BA, AirPlus Launch Business Travel Card

U.K.-based corporate travel buyers have a significant new source of invoice settlement and management information at their disposal, with the launch of a jointly marketed corporate card by AirPlus and British Airways. The companies are rolling out the British Airways AirPlus Company Account product in the United Kingdom and plan eventually to bring the card to the rest of Europe and the United States.

As an added incentive, BA will absorb the merchant fee on purchases of corporate net fares made with BA AirPlus. The airline since June 1 has refused to pay a merchant fee for any other cards—a policy that has led to an as-yet-unresolved legal dispute with American Express. BA and Amex market a joint British Airways American Express charge card in the United Kingdom, for which this new venture will provide significant competition.

BA AirPlus replaces Basys, which BA launched in March 2001. Although Basys offered buyers much coveted flown data, it was regarded by critics as little more than an accounting system and could be used only to settle air expenditures. The new product will allow settlement and data generation for all services provided by business travel agents. It also will deal in any currency in any country. Basys only covered purchases made in the United Kingdom and they had to be in sterling.

Unlike the BA Amex card, what BA AirPlus does not yet have is a walking plastic option—in other words, giving travelers a card they can use at restaurants, hotels and other establishments. For now, all purchases only can be made through the client's appointed travel agency. BA is in discussions with various financial institutions and expects to announce a Visa or MasterCard plastic agreement soon.

BA and AirPlus are hoping they can replicate the success of Lufthansa AirPlus in Germany, where it is an integral part of most corporate travel programs. No fewer than 15,000 of AirPlus' 16,000 corporate clients are based in Germany and 71 percent of all business flights in the country are settled through AirPlus. The company, which is a wholly owned subsidiary of Lufthansa, claims it is used by 88 percent of Germany's top 100 companies and all of its top 10 banks.

The chief benefit to German companies is that the flown data generated by AirPlus is accepted by both airlines and corporates as a reliable source for deal negotiations. Approximately 20 carriers recognize the data for this purpose, including United Airlines, Delta Air Lines and BA as well as Lufthansa.

Chris Fry, sales and marketing director for Hogg Robinson, parent company of BTI UK, expected the new product to attract companies that currently have no corporate card arrangements. "This bridges the gap between Basys and traditional lodge cards," Fry said. "The data is excellent, although we are waiting to see how they will sort out walking plastic to go with it. We have told BA that the market is companies without a card. About 35 percent of British businesses don't have one, of which most are midsize but some are large. There is a much higher take-up of payment products in the U.S."

To achieve success in the United Kingdom, BA AirPlus will have to overcome lingering suspicions about BA's strategic intentions. Early users of Basys felt the airline did not support the product properly and concerns remain about whether BA can tap into data generated by the product without the permission of corporates. "There is a habit of scratching the surface of initiatives from BA and finding something else is driving it," said one travel manager who did not wish to be named.

BA general manager for global distribution Chris Vukelich gave assurances that the airline would not have sight of client data, a response backed by Michael Wessel, director of communications for AirPlus. "We have had to work for a long time in Germany to prove we are independent," he said. "The fact that we are clearly not part of BA should convince U.K. clients that this is a neutral solution."

One buyer who is enthusiastic about the launch of BA AirPlus is Terri Collins, U.K.-based Europe, Middle East and Africa travel manager for Motorola. The company currently is a user of Basys—in addition to a credit card for travelers and a purchasing card—and has found it a highly useful tool.

"Basys provides us with data electronically and a feed into the general ledger," she said. "It has streamlined our data process and enabled us to cut costs.

"The flown data has been particularly helpful because we have matched it against booked agency data to ensure the refund of ticket credits—BA has said it will pay us on that basis," Collins continued. She estimated that 30 percent to 35 percent of Motorola's EMEA tickets go unused, of which 5 percent are not returned by travelers. Collins also intends to start using the flown data for airline negotiations.

Collins said she will be able to do even more with BA AirPlus. "It is a great step forward," she said. "Being multi-currency should give me totally consolidated data for the region and I will be able to cross-charge back to budget-holders. Given that, even with the advent of the euro, we operate in several currencies in the EMEA region, I will value the ability to consolidate from a financial point of view." Collins also welcomed the opportunity to add non-air expenditure, with rail being particularly important in continental Europe.

The corporate travel market now will wait to see if AirPlus can use the United Kingdom as a launchpad to expand beyond its power-base of Europe's German-speaking countries. AirPlus is number one in Austria, as well as Germany, and also a major player in Switzerland.

Lufthansa's AirPlus is the most successful version of the airline industry-owned Universal Air Travel Plan, formerly Air Travel Card, which dates back to 1936. In spite of several strong selling points—especially the provision of flown data and the ability to prorate interlined itineraries—and its central role in German travel programs, it has never effectively challenged the hegemony of American Express in other countries. In the United Kingdom, for instance, many existing Lufthansa AirPlus customers are subsidiaries of German companies.

AirPlus will find it hard to establish so strong a hold elsewhere. In addition to its inherent benefits, the Lufthansa version also owes its success to close integration with the airline's frequent flyer scheme and the historical context of its launch in 1989, when payment cards were little used in Germany. Nevertheless, Wessel said, "We believe there will be an immediate, significant increase in sales in the U.K. market."

Wessel added that AirPlus intends to step up its activity in the United States, France and Italy as well as the United Kingdom. One buyer who thinks UATP will expand to a larger market—in Europe at least—is Ingo Classen, head of global travel management for Bayer. "It is very important for us because it brings our data together and we use it as the basis for supplier negotiations," he said. "In future, it will be even more important because we are seeing more and more regional and global supplier contracts.

"At the same time, the economic downturn means there is increasing focus on cost-cutting on the travel side, and to reach targets, you need to have high data quality," Classen continued. "In the U.S. market, 90 percent of trips are point to point, so maybe high data quality is not so important. In Europe, there are a lot more complex trips and interlining, so we need the quality."