoicing and getting paid in 30 days or 60 days and reconciling all that paper is very expensive. It's like cash. People think cash is cheap. Cash is not cheap."
Meanwhile, other central hotel billing options have emerged in the corporate market. Carlson Wagonlit Travel U.K. last month became the first travel management company to offer clients a hotel bill-back facility, becoming the first agency to use Travelport subsidiary ENett International's automated invoice feeds from hotels. The new system automates hotel bill-back, which in the past required hotels to send paper invoices to the corporate traveler's TMC that then presented a monthly bill to the corporate client.
"The bill-back system is more prevalent in the United Kingdom than in the United States, where everybody pays by card," said CWT U.K. director of industry affairs Nigel Turner. "In the U.K., not all organizations, especially government departments, want to give their employees cards for paying hotels."
While Turner noted central lodge cards are an option for corporations looking for such centralized hotel payment, "The key thing with lodge card is you often can't get the itemization," he said, referring to hotel folio-type data, which remains elusive from many hotels. "Even hotels within a single hotel group can't always do that because of different systems. It's a lot more complex to get consistent itemized data from hotels than from airlines.
BTN's 2010 Best Practitioners: Walmart's Mary Sharp
In February 2010, Universal Air Travel Plan, which for decades had been an air-only centrally billed payment platform for corporations, announced the addition of La Quinta Inns & Suites as the first hotel company in its merchant network. That announcement was the culmination of efforts led by Walmart to pioneer automated central billing of hotel payment, a process that previously had been laden with paper and rife with inefficiency. Those efforts began in late 2008, were tested throughout 2009 and implemented this year, delivering Walmart's goal of using its preferred payment method—already the primary method for corporate air transactions—into the realm of hotel transactions.
A longtime user of UATP for Walmart's ARC-certified Corporate Travel Department to settle airline transactions on behalf of its corporate travelers, the massive Bentonville, Ark.-based retailer previously had relied on a far less efficient process for the settlement of hotel transactions.
"Prior to the automation, we were just manually paying invoices that came from the hotel," Walmart senior manager of corporate travel Mary Sharp said. "We would get the invoice and ensure its accuracy, and it was very time-consuming to do that. This was far more sustainable for us."
Sharp said the new process with La Quinta and UATP "provides a secure loop for us from reservation to payment."
Getting to that point was a group effort, led by Walmart, that required cooperation from UATP, issuers of its UATP payment platform, American Airlines and La Quinta.
"When you look at your computer, you have the Intel sticker," UATP CEO Ralph Kaiser said. "We're like that: We're the ingredient brand. We make things run, but we're not the main driver. This came from Walmart and American coming to us and asking, can you do this for us? We said, of course."
Getting the various supplier constituents on board "was an idea, and we presented to them individually, received their buy-in and had a joint meeting and further discussions from there," according to Sharp. "We're always looking at our business and looking for efficiencies. We did a beta test with a few hotels that were the most popular hotels in our portfolio, the ones we used the most. We worked out any issues and then we were ready to roll it out."
The new payment method fit well into Walmart's unique approach to corporate payment. Kaiser explained.
"Walmart doesn't issue walk-around plastic to a lot of their travelers," he said. "Let's say I'm in Arkansas at Walmart headquarters and I'm going to Chicago. I'll book the air, and I'll book the La Quinta property through the Walmart CTD, and all of that will be invoiced to Walmart on the American Airlines-UATP payment. When the traveler gets to the hotel, the room is paid for."
Now, the players are setting their sights on expansion. Walmart said it would like to extend its innovative program to other preferred hotels.
UATP, meanwhile, is setting its sights on ubiquitous acceptance at hotels, and said it already has gained interest from other clients on its payment platform that want to use the form of payment in their hotel program.
American Airlines sees expansion opportunities, as well. "Walmart approached us to see if we could utilize their UATP account for hotels. We worked with UATP and La Quinta to make it happen. We've been successfully running the program since 2009 and see additional opportunities to expand it," said Karen Buls, American director of small/medium-enterprise products, marketing and sales strategy, in a statement issued in February.
Meanwhile, La Quinta president and CEO Wayne Goldberg also sees this as more than a one company opportunity. "When it got announced, we knew we had something," he said. "I believe there's going to be huge legs, long-term. We have some customers who are very interested. People think it will replace direct bill."
Face To Face With La Quinta Inns & Suites' Wayne Goldberg
This report originally appeared in the Sept. 6, 2010, issue of Business Travel News.
By Michael B. Baker
La Quinta Inns & Suites president and CEO Wayne Goldberg spoke recently with Business Travel News hotel editor Michael B. Baker about revenue and rate projections for upcoming corporate negotiations and a development update for the midprice hotel chain.
Business Travel News: What's your outlook for the rest of the year?
WayneGoldberg: Every month of 2010 has been better than the month before. So far, August looks like it's going to be our best month. It started out really strong. Demand is clearly stabilizing. Occupancy has been growing most of the year, and we've had positive revenue per available room the last several months. We're clearly seeing signs that things are continuing to improve. Rates are still not where we would like them to be, but we're starting to see the momentum in the industry and our segment. 2010 will have growth. It will not be robust growth, but modest growth. All of that will come in occupancy. In 2011, we'll start to see a little rate and occupancy.
BTN: How about corporate rates?
Goldberg: We've had the reality of the full-service guys. We have to get them out of our space. When they start moving out of our space and moving their rate and getting corporate bookings back, ours will improve.
BTN: How is development progressing?
Goldberg: The development picture continues to be very strong. We had 58 hotels open last year. This year, we'll open 65 to 75 hotels. I'm hedging a little bit, because it depends on acquisitions that require conversions we could get by the end of the year that open early. We've seen things taper off. We've cleaned up the pipeline and removed some properties we don't believe today will be developed. It continues to be over 200 hotels, down from 220. As we continue to grow, we're getting close to number 800, so in the next two and a half years, we'll be at 1,000 hotels and 97,000 rooms.
BTN: What about international development?
Goldberg: Growth continues in Mexico and Panama, and we're working on some things in a number of other places, like Guatemala, Colombia and Costa Rica. We also have a real interest in Brazil. Execution is very hard, but hopefully some things will happen and we'll be able to get our footprint in Brazil as well. The growth there is just phenomenal.
BTN: What's been your focus for amenities and service?
Goldberg: We've done things like our deal with Universal Air Travel Plan. We have voice in the cloud. We haven't put a phone switch in a hotel in four years. We've found ways to lower cost, improve technological advances and it's just a matter of time before they become standard, like increasing Internet bandwidth delivered to a property to 3 megs from 1.5.
Do Airline Co-brand Credit Cards Meet Travelers' Needs?
Ai Editorial by Christopher Staab, Managing Partner, Airline Information
The airline co-brand is the king of credit cards, spurring consumer spending, as well as airline and bank revenues, like no other card. Consumers love to hoard frequent flyer miles, meaning they often choose airline co-brands versus cash-back and hotel cards which can offer more generous rewards. But, how long can the party last for this major source of revenue for airlines? It has been much discussed already that the lack of availability of frequent flyer seats is putting this model under pressure, but I believe airline co-brands could eventually be de-throned for also not meeting the needs of international travelers.
Almost all U.S.-issued airline co-branded credit cards, which are logically aimed at frequent travelers, charge a 3% foreign transaction fee on charges made on overseas purchases. 1% of this is the interchange fee charged by the Credit Card Networks and 2% is charged by the issuing bank (and it is reported that in some cases that the airline partner may share in this 2%.) The exception is American Express, which charges a 2% foreign currency transaction fee. Now many U.S-issued credit cards are even charging "foreign transaction fees" on U.S. Dollar transactions made abroad or even charged by foreign merchants via Internet, even though no foreign currency exchange takes place.
To read the entire editorial, visit http://www.airlineinformation.org/
Conference report: Airline Distribution 2010 By Mark Pilling
The 2010 Airline Business/UATP Airline Distribution event showed that ways of selling seats are changing, but not necessarily getting cheaper or less complicated, writes Mark Pilling in Rio de Janeiro
The global financial malaise felt like a faint discordant echo to the delegates at this year's Airline Distribution conference in late April. Sampling a few days of Brazil's buoyant economy from the event venue on Rio de Janeiro's bustling Copacabana beach strip, visitors could see for themselves just why Latin America has become such a vibrant travel market with airlines to match.
To view the entire article, please click here
UATP Airline Distribution Conference - Highlights
Rio conjures up many images. From the Statue of Christ to sunny Copacabana beach, people certainly have a strong impression of the city. Unfortunately, the Statue of Christ is closed and it was raining heavily during the conference so many of the delegates might have left the UATP Distribution conference with a slightly different impression!
However, they will have left the event armed with considerable more insights than when they stared. David Peller, from ITA Software when commenting on a networking event said that the best speakers shared at least one piece of information that you wouldn't find on the net. And, the UATP Distribution Conference did not fail on that front with numerous speakers and panellists sharing these types of insights.
Chris Vukelich from ENett was at his best in getting to the heart of the issue. His comments about "Putting lipstick on a pig" became the main talking point at the event. What he was illustrating was that there is no point in tinkering around the edges of the distribution issue and that you can't look at it in isolation. Distribution and payments are interlinked. The debate he opened up about both distribution and payment costs being controllable and not something you leave to the dusty old boys and girls in the back room was central to the whole conference.
What he also showed was how to be an excellent panellist. From talking with numerous of the delegates the whole event was well received as was the quality of the contributions from many of the speakers/panellists. Where Vukelich excels is to get to the heart of the issue and he clearly demonstrates he knows his subject. I don't think he mentioned in any of his replies what ENett where doing in this area (although from my separate conversations with him they are doing some pretty cool things) and that, in my mind, establishes him as a true expert.
As the conference was taking place in Rio we were all treated to a number of insightful presentations about the region and its airlines. Both GOL and Pluna shared their insights in how they have succeed in the region. They reinforced what ALTA was also saying – that the region has huge opportunities, but also has higher costs and numerous challenges to overcome. It was refreshing to hear from ALTA about these challenges – from government tax and levies (who knew that countries like Brazil who are broadly self sufficient in oil charge airlines more than the market rate for fuel!!) to lack of infrastructure also posing obstacles in the way to profitable growth. However, it was not all doom and gloom on that front as ALTA appear to be working hard to get the governments in the region to open up.
Now, no airline distribution conference that has already touched on the higher costs in the region would be complete without a discussion of GDS's costs. Radixx, Sabre, Amadeus and Travelport were all well represented at the conference and putting forward how they can work with their customers to improve distribution. For my mind, the "new" entrant (I say new because they were in the region, left and are now back in force) of Travelport in the form of Julio Bruno Castellanos put forward an interesting case. Basically, that being new they are keener and more price aware than others.
Sabre very kindly sponsored the evening entertainment where delegates were treated to a traditional Brazilian meal. For those of you not familiar with this, churrasco is essentially a massive "meat feast" (although the vegetarians sitting next to me seemed to be enjoying it as well!) where a vast variety of different meats are brought to your table and served to you. Like many of my fellow delegates I think I ate as much meat in one evening as I normally do in a month!
It really got me thinking though about the concept of "all you can eat". I've got a bundle like that for my broadband and phone at home. I have it on my cell/mobile – including internet (although not on roaming!) I even have Boingowhich lets me eat all I can on a wide range of wifi hotspots around the world with access to some 100,000 in total. If "all you can eat" works in these markets I wonder when or if it will arrive for the GDS's?
The conference also talked at length on ancillary revenue. In my days at BA where I tried very hard to get them interested in ancillary revenue things have now moved on dramatically. The talk is no longer about doing ancillary revenue on direct distribution (broadly that is a given) but how to be able to distribute via indirect channels/GDS's. This is a major change, and also a major challenge. There was numerous talk of "standards" but also a desire from many of the airlines to "just do it" and to hell with the standards as by the time they get delivered the world will have moved on.
There were hints at AA Direct Connect and the work that they are also doing with HP and if this was the future. Few people were willing to say anything in the public side of the conference but in conversations with the airline delegates they were all willing AA on. There seemed to be a feeling of letting them lead the way and if they succeeded to have plans to follow quickly. But they weren't about to join them and would be waiting in the wings to potentially pick up business is the whole Direct Connect goes pear shaped.
It was a great conference and this high level summary perhaps shows you why the phrase "lipstick on a pig" struck such resonance with the delegates. Latin America is a growth market, but it isn't one country and there are numerous challenges. Distribution and payments continue to be a major part of these challenges and both suppliers (GDS's and payment companies like UATP) and airlines are rising to this. Certainly, the image of Rio that will stick with me (and the views from Sugar Loaf were truly spectacular – and it was open!) is of that poor pig and it's lipstick……although, tell me, how would you put lipstick on a pig? Maybe we will find out at Airline Distribution in 2011!
Wal-Mart Pushes UATP To Accept La Quinta, Other Hotel Charges
Article in Management.travel
by Mary Ann McNulty
Growing its merchant network beyond air and transportation-related charges for the first time in 74 years, Universal Air Travel Plan began accepting charges from La Quinta Inns & Suites to serve its American Airlines client Wal-Mart. Soon, UATP expects to announce additional hotel chains as well as car rental firms as merchants, according to president and CEO Ralph Kaiser.
UATP's airline owners and issuing carriers began talking about merchant category expansion in mid-2008, when UATP reported record billings of $12 billion.
"We're a volume-based company, so the more volume we put on the network, the cheaper every transaction gets for the ownership group and our members," Kaiser said. "For every dollar of air, there is another dollar of associated travel and entertainment spend; part of that [additional spend] is hotel. If we could capture some of that, it would be helpful for corporations and good for our members."
"As UATP is the least expensive form of payment for air, it's probably going to become the least expensive form of payment for hotels and rental car companies," Kaiser said. "If I'm one of those merchants, I'd be happy to pick up several hundred million dollars of volume at a lower [transaction] rate. We don't have estimates on volume potential. We just know that it's pretty worthwhile for us to pursue." Kaiser declined to reveal UATP's hotel and car transaction fee charges, but has consistently said it is at least 1 percentage point less than payment competitors.
Developing Data Field Standards
UATP's councils, issuers and merchants developed data standards, reporting and delivery schedules for the new merchant categories, so technical development didn't begin until 2009.
"We wanted to bring our members along slowly and make sure we got it right," Kaiser said. "Going into a new merchant category completely unrelated to air transactions and the fields we populate for air was new territory. To add hotels, UATP had to expand data fields to include "check-in [and] check-out dates, room rate, property location, address, tax and customer reference info."
As each issuing airline provides client reporting, Kaiser said, it was critical for airline issuers and merchants to "understand data fields," which are the most important, what each would include and how they would appear in reports.
La Quinta became the launch hotel chain after Wal-Mart asked its UATP issuer American Airlines if it could use the payment card to streamline hotel billing, according to American's small and medium enterprise products marketing and sales strategy director Karen Buls.
"We've been successfully running the program since 2009 and see additional opportunities to expand it," Buls said in prepared remarks. Hotel acceptance on the UATP card, according to Wal-Mart travel services senior director Rick Johnson, "adds efficiencies and cost savings" to its travel program. "Plus this will provide a centrally billed product that can be easily reconciled."
Electronic Feeds Replace Paper
Instead of paper invoices, La Quinta now bills hotel charges to UATP accounts. American consolidates all air, rail, agency and La Quinta charges billed to Wal-Mart's UATP accounts and electronically transfers invoice detail to ease reconciliation and dataflow to financial systems, and speed payment, according to Wal-Mart and UATP.
"Even with the transaction fee, billing through UATP accounts provides La Quinta better reconciliation, speed of payment and data," Kaiser said. "Benefits outweigh the cost of accepting the UATP card," he added.
"Less expensive is certainly a driver for us," said La Quinta sales executive vice president Feliz Jarvis. "If we have a client like Wal-Mart, UATP provides us with opportunities to have the best of both worlds." Although it is less prevalent in limited service chains than in full-service, some large corporate accounts "look to us to provide centralized billing or direct billing. This can be time consuming and inaccurate for clients," Jarvis said, so the hotel chain looked for solutions.
La Quinta worked with Remco Software, maker of the NiteVision property management system used by the chain's nearly 800 franchised and company-owned locations, to code and test interfaces to Sabre and UATP. NiteVision electronically transmits hotel charges to UATP via the Web, according to Remco president and chief technology officer Mark Loyd. Payment authorizations are made only when corporate travel policy parameters are met, according to the companies.
Consequently, La Quinta could accept and centrally bill payment from an employee who presents a UATP card at a front desk, what UATP calls "walking plastic." When he envisioned network expansion to hotel, Kaiser said, he thought "centrally booked and billed" charges would be the norm. "We are not connected to traditional point of sale terminals and acquirers like Visa, MasterCard and American Express." But if proprietary hotel booking software is able to transmit charges to UATP, Kaiser said, "it will be up to companies and issuers to allow point-of-sale transactions."
La Quinta said it plans to accept UATP payment entered as part of the booking process or at the front desk. Now, La Quinta is "trying to expand" the UATP central billing to other clients and prospects with special focus on five to 10 clients for which it provides centralized billing, Jarvis said.
