Low Cost & Regional

ATPS2024: Airlines adapt approach to payments amid evolving distribution landscape

Airlines are adopting solutions to keep the costs of payments down giving them greater ability to control how efficiently they accept and settle transactions.

A panel at the Airline and Travel Payments Summit held in London last week and led by payments orchestration technology platform Nium heard from Air Europa and Air France KLM.

Speakers discussed the changing environment for payments as consumers demand more alternative ways to pay and the aviation sector adopts the New Distribution Capability (NDC) standard developed by global airline body IATA.

Yago Casasnovas, payments fraud prevention and distribution lead at Air Europa, said within the existing GDS and IATA payments structures it’s “extremely difficult” to bring in new payment methods.

“That’s one challenge,” he said, “and related to that the fact that in the credit card payment methods airlines have been struggling for many years with high costs and it’s been very difficult to overcome these costs.”

Casasnovas described the current situation as “unhealthy” and said ideally there would be an agreement with all parties involved, including travel agencies, as to the solution.

Joost van der Sande, retail strategy director at Air France KLM, said airlines do not have enough tools in their toolbox to solve the problems of payments.

He said there needs to be something in between IATA-based solutions used by airlines and merchant of record methods, preferred by consumers, that offers additional forms of authorisation.

“When your payments costs are higher than your distribution costs it signifies the challenge we have in payment costs.

“In the direct channel we are trying to offer alternative forms of payment to the consumer to mitigate costs. And I’m trying to find mechanisms to have that dialogue with travel agencies also to do so. Travel agents are also trying to innovate.”

Van der Sande added, where it is allowed by regulations, there is the option of surcharging for the use of alternative forms of payment.

Casasnovas said: “Firstly, it’s very important to have a picture of the costs on an agency level so you are able to see what an agency distribution is costing you. You can also consider those costs in terms of competitive advantage.

“There are several different ways of approaching this. In Europe virtual cards are very successful. In the Americas, a lot of consumer cards are still being used. There’s not much we can do there, it’s very hard to move away from that because it’s been like that for so many years.

“The only thing we can do is to incentivise new forms of relationship with agencies. But there will always be GDS and credit cards, especially in places where you are not powerful and you want reach like, in our case, Japan and Australia. That’s where GDS and cards are great because it works everywhere.

“In core markets in Europe, that is where we have found a solution like Nium where you can drastically reduce the costs.”

John Taylor, head of airline payments at Nium, said its payments scheme agnostic airline solution offers carriers more control and more options. “Cash is obviously still an option. Surcharging is clearly not ideal.

“The key for me is payment is becoming a topic in distribution agreements. I think that’s a healthy thing. Collaboration between airlines and agents is something we have called out for for many years.”

The adoption of IATA’s NDC, which was developed to give designed to give airlines more control over the customer offer, has been a major disrupter in the distribution of airline fares and products, both airlines on the panel agreed.

Van der Sande said Air France KLM was an early adopter and has seen good uptake, particularly among OTAS, and it is about to launch a minimal viable solution for corporate business.

“All processes are changing, including payments,” he said. “In principle with NDC we get a little bit more control.”

Casasnovas said Air Europa is poised to start adopting NDC and is building its strategy. “It’s clear in our minds what we want to do.

“In GDS you do not want the agency card because of the cost, with NDC it’s the other way round, you actually want the B2B payment method. The customer card comes with many issues.”

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