Magazine article American Banker

Airlines Seek Cheaper Ways to Take Payments

Magazine article American Banker

Airlines Seek Cheaper Ways to Take Payments

Article excerpt

Byline: Daniel Wolfe

A growing number of airlines, facing rising fuel prices, are trying to reduce their online payment expenses by signing up for alternatives to credit cards.

"Credit cards really are the last area where there's an ability to save money," said Ralph Kaiser, the president, chief executive, and chairman of Universal Air Travel Plan Inc. "Credit cards have traditionally been a more expensive form of payment than anything else."

The biggest airlines can pay $250 million to $300 million in card fees each year, Mr. Kaiser said.

His Washington company, which is owned by several airlines, offers a corporate payment card and runs a payment network for 240 carriers and travel agents worldwide. Last month it said it would route payments made to carriers through Bill Me Later Inc. It also supports payments made through PayPal Inc. and Moneta Inc. It does not handle consumer credit card payments.

Mr. Kaiser said that UATP has been promoting alternative payment systems since 2005, and that interest from carriers and consumers is starting to take off.

The amount of money spent at U.S. airlines through alternative payment methods has doubled in the past year, he said. He would not provide exact figures, and he made it clear that alternative methods are not "something that's going to replace credit cards entirely."

Some carriers were trying to negotiate lower fees with the card networks as early as 2005, but few said they were considering alternative payment systems then.

Airlines are turning their attention to alternative payments now because there is little else they can do to cut costs as fuel prices rise, he said. "The price of oil has added pressure in general to find savings anywhere that can be found, and one of the challenges for airlines is they've done a very good job, particularly in the U.S. market, of squeezing costs out of their operations."

Midwest Air Group Inc., Northwest Airlines Inc., Southwest Airlines Co., JetBlue Airways Corp., Delta Air Lines Inc., and AirTran Holdings Inc. offer at least one alternative method through UATP, he said. He expects another U.S. airline to join the list each month through early next year, and his company plans to begin offering alternative payments to its foreign airlines this year.

Some airlines have struck their own agreements to accept alternative payments. Continental Airlines Inc. has used Bill Me Later for nearly two years.

The online travel company Orbitz LLC accepts Retail Expansion Network Inc.'s PaidByCash. Sabre Inc.'s Travelocity accepts only credit and debit cards.

Mary Anne Gillespie, PayPal's vice president of sales, said the eBay Inc. unit is benefiting from the air industry's efforts.

"Independent of us, airlines are trying to drive business to their least-cost channel, which is the Web," she said. "Since that's a goal, companies like PayPal can say 'Well, we have an alternative payment option,' and it becomes very good news to them."

PayPal payments can still be charged to credit card accounts, but the fees PayPal charges merchants are generally less than what they would pay an acquirer to accept card payments directly. …

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