<H1> Card Pilots Proliferate</H1><H3> More Major Airlines To Make Smart Cards Part of E-Ticket Testing</H3>By Jay Campbell
Several major U.S. airlines plan to test smart cards as boarding passes within the next year.
While the conventional wisdom has been that it would be five to 10 years before smart cards proliferate, tests by the Delta Shuttle and Lufthansa Airlines have shown that smart cards can work, prompting other airlines to revise their timetables.
"In the next six months, two or three more airlines will be interested in doing field trials of the contactless systems," said Siemens Components' director of marketing chip card integrated circuits Jurgen Hammerschmidt.
These kinds of smart cards, destined to evolve into a "total solution" travel card for calling, corporate payment, purchasing and airline boarding, are now being considered as a means for electronic ticketing by American, Continental, United and others.
American Airlines plans this week to unveil its version of electronic ticketing, which a source said will use smart card checkin platforms but not necessarily the card itself. An American spokesman said he couldn't comment "because of impending announcements." The announcement would support statements by AMR chairman Robert Crandall, who often refers to card technology as a better form of electronic ticketing (BTN, June 10).
United Airlines, far ahead of American in implementing electronic ticketing, is planning a test of the smart card checkin units by mid-1997, said marketing manager Bryanna Wilczynski. She said smart cards could be the key, but the program is still in the research stages. "We've set next year for our test because we're not sure exactly the place they have in the airline industry," she said.
According to United's director of distribution, Sue Fullman, "we've been doing a lot of work in the last few weeks on smart cards. We didn't see value in it before and were concentrating on our electronic ticketing product, but now we're seeing value." She said closer cooperation with smart card leader Lufthansa has helped.
Continental, which last year joined United as the other leading network carrier developing electronic ticketing, said that while its big push is for the e-ticket, "we are discussing options with smart card providers," said a spokesman. "We haven't seized one yet, but when we do, we will use our e-ticket machines as the receivers."
The two carriers that already have tested smart cards, Lufthansa and the Delta Shuttle, have no plans to look back. Lufthansa's test, which originally involved 1,000 business travelers on the Berlin-Frankfurt route, has matured to include 100,000 travelers throughout Germany.
According to Siemens, which provided Lufthansa's chip card checkin platform, the airline plans to provide cards to all its frequent travelers by next year. "Lufthansa is now making the business case to the International Air Transport Association," said Hammerschmidt. "Their system is well advanced and appears to be a whole solution, saving money and time."
Delta Shuttle also has expanded its smart card program beyond the test phase. A recently signed contