Air Pulse
Airline Distribution & Finance News
  • Airlines
  • Industry Payment
13 October 2021

The Airline Payment Framework

Historically, payments have not received a lot of attention within the context of airline commercial strategies. That is changing as airlines recognize that costs diverge widely among different payment methods and that payment itself can be a competitive tool. Given this reality, payments and payment strategy needs to be elevated to the executive level of leadership at an airline.

Concurrently, the area of payment is getting increasingly complex, with a variety of emerging payment instruments and technology solutions, more payment intermediaries and changing regulations- all this in a global dimension.

In this fast-changing environment, joining payment with the commercial strategy can be a basis for value creation. Benefits can include maximizing customer reach and sales conversion, improving the customer experience, stimulating innovation, while securing the cash flow for airlines, minimizing payment related costs, and widening the payment options to the ultimate benefit of end consumers.

In 2019 estimates were made by Edgar, Dunn & Co. (EDC) for IATA to size the industry payment impact on revenue creation, as well as on expenditures and identify possible areas of cost and process efficiencies, ultimately benefiting consumers.

Key learnings, in order of magnitude, were that:

  • Payment could contribute up to US $11.7bn of incremental revenue thanks to better payment conversion rates and better acceptance of local payment methods.
  • Payment was recognized as a major cost factor for airlines, with an estimated magnitude of US $10.2bn composed of payment acceptance fees, fraud- and risk-related costs, costs of cashflow and cost of payment processing.

In their retailing transformation journey, airlines increasingly sell via multiple channels and face pressure to support multiple payment instruments to respond to end consumers’ needs.

To increase bookings with new customers and new destinations, they need also to provide a seamless and convenient payment experience to their customers. In addition, airlines sell more and more ancillary goods and services from both their own inventory and from their partners.

The COVID-19 pandemic has not fundamentally changed what is at stake for airlines; however, it appears to have accelerated the evolution of payments trends and complexities without removing foreseen challenges.

The Airline Payment Framework has been developed with the Payment Methods Working Group (PMWG) to address the Industry Financial Advisory Council (FinAC) strategic framework topic 3b. Industry Payments - Payment strategy and to support “cost efficient forms of payment” for the airlines.

This first edition addresses the airline payment instruments landscape in distribution and intends to raise airline industry awareness with regard to developing, implementing and measuring the success of an airline payment strategy. Subsequent annual editions will incorporate other strategic payment areas as the PMWG work will progress.

It has been constructed as a toolbox, giving readers the ability to pick and choose from different options and possibilities.

Airline intended readers are all staff involved from the definition of the airline strategy to the ones implementing the payment policy across all channels and the ones monitoring it (commercial, payment, finance, …).

Airline Payment Framework: What is it?

 

Payment is also much more than just the process of collecting sales. It is a core business component, integrated into distribution, and plays a strategic role for the company’s financial health.

Many elements need to be considered by an airline when deciding what it will sell, to whom and how it will get paid. Therefore, airlines should consider building a payment strategy, integrated into the commercial strategy.

The Airline Payment Framework document is aimed at raising awareness with regard to considerations airlines may want to take into account when building its payment strategy, when implementing it with its partners and customers and when measuring its performance.

The document is therefore structured into three main pillars:

Airline Payment Strategy
The first section of the document addresses important aspects of payment to define a robust payment strategy. And it illustrates finally what are the potential risks for an airline of not having defined a payment strategy.

Airline Payment Policy
The second section focuses on considerations related to issuing payment policies for the various distribution channels that support the airline payment strategy.
An appendix provides an overview of the forms of payment with key challenges and further considerations.

Airline Strategy Monitoring
The third part explores the importance, benefits and the features of proper monitoring within the organization that leads to better efficiency, feeding and fine tuning further the airline’s payment strategy for incremental outcomes.

Where can airlines find the Airline Payment Framework document?

This document is intended for airlines only and have been published in the “Payment Methods Working Group - Knowledge Sharing Community”. Already, 147 different airlines’ staff have access to the Community. Should any airline be interested in joining the Community or on-board additional members of their staff, please refer to the Community onboarding & user guide (pdf).

We use cookies to give you the best experience on our website. We also use cookies for advertising purposes. Please see our privacy policy and cookies help page for complete information.