"I did not think that the model of being on a direct bill invoice would be attractive to switch to UATP's centrally billed form of payment," Kaiser acknowledged. "But because our economics are lower than traditional charge cards" and can deliver other advantages over paper-based invoicing, "it worked. I was pleasantly surprised because this broadens the appeal. Obviously if you can switch off an expensive card to UATP it makes sense to."
UATP now is focusing on signing and implementing additional hotel chains and car rental companies, as well as more of its 13 issuers.
"All of the U.S. issuers are now talking about, or making plans to follow suit," Kaiser said. In addition to American, issuers include Continental Airlines, Delta Air Lines, United Airlines, US Airways, AirPlus International. Outside the U.S., UATP issuers include Air New Zealand, Austrian Airlines, El Al, Japan Airlines, Qantas Airways and Gol in Brazil. AirPlus issues UATP-based company accounts for 10 carriers including Air China, Austrian Airlines, British Airways, Lufthansa, Northwest Airlines, Swiss International Air Lines, TAP Portugal and Singapore Airlines.
Pressure to add more issuers, merchants or accounts to boost transactions has intensified as billings last year dropped 25 percent to $9 billion, due to economic conditions in its three largest markets–Japan, Europe and the United States, Kaiser said. To boost transaction volume, UATP has targeted new merchant categories, issuers and corporate accounts.
"We were fortunate that as we were hatching this strategy we had some really big players–Wal-Mart, American Airlines and La Quinta–willing to do this," Kaiser said. "We feel really good about where we are because we've stress tested this every which way we could."
La Quinta First Hotel Chain To Join In UATP Network
Article in BTNonline.com
Universal Air Travel Plan in February added to its fold its first hotel vendor, La Quinta Inns & Suites, marking a first step in what the network hopes leads to eventual widespread acceptance among both hotel and car rental companies.
The La Quinta agreement grew out of a trial run that began in 2009 with UATP client Wal-Mart, UATP president and CEO Ralph Kaiser said. Wal-Mart uses the UATP network with American Airlines as its issuer, and it approached the airline to use its account to handle transactions from La Quinta, one of its primary hotel vendors for domestic travel.
"We like to make sure we're cutting-edge without spending millions of dollars on incredible amounts of resources innovating things that won't make a difference," La Quinta president and CEO Wayne Goldberg said. "This partnership is creating something that will be a major platform for our industry, for airlines and other retail outlets."
Both Goldberg and American Airlines, UATP's founder, described the launch period with Wal-Mart as a success and said La Quinta now is ready to offer UATP acceptance to other corporate clients. At the same time, UATP is involved in discussions with other hotel brands and also has talked to all major car rental suppliers about introducing acceptance, Kaiser said.
"The chief benefit is going to be the data and reconciliation," he said. "We'll be offering the same detailed data for hotel transactions we do in air in a centrally billed and booked environment."
The network in recent years has reported intentions of expanding beyond its airline network. Last year, it announced a partnership allowing users to purchase travel on Amtrak through all points of sale (BTNonline, March 31, 2009).
Adding hotels and other non-airline vendors provides issuers the chance to grow volume, Kaiser said. With hotel acceptance, for example, corporate travelers can use UATP on trips even when no air travel is involved, he said.
UATP's issuer network, which includes AirPlus International and several major airlines, remains an airlines-only club, however. "Nothing is going to change about the ownership group, at least not in the short-term," Kaiser said. "If it ever makes sense for both players, we'll see which way the market pushes us."
Towards a Declaration of Inter-dependence?
Article from Edgar, Dunn & Company
What does "independence" or "inter-dependence" have to do with the payments industry?
One of the major questions to be addressed by the payments industry (and especially by merchants) is whether to move towards independence or towards inter-dependence. A recent survey completed by Edgar, Dunn & Company (EDC) among 70 airlines clearly shows their move towards independence for payments-related matters. However, it is unclear whether these merchants will move towards inter-dependence in the future.
At first, what do we mean by these words? Human beings and businesses typically grow through three phases:
From dependence … to independence … to inter-dependence
Yesterday's Position Today's Position Tomorrow?
Phase 1: Dependence
The best analogy is newborns: they are completely dependent on their parents for all their needs. Just as start-up companies are completely dependent on one client or on one supplier such as their bank
Going back to EDC's "Airline Payments" survey, interviews with airlines indicate that they used to be fully dependent upon their "acquiring" bank (with whom they signed a merchant contract enabling card acceptance) and upon the payment networks. This can be summarized by their typical comment of "we had no choice"
Phase 2: Independence
The analogy here is toddlers or young teenagers: they are convinced that they can be completely independent and can do what they want. Just as maturing businesses can make major decisions without involving their partners
The "Airline Payments" survey clearly shows that the majority of airlines are proactively becoming independent; this can be seen in their strong move towards accepting alternative forms of payment, surcharging credit cards, etc. (see survey results below)
Phase 3: Inter-dependence
The analogy here is adults collaborating via informal networks or formal organizations in order to achieve a greater outcome than they could achieve on their own. Just as banks got together thirty years ago to set up interbank associations such as Europay, MasterCard and Visa
The "Airline Payments" survey shows early signs of collaboration between airlines and payment providers, such as banks and payment networks, but it is still unclear whether collaboration will become the standard modus operandi
With this framework in mind, the following reviews the key findings from the "Airline Payments" survey that EDC recently completed, in collaboration with the conference organisers, Airline Information, across 70 airlines.
1) Cost of Accepting Cards
For most airlines, traditional card brands such as American Express, Master- Card and Visa have achieved a high penetration of airline ticket sales, up to 85%-90% in some cases. As such, the cost of card acceptance is often an important "distribution cost" for airlines, alongside other distribution costs such as Global Distribution System fees or travel agency commissions.
Based on responses from our sample, the average total cost of accepting cards is typically in the $7-$10 range per airline ticket. This cost has been attracting an increasing amount of attention among airlines, as many have already reduced, or attempted to reduce, their other distribution costs. In terms of trends over the next 2-3 years, airlines are equally split between optimists and pessimists: 42% believe this cost will decrease vs. 40% who believe it will increase.
2) Acceptance of AFOPs (Alternative Forms of Payment)
Airlines had historically limited their acceptance primarily to international branded cards, such as American Express, Diners Club, MasterCard, Visa and UATP. One of the first signs of a move towards "independence" is the increasing number of airlines today accepting forms of payment that were not traditionally accepted, especially for online direct sales. For instance, Lufthansa started accepting PayPal in 2009 across more than 40 countries.
When asked about their current status, about two thirds of airlines (63%) already accept AFOPs. This might look surprisingly high. However, it includes "debit cards"; airlines have been accepting MasterCard / Visa-branded debit cards and are starting to accept domestic debit card schemes. It also includes "bank transfers" that are becoming increasingly available via an Internet interface such as iDEAL in the Netherlands, BPAY in Australia, direct linkage to each bank's online banking facility in India, etc. And finally, e-wallets such as PayPal are already accepted by 29% of these airlines.
Looking at the next 2-3 years, half of the airlines believe that AFOPs will represent a significant percentage of total airline ticket sales, i.e., more than 10%. These airlines expect that the acceptance of AFOPs will have more than a marginal impact on their cost base, especially if AFOPs do not remain constrained to the airline's own website. As such, there is increasing interest among airlines in AFOPs for other important sales channels, such as call centres or travel agency sales.
Most airlines look at AFOP as an "addition" to their accepted forms of payment and not as a "replacement" initiative. In other words, they will continue to accept traditional card brands such as American Express, MasterCard and Visa, and are adding AFOPs for specific objectives.
In our interviews with airlines, it became clear that there are multiple objectives driving this increase in AFOP acceptance. In some cases, airlines focus on cost reduction, whilst in others, the major drivers are:
"market reach", i.e., accepting forms of payment that are popular in a specific domestic market
"increased sales", i.e., achieving a higher sales conversion rate by offering a wider range of payment methods
In addition to new payment methods, there seems to be a strong interest among airlines for new payment technologies such as mobile-based payments, especially for remote payments whereby a NFC (Near-Field Communication) infrastructure is not required. About 53% of airlines expect to accept mobile payments within three years. This interest is consistent with other mobile services introduced by the likes of Air France, Lufthansa, etc. enabling mobile check-in and mobile boarding pass.
3) Increasing Usage of Surcharging
Perhaps one of the strongest signs of this sought-after "independence" is the strong interest among airlines for surcharging (i.e., charging an additional fee depending on the selected form of payment).
71% of airlines expect that the use of surcharging will increase over the next 2-3 years. It seems that the most active geographic region for surcharging is Europe. The Payment Services Directive was meant to be transposed into national laws across 27 European countries, and one of the key articles (52-3) is clearly promoting an increase in merchant freedom to surcharge. As an example, KLM in the Netherlands started surcharging credit cards across all channels in August 2009, and Low Cost Carriers such as Ryanair and EasyJet now surcharge cards as a standard practice.
Looking at the next 2-3
4) Increased Interest in Airline Issued Forms of Payment
Another sign of increased "independence" is the interest among airlines for airline issued cards (private label cards, UATP, etc.).
61% of airlines expect to see further increases in airline issued cards over the next 2-3 years. Examples illustrating this trend are the recent announcements by airlines such as GOL (in Latin America) and El Al to start issuing UATP lodged accounts to their corporate customers. In addition, other airlines, such as Lufthansa via its subsidiary AirPlus, have been successful at growing this corporate form of payment whereby the airline is the actual "issuer".
5) Future Concerns / Threats
In light of the above trends, the survey also asked the "What keeps you up at night?" question.
As could be expected, acceptance cost and payment fraud rank as the two biggest payment threats perceived by airlines over the next 3 years. On the issue of fraud, a number of airlines have adopted 3D Secure (resulting in a liability shift for some of the card transactions in the event of fraud), and nearly half of the airlines in the survey remain concerned about the impact of payment fraud.
However, more un-expectedly and interestingly, the third threat is viewed as "operational complexity". In the interviews, a number of airlines expressed a concern over the growing operational complexity of payments, driven by the very independence that they seek. In other words, there is an emerging realization among airlines that the flip side of independence (e.g., accepting AFOPs, expanding surcharging, self-issuance) is increasing the complexity of the merchant's internal payments operations.
Which brings us to "inter-dependence"
Towards inter-dependence?
The survey results indicate that there are two main scenarios for the future state of payments in the airline industry:
Scenario 1: Merchants (airlines) become increasingly independent. This would involve mostly opposing relationships between airlines and payment providers
Scenario 2: Merchants (airlines) become increasingly inter-dependent with payment providers (payment networks, banks, etc.). This would involve mostly collaborative relationships between merchants and payment suppliers
An example of a retailer in another industry who has focused on collaboration is Whole Foods, a successful US food retailer specialized in organic food. It has developed its own "Declaration of Interdependence".
Interestingly, one of the key parts of this Declaration is the statement that Whole Foods is not a "fully self-sustaining ecosystem" on its own, hence the importance of other businesses (suppliers) in "creating an outstanding retail shopping experience". In other words, Whole Foods recognizes the importance of collaborating with its suppliers in order to differentiate its value proposition for consumers.
Based on the airline survey and EDC's consulting experience across the payments industry, we would suggest that merchants might well gain from collaborating with payment suppliers, such as banks or payment networks, and vice versa.
This approach would involve airlines collaborating with their payment providers potentially for a range of tactical and more strategic initiatives. This could include initiatives to co-develop payment products, to bring to market new technologies (e.g. contactless, mobile) and/to enter new countries jointly. Such a collaborative approach should help payment providers launch innovative products with a greater likelihood of success. And it should also help merchants with the introduction of products supporting even more their sales efforts and with less impact on their internal operations.
Will the airline payments industry evolve to a state of inter-dependence? It is hard to tell and EDC hopes that the survey results will contribute to this debate. Ultimately it will require two key ingredients: first, a belief that airlines and payment providers will both be better off in the long-term if they collaborate more closely; and second, a high level of trust among participants.
Early indications are that there is at least an appetite for more frequent and more engaging discussions among the parties. This is a good first step and will help build trust. But, it may be a couple of years until a clearer picture emerges.
UATP Books a Hotel As Its Airline-Card Network Diversifies
Article in DigitalTransactions
Processing volume hit some turbulence last year, but that didn't stop Universal Air Travel Plan Inc. from pursing its goal of adding merchants to its airline-owned network. Washington, D.C.-based UATP last week reported that LQ Management LLC's La Quinta Inns & Suites has become the first hotel chain in the network, where the UATP card is accepted by about 250 airlines. "Corporate-client demand for UATP acceptance at hotels drove this initiative," UATP president and chief executive Ralph Kaiser said in a news release.
More hotels are likely to be added, as are car-rental agencies, a UATP spokesperson tells Digital Transactions News by e-mail. "Yes, we are in the process of working with other chains and look forward to expanding the network," the spokesperson says. UATP wouldn't identify any pending deals with either a hotel or car-rental company.
UATP indicated about a year ago that it was working on bringing hotels into its network, which carriers developed to facilitate corporate air travel (Digital Transactions News, Feb. 17, 2009). Eleven domestic and foreign airlines issue UATP accounts and cards to corporate clients, in addition to processor AirPlus International on behalf of three. Asked about the time it took to bring a hotel on board, the spokesperson says, "Adding this new category required extensive testing. We wanted to be sure that the systems work as they were developed so that our corporate clients will enjoy the new developments."
AMR Corp.'s American Airlines, UATP's founder and a major issuer of UATP cards, along with Wal-Mart Stores Inc. played key roles in bringing Dallas-based La Quinta into UATP. In the release, an American Airlines executive said Wal-Mart approached the carrier about adding hotels to its UATP account. The UATP spokesperson says American issues UTAP accounts to Wal-Mart, which buys all of its global air travel over UATP. Now Wal-Mart, and other merchants, can get centrally billed hotel as well as airline charges through UATP. Dallas-based La Quinta has nearly 800 limited-service hotels in 46 states, Canada, and Mexico.
Adding hotels gives corporations one more reason to use UATP cards, which cost network merchants less to accept than general-purpose credit cards. Besides working to add travel-related merchants, the network is bringing alternative payment systems to its clients, including PayPal Inc., Acculynk Inc., which specializes in processing Web-based PIN-debit payments, and several others. Those online networks could bring consumer-originated payments to the network.
But after gaining altitude in 2007 and 2008, when UATP's processing volumes hit $10 billion and $12 billion, respectively, volumes plunged about 25% last year to $9 billion as the recession took its toll. "Corporate client travel was affected by the economy as most sectors were," the spokesperson says. She adds, however, that, "We are already seeing double-digit improvement in 2010." The spokesperson also says UATP's other services, which include various settlement services, training for airline personnel, and insurance products, did not suffer the declines that network payment processing did last year.
UATP is expanding the payment network to hotel and car rental, and announced La Quinta Inns & Suites as its first hotel merchant.
Client demand to expand centrally billed payments beyond air, travel agencies and Amtrak prompted UATP to talk to hotel chains and car rental firms, according to Universal Air Travel Plan president and CEO Ralph Kaiser. UATP founder American Airlines is the first issuer to expand to hotel payment acceptance, in service of client Walmart. The retailer has been using its AA UATP account to centrally bill hotel charges at La Quinta since last year.
Dave Holmes, UATP, interview at NBTA Annual Conference, San Diego
UATP Signs Deal with NxSystems, Inc.
Article in Odyssey eMagazine
Universal Air Travel Plan, Inc. (UATP) has announced a partnership with NxSystems, Inc., a leading provider of Global Payment Solutions. NxSystems product line includes domestic and international prepaid cards that are processed through a proprietary multi-currency payment platform gateway that allows worldwide access to e-banking, e-payments and e-commerce.
Ralph Kaiser on BusinessTravelRADIO
Univeral Air Travel Plan (UATP) President and CEO, Ralph Kaiser, on BusinessTravelRADIO
The Virtual World Comes to Commercial Cards
Article in Commercial Payments International
For the past several decades, when payment cards were mentioned the image of a piece of plastic with rounded edges came immediately to mind. However, recent developments in both the commercial and retail card areas are resulting in the disappearance of the little piece of plastic. Sarah Williams looks at how virtual cards are being used by the commercial payments industry.
'Virtual' is a term and state that is increasingly utilized for many different applications and this trend has definitely reached the world of commercial payments cards. Virtual cards simply refer to payment methods that work in the same way as traditional payment cards but without the physical plastic card.
Note: A subscription to Commercial Payments International is required to view the entire article
Gol lança cartão corporativo UATP
Article in clientesa.com.br
Nova opção de pagamento de viagens corporativas é aceita mundialmente
A Gol anunciou que emitirá contas UATP (Universal Air Travel Plan – Plano Universal para Viagens Aéreas) com o lançamento do novo Cartão Corporativo Gol. "O UATP é uma ferramenta valiosa para fortalecer a posição da Gol em relação a empresas e agências de viagem, ao mesmo tempo em que reduz nossos custos de distribuição", afirmou Tarcísio Gargioni, vice-presidente de marketing e serviços da Gol.
