This is an area that is generally poorly understood by airlines, however, and is rarely measured. Indeed, new payment methods offer airlines an opportunity to increase revenues. “There is no doubt that payment has been undermanaged in aviation, but interviews have confirmed that airlines not only focus on controlling costs but also are increasingly starting to leverage payment on the revenue side,” says Burg. IATA Pay is an enabler of this latter trend and is already becoming established in a number of markets with several airlines. And real-time bank transfers will likely be a major development in a few years.” “Also, Buy Now Pay Later is working well in markets, such as the United States. “Wallets are gaining traction in markets such as China,” he says. But Burg believes the benefit would be seen in the mid-term. Integrating them isn’t cheap or easy as aviation is a complex, global business. Nevertheless, alternative payment methods are gaining traction. Payment is quick and secure, and they are often tied to loyalty-related bonuses, which makes them popular with customers. But they also come with several advantages. “They’re just collecting that money for somebody else.”īurg notes that cards represent over 90% of transactions for some airlines. “But also, airlines are paying fees on $93 billion that they don’t even get,” he says. Pascal Burg, Director at Edgar, Dunn & Company, says there is a reliance on card transactions in aviation, and card payment fees represent the largest component of the total acceptance costs. The payment acceptance cost was $20.3 billion or about 2.2% of total payment amount. The headline finding is that airlines took in $977 billion in 2019, including $93 billion of fees and taxes on behalf of third parties such as infrastructure providers and tax authorities. Two studies, one undertaken by Edgar, Dunn & Company ( Airline Payment Cost and Revenue Drivers) and the other by McKinsey & Co ( Payments Value Opportunity in Airline Retailing) explore the costs and revenues associated with payments for the airline industry globally. There are two aspects to consider: controlling costs and increasing revenue. Alongside controlling distribution and an offer and order environment, improving the payment sector is key to unlocking value for airlines.
PAYPAL TRANSACTION FEES KEY IN MANUAL
Though much has been made digital, the back-office processes have remained largely unchanged for decades and manual intervention is the norm in many instances.īut as airlines strive to meet demand in the post-pandemic world, payments have become a key performance driver. Airlines traditionally struggle with several payment-related issues, including refunds, contracts, cash flow, and integrating new payment methods.
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