Airlines Give Themselves More Leverage on Fees

By Lindenmayer, Isabelle | American Banker, March 4, 2005 | Go to article overview

Airlines Give Themselves More Leverage on Fees


Lindenmayer, Isabelle, American Banker


Struggling with thin margins and rising costs, airlines are trying to whittle away at the fees they pay for processing credit card payments.

And though negotiating lower fees from card companies has been a challenge in the past, airlines are finding that cobranded credit cards and the ability to use alternative payment systems are giving them more leverage.

A result is serious scrutiny of credit card fees, which according to Edgar, Dunn & Co. cost airlines an average of $12 per ticket.

Pascal Burg, a director of Edgar Dunn, a research firm in San Francisco, said that "two or three years ago the airlines were not in the driver's seat; they saw payments as an inevitable cost. Today the larger airlines are definitely much more in the driver's seat."

Aside from the sizeable transaction volume airlines provide to card companies, airline cobranded cards have become some of the best-selling cards for the associations, giving airlines more negotiating power.

Steve Freiberg, the chairman and chief executive of Citigroup Inc.'s credit card operation, said demand for Citi's co-branded airline cards continues to surprise him.

"Miles are still a pull," he said. "We've had growth that far exceeded our expectations" on the cards.

Mr. Burg said several airlines have been able to use that newfound leverage in their favor.

"More than one airline," he said, "has negotiated its rates down. It is fair to say that over the next few months there will be more pressure on MasterCard and Visa to lower their fees ... and a lot of airlines are looking hard at their American Express relationships."

British Airways PLC spokesman Steve Ebrrow said the carrier is "looking to reduce costs in payments." But he conceded that "it's difficult when you're looking at cutting costs in the money collection process, because credit cards are still the payment of choice."

Some airlines are starting to dabble in less costly online payment alternatives. Last spring Continental Airlines Inc. added First Data Corp.'s Western Union remittance service as a payment option on its Web site. That allows passengers to reserve a seat and then send payment to the airline through one of Western Union's walk-in outlets.

The Houston-based airline also incorporated a bill-me-later function that involves mailing the customer a bill, which is typically paid by mailing back a check.

Also, in 2004 Continental started accepting electronic checks online; customers enter their bank account information, and the airline then initiates an automatic clearing house debit.

John Slater, continental.com's managing director of distribution, said that with the new payment features "the consumer wins because they get more choice, and we win because we get discounted distribution channels."

Continental originally focused on offering the three new payment options for customers abroad, particularly in Latin America, but response has been equally positive with domestic customers, Mr. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Airlines Give Themselves More Leverage on Fees
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.