Os clientes do Gol UATP se beneficiarão de processos descomplicados de registro, pagamento e reconciliação, além de relatórios de viagens aéreas de alto nível. O programa Gol UATP aprimora o gerenciamento de despesas com viagens por meio de informações detalhadas, que incluem nome do passageiro, companhia aérea, destino e outros dados do itinerário. A Gol utilizará o novo sistema de faturamento e portal corporativo do UATP, o UATP Processing Solutions, que permite que empresas designem números de contas de UATP individuais para centros de custo específicos.
De acordo com Ralph Kaiser, presidente e executivo-chefe do UATP, ter na lista de companhias aéreas do UATP a Gol prova quão popular é esse meio de pagamento, tanto no mercado brasileiro quanto mundialmente. "Passageiros corporativos na América Latina que utilizarem o Cartão Corporativo Gol terão acesso a um nível de conveniência e serviços superior, seja qual for seu destino", explica.
Aceito por mais de 250 companhias aéreas associadas e representando mais de 95% da oferta de assentos em todo o mundo, o UATP é designado para diminuir despesas com vendas, reduzindo ou eliminando taxas de operações com cartão de crédito para companhias aéreas. Agências de viagem também são beneficiadas pelo UATP devido às menores taxas de serviços comerciais de cartão de crédito e à capacidade de reconciliar automaticamente os números das passagens às taxas de serviço por meio do programa comercial para agências de viagem do UATP. Para empresas, a rede proporciona um método de pagamento simples e direto, o qual as isenta de taxas de conversão cambial, taxas anuais e taxas por cartão, ao contrário das outras formas de pagamento.
Op-Ed: Don't Surcharge, Share Card Costs
As the managing director for a leading corporate payment provider, I have an opinion about credit card economics that might surprise you. Most of the discussion in the media and among corporate customers today focuses on what the airlines are doing to pass along card fees. However, a fair debate on this subject would require an understanding of why. Now more than ever, airlines are looking for areas to save costs. So it's logical that distribution and payment would be a part of this savings equation. While I understand the somewhat inequitable card economics, there are smarter ways to leverage the playing field than blanketed surcharging.
I believe the genesis of the merchants' frustration is that the level of fees charged by most cards exceeds the perceived value. It is one of the economic realities that the merchants pay the bill: Their proportion is nearly 90 percent of the total credit card cost. In fact, the cardholder only pays 10 percent. This revenue generated is usually used to fund strategic loyalty building with the customer in the form of rewards, rebates and incentives. What's not always clearly understood in the industry is that not all card companies are alike. Their fees are different, their level of rewards and incentives are different and importantly, their technological capabilities and comprehensive offerings are different. So why should cards all be treated alike?
The new reality is taking shape as I write. In parts of Europe and Asia/Pacific—Hong Kong and Australia, for example—credit card surcharging is already in place. In fact, GDSs in the Netherlands are now technically prepared to handle and display the surcharge fees. This is not simply related to major airlines worldwide, but merchants of every size and category, from low-cost carriers to ferries!
What does this mean for the end user, the cardholder or corporate customer? Certainly regression if they demand that their agencies revert to paper invoices and manual processes. Customers would then be required to work without the benefits of a credit-card-based payment solution to optimize costs and processes related to business travel. They would lose the enhanced invoice data, electronic data integration, global data consolidation and extended payment terms to which they've become accustomed and around which they have built their travel policies and budgets.
Further discussion is developing in the United States, where United Airlines has said it will begin imposing heavy penalties on select travel agencies for continuing to use their merchant contracts after a certain date. These agencies must now become merchants themselves and face higher bond liabilities and bear the credit risk while losing such benefits as improved cash flow.
So why would United in the United States exclude UATP within their decision? Because, as a UATP card issuer and merchant, they are well aware of the benefits the UATP card brings. As the leading issuer of UATP worldwide, AirPlus is the preferred partner of airlines worldwide.
To conclude, airline benefits from card-based payment systems include outsourced invoice processing, reduction of fraud and credit risk, as well as quick and timely settlement. I believe airlines benefit greatly from credit card payments and they are indeed prepared and willing to pay for those benefits, just not at the same scale as they pay today. They simply want to find fair pricing that fits their cost savings objectives.
I believe change is imminent, and we've been assessing and researching this topic for some time. My proposal is a 50 / 50 share of card costs between the merchants and the cardholder or corporate customer. That is a fair allocation of costs. We have proposed that model to airlines and corporate customers alike and their responses are promising. With that in mind, I believe we'll have new credit card economics which are smarter than surcharging.
Ralph Kaiser on Travel Talk Media
Univeral Air Travel Plan (UATP) President and CEO, Ralph Kaiser, on Travel Talk Media.
UATP Advances Plan For Hotel, Car Payment
Article in BTNonline
Universal Air Travel Plan president and CEO Ralph Kaiser this month told Business Travel News the payment network has gained approval from its board to add hotels and rental cars to its merchant network. Kaiser said UATP, which for nearly three-quarters of a century has offered a centrally billed payment option for airlines, has been piloting the new payment capabilities with a corporate client and a major hotel chain, though he would not disclose its partners on the project. Kaiser said UATP's board last month approved the plan, and he expects to announce at least one major hotel chain as a merchant by year-end.
Amex Reports Continued Q2 Price Drops
Average domestic airfares in the second quarter decreased 18 percent year over year to $212 and international fares fell 19 percent to $1,609, as companies increasingly required travelers to book seats in the back of the plane, according to this month's American Express Business Travel Monitor. During the quarter, 36 percent of booked seats were in business class, compared with 50 percent in the second quarter of 2008. Average domestic booked hotel rates fell 2 percent to $150 compared to the first quarter of 2009, the monitor showed. While international booked hotel rates decreased 12 percent year over year, rates increased 6 percent over the first quarter to $241. Car rental rates decreased 3 percent from the previous quarter to $71.
Amadeus To Release New Agent Desktop Tool
Amadeus this month announced its plans to release a new agent point-of-sale tool, primarily designed for corporate travel management companies, which the company expects to begin rolling out in North America in the first half of 2010, followed by a general deployment in the second half of the year. Like other agent desktop developments from other global distribution system providers and mega travel management companies during the past 18 months (BTNonline, Aug. 11, 2008), Amadeus One has both a graphical and cryptic user interface, operates in a multi-GDS environment, housing traveler profiles and other non-GDS data (BTNonline, March 16) and brings several mid-office quality control functions up to the front end. Focusing on corporate travel, Amadeus One integrates policy management administration and rules-based modules so agents can more easily configure policies into the system and monitor them. Amadeus' Boston-area development team has been working on building Amadeus One during the past 12 months by integrating several Amadeus technologies currently in use in the marketplace, including profile solutions and command engines, according to Amadeus North America senior vice president of product development Mary Keagul.
Hyatt Files For Initial Public Offering
Hyatt Hotels Corp. this month announced a filing with the U.S. Securities and Exchange Commission proposing an initial public offering of shares. Hyatt intends to raise up to $1.15 billion in the IPO. The filing did not specify the timing of the IPO. The company's portfolio of 413 branded hotels with119,509 rooms is among the world's largest. Hyatt has operated as a private company for several decades. The family of Hyatt founder Jay Pritzker took Hyatt and its separate international interests private in 1979 and 1982, respectively. The two joined to create the unified Hyatt Hotels Corp. in 2004.
All UATP Cards Now Accepted for NBTA
ODYSSEY magazine
Article in ODYSSEY magazine
Universal Air Travel Plan, Inc. (UATP) has announced that it is now accepted by the National Business Travel Association (NBTA) as form of payment for all NBTA registration fees.
By adding UATP to our payment options we are giving our members and attendees greater flexibility to choose their preferred form of payment," said Kevin Maguire, CCTE, GLP, NBTA president & CEO. "UATP is a longstanding member and supporter of NBTA, and we are pleased to strengthen that relationship to make UATP part of NBTA's business processes."
NBTA is the authoritative voice of the business travel community, representing over 4,000 corporate travel managers and travel service providers who collectively manage and direct more than $200 billion of expenditures within the business travel industry, primarily for Fortune 1000 companies.
"With this new development in the relationship with NBTA, UATP is enabling maximum use for our customers," Ralph Kaiser, president and CEO, UATP stated. "We want to be able to meet the demands of our corporate clients; adding UATP as a form of payment for NBTA events will help our clients centralize one of the most important investments for corporations, meeting expenses."
UATP is an active NBTA member and a sponsor at many of NBTA's events globally. Visit UATP at the NBTA International Convention, 23-26 August, San Diego, Booth #837.
UATP offers prepaid vouchers
Article in Travel Weekly
Universal Air Travel Plan (UATP) partnered with Paysafecard to offer Cash-Ticket, a prepaid voucher that consumers can use to purchase flights online.
In its initial iteration, the deal provides access to the Cash-Ticket vouchers at many outlets in Europe, UATP said. The voucher or set of vouchers will come with a 16-digit PIN code to be used when making online purchases.
When buying vouchers, the consumer pays a one-off fee of two euros, regardless of how much credit is purchased.
The arrangement enables airlines to process Cash-Ticket transactions via existing airline UATP connections.
To date, UATP has traditionally been used as a form of payment for corporate travel. Cash-Ticket takes UATP into the consumer arena.
Paysafecard CEO Michael Mueller said the deal allows airlines that work with UATP "to accept real online cash payments from a new group of customers."
Mueller said Paysafecard has found that online cash payment enables websites to reach people who haven't previously made purchases online.
UATP President Ralph Kaiser, said, "There is a steady trend toward debit-based payments and cash transactions. …The partnership allows speed to market for Cash-Ticket through existing UATP connections and offers the airlines lower distribution costs."
Paysafecard operates in 20 countries and has offices in London, Vienna and Bern.
UATP Partners With UK's Paysafecard For Prepaid Air Voucher
JULY 08, 2009 — Universal Air Travel Plan on Wednesday announced a partnership with the U.K.-based Paysafecard Group to create a prepaid voucher system to purchase air tickets with UATP partner airlines.
The voucher, Cash-Ticket, does not require personal bank details and instead provides a 16-digit PIN code to users, including infrequent or guest business travelers who might not have a corporate charge card. Users can track their balance and transactions online.
A Cash-Ticket also requires a €2 activation fee. The vouchers come in denominations of €10, €20, €50, €100 and €150, and travelers can use up to 10 at once.
"Consumers continue to look for greater convenience and security for online purchases," UATP president and CEO Ralph Kaiser said in a statement. "There is a steady trend toward debit-based payments and cash transactions. Cash-Ticket is perfectly poised to capture this growing trend."
Brazilian Gol Airlines SMILES
Article in Zacks Investment Research
Earlier this week, Gol Linhas Aereas (GOL – Analyst Report) the first Brazilian low-fare airline, announced the creation of the SMILES credit card through its subsidiary, VRG Linhas Aereas S.A., in partnership with two banks, Brasil SA and Banco Bradesco SA (BBD).
According to the agreement, the banks will issue credit cards to their clients bearing the SMILES air-miles logo and GOL will receive R$252 million (US$129 million) in return. Out of that, 60% will be paid by July 31, 22% will be paid by January 31, 2010 and the remaining 18% will be paid in monthly installments in the first five years.
The company intends to make people familiar with the benefits of SMILES through this initiative, which is indirectly expected to boost its revenue. SMILES loyalty program, the largest mileage program in Latin America, currently has more than 6.2 million clients with up to 100,000 new registrations each month. The company acquired VARIG's SMILES frequent flyer program in October 2008, when it consolidated with VRG.
Recently, Gol purchased some stock in UATP's business travel program and became a UATP shareholder. UATP — whose accounts are accepted as a form of payment for corporate business travel by Amtrak, airlines and travel agencies worldwide — will help develop a corporate client base, which will be a revenue booster for the company.
Although oil prices have increased to US$71 per barrel from approx US$35 per barrel in March 2009, they are expected to fall below US$60 by the end of the year because of weak global sentiments. The decrease in oil prices will benefit the aviation industry by reducing airline fuel costs. Therefore, we continue to have a neutral view on Gol, Tam (TAM – Analyst Report), and Lan Airlines S.A. (LFL – Analyst Report).
Jetstar unveils new payment and marketing initiatives for travel industry partners
Article in Scoop Business
Australia's low fares airline Jetstar has today announced at the Australian Tourism Exchange (ATE) a series of new payment initiatives as well as heralding a three year multi-million dollar strategic marketing partnership with Tourism NSW to better support key travel industry partners.
As the fastest growing international airline now operating into and from Australia, Jetstar continues to evolve its distribution and settlement processes to more effectively but efficiently support an expanding Pan Asian network.
Jetstar plans to introduce Universal Air Travel Plan (UATP) payment and settlement process, initially in New Zealand, that will help support recently expanded trans Tasman and newly introduced domestic New Zealand low fare services between Auckland, Christchurch, Wellington and Queenstown.
Available within weeks, Jetstar's offer of UATP services will see it join the low cost global payment network company stable of carrier's now including its parent company Qantas Airways, Air New Zealand, British Airways, American and Delta Air Lines.
Jetstar Chief Executive Officer Bruce Buchanan said the growing take-up of UATP and its provision of extensive billing services had particular importance within the Japanese and New Zealand travel markets, two primary international and operational strongholds for Jetstar.
"Jetstar now operates the greatest number of services on the Australia-Japan route along with a fast growing New Zealand flying business which makes the introduction of UATP particularly appealing and of strategic importance in our engagement with the travel industry and corporate clients," Mr Buchanan said.
"UATP lowers the cost of distribution by lowering the cost of accepting credit cards and thousands of travel agencies now accept UATP as a low-cost form of payment for air travel, service fees and net fares."
In a range of announcements as part of an update to the travel industry at ATE, the Jetstar CEO also unveiled:
0. Formal commencement of interline E-Ticketing with the South Pacific carrier Air Calin, which follows interline arrangements already established with Qantas and Etihad;
0. Jetstar's Gold Coast Lounge launching today, a one-off passenger lounge concept at the low fare carrier's major Australian leisure gateway;
0. Unveiling a major new three year, multi-million strategic marketing partnership with Tourism NSW to cooperatively support Jetstar's international and domestic operations into its NSW ports as well as the Gold Coast Airport gateway into northern NSW tourism markets.
Mr Buchanan said despite the continued success of Jetstar.com as its major distribution channel with over 4 million unique visitors monthly, the airline had become increasingly attuned to ensuring it had the commercial tools to best meet the constant level of change within both wholesale and retail travel markets.
He said the airline's renewed partnership with Tourism NSW equating to a substantive three year cooperative marketing agreement would support both Jetstar domestic and international services into Sydney, the Hunter Region (Newcastle Airport) and North Coast (Ballina Byron Airport) markets.
"Both Japan and New Zealand will be target visitor markets with our dollar for dollar future marketing initiatives designed to be all about driving greater customer conversion and aligned to now greater levels of Jetstar international services from both countries into Sydney and northern NSW via our Gold Coast Airport gateway," Mr Buchanan said.
"Our previous cooperative campaigns with Tourism NSW have delivered results been ahead of expectation in terms of converting travel sales and visitation numbers to New South Wales.
"This new three year partnership will strengthen our relationship and offer both parties
greater opportunities to extend the reach and effectiveness of tourism campaigns and
promotional programs."
Jetstar's Gold Coast Lounge has capacity for 120 people and features a range of benefits, including a designated children's play area and children's cinema, complimentary food and beverages, Internet access and plasma screens showing movies, music videos and television news.
Mr Buchanan said Gold Coast Lounge is a welcome addition for Jetstar passengers travelling from Gold Coast Airport on one of the airline's existing 120 weekly domestic and 23 weekly international return services to Japan and New Zealand.
"Gold Coast Lounge is the latest example of Jetstar's commitment to offering even greater choice to our customers both in the air and now on the ground in our largest holiday port," Mr Buchanan said.
"The unique opportunity at Gold Coast Airport allows us to offer Jetstar passengers the choice of a passenger lounge. This lounge will support our ever growing domestic and international services operating to and from our Gold Coast flying hub."
Entry to the Gold Coast Lounge is available for purchase at Jetstar.com as part of a seamless process when booking a flight from the Gold Coast. Entry can also be purchased via the Jetstar Telephone Reservations Centre or at Gold Coast Airport.
A special introductory rate of $5 is now available when pre-purchased from Jetstar.com or on 131 538 before travel, or $10 at the door (from 15 June 2009). It will be available until midnight Tuesday 30 June 2009 unless sold out prior and the offer may be extended.
Passengers flying StarClass on Jetstar's direct flights to Japan from the Gold Coast will receive free entry into theGold Coast Lounge.
Companies Shift To Central Pay
Companies increasingly have been shifting to central rather than individual corporate payment and liability structures due to improved expense reporting capabilities as well as a need for tighter spending controls, and issuers and consultants said the economic climate could accelerate that growth in coming years.
More than half of Fortune 500 companies participating in a survey had corporate liability in their card programs, up from one-third in 2004, according to preliminary data, said Richard Palmer, professor of business at Eastern Illinois University, who has conducted that research for MasterCard Worldwide. The study should be released in a few months, he said.
"The direction is very clear," Palmer said. "It's been very steady in all the categories, and the economy has made the case clearer for everybody."
Programs with a central payment structure—some of which still carry individual liability—are even more widespread. Preliminary data from an upcoming BTN survey of large-market companies show that more than half have a central pay system in place.
While the growth has happened for several years, it is a turnaround from a number of years prior, when companies were moving in the other direction, said Jeff Rankin, senior vice president for U.S. Bank Corporate Payment Systems. "When individual liability reared its head 11 or 12 years ago, the shift was for the companies to get the liability off of their books," Rankin said. "As it's become a little more onerous, companies have moved back to company liability."
Advances in expense reporting technology have played a large role in the shift. About three-quarters of Fortune 500 companies have electronic expense reporting tools in place. Of those, almost 90 percent have automated expense management software, Palmer said. Without it, central pay and especially corporate liability programs are more difficult to manage.
"Central pay theoretically has always been a best practice because the company has more control over the cash flow and more control to ensure their rebate situation," said David Hillman, principal at Consulting Strategies. "Since you only want to pay on approved expense reports, if your culture is one that doesn't promote timely expense report submission, it becomes a very cumbersome process."
Reconciliation has been the biggest obstacle to central pay programs, said travel management consultant Carol Ann Salcito, president of Management Alternatives. "Tools are not perfect but are much better than they were," she said. "Corporations are looking at these tools and making informed decisions as to whether the gain overcomes the pain."
At the same time, companies have been looking for ways to get tighter controls around their travel and entertainment budgets. Richard Crum, president of AirPlus International, said he's seen interest in central payment accelerate from corporations needing to increase compliance. A central payment structure, for example, guarantees that travelers book through the proper channels and gives companies a way to see non-compliant bookings as they happen, not when the employee files the expense report after the trip already is complete, he said.
Biopharmaceutical services provider Parexel International, for example, expanded its AirPlus-issued lodge card use, including a U.S. rollout last year (see story, page 6). The shift cut agency leakage between 30 percent and 50 percent, said vice president of worldwide procurement and travel Cynthia Crooks-Garcia.
Individual liability programs, since they require employees to pay off the bills anyway, also increase the likelihood of employees using their personal cards for T&E purchases, perhaps to gain points on their own rewards programs, said Terry Wellesley, managing director of spend and payment solutions for issuer BMO. "At this point, there is less control, transparency and data collected by the corporation, a situation that is certainly less than ideal and does not allow the organization to extract full value from its corporate card program," he said.
Rewards programs for corporate cardholders, touted as a way to increase corporate card compliance, also are falling out of favor in travel programs, giving room to a rise in central pay and liability programs, said Marcie Verdin, group head of the large market segment for MasterCard's global commercial products. Aside from the cost to the company, letting employees earn points based on how much they spend on trips might not encourage the best behavior, U.S. Bank's Rankin said. "Rewarding an employee just for utilizing their credit card is a very difficult decision and not one of which we're a high proponent," he said.
Tighter controls and expense tool advancement predated the economic downturn, and as of yet, issuers said they haven't seen a seismic shift directly attributable to the economy. Some issuers, including BMO and American Express, said in general many companies remain comfortable with whatever program they already have in place.
Even so, the full impact of the economic downturn on corporate payment structures might not yet be fully realized, particularly in light of the credit crunch. "We anticipate seeing a delayed reaction in the increased demand for central pay programs from companies that experience challenges with their individual pay programs during the recession," BMO's Wellesley said.
Difficult economic times make it more likely that cardholders in individual pay card programs fail to make payments on time, leaving corporations liable for outstanding balances, according to Wellesley. The corporations in turn will have to dedicate resources in tracking down those cardholders.
"This can be very challenging and time-consuming, especially in cases where the employee is no longer with the company," he said. "Late payments may also be subject to interest or late fees for which the corporation is ultimately liable."
Companies just embarking on setting up a credit card program will find some issuers offering only corporate liability programs, MasterCard's Verdin said. That's part of an effort by the banks to reduce their overall risks, she said.
Consulting Strategies' Hillman said he has not yet seen reluctance from issuers to issue cards, but the tighter controls allowed by a central pay and liability structure could gain importance as banks tighten policies. "Banks and the other card companies will keep a close eye on their receivables, and they're not going to allow companies to extend themselves more than they should," Hillman said.
As individual credit ratings can sour due to negative economic factors, central pay and liability will prevent corporations from having to guarantee credit on such individuals. "That we're moving in the other direction probably forestalls a problem we might have had," Rankin said.
When it comes to smaller companies, Palmer expects individual liability programs to disappear completely.
Christopher Russell, executive vice president of outsourcing for the Americas for international payments supplier Travelex, said companies are exploring some other options to allow them to keep spending within required limits. Some, such as using prepaid cards for contractors or other infrequent travelers, are encouraged by consultants as extra tools to the payment programs. Not all of the shifts are in the right direction, however. A few companies have been eliminating their card programs and instead are asking employees to use their personal cards, Russell said.
UATP partners with TravelDaily to present the 2009 China Travel Innovation Summit
Article in TravelDaily
TravelDaily (www.traveldaily.cn), China's leading online publisher and event
organizer with emphasis on the distribution, marketing and technology trends in the travel and
tourism industries, today announced that it has welcomed UATP as a key partner for the 2009
China Travel Innovation Summit, to be held in Beijing on May 12-13.
UATP is a low-cost travel payment network that provides travel managers with unparalleled
detailed data, central billing, thorough tracking and maximum control over travel spend.
Issued by airlines around the world, UATP lowers distribution costs for airlines and merchants.
UATP is accepted worldwide by over 250 airlines, over a thousand travel agencies, and also
connects airlines to non-traditional forms of payment such as PayPal and Ukash.
"We are proud to have UATP sponsor the 2009 China Travel Innovation Summit," said Eva He,
Event Director of TravelDaily. "UATP's involvement will bring significant value to this summit
and our fellow attendees. By working together with UATP, we are confident we will make this
conference a great success."
UATP Regional Manager, Asia-Pacific, Steven Luan, will join the Executive roundtable: Online
TMC vs. Offline TMC on 13 May discussing how UATP works within the business traveler
environment, the growth of the online travel agent and how the corporate traveler environment
both within China and worldwide is changing and responding.
UATP, the first charge card accepted for domestic air purchases within China, currently has the
following airline merchants who accept UATP as a form of payment: Air China, China Eastern
Airlines, China Southern Airlines, Grand China, Hainan Airlines, Shandong Airlines, and
Shenzhen Airlines.
The 2009 China Travel Innovation Summit will be held at the Hotel New Otani Chang Fu Gong,
Beijing. For more information about this summit, please visit the event website.
http://www.traveldaily.cn/Innovation/select.asp
site map | legal/privacy | ©2016 UATP
Procurement Panel Digs Into Multinational Structure
Article in The Transnational
As corporations evolve their travel management programs, many buyers must choose the most effective structure to manage the category on a worldwide basis. Procurement executives with four multinational companies outlined for participants at an Association of Corporate Travel Executives meeting here this month how they organize programs ranging between $20 million and $1 billion in annual travel and entertainment expenditures.
Accenture began consolidating travel and events globally in 2001, beginning with travel agencies, online booking tools and global metrics. It has continued to evolve the program to leverage spending, focus on the traveler experience, optimize cost levers and implement demand management. However, the strategic goals have remained consistent for the past decade, according to Mary Bastrentaz, Accenture senior director of global travel and events. The goals are to "drive for cost efficiency, optimize use of technology, track performance, influence behavior, provide a positive traveler experience," and expand collaboration and best practice sharing.
Accenture currently uses a dual-agency approach around the globe, with Carlson Wagonlit Travel serving it in 34 markets–about 80 percent of its business–and American Express Business Travel handling the remainder in 14 markets. Online adoption for 21 markets is at 80 percent. Around the globe, the company uses one card, American Express, for its $1 billion of spend, of which air comprises $622 million and hotel represents $314 million. However, Bastrentaz said she is currently leading a travel agency and technology transformation to move to one agency and technology platform around the globe. While Bastrentaz is responsible for contractual relationships with suppliers, she relies on "influence and collaboration" with team members in 13 geographies around the globe to identify the best solutions for each region. Monthly, the regional leads of travel and meetings hold a conference cal on which "I share the strategy and vision; they are the ones responsible for executing to that strategy," Bastrentaz said.
Last year, Bastrentaz "successfully focused on consolidating Accenture's $200 million in meetings spend, leveraging the success in travel management to further drive down meeting costs and standardize polices," Georgetown University McDonough School of Business professor and deputy dean Ricardo Ernst said in introducing her.
Accenture's approach to travel management allows the travel team to share best practices, gain the trust and confidence of local leadership and a "better understanding of local market needs." The structure, Bastrentaz noted, is "more expensive," and decisions can take longer. "But the decisions are a lot more solid," she added.
After it acquired Trane last year, Ingersoll Rand "senior management really looked at the best of both worlds and decided the best way forward for the company," said Pascal Struyve, Ingersoll Rand Enterprise Services global director of travel, fleet and meeting services. "Luckily for me in the area of travel and meeting services, the Trane model was chosen as the way forward. Based on that Trane model of consolidation–making sure we had a standardized approach–we are now in the process of implementing this to all regions."
When its vision is fully implemented, Ingersoll Rand will use BCD Travel in 46 countries and a Citigroup card program in 44 countries, according to Struyve. The company currently spends about $60 million on air travel, has 464 preferred hotel properties globally and spends 2.11 percent of its sales revenues on travel. The global team is based in China, Europe, India and the United States.
The model began to emerge in 2001 as American Standard Companies expanded its program outside the United States with WorldTravel BTI as its global agency. By 2006, the company had consolidated in EMEA with a centralized service center model and implemented standardized travel processes globally. That company became Trane, now part of Ingersoll Rand.
"A true global program would have simply the same processes and methodology everywhere; I am not a believer that that works," Struyve said. Instead, his team tries to "consolidate on a global level, create a global framework" and make sure that local employees have "room to operate based on their local habits, needs and culture." For example, policy and reporting may be the same framework, but how pretrip approval is handled in a region would be left to the region, he explained.
"I have never had so much attention about travel in an organization. It would have been a dream before to roll out a fully global program in a new company that hadn't heard of consolidation in, say, a year or year and a half," Struyve said. Previously, "I had to beg almost for months and months before a senior vice president or president could spend 10 minutes with me. Now, they're calling me to ask if I have 10 minutes for them. It's a very strange world, but I'm very happy about it."
Meanwhile, Parexel International a year ago implemented a global approach to travel management, according to Cynthia Crooks-Garcia, vice president of worldwide procurement and travel. Supported by four procurement executives based in Asia, Germany, the United Kingdom and United States, Crooks-Garcia last May deployed a global travel policy and a year earlier launched a global corporate card as the first steps to gain insight on travel spending at the fast-growing company with operations in more than 60 countries. The UATP card is now used in nine countries across the Americas, Asia-Pacific and Europe, and a payment tool administrator is in place as deployment continues around the globe. Parexel reported 2008 travel volume of nearly $17 million in the United States and C$1 million (US$888,000) more in Canada.
The four travel procurement specialists and Crooks-Garcia are focused on consolidating payment forms and agencies, as well as on launching an online booking tool, first in the United States, Canada and United Kingdom, then in Continental Europe, Asia-Pacific, Latin America and South Africa. Along the way, Crooks-Garcia said the strategy is to consolidate small meetings and eventually the company's large meetings.
"Right now, we have a very, very fractured program. We've brought it down to 70 travel agencies–that's a lot because we're only operating in 66 countries," Crooks-Garcia said. To bring the program together, Parexel decided to use the payment tool as the foundation to "understand where our money is going. We're currently doing an RFP for travel agencies in the U.S. and U.K. and then will expand that through Western Europe, Eastern Europe and Asia-Pacific."
Growing by acquisition during the past two and a half years, Crooks-Garcia said the company "is very focused on where do we do things the best, and how do we do them?" Consequently, "a lot of our policy work is coming out of Asia-Pac," project management in Berlin and imagination and strategy in Waltham, Mass.
Eighteen months ago, Microsoft restructured its travel and auto procurement as a global category–the only one within the company–that reports into headquarters instead of geographic regions. More than 15 people based in regions around the globe report to senior procurement director Mark Evans to help manage the program. The structural switch was made, Evans said, because "we thought we could better leverage" the spend and "escalate" relationships.
Microsoft uses American Express in 53 countries and the American Express card in 63 countries for its air spend of about $400 million and hotel spending of about $200 million. After deploying an Amex card in 1982, an agency relationship in 1994, online booking in the United States in 1996, Microsoft began consolidating travel in Europe, the Middle East, Africa and Asia in 2004 and reorganized as a global travel team in 2007. This year's major effort is a global agency request for proposal, Evans said.
Supplier leverage for responsiveness and financials, best practice sharing and resource flexibility and support are among the advantages of the global structure, Evans said. But the configuration also presents challenges: remote leadership, morale with a virtual team and inclusion in regional procurement office activities despite the global reporting structure.
Airline Distribution 2009 conference report
Article in Flightglobal
By Mark Pilling
It's like someone trying to drink from a fire hydrant" is how Marc Rosenberg compares the job of today's executives with airline distribution in their management portfolio.
As keynote speaker and summariser of the Airline Business/UATP Airline Distribution 2009 conference, held in Vienna in early April, Rosenberg, the former vice-president sales & product distribution at Air Canada and now an independent consultant at Marsalyn Creative, said: "There is so much to handle and there is so much confusion out there on how to do it."
Over the past decade the distribution world has changed enormously. Up until the late 1990s, tickets were mostly sold by travel agents using global distribution systems to make and manage the bookings. The rules for all were straightforward. "In the past you didn't need a distribution strategy," said Lars Denlew, director distribution and e-commerce at Gulf Air. "This whole thing changed when low-cost carriers came along and showed they can actually sell a ticket much cheaper." At Gulf Air, it is up to seven times more expensive to distribute through a travel agent compared withthe web, said Denlew.
As the 2008 Airline Business/SITA Airline IT Trends Survey showed, on average low-cost carriers sell nearly three-quarters of their tickets on the web. For some it is also much greater. EasyJet, for instance, makes 98% of its sales through its own website, said Jerry Dunn, easyJet's distribution development manager.
Managers of network and low-cost carriers alike are struggling to find the best distribution strategy which makesbest useof their own websites, while selling via travel agents where ­appropriate. "For most it is not about either/or, it is about choosing the right path," said moderator Richard Clarke, director of Travel ­Technology Research (T2R).
"Improved channel profitability is the ultimate objective," said Rosenberg. "Cost is a big driver, but the bigger one is driving revenue resulting from merchandising opportunities."
And in today's dire economic situation, the ability to boost revenue from better merchandising, which could mean improving the sale, upselling of different fare categories or selling ancillary products like insurance, car hire or lounge access, is critical. "Our tickets need to be sold in a technology environment where that is optimised," said Rosenberg. "For now GDS technology limits that opportunity. You need to ask should you be compromised by that technology or should you be embracing it?"
Air Canada found the GDSs did not have the technology to deliver seat selection and the ­carrier was losing ancillary revenue opportunities. It moved seat selection and its buy-up branded fares out of the GDS environment. This was a radical but calculated decision that angered the GDSs, but was designed to let Air Canada play by its own rules.
Air Canada's move was not about cost savings, but about new revenue generation opportunities. It wanted the ability to offer passengers the choice of different fare categories or seat assignments or to buy lounge access. This was only possible on its own website as travel agents using the GDSs cannot, for now, offer these choices. It is simply not part of the menu displayed to them by the GDSs.
As the GDSs tackle this issue, they have already made major efforts to ensure that airlines make all of their fares available to them and travel agentsdo not hold back special cheap fares that are only available on the airline website. The move to sign these so-called full content agreements began a few years ago.
For its part, Air Canada never had an appetite for these full content deals because of its strategy of pushing ancillary revenues. Fearing that Air Canada's move could become an industry trend, the GDSs moved rapidly, and have since signed multi-year full content distribution deals with all of the US majors and many other carriers around the globe. It has been a successful strategy to protect travel agency access to the entire airline fare inventory. The GDSs give discounted distribution prices to those airlines that sign full content deals.
But is it short sighted? "What have full content deals achieved other than segment booking savings?" asks Rosenberg. "I suggest they have slowed down many of you in your own efforts to boost ancillary revenue opportunities. The content belongs to the airline, it doesn't belong to anyone else – you must believe in that."
Technology providers like Ireland's Datalex and US-based company ITA Software have come up with solutions that enable carriers to develop their websites to capture these opportunities. It will be an essential part of airline strategies to raise revenues and boost yield in these tough economic times. "In 2009 there needs to be a big focus on merchandising," said Ornagh Hoban, vice-president strategy & marketing at Datalex.
The missing part for the GDSs is being able to reproduce what airlines are able to sell on their own websites at the travel agent point of sale. "Our clear strategy is to empower airlines to do what they need, because they are going to do it with or without us," said David Doctor, global head of airline distribution at Amadeus. "We know there's a lot of catch up to do." A year ago Amadeus launched its Airline Retailing Platform, designed to allow airlines to present their products to customers as they appear on their website. Qantas is the pilot for this with the first elements going live this year. The work Amadeus and others are doing is welcomed by airlines. "They [GDSs] are at the stage where they are now saying 'I get it now and I want to work with you'," said Rosenberg.
While the GDSs have been slow to align the airline website customer experience with that travel agents can offer, there is general agreement that GDSs are here to stay. "I acknowledge the fact that GDSs can be a good distribution channel – but they do not bring value for every passenger category," said Denlew.
The market power of the GDSs has meant it has been hard for small- and medium-sized carriers to control their distribution costs. "For us the GDS channel is easily over-priced by 40%," said Rudy Maex, vice-president channel development & service delivery at Brussels Airlines. "But as a smaller player it is tough to withdraw content. We don't have much muscle to show to the travel agent community." At the same time, "GDS full content discounts remain relatively marginal for smaller carriers," said Maex.
GDSs are still crucial for Brussels Airlines with 65% of its sales in 2008 coming via this channel, compared with 27% via the web. To offset the high GDS costs, and with a strategy to make every channel cover its costs, the carrier was one of the first to charge travel agents a GDS booking fee in 2005. This fee is now €3 ($4) per segment for any booking class.
The merger of SN Brussels Airlines with low-cost and non-GDS carrier Virgin Expressmade this transition, which was resisted by travel agents, a little easier, said Maex. The move, coupled with the removal of travel agent commissionsand the introduction of credit card fees on the web is judged a reasonable success at the carrier, with distribution costs reduced by 60-70% over the past five years, said Maex.
Interestingly, while network carriers have been fighting to boost their web sales, some low-cost carriers have been moving to use GDS distribution to access new customers. But they have been trying to do this on their own terms where possible to avoid high GDS costs.
EasyJet, AirAsia and Transavia, for example, have worked with Amadeus on technology that connects their website booking engines with the GDSs. "We made a conscious effort four years ago to tailor our products to the business traveller," said easyJet's Dunn. Part of this meant enabling selected business travel agents to sell easyJet tickets via the GDS. This is done using a direct connection between the easyJet website and Amadeus.
Ticket numbers sold this way are still relatively modest but it does produce higher ticket yields, said Dunn. EasyJet recovers its distribution cost and any ancillary revenue lost whentickets are booked by an agent by charging them a fee per booking.
Another that has brought on board GDSs is Spain's Vueling, which has just completed a merger with low-cost neighbour Clickair. "We were not targeting the indirect market in Spain.We thought direct channels were enough,but it wasn't.The model was failing," said Juan Carlos ­Iglesias, Vueling chief sales officer.In particular, Vueling realised its ability to sell in crucial business markets like Madrid-Barcelona was hampered by not being available through travel agents, and decided to bring in the GDSs. "We did nothing special we just plugged in our system to the traditional GDS," said Iglesias.
It began selling on Amadeus in mid-2008. Travelport was added in December. "Now 20% of our total sales are coming from the GDSs and it is also bringing higher yielding passengers," said Iglesias. This will bring a positive bottom line impact of between €20-30 million in the first half of this year, he said.
Although GDS distribution has been a major part in Vueling being able to reach breakeven once again, Iglesias is under no illusions about the cost. "We are paying the most expensive price of the GDS because we've just ­arrived," said Iglesias.
Read the report from last year's Airline Distribution conference in Kuala Lumpur here
UATP Partners To Facilitate Online Payments Sans Cards
Article in BTE
UATP has joined with Ukash to provide an alternative payment solution for travelers who do not use credit or debit cards or avoid online purchases because of the threat of online fraud and identity theft. Ukash customers exchange cash for a prepaid voucher containing a unique 19-digit number which is then used to pay online. No financial details are exchanged with the merchant, making Ukash increasingly attractive to online consumers concerned about data security. The Ukash vouchers can be purchased online, on mobile or at more than 275,000 stores globally.
Ukash, which is regulated by the UK Financial Services Authority, (TM) is a globally-recognized e-commerce payment method. It is one of a small number of Electronic Money Institutions, a status that allows a single maximum online cash payment transaction of up to 500 Sterling pounds/750 euros.
UATP expands payment services to corporate rail travel
United Air Travel Plan (UATP) has already signaled its intention to move beyond its involvement in air travel and last week it went a step further in this direction. Following a deal with Amtrak, UATP corporate cardholders will now be able to pay for Amtrak services at all points of sale. The move is timely, as UATP says that over the past few months it has observed some shift from air to rail travel by corporates.
UATP and Amtrak
Universal Air Travel Plan, Inc. (UATP) has announced its partnership with Amtrak and with that UATP corporate card holders are now able to make Amtrak purchases at all points of sale with their UATP cards.
"Corporate travel on Amtrak has grown significantly and our clients have made it known they want the ability to pay for Amtrak purchases with their UATP cards, we had to respond," said Craig White, Amtrak Senior Director, Travel Industry Sales. "It is a win-win situation; the corporate client is able to use their preferred form of payment, UATP, and Amtrak is able to reduce expenses.
During FY 2008 (Oct. 2007-Sept. 2008), Amtrak welcomed aboard more than 28.7 million passengers, representing the sixth straight fiscal year of record ridership when comparing the same routes. An average of more than 78,000 passengers ride on up to 300 Amtrak trains per day.
"We have seen a shift in corporate travel to rail from air in the last several months; having UATP accepted by Amtrak at all points of sale will allow UATP clients to seamlessly make travel plans on all one card, UATP," said Ralph Kaiser, president and CEO, UATP. "This is a strategic move for UATP and we look forward to providing our client-base with all the tools and options needed for their corporate travel programs."
Amtrak operates a nationwide rail network, serving more than 500 destinations in 46 states on 21,000 miles of routes, with nearly 18,000 employees.
Ukash customers soon to exchange cash for prepaid vouchers with UATP
Article in The Nilson Report UKASH customers will soon be able to exchange cash for a prepaid voucher containing a unique 19-digit number to be used online to pay for airline tickets at many of the 250 member airlines of UATP as well as at thousands of other Web sites including Skype, Habbo, and Ladbrokes. Vouchers can be purchased online or at more than 270,000 retail outlets in 14 different countries in Europe and in South Africa.
UATP To Allow Amtrak Purchases Through All Points Of Sale
BTNonline
Universal Air Travel Plan today announced a partnership that will allow its card users to purchase travel on Amtrak through all points of sale, part of a previously announced strategy for the network to broaden its merchant circle beyond the traditional air categories.
UATP president and CEO Ralph Kaiser said there had been numerous requests from users, particularly those on the East Coast, to use the card for Amtrak purchases as many have shifted their corporate travel from air to rail in recent months. Existing agreements already allowed UATP card users to purchase Amtrak tickets through global distribution systems, but the agreement now opens up that capability to direct purchases through Amtrak's Web site or train station kiosks, he said.
"In a way, Amtrak has been a merchant of UATP in terms of being able to book through the GDS, but this makes them a full-fledged merchant partner," Kaiser said. "It's one of the first non-air merchants that we've had."
The network previously announced its intention to grow its network to other supplier categories, including hotels and car rental companies (BTNonline, Nov. 17, 2008). Kaiser said that strategy remains in place, though no announcements are imminent.
Amtrak becomes merchant for UATP card
The Universal Air Travel Plan, which processes selected travel-related purchases made with the UATP card, announced a deal to make Amtrak a merchant for the card. Effective immediately, UATP cardholders can use their cards to make Amtrak purchases at all points of sale.
Craig White, Amtrak senior director, travel industry sales, said corporate clients have been requesting the option to pay for their train tickets with the UATP card.
Now, he said, "the corporate client is able to use the preferred form of payment, UATP, and Amtrak is able to reduce expenses."
Ralph Kaiser, president and CEO, UATP, also highlighted the relevance of the new arrangement now, given that there has been a shift in corporate travel from air to rail in recent months, he said.
Earlier this year, UATP said it would expand its merchant base this year to include hotels and car rental firms, as well. There already are some rail carriers and travel agents that serve as UATP merchants.
UATP Keeps Its Eye on Alternative Payments—and Hotels
Digital Transactions
Article in Digital Transactions
Universal Air Travel Plan Inc. is still in growth mode despite some weakness in its core corporate travel business, thanks in part to an ongoing alternative online-payments initiative that started in 2005. Now the specialty payment processor is looking to sign hotels as merchants.
Processing volumes rose about 20% last year for Washington, D.C.-based UATP. "In 2007 we broke the $10 billion mark; in 2008 we were at $12 billion," president and chief executive officer Ralph Kaiser tells Digital Transactions News by e-mail. "Our profitability is not public, but suffice it to say 2007 was a good year and 2008 was even better."
UATP has 19 airline shareholder-owners worldwide. Thirteen issue its card, and its brand is accepted by nearly 250. Online payment systems are an increasingly important part of the mix as UATP seeks to offer airlines new product offerings beyond its core corporate travel card, especially ones that cost the carriers less to accept than general-purpose credit cards (Digital Transactions News, Aug. 20, 2008). Already accepted or planned payment brands usable through UATP include PayPal Inc., Bill Me Later Inc. (recently acquired by PayPal parent company eBay Inc.), Moneta Corp., the PIN-based specialists HomeATM and Acculynk Inc., and prepaid cards through Ceridian Corp.'s Stored Value Solutions.
"We're seeing a little bit of softness in our core business," says Scot Bealer, UATP's vice president of worldwide sales and marketing. "These alternative forms of payments have a lot of room [to grow] in terms of cutting expenses for the airlines."
Bealer declines to say exactly how much volume the alternatives are bringing to UATP, but says the year-over-year growth rate "is significant, as in triple digits," and generating "hundreds of millions in dollar volume in aggregate."
PayPal is "the leader in terms of volume growth" at UATP, according to Bealer. Nine airlines now take PayPal through the UATP switch—the result of a quiet but lengthy operational effort. The other announced partners are just launching or working on the back-office operations necessary to make acceptance work through UATP. Delta Air Lines Inc. currently is UATP's only carrier live with Moneta. Continental Airlines Inc. has a direct connection to Bill Me Later that pre-dates UATP's initiative.
Besides airlines, UATP's current merchant acceptors are travel agencies—some directly but most through merchant acquirers and connections to specialist ticket processors—and Amtrak. Now the company is looking to sign other travel-oriented merchants, especially hotels. Bealer won't give details yet, but says, "we are in fact doing some work in the hotel realm; we have some test transactions we're processing."
Part of the strategy to broaden UATP's utility beyond corporate travel bookings by making leisure travel possible through its network. "We're almost reinventing ourselves," Bealer says. "Originally our focus was on the corporate market."
Doing so, however, makes UATP even more of a competitor of American Express Co., the travel-and-entertainment card leader. But Bealer says UATP has some advantages, especially on price. AmEx's average worldwide discount rate was 2.53% of the sale in the fourth quarter. UATP's standard merchant pricing is 1.75%.
UATP Announces Record Charge Volume For 2008
Universal Air Travel Plan, Inc. (UATP), the low cost payment network privately owned by the world's airlines, has announced record charge volume and profits for calendar year 2008. UATP CEO Ralph Kaiser stated, "UATP continues to prosper even in today's economic environment. While we see challenges from an overall decrease in travel spending in the upcoming year, there are enough growth drivers in our business to continue to be optimistic about our performance in 2009."
UATP processed approximately US$12 billion in 2008, all with just 38 staff worldwide. UATP has also been working hard to diversify its product offerings beyond its core corporate travel charge card business with great success. "UATP's alternate form of payment processing business has taken off in 2008 much like our USS business did after its launch a few years back. Both lines of business are posting impressive growth rates," added Kaiser.
UATP's alternate form of payment processing includes work for such online payment brands as Acculynk, BillMeLater, HomeATM, Moneta and PayPal. USS is UATP's in-house, proprietary settlement system which allows travel agency and low-cost air carrier payment processing to be conducted outside of normal channels. In 2009, in addition to offering air travel payment, with its industry leading data, UATP plans to expand its merchant base via USS to include hotels and rental car companies. This is expected to add significant charge volume to the network and greatly enhance the core product offering.
"Notwithstanding the current economic climate, 2009 will be a growth year for UATP. We are a dynamic and hungry company and we're always looking for ways to save money for the airlines and their corporate customers while enhancing profitability for our shareholders," concluded Kaiser.
UATP to add hotels, car rental companies as merchants
Universal Air Travel Plan (UATP), which supplements the ARC and IATA settlement systemswith processing for air purchases made with the UATP card, intends to expand its merchantbase this year to hotels and car rental companies.
Company spokeswoman Wendy Ward said UATP is making the move because holders of theUATP corporate card have been asking for it. "We have major corporations that want to puteverything on the UATP card," Ward said, but they cannot do so at the moment.
Originally, UATP merchants were airlines, and the ARC and IATA systems provided settlement.
However, today some travel agents and rail carriers are UATP merchants, as well, with UATP handling the processing.
In the case of agents, this is typically for the purpose of processing payments whencorporate customers use the UATP card to pay service fees or for the purchase of packagefares, net fares or consolidator fares.
UATP launched its in-house settlement service, called UATP Settlement Services (USS), in2003. UATP says the system offers settlement in multiple currencies and with no currencyconversion fees, a selling point.
Thoughts from the industry on opportunities from the recession
Received wisdom has it that the recession presents an excellent opportunity for corporate card providers to win new business. The case for introducing a mechanism that improves cost controls, the argument goes, is stronger than ever, and cards meet precisely that requirement. Amon Cohentalks to industry insiders in different segments of commercial payments to test this theory and finds some surprising opinions.
Is the received wisdom correct? Not the biggest fan of his bank-backed rivals, Universal Air Travel Plan president and CEO Ralph Kaiser says not. He claims the downturn will expose plastic corporate cards as expensive, unreliable extravagances. "We might see a retraction in walk-around cards," he says. "There may be a move to better control with centrally placed lodge cards, where it is easier to make sure spending is sitting within policy. The walk-around cards reward travelers for booking more flights by giving them a set of golf clubs or a trip to Hawaii."
One might expect Kaiser to say such things, but some corporations also consider plastic a liability in a recession.CPI recently obtained a copy of a memo sent out by a very well-known hi-tech company telling employees their cards were being withdrawn. "Keeping in line with our goal of ensuring better cost controls across our business, we have decided to significantly reduce the use of our corporate cards," the memo said. "Effective immediately, ALL employees (with the exception of senior management team or newcomers that don't have any credit history) that currently have a corporate card will no longer be eligible to use these and will be asked to return these cards into HR over the next two-week period."
The good news for card providers is that most of their clients still believe the opposite is true: that a card equates to more, not less, control. One example is the aircraft manufacturer Airbus, which uses a card in conjunction with an expense management system. "It is definitely useful for helping our cost control," says Airbus's UK travel manager Geoff Allwright, who thinks the recession makes the case for cards more compelling.
Airbus asks its travelers to provide an estimate of their total trip cost before departure. Their managers are then able to set a budget for the trips and compare the actual expense incurred on their return. "The alternative is to let travelers use their own cards or cash but that means we don't get good data," says Allwright. "It all adds to the big picture."
Brian Merry, director of product for the travel management company HRG, agrees. He is seeing greater interest from clients in cards, especially for filling in the gaps in data left by other sources. "You can use your TMC data to manage travel expenditure, but the only way to manage entertainment expenditure is through a card," he says. Merry reports that clients are cracking down on restaurant spend – spending less, and judging whether entertaining customers is justified in the first place.
However, if card companies are to gain from the opportunities presented by recession, they need to make a vigorous case for how they can help clients, and they also need to show more flexibility. That is the opinion of Stephan Hylander, global travel manager for the Volvo Group, the collection of all Volvo's businesses other than its car-making operation.
Whether this is a good time for corporations to introduce or change their card programs depends on the contract offered, according to Hylander. "If it is just replacing one card with another without enhancing the conditions, that would not be a priority," he says. "If there is a good business case, then right now is the best time for any procurement initiative. However, senior management will only approve projects if they can see a fast payback."
Hylander is unsure whether card companies are capable of meeting this requirement. On the one hand, he finds that having a single global card is greatly improving his hotel data. However, as an experienced procurement professional who has only started to deal with travel and cards over the past couple of years, he is disappointed with the conservatism of bank issuers. "I have found it one of the toughest industries to persuade to make adjustments to client needs," he says. "It is very much a case of the client adapting to the supplier's needs."
His chief complaint is that banks will not agree to consistent global conditions for criteria such as exchange fees, data collection fees or application form procedures. In Hylander's experience, issuers make much better offers in markets where they are well-established than in those where they are not.
The improvement Allwright would like to see from card companies is better detection of potentially fraudulent use of cards, which is also an increased concern in the recession. "It seems to be down to us to spot what is going on. They seem a bit slow on the uptake," he says.
Misuse of cards is, naturally, a source of concern to issuers as well. Kaiser believes this could lead to traditional issuers restricting their lines of credit for new corporate customers and reducing credit for existing clients known to be experiencing financial problems. This could take the form of limiting the number of permitted purchases or even placing daily restrictions on expenditure, he says.
Merry also thinks issuers are likely to reduce credit lines, but for a slightly different reason. Given that banks have much tighter constraints on their liquidity, he predicts they will shorten credit for customers who are not using their full entitlement. "If a company has a $1 million credit line and it is only using half of that, the bank will not leave it lying around idle because it precludes the bank from offering credit lines elsewhere," he says. "In the past, idle credit didn't matter."
And while on the subject of better management of funds, Kaiser has one last comment for the mainstream issuers for what he regards as the profligacy of using higher merchant fees to fund cardholder incentives. "It will be interesting to see whether they can maintain the benefits they give to their customers," Kaiser says. "Will merchants be able to sustain fees at that level?
UATP Eyes Hotels, Car Rental
NOVEMBER 17, 2008 — Universal Air Travel Plan president and CEO Ralph Kaiser this month told Business Travel News that the payment network is exploring expanding its merchant network next year to include hotels and car rental vendors.
"We're looking at these things now," Kaiser said. "It's a scenario where these could be centrally booked and billed, and we're doing it at a time when companies are looking to increase savings."
Though the network is owned privately by the world's airlines, broadening it to include other travel categories could be attractive to hoteliers and car rental vendors looking for savings. Network participation allows merchants to have lower service fees for payments than with traditional corporate card transactions.
Currently, more than 240 airlines and travel agencies accept UATP for air travel, service fees, management fees and net fares payment. UATP already has expanded its offering beyond its core travel product, according to the network, to facilitate alternate payment forms. Kaiser said he expects UATP's charge volume to reach $12 billion this year and grow in 2009. The network also expects the airline merchant base to grow, particularly as the industry looks to cut costs related to card processing fees.
Credit Crunches Corp. Cards
NOVEMBER 17, 2008 — Tightening credit availability as a result of the global financial crisis could hinder corporate travel and entertainment card negotiations, particularly for small and midmarket companies looking to implement new programs. Simultaneously, the crisis could bring new opportunities for buyers, with consolidation giving some bank players new strength in the market, the potential for banks to focus more on the corporate credit side of their business and new opportunities with alternatives to traditional corporate cards.
The economic meltdown is building banks' reluctance to extend credit to corporations and other banks, said David Hillman, principal of Deerfield, Ill.-based Consulting Strategies. While companies with mature or large-volume accounts will be insulated, companies looking to start card programs might find the environment challenging.
"The bank's internal review board might want to hold back on all new lending relationships and credit relationships and only deal with those companies that are high-dealing clients," Hillman said. "There's only so much credit they could extend."
Joanne Robinson, principal of data analysis and research firm Commercial Payments International, said banks are clamping down on credit lines, even lowering limits in some cases. Banks also will give stricter new lines and policies for small enterprises.
Additionally, card issuers will be reviewing terms of current agreements for spots of vulnerability when they come up for renewal. "Any place the issuer has a fear or concern about a company, liability, the size of line and so forth will be up for renegotiation," Robinson said.
Jay Cary, vice president of marketing for American Express, said existing accounts should notice little change and that new customers would be treated the same as they would in any economic environment. The financial difficulties the companies might be facing, however, could hurt their credit and therefore make them seem higher-risk, he said.
A strategy in the current economy might be to shift away from corporate T&E cards with individual liability, particularly as employees with less-than-stellar credit ratings would have more difficulty in procuring their own cards, Robinson said. "With corporate liability, it will be easier to get the credit," she said.
American Express currently has more than half its base using some form of corporate liability, Cary said. "It's not something we're looking to actively grow, but we consider corporate liability a best practice," he said.
The current credit market also makes a stronger case for payment alternatives, analysts said. Ralph Kaiser, president and CEO of the Universal Air Travel Plan, said he expects his network to grow, particularly as companies look to move to centrally managed accounts to get better control over their travel spending. "If corporations are worried about spend, they can know where their charges are going," Kaiser said. "Companies are being more prudent in tightening belts."
Corporate card programs also could see a benefit from the credit crunch. With corporate credit a much lower risk than consumer credit—corporate cards generally are paid off every month rather than carrying a balance—issuers and networks could begin to allocate more resources to the corporate side of their business.
An example is American Express' recent announcement of cost-cutting measures, including the reduction of its workforce by 10 percent (BTNonline, Oct. 30). Of note in the announcement was that the company indicated a desire to invest where there are strategic opportunities, Commercial Payments International's Robinson said.
The key will be selecting investments that bring the most profitability, American Express' Cary said. "We certainly do not want investment to stop in the commercial card business," he said.
In general, corporate card issuers and networks will not want to stall commercial-side innovation, Robinson said, adding, "The fear in the industry is that if investment and innovation stops, they'll have to play catch-up in a few years."
Even before the financial crisis reached full boil this fall, the payment industry was experiencing the heat of merger and acquisition activity, most notably American Express' acquisition of GE Money's Corporate Payment Services and Discover Financial Services' purchase of Diners Club International from Citigroup (BTNonline, April 28). In general, such activity results in the removal of a player from the market, but more recent activity could give a few banks more prominence in the corporate payment sphere. Wells Fargo, for example, plans to acquire Wachovia, which has a base of corporate and government customers.
"Wells Fargo is a strong second-tier player and is going to be acquiring a lot of new clients," Consulting Strategies' Hillman said. "This makes them a strong national player in banking and could boost their position."
Across the Atlantic, U.K. bank Lloyds TSB's planned takeover of competitor HBOS could produce a similar effect, Robinson said.
In terms of rebates, the bigger impact could be not from the credit crunch itself but from legislative action spurred by it. While the U.S. government has been reticent to regulate interchange fees, a primary source of revenue that feeds corporate card rebates (BTNonline, Aug. 15, 2005), it's once again a possibility with a new economic situation and governmental makeup.
U.S. companies currently enjoy some of the highest rebates in the world. Any change to interchange will affect ability to pay those rebates, Robinson said. Issuers also might look at other ways to replace any lost revenue that could directly impact travel buyers.
"They provide a lot of value, like data aggregation and analysis, and they might be looking to get that value back from companies," Robinson said.
Conversely, it's also possible that card suppliers could increase interchange fees for additional revenue to supplant losses in the bad economy. While that could mean higher rebate opportunities, merchants also might have to find ways to reclaim that lost income through higher costs or diminished service. Airlines in particular have had credit card costs on their radar in recent years.
"Corporations might get an additional benefit, but it hurts the merchants who have to accept the card," UATP's Kaiser said. "When companies face higher costs, it affects their employees and their customers.
More network competition?
This week, the payment network Universal Air Travel Plan indicated that it is considering expanding its existing merchant network in 2009 to both hotels and car rental vendors. (At present, over 240 airlines and travel agencies accept UATP for air travel, service fees, management fees and net fares payment.) It believes the time may be right to make such a move as so many companies are looking for ways to cut costs. Merchants are usually charged lower service fees by UATP than by other corporate card networks. If UATP proceeds with this strategy, it would represent more competition for the existing dominant payment networks such as MasterCard and Visa. UATP is already a significant payment network as far as airline payments go – the organization is expecting its charge volume to reach $12 billion in 2008, with further growth predicted for next year.
Airlines Seen Facing Winter Survival Battle
Article in Reuters
By Tim Hepher and Helen Massy-Beresford
PARIS (Reuters) – European airlines face a cut-throat battle to survive the winter as recession threatens the recipe many have used to ride out a spike in oil prices — sharing the pain with consumers by slapping on fuel surcharges.
Airline bosses at a conference ending on Friday heard warnings that the slump in confidence after the banking crisis left no choice but to cut costs, merge or go bust.
"Consolidation will be very strong in coming months either through players merging or disappearing. That's overdue," said Air France-KLM (AIRF.PA) Chairman Jean-Cyril Spinetta.
Delegates at the World Air Transport Forum said the only question was whether a major flag carrier would fold. Small Danish low-cost carrier Sterling this week joined a list of more than two dozen carriers that have gone bust this year.
"Everyone is saying I will wait for my colleague to collapse first, just to give me a bit of oxygen for a few months," said Marc Rochet, head of all-business-class airline l'Avion, recently swallowed by British Airways Plc (BAY.L).
Still, some airlines put a brave face on the crisis with upbeat growth targets, saying the rebound may be strong if they can hold on until 2010. One expert accused them of bluffing.
"Nobody wants to be the first to give bad news. Everyone is lying to each other," Ralph Kaiser, head of corporate travel payments system UATP, told delegates.
Air traffic historically tends to grow at twice the level of gross economic product, but global international traffic fell in September for the first time in five years.
Industry icon Bob Crandall, the former American Airlines chief credited with introducing changes such as yield management, said the correlation between growth and traffic was unlikely to be re-established and the industry must brace for a long crisis.
"My prediction is the world's financial difficulties will be much worse than most of us think," he said.
DEBT CURE
Many airlines are losing money in an industry which, at the best of times, has rarely been able to generate fat margins.
"Those who come out will be those who enter the crisis with solid finances and low debt," Spinetta said.
Air France-KLM is vying with Lufthansa (LHAG.DE) for a stake in rescued Alitalia, following a state spin-off of bad assets, and until recently was eyeing Austrian Airlines (AUAV.VI).
Alitalia (AZPIa.MI), weeks away from running out of cash as it seeks to escape insolvency, received a lift on Friday when four unions agreed a conditional deal with local investor group CAI, assembled to rescue the Italian flag carrier. But doubts remained over whether unions would sign up.
Airlines were pummeled by record oil prices which peaked at around $150 a barrel in the summer before dropping back below $70.
Many imposed fuel surcharges, but the recent traffic drop and abrupt economic slowdown could bar their escape route.
"In July everyone said their costs were out of control. They were able to pass on fuel costs, but now it is not certain they will be able to and that is going to increase pressure," Bjorn Naf, chief executive of Bahrain's Gulf Air told the forum.
Long-term, unless oil collapses, the industry faces the challenge of persuading consumers to pay higher prices.
"We are in a hiatus and that is why there is so much drama going on in the industry," Virgin Atlantic Chief Executive Steve Ridgway told Reuters in an interview this week.
Although such price tags spell misery for Western airlines and consumers, airlines and airports from the oil-fired Gulf drew a contrast with growth in their region, saying it would be sustained by the diversification of their economies.
The head of Dubai Airports, Paul Griffiths, called the financial crisis a "blip" that will not deter the southern Gulf emirate from plans to build the world's largest airport — covering twice the size of the territory of Hong Kong.
"People (in the global airline industry) will continue merging or go bankrupt and disappear. But Gulf carriers will keep growing and weather the storm," Gulf Air's Naf said.
Non-OPEC Bahrain, a relatively minor oil producer situated 30 minutes' drive from Saudi Arabia's wealthy Eastern Province, aims to carve a niche for its still loss-making airline with fast transit times. Three billion people can be reached in five hours' flying time from the Gulf using new planes, Naf said.
(Additional reporting by Nathias Blamont; Editing by David Holmes and Simon Jessop)
Moneta includes banks in online payment transaction revenue
TechJournal
Article in TechJournal
By Allan Maurer
ATLANTA—Despite strong competition in the online alternative payments space, Moneta offers two compelling differentiators, says CEO Guido Sacchi. First, Moneta lowers the cost to merchants of accepting online payments by about 50 percent. Second, it provides a way for banks to create revenue from the alternative payments space.
That's particularly important to Moneta, because the company partners with financial institutions to give them a brand presence at merchant checkouts online. "It's a real pain point for banks. They don't see revenue flowing from alternative payments today," says Sacchi. "They have been pushed to the sidelines in online transactions."
So, he says, they are interested in a system that brings them a new revenue stream.
The system allows online merchants to accept and process ACH and card payments, and gives consumers the ability to pay directly from checking accounts.
"For consumers, it provides security, safety and convenience," says Sacchi. Consumers receive an electronic wallet when they set up a Moneta account, so they do not need to give personal information to each merchant.
Moneta evolved from Checkfree, which developed the technology and launched it in 2006. Private equity investors bought the Checkfree assets and Moneta launched two and half months ago.
It has raised about $10 million from private and angel investors, counting the Checkfree purchase price.
The ten-employee company is looking for a $6 million Series A round of investment capital.
Moneta's system is already an option on Delta Airline's Web site checkout and has ten top Internet merchants signed or committed, Sacchi notes. "Airlines are a good vertical for us," he says. "They obviously do a lot of business online and have relatively high transaction fees averaging $400."
Leveraging resellers with established merchant relationships is part of its go-to-market strategy. The company also has a partnership with airline transaction processor UATP (Universal Air Travel Plan) which makes Moneta's system easy to implement.
The market opportunity for alternative online payment systems is huge and growing.
Bernstein Research says online commerce is expected to rise from $226 billion in 2007 to $361 billion by 2010. Traditional credit cards are expected to hold onto a significant share of that business, but alternative payment methods capture a growing chunk.
Moneta quotes Javelin Strategy and Research, which says alternative payments will account for 30 percent of total online transaction volumes by 2012.
Moneta has additional features in development for its product, including pay ahead or pay later options and the capability to extend transactional credit at the point of sale, as well as the ability to accept gift cards. The new features are planned for Q2 2009.
Although Sacchi freely admits there is heavyweight competition in the alternative payments space, from eBay's Paypal and recently purchased BillMeLater, he isn't afraid to compete.
But, he says, "The best player is going to win the prize and we're willing to play in the space. We haven't seen anyone else doing the bank strategy. We've only been at this two and half months and the way it has resonated in the marketplace is astounding."
On the Web: http://www.monetacorp.com/
Moneta Seeks Growth in Alternative Payments by Working with Banks
With interest in so-called alternative-payments providers running high among merchants and consumers, Moneta Corp. recently announced a new management team and this week unveiled a strategy for capturing online transaction share from both bank cards and other alternative players. Speaking to Digital Transactions News, Guido Sacchi, the Atlanta-based company's newly installed chief executive, says Moneta will work with financial institutions to enroll customers and build up an account base that will help attract merchants.
Indeed, part of the strategy is to share Moneta's transaction fees with cooperating banks, says Sacchi, who joined Moneta a few weeks ago after a six-year stint with CompuCredit, a company that works with banks to issue general-purpose credit cards. In return for enrolling their customers in Moneta and helping to promote the payment service and its merchants to them, banks will receive roughly 50 basis points of fee income from each Moneta transaction those customers perform, Sacchi says, while adding the precise payment is negotiable with each bank. Five banks, whom Sacchi can't yet name, are close to signing on, he says, and a pilot with one of them will launch soon.
Sacchi argues banks are at risk of being left behind by alternative payments, which enable online transactions through channels the institutions and their networks may not control. "We believe banks are the big losers in online shopping," he says, explaining that Moneta's strategy is to give them an incentive to promote Moneta to their customers. In this way, he says, merchants are more likely to sign on, as well. "Merchants are interested in enabling alternative-payments players that can provide a big lift in sales," he says. The way to provide that lift, he says, is to leverage a sizable base of users.
Conceived by online bill-payment processor CheckFree Corp. in 2003, Moneta began operations in 2006 and became an independent company earlier this year. It currently has 75,000 enrolled users and 10 merchants that have either implemented the service or have signed on. These include Delta Air Lines, which adopted Moneta as a result of the company's link to a transaction switch operated by Universal Air Travel Plan (UATP), which issues and processes private-label cards for major airlines.
With Moneta, consumers enroll their bank-account data and then make payments by selecting the Moneta option on participating merchant sites. At this point, they are redirected to Moneta's servers, where they enter a user name and password to authenticate themselves. If the customer has enrolled through his bank, this page will look like a page on his bank's site. After authentication, the customer returns to the merchant site. Moneta relies on the automated clearing house network to move funds from consumer to merchant accounts. Merchants assume the risk of fraud; the risk of insufficient funds is assumed by either the merchant or the bank, depending on when the problem is detected, Moneta says. Merchants pay approximately 1% to 1.2% plus a dime per transaction.
Sacchi says the processor is also planning to introduce payment channels other than the ACH, including credit and debit cards. It already has an agreement in place with fellow Atlanta company Acculynk Inc. to process PIN debit transactions. Acculynk relies on so-called floating PIN pad technology to permit consumers to use debit cards and PINs for online payments to merchants (Digital Transactions News, Aug. 20). These transactions carry an additional 10 to 20 basis points in fees, Sacchi says. The credit card option, he says, will become available before the second quarter next year. The company is looking at introducing transactional credit, as well, to allow account holders to finance purchases, he says.
Sacchi sees a number of strategic benefits from working with banks. Consumers will be more willing to shop and pay online, he argues. "There are a lot of online shoppers who are not transacting online at all," he notes. "To conduct a transaction that is branded with your bank is a way to bring them into the online-payments world." Banks, meanwhile, fear the erosion of deposits and interchange income to alternative payments and could see Moneta's approach as a solution, Sacchi says. "Banks are extremely scared about declining deposits," he says.
At the same time, the current credit makes it harder for banks to support credit card payments by extending credit limits, Sacchi argues. "We are riding a trend that favors alternative payments, especially debit," he says.
PayPal's Airline Business Gains More Altitude with Continental
Continuing its conquest of the nation's air carriers, PayPal Inc. reports that it is now accepted on Continental Airlines Inc.'s Web site. Houston-based Continental's acceptance of PayPal leaves the nation's two largest carriers, American and United, as the only big domestic holdouts.
Besides newly booked Continental, which claims to be the world's fifth-largest airline, PayPal's U.S. airline acceptors now include Northwest (the first, announced in late June 2007), Southwest, US Airways, Delta, Midwest, JetBlue, and AirTran, a spokesperson says. The spokesperson wouldn't say if more announcements are imminent, but says, "Over the last year we've signed eight airlines, that's a little more than one every two months. That's a pretty good clip for us." PayPal's foreign acceptors include two low-cost carriers, United Kingdom-based Monarch and Malaysia-based AirAsia.
A Continental spokesperson did not respond to requests for comment, but in a release the carrier said it wanted to add payment options for its customers. That's generally the story with PayPal's other airlines. Continental already accepted Bill Me Later Inc., the online credit system, and Western Union for bookings on its continental.com Web site.
Carriers also are trying to displace checks and cash wherever they can, says James Van Dyke, president of Pleasanton, Calif.-based Javelin Strategy & Research. He notes that Dallas-based Southwest Airlines Co. on Tuesday said it would accept only credit and debit cards for in-flight drink purchases beginning Sept. 9. Southwest's flight attendants will use hand-held terminals from GuestLogix Inc. to handle the card payments. Several other carriers have banned cash in the cabin or added card payments as an option. "Everybody is more open to [payment] alternatives, even while they're advancing card-based payments at the expense of paper-based payments," Van Dyke says.
The retrofitting of the airline-owned Universal Air Travel Plan's switch so that it would link to other payment networks has played a major role in giving airlines more online payment options, such as PayPal, beyond general-purpose credit cards. In late July, Washington, D.C.-based UATP, which has links to 240 carriers worldwide, announced a deal with Bill Me Later that will enable carriers to offer that option. UATP also is working with Atlanta-based processor Acculynk Inc. to bring PIN-based debit purchase capabilities to airlines' Web sites (Digital Transactions News, Aug. 20).
Online PIN Debit Gets a Boost with the Latest UATP Payments Deal
(August 20, 2008) Universal Air Travel Plan's alternative-payments initiative added a fifth processor this week with the announcement that Acculynk Inc. will process PIN debit transactions online for airlines that choose to enable the option through UATP's switch.
The news not only further's UATP's 3-year-old effort to add alternatives to credit cards for online ticket sales, but it also represents a major step forward for the use of PIN debit cards on the Internet, a payment method that has been left behind as other alternatives to credit and signature debit cards gain volume.
The connection to Atlanta-based Acculynk should be live within 30 to 45 days, estimates Tom Cunningham, vice president of business development for Washington, D.C.-based UATP, which provides corporate credit accounts and transaction processing for many of the world's largest airlines. Cunningham says one air carrier in particular, which he won't name, has already said it plans to use the Acculynk service. UATP has also recently signed a similar deal to link to online processor Bill Me Later Inc., and already provides PIN debit access through HomeATM, a Montreal-based processor. Two other alternative-payment providers, PayPal Inc. and Moneta Inc., have also signed processing deals with UATP.
PIN debit's appeal to airlines, Cunningham says, lies in both lower transaction costs and fast, guaranteed payment through the electronic funds transfer networks at a time when carriers have seen merchant processors increase holdbacks on airline credit card sales. PIN debit transactions generally clear the same day. "This is a situation where there's a direct transfer from the customer's checking account, and there's no holdback," he notes.
At the same time, Cunningham says recent events like the runup in fuel prices have caused airlines to re-examine costs they can more readily control. "There are limited ways airlines can control their costs, so increasingly distribution costs and form-of-payment costs are becoming highlighted," he says. Whereas a $500 fare might cost an airline around $10 to accept on a credit card, the same transaction might incur half that cost on a PIN debit card, reflecting EFT network interchange of 0.75% plus 15 cents. The transaction becomes even cheaper—dramatically so—when processed through networks that have interchange caps, which typically are 65 cents.
Factors like this make UATP optimistic the PIN debit option through both Acculynk and HomeATM will prove popular. No UATP airline has yet adopted HomeATM's PIN debit service after eight months of availability, but Cunningham says he's not surprised. "That's not unusual," he says. "It does take time." He says airlines have expressed interest in HomeATM's system as well as that of Acculynk. "We've had conversations with two to three fairly significant names," says Nandan Sheth, president of Acculynk. "Airlines are aggressively looking at value-added payment types."
Acculynk's system is based on technology developed by ATM Direct, whose assets Acculynk bought in February for $600,000 after ATM Direct's owner, Pay By Touch Inc., filed for bankruptcy (Digital Transactions News, April 3). Since then, Acculynk has dropped the ATM Direct brand and slightly changed the spelling of its name (it had been Accullink). Acculynk's technology relies on software that allows computer users to use mouse clicks to enter a PIN on a so-called floating PIN pad that appears on their screens. From that point, the processor passes transaction details, including encrypted PINs, on to the EFT networks for authorization and settlement. With HomeATM's system, consumers use an attached peripheral card reader to swipe their cards and enter their PINs (Digital Transactions News, Dec. 18).
Distribution 2008: Flying off the shelf
Flight Global
Article in Flight Global
The Asia-Pacific market has its own specific challenges when it comes to selling and marketing its "perishable" product, the aircraft seat, delegates heard at the 2008 Airline Distribution conference
In the railway station underneath Kuala Lumpur's famous Petronas Twin Towers an entire walkway is emblazoned, floor to ceiling, with the vivid red advertising of AirAsia. More specifically, the message is designed to tempt customers to the airline's website, which has grown to take about two-thirds of its bookings.
The adverts, shamelessly name-checking the airline's connection with Manchester United soccer stars Ryan Giggs and Wayne Rooney, are a vivid demonstration of the impact this south-east Asian airline brand has had on consumers in Malaysia. Under the leadership of Idris Jala over the past two years, the country's flag carrier Malaysia Airlines, battered and bruised by the entry of AirAsia into its home market, has proved that a legacy carrier can reinvent itself to compete with a low-cost upstart, and indeed thrive in a market where air travel has boomed and continues to flourish.
In his keynote speech at the 2008 Airline Distribution conference, organised by Airline Business and corporate credit card company UATP, and held in Malaysian capital Kuala Lumpur, Idris described how his carrier has already achieved a 20% reduction in costs in the last two years as he seeks to transform the business. "We need to be a five-star airline. I am often asked, isn't this a contradiction – how can you possibly offer quality and at the same time reduce cost? I say it is all about finding the sweet spot between quality and cost – it is difficult to do and requires a lot of work, but we have to build a ship that can weather the storm."
For Idris, Malaysia Airlines is only at the beginning of its transformation as he goes about fixing parts of the airline that were not working properly. "It's all in the execution – strategy is cheap," he told the audience. Much effort has gone into improving the carrier's "enabling systems", he said. "We have struggled with implementing IT systems as a company, but in the last two years we broke the trend." Upgrades to the airline's website have come in and e-ticketing has been brought in over the past year to meet the end of May IATA deadline. In the distribution area, Malaysia Airlines is "putting a lot of emphasis to catch up on this game", ­explained Idris.
In some ways, Asia as a whole lags the rest of the world when it comes to distribution. As Beatrice Lim, commercial director of the Association of Asia Pacific Airlines noted, quoting the Airline Business/SITA IT Trends Survey, online sales represent just 14% of the region's total bookings. It is half the amount of Europe and a quarter of that of the USA.
Carriers are stepping up their online push as they seek to emulate their western peers in reducing distribution costs. However, with the region's strong affiliation to travel agents to consider, the move is not to wage all-out war against agents and the Global Distribution Systems, but to undertake a more subtle and gradual transformation. As Eddy Leong, managing director of Firefly, a regional start-up carrier formed by Malaysia Airlines, said: "We are trying to shift our [sales] channels to direct distribution, but we are meeting some resistance."
The positive note for this dynamic region is that demand remains robust, although "for this year, performance is anyone's guess", said Lim, as fuel prices soar. This is in contrast to 2007, which saw a record operating profit of $6 billion for AAPA ­carriers. On the negative side, some see a slide towards less desirable distribution practices in the Asia-Pacific. In particular, airlines frown upon GDSs paying incentives to travel agents to use their system over others. In Europe and the US, airlines have attacked this model, with success. As Lars Denlew, vice-president distribution & e-commerce at Gulf Air said: "Thank you very much BA for taking this fight – you have my 110% support for that."
But, according to Deborah Dickens, senior manager distribution at British Airways: "We are seeing this business model moving into the Asian market. It's quite depressing as an airline to see that model proliferate in new markets, but it is up to airlines in those markets to see if they can change that business model."
Asian GDS Abacus, which is celebrating its 20th anniversary this year, bemoans this shift. "Incentives are not the way to go, but Abacus can't fix the problem," said Patrick Lai, vice-president North Asia & content marketing at Abacus, which is jointly owned by 11 Asia-Pacific based airlines and Sabre Travel Network. "For the first decade incentives were not a big problem, but in the last 10 years as foreign GDSs try to enter this market in a big way they have become more common." Offering incentives has been a typical method for the newcomers to "buy into the market". "Some agents survive on the incentives not on the tickets they sell. This is a very worrying trend," said Lai.
Some markets, like Malaysia and Singapore, are moving to the western model, where agents charge a fee to customers instead of obtaining incentives from the GDSs. "In Singapore travel agents are managing that [transition] pretty well – in some cases agents say they can make a little bit more money," said Lai.
Abacus, which despite losing market share to the likes of ­Amadeus and Travelport, is the region's largest GDS outside China and is trying to defy going down the incentive route. "I want airlines to work with us to influence the behaviour of the agents and share the difference with the ­airlines," said Lai.
But in other markets, the fee-based model is absent, for example Hong Kong and China, where travel agents remain highly popular. There are some 6,000 travel agents in China that sell mostly domestic flights and about 800 that are authorised IATA agents to offer international destinations, said Hugo Zhang, product ­director GDS business department at TravelSky Technology.
The Chinese GDS is the only IATA authorised distribution system in the country and provides the inventory management for the country's main carriers. In this controlled environment, most agents in China operate on a commission-based payment structure. With a virtual monopoly, the incentives issue has not come to China so far, said Zhang.
As the Asia-Pacific travel market wrestles with the future of incentives, it is also bringing low-cost carriers into the fold. Abacus recently signed deals to distribute Firefly's fares, adding it to contracts with AirAsia, Jetstar Asia and India's Deccan.
The web is easily AirAsia's most important sales channel, and is the one it is focusing on boosting, explained Rayner Teo, the carrier's head of sales & distribution. Its website currently represents 65% of its sales, with 23% coming from its call centre, sales offices and group bookings via travel agents. Another 10% comes from travel agents using AirAsia's B2C booking platform while just 2% come via its access deal with GDSs signed a couple of years ago.
When AirAsia signed with Abacus, Amadeus and Travelport it "was looking to it more as going into new markets, to places where internet penetration is low", said Teo, such as Cambodia and Laos. "But somehow this didn't really work out and sales are quite small. With the introduction of the GDSs we did notice a bit of cannibalisation from what we had already, so at the end of the day there is still a lot of work to be done."
As carriers and suppliers become more experienced with the online world, new challenges emerge to manage this environment. Online travel agents, for example, obtain the fares of low-cost carriers by screen-scraping their content from the airline websites. AirAsia knows this is going on, and has sent some letters to online travel agents to stop the practice, said Teo: "We are still analysing what incremental value they add, and have not reached a conclusion yet." ­Adding distribution channels also gives AirAsia more work in revenue management. "It is ­increasing in complexity," said Teo. "As we add on additional channels of sales we do protect what kind of price is allowed in these channels," he said.
Grab a Bargain From ANZ
The "sold out" sign is swinging gently on the grabaseat website for flights from Wellington to Hamilton. But if you are quick you can still buy for NZ$39 ($30) a flight from Auckland to Rotorua.
Grabaseat is a site Air New Zealand has developed to "throw very low fares" onto the market, Cam Wallace, ANZ's general manager for New Zealand and Pacific sales told the Airline Distribution conference. Every day ANZ puts around 500 cheap seats up for sale on grabaseat.
The site counts them down to zero before your very eyes as they get snapped up. It is a sales tactic pioneered by television where hyped up presenters offer a limited number of items and people call in to buy them. The items count down to zero on the TV screen as they are sold.
The carrier "threw grabaseat together in a few weeks", said Wallace, as a kind of experiment. It is proving successful with the site obtaining 40,000 hits a day. These ultra-low fares are only available on this site.
EXECUTIVES FROM MALAYSIA AIRLINES, QANTAS, AIR NEW ZEALAND, TIGER AIRWAYS AND MORE AT UATP
EXECUTIVES FROM MALAYSIA AIRLINES, QANTAS, AIR NEW ZEALAND, TIGER AIRWAYS AND MORE AT UATP – AIRLINE BUSINESS MAGAZINE: AIRLINE DISTRIBUTION 2008 CONFERENCE 22-24 APRIL OVER 30 AIRLINES ATTENDING OR SPEAKING; GDSs, ONLINE PORTALS….MORE!
Airline Executives Showcased at Airline Distribution 2008
WashingtonDC – UATP and Airline Business magazine present Airline Distribution 2008, a global conference focusing on distribution and issues facing the airline industry today; 22-24 April, Kuala Lumpur, the Mandarin Oriental.
Airline Business Editor Mark Pilling will present opening remarks and moderate the lead Executive panel with senior commercial executives from network carriers and industry analysts. The panel will focus on managing distribution costs as the rules of the game change rapidly in the way that tickets are sold as well as the debate of profitabilty on short-haul routes and future initiatives.
Keynote address by Idris Jala, Managing Director/CEO, Malaysia Airlines. Transforming an airline from near bankruptcy to profitability in less than 18 months, Jala will address the successful turn-around strategies and discuss future strategies for the continued growth success of Malaysia Airlines. Jala will join Asia-Pacific Airline Business Editor, Nicholas Ionides, for a Q&A session with the audience; and Cam Wallace, General Manager for New Zealand and Pacific Sales, Air New Zealand. Wallace will discuss Air New Zealand's distribution strategies and the future of Air New Zealand. Airline Business Editor Mark Pilling will join Wallace for a Q&A session with the audience. Don't miss your chance to quiz these industry leaders!
Other speakers include industry experts from Association of Asia Pacific Airlines, Amadeus, Zuji, Edgar Dunn & Company, Abacus, BilltoBill, UATP, Travel Technology Research Limited and more.
Register now for the UATP-Airline business: Airline Distribution 2008 Conference, Kuala Lumpur at the incomparable Mandarin Oriental. Online registration is at www.uatp.com/distribution2008
Listen to the industry's leading experts speak out on business critical topics during sessions that will address:
1. Executive Session – The Asian Outlook
2. The Distribution Debate – what major factors must be considered within the distribution chain?
3. The LCC Model – Expanding Choices and Offerings
4. The Payment Debate – credit card costs are now the largest distribution expense for airlines; what is being done to change this?
5. Corporate Buyers – Give Me What I Want – Is it Managed Travel?
6. Ancillary Revenue – The New Model?
Join your colleagues for this executive-level distribution forum and networking event.
For complete details, an up-to-date agenda and a chance to "meet our speakers and sponsors" visitwww.uatp.com/distribution2008
Contact marketing@uatp.com with any questions.
5Q with UATP's Ralph Kaiser
The Transnational
5Q with UATP's Ralph Kaiser
12 December 2007 – Mirroring the success of its 19 airline owners, Universal Air Travel Plan reported record volume of more than $1 billion in October and is expected to surpass $10 billion for the year. Following several years of decline after 11 September, business has picked up in the United States as carriers refocus their efforts on UATP's card. But for this 71-year-old payment company, growth now is occurring on a global basis, according to UATP president and CEO Ralph Kaiser. The Transnational talked to Kaiser last week about the company and trends in the payment sector. An excerpt follows:
What is causing the growth in charge volume and how much can be attributed to the deals you've done with PayPal and CheckFree to provide the infrastructure to allow carriers to offer on their Web sites those payment options?
Those deals with PayPal and Moneta (formerly CheckFree Retail Payments) are really going well–almost everyone would categorize it as "better than expected"–and we're seeing a lot of processing volume, but those tend to be leisure sales. We're seeing corporate charge growth in all markets. Particularly U.S. carriers have done really well and reinvigorated their programs. But the majority of our business is outside the U.S. All markets are growing now and we're seeing carriers beating forecasts in all IATA areas, 1, 2 and 3. [International Air Transport Association groupings for the Americas, Europe/Middle East and Africa, and Asia-Pacific]. We're forecasting another 10 percent or more growth for 2008, which is phenomenal growth for us. About 1 percent or 2 percent growth is due to things like foreign exchange and fare increases, [but] most of it is organic. The goal for 2008 is to position UATP with the airlines as, "If you have a payment need, we can probably address it for you." The core business of UATP will always be the corporate charge program. But what we've discovered is that there are a lot of other payment issues out there that we can tackle for airlines. If an airline wants to create its own rewards program, or prepaid or gift card program, we might be able to facilitate that on our exiting infrastructure. We've proven it over the course of 2007 through the alternative payment provider relationships and some things that we're working on that will roll out in 2008.
Several of your 19 airline owners are based outside the United States now. Has the ownership makeup changed?
The shareholder group is definitely global. For example, my board of directors elected from the shareholder group is nine airlines: British Airways, Lufthansa, Continental, United, American, Delta, Japan Airlines, Air New Zealand and Qantas. It is a global company and it has a global focus. We recently added positions in Sao Paulo, Beijing and hopefully are putting someone in Tokyo this month or next month. We added a lot of merchants this year in mainland China, so you'll see UATP transactions there. We'd like to see an issuer in China in 2008, but we know that we have merchant acceptance there now for all UATP accounts around the world. We'll also see more transactions in India, Latin America and other places in Asia-Pacific. UATP in its early days was definitely U.S.-focused and most of its volume came out of the United States. Now, it's totally the opposite. Of the $10 billion we'll do for 2007, about three-quarters will be transacted outside the U.S.
What are the financial benefits to the 13 issuing carriers of UATP versus competing card products?
If they issue the product and that product is used to buy tickets on their own airline, it's a zero percent transaction, an "on-us" transaction. When that same card is used on another airline, an interline transaction, then the airline earns the revenue that otherwise would go to a card company. So the airline acts as a card issuer, just like your bank does when it issues a Visa or MasterCard. UATP's "banks" are airlines, so they earn the revenue from merchants that Visa, MasterCard or American Express issuers would earn. Every time you use your credit card, the merchant pays a little to process the transaction. The difference is that the UATP rate is significantly lower, usually 1 percent less, than a typical charge card rate, 2.2 percent to 3.2 percent. In the U.S., it may be 2.2 percent to 3 percent, but in Latin America it can be over 3 percent. There are some markets where the rates aren't quite as high because they're regulated. We know that some card companies are even raising their rates currently, which is almost hard to believe at a time when airlines are trying to lower their costs. That actually might be why we're seeing more volume moving over to UATP. Over the past year, we even saw where card companies aren't raising rates; they're shifting more business to the more expensive cards that they have. So accepting a corporate card is going to be more expensive than a consumer card in many cases. By shifting companies into different card products, issuers can effectively put them in higher-rate cards without actually raising the rates for airlines. The card associations are doing it. We've definitely heard that American Express is raising rates on some major airlines all over the world. It's coming as a pretty big shock to a lot of airlines.
Is there demand for UATP to expand beyond air, rail and travel agency fees to capture other types of corporate travel spending?
We're looking at adding some non-air spend to the traditional UATP accounts through acquirers. Some corporates have asked our airlines if they could put rental car or hotel on their UATP accounts. We think that's something we'd like to do in 2008 in the centrally booked and billed charge environment. We would do it through acquirers that already have those merchants. We'd just sign deals with acquirers who could then tell all their merchants that now they could accept UATP through that acquiring relationship. If we do add acquirers for non-air, those transactions would probably be a little more expensive to those merchants–the hotels or rental car [firms]–because the acquirer fee will be on top (of our transaction fee), but we still think it will be less than typical credit card for those same merchants. So the lower rate that UATP affords its airlines will probably be available with an acquirer charge layered on top to the hotels and rental car companies. This is not something that's rolling out tomorrow, but we do believe that's the direction we want to go in 2008 because there is demand out there. Anything that the airlines see and want to do, we try to get it done.
For corporations, are there benefits to travelers with the UATP cards?
The benefit doesn't necessarily go to the traveler as much as it goes to the corporate. An airline signs a corporate deal and says, "I'll give you my best fares on these city pairs if you'll use my payment tool." That's the big difference. Individual credit cards tend to reward the traveler. They charge more money to the merchant, then use that money to reward the traveler and breed loyalty to the card–whereas UATP breeds loyalty to the airline and it's the corporation that really benefits through lower fares though a corporate deal that they probably can't otherwise get. In some cases, UATP issuers will rebate corporations for hitting certain travel levels, but that's really going to be an individual, case-by-case basis and it would have to be a pretty sizeable account to receive travel rebates. Some travelers might benefit from lounge access that might come with a UATP account or pre-boarding rights, even if flying economy. But it's not so much an individual reward tool as much as it is a way for companies to save money by getting the most favorable travel deals.
Airlines hope new payment options will end 'abandoned shopping carts'
Airlines hope new payment options will end 'abandoned shopping carts'
Article in USA Today
by David Grossman
When booking a recent flight on Continental Airlines' website I encountered a myriad of possible payment options. Besides the usual credit or debit card options, I could also purchase my ticket using Western Union, TeleCheck, or Bill Me Later in addition to picking up my ticket at a Continental Airlines Ticket Office, at the airport or by redeeming a Continental Airlines Gift Certificate, Travel Certificate or a Gift Account.
Continental is not the only airline offering multiple payment options these days. American Airlines also has a Western Union option. US Airways also offers Bill Me Later and will soon join Northwest, Southwest, and Midwest Express in allowing airline customers to pay for tickets using PayPal.
Why are airlines suddenly expanding your purchase options? Increasing online sales is the most obvious reason. Scott Stachowiak, Continental's Director of Distribution Planning and eCommerce, cites a study by the research firm Cybersource that showed how increasing the number of payment options significantly drove up the conversion rate of lookers to bookers. "For the online world, that is extremely significant because abandoned shopping carts are a huge problem," Stachowiak told me. "We've got all these eyeballs but we just can't get them to purchase."
Airlines also encourage alternative forms of payment because most such options cost less than traditional credit card transactions. Like all merchants, airlines pay a fee to the credit card companies every time someone uses a credit card to purchase an airline ticket. These fees generally range around 2% to 3% of the ticket price depending on the card, the value of the ticket, and the negotiated deal between that airline and the credit card company. On a $1,000 airline ticket, approximately $20 to $30 of your money goes to the credit card company.
To lower costs, airlines first took aim at travel agency commissions. Next they targeted the booking fees paid to the "Global Distribution Systems" that connect travel agencies to airlines. Now they are poised to tackle the next highest cost in issuing airline tickets: the credit card fee.
"Airlines are looking at every nickel and dime they can find with spiking fuel prices," says Ralph Kaiser, President and Chief Executive Officer at UATP (Universal Air Travel Plan), a company owned by 13 major airlines, which allows those airlines to issue their own branded UATP card for ticket purchases. "They've addressed almost every piece of their cost structure and we believe they're going to get more and more aggressive on credit card fees," Kaiser told me.
Although UATP is not exactly a household word, it was actually the first credit card, predating American Express, Diners Club, MasterCard, Visa and all others. The UATP card is used primarily by corporations rather than individuals. While all major airlines offer their frequent fliers a co-branded credit card to consumers, these airlines also offer UATP cards to their corporate clients. With UATP, airlines avoid most of the fees paid to credit card providers. A smaller fee is collected by UATP to administer the program, and an airline issuing a UATP card also receives a small interline fee from other airlines when their corporate customers use that card to book travel on another airline.
This allows the issuing airline to share some of that savings with corporate customers in the form of a discount. And the discount encourages corporations to continue to use the UATP card for air purchases. Many corporations use UATP or other corporate credit cards to track their travelers and assure travel policy compliance through a centralized billing and reporting system. Although corporations of all sizes use UATP, the card is particularly beneficial to smaller companies, according to Stachowiak, because they are less likely to receive a "kickback" or rebate directly from the consumer credit card companies.
While the UATP card may be used only for air travel, some airlines offer corporate customers an AirPlus card, which is essentially a UATP card co-branded with a regular credit card. This allows travelers to put all of their travel expenses on one card and still get the benefits of UATP.
UATP accounts for several hundred million dollars in airline tickets annually at Continental and Stachowiak says that number is growing at 20% to 25% per year. Continental expects that UATP and AirPlus could eventually generate as much as 33% of the airline's revenue.
But beyond AirPlus and UATP, Stachowiak says almost one in five Americans don't have a credit card and this number is significantly higher in many other countries. Many credit card holders are also already over their limit or are still uncomfortable using their card to make an online purchase. That is why Continental initiated several other payment options.
With Western Union the customer reserves the ticket online and goes to any one of the 280,000 Western Union offices worldwide to complete the purchase. With Telecheck the funds are debited directly from the customer's bank account when the ticket is purchased. Bill Me Later customers get an extra level of security by making purchases online without entering a credit card number.
Perhaps the most interesting new ticket purchase option is PayPal. PayPal and its archrival, Google Checkout, offers consumers secure payment for all kinds of goods and services. With a PayPal account you can pay the seller directly from your bank account or specify a credit card for payment. With EBay as its owner and more than 150 million accounts, PayPal is a logical addition to any airline's payment options. With several major airlines now embracing PayPal, the remainder of the industry will not be far behind.
Alternative forms of payment are definitely on the rise, but don't retire your credit cards just yet. Those enormous credit card issuers aren't going to go away without a good fight. As alternative forms of payment increase in popularity, the traditional credit card providers will likely lower their fees or do whatever is necessary to retain their dominance in airline ticketing. And as always, business travelers will benefit from the competition.
UATP, Lowers Credit Card Fees for Business Travel, UATP on World Business Review
Distribution Discussion Turns to Payment
travelManagement
November 29, 2006 • Chicago – Now that global distribution system costs have been redistributed, airlines have set their sights on lowering the cost of accepting credit cards. But how this effort will impact corporations in 2007 is up for debate.
Sounding the alarm, BCD Travel executive vice president of global sales Travis Tanner this month told an Association of Corporate Travel Executives forum in Chicago, "Over the next 12 months, there is going to be an absolute battle over credit card fees. No one wants to talk about it–especially large travel agencies. But corporations need to hear about it and ask, 'What has happened in distribution that hasn't been passed on to you as a customer?' Nothing! Anytime the airlines want to take costs out of distribution, travel agents don't have room to do anything. Over time, what really happens is that they just raise your airfares. I wish people would be honest with you."
Of bigger financial concern to corporations that rely on credit card rebates to fund operations is Tanner's warning that those revenues could be at risk if airlines lower their fees. [Rebates typically offered to large customers are tied to speed of pay and other factors, and can reap from 10 to 100 basis points–or one-tenth of 1 percent to 1 percent of dollar volume–sources told Management.travel.]
Not so fast, advised Consulting Strategies principal David Hillman, a travel and expense management consultant, and Edgar, Dunn and Company director Pascal Burg, who consults for payment providers and travel industry suppliers.
Hillman notes that credit card fees have been on the airlines' radar for several years. "But why would the corporation choose a direct bill option, when they currently not only don't pay for using corporate cards, but get a rebate, insurance, loyalty programs for travelers, reporting and risk mitigation?" Hillman asked. "The alternatives would need to provide corporations with all the data-related services that they currently get–hotel, car and restaurants and some of the other bells and whistles associated with these. That's not an easy thing to do. Certainly, you could dream up ways of doing this. One is for airlines to incur a cost, providing airline-related benefits to the corporation [where] at least they're getting a relationship for their money, as opposed to just paying the credit card fees, but this has to be net zero cost to the corporation."
Burg and the International Air Transport Association reported that with the decline of GDS fees, visibility of the cost of payment solutions has spiked. "Card fees are more visible as other distribution costs are successfully reduced," moving "from 10 percent of distribution costs to 25 percent," said IATA's Donovan Stenning during a presentation last month.
Exact percentages are negotiated and confidential, but airlines pay around 2 to 2.5 percent to accept American Express, Visa, MasterCard and Diners. On a $500 ticket, Burg estimated a $12.50 fee, and said that the U.S. airline industry pays about $1.5 billion in credit card fees. IATA reported total annual card volume of $140 billion and costs of $3 billion globally. Northwest's vice president of distribution Al Lenza has recently said at industry events that his company's payment bills exceeded its GDS bills.
Added Universal Air Travel Plan president, CEO and chairman Ralph Kaiser, "No one believes that airlines are going to stop taking credit cards. We just need to rationalize those costs. Why should someone pay 2.5 percent on a $5,000 ticket that provides no benefit to an airline and establishes loyalty to the credit card company?"
Burg said airlines are trying several tactics to lower costs, including "optimizing the payments mix that includes offering alternative forms of payment," such as PayPal and electronic check; reducing the cost of card fraud; streamlining internal billing processes such as the handling of chargebacks and reconciliation; renegotiating merchant fees; becoming an issuer through UATP, or partnering with other credit card companies; and maximizing the revenues generated by airline co-branded cards. American Airlines last year introduced its own gift cards. Internationally, some carriers such as Ryanair and KLM are even adding surcharges to accept credit cards and expanding use of Internet banking.
The trick is to act without upsetting buyers, Burg said.
According to Continental's John Slater, "We've had some discussion with some customers about direct settlement, but I don't know that it would dominate our distribution strategy." For customers who have an interest, Continental is willing to talk, said Slater, managing director of distribution planning and e-commerce. "There are some hurdles to overcome–people are more in an exploratory mode right now," he summarized. "We're not on a quest to radically change this."
Continental is an "active proponent" of the UATP platform. On its Web site, Continental offers alternative payment options including Bill Me Later, TeleCheck and Western Union. UATP and its international partner, AirPlus International, are actually owned by the airlines and provide carriers with a low, or even no-cost means to efficiently process charges. To help spur use of alternative payment forms, UATP earlier this year partnered with both PayPal and CheckFree to manage back-end processing.
Unlike the GDSs, which are really transaction providers, credit cards are not a pure expense, Slater said. Continental is focusing its attention on "who really are our card partners–Chase and American Express," and then all the rest. The airline has a co-branded relationship with Chase and offers incentives to use that card.
Burg said some airlines are interested in conducting pilots with large agencies and buyers to trial non-card payment options "and share the cost savings across stakeholders. It might be a useful conversation to have between a travel department and some of their travel suppliers," he added.
BCD's Tanner urged travel managers to query suppliers about broad distribution issues as part of negotiations in 2007. "Don't just talk to them about airfares, but talk to them about distribution and what they're doing to you," Tanner said.
Highlighting the international interest in this topic, Crum noted that the Australian government has capped the rates that credit card companies can charge. At an IATA meeting last summer, several airline CEOs asked the board of governors to develop a proposal to reduce credit card costs, a spokesperson said. The topic is to be discussed at an IATA meeting next month.
Article in travelManagement
In Control: Wal-Mart's Travel Program
In Control: Wal-Mart's Travel Program
To run a travel department using ARC's Corporate Travel Department designation, travel managers do not need to be longtime agency operations administrators or experts in the complicated processes of ticketing and settlement. But they do need to be into control. Few travel managers embody that characteristic as much as Wal-Mart global travel services director Duane Futch, who this spring addressed the Universal Air Travel Plan's Airline Distribution conference in Dublin.
During a speech in which he assigned Wal-Mart partial or total credit for, among other things, ending Northwest Airlines' doomed 2004 plan to add surcharges to global distribution system bookings and getting American Airlines to pick Shanghai over Beijing for its new China service from Chicago, Futch outlined some of what the world's largest retailer has done with its control.
"We have developed what I call a leading-edge method of connecting our offices," Futch told more than 200 attendees from more than 40 airlines. "Through [Sabre's] GetThere electronic self-booking tool, and the Sabre global distribution system, the bottom line is, we hold one ARC number. We have several pseudo-cities that we have created for each of the countries that we are doing business in. And that country maintains its own database of associates and individual profiles. It's very simple. They book in their own country. That record is then transmitted to [Wal-Mart headquarters in] Bentonville, Ark., where it goes into our systems there. It is e-ticketed there and then transmitted back to the local country and paid for in that local country currency through our UATP relationship.
"In addition, if an office is closed and an associate needs help, based on our worldwide presence, what we are getting ready to do, we can tap into each of those pseudo cities, or those records, find out where that individual is, or what they need to have done, and that other office can make that happen. Or, we have a relationship with American Express for after-hours service."
Futch supports the complete listing of airfares and inventory in the GDSs, going so far as to say the company would even pay Ryanair's GDS bill if the airline would participate. "But there are some exceptions," he said. "If you have web-connect capability, we can go out and scrape on your Web site and pull you back in. The whole key is that we have to have control of our data, and we have to know where our people are at."
Citing the importance of long-term relationships, Futch said the UATP contract is "the longest-running identifiable, active contract at Wal-Mart. That agreement was signed March 17, 1969 with the Walton management company. It was signed by our founder, Sam Walton. The contract only had one modification in that entire history: to change the name to Wal-Mart."
The company's "vision statement" with regard to travel is to deliver travel inventory at the lowest possible cost. "We at Wal-Mart are seriously into business metrics," said Futch. "Average cost per ticket? Forget it. That is not a serious metric that I look at. That fluctuates so much, everyone wants to add this or that, or charge extra for an aisle seat … that just does not work for us. My true business metric, the one I look at every month when I get my P&L, is 'What does it cost us to produce a ticket?' Then I benchmark that against all the other folks out there [including] the travel management companies. I can tell you now that we are substantially less in our cost to produce a ticket than anyone could ever believe, because of our technology now, the way we do our business and the contracts we have."
Wal-Mart likes the simplicity of having the lowest possible number of providers for a given service. "I want one settlement engine: ARC. I want one payment plan: UATP," Futch said. "We can't have fragmentation in the settlement process. It costs money to have all those different cards (Amex, Visa, MasterCard, etc.) and we don't want that. We want one form of settlement, and that's all there is to it. Very simple with UATP. Its seamless."
Futch said Wal-Mart has "very good" relationships with American Airlines, British Airways, Delta Air Lines, Northwest Airlines and others, but the company also operates an internal airline with 22 jets, which it calls Wal-Mart Aviation.
Sustainability issues have been top of mind for the giant retailer, which now is working to incorporate that thinking into its travel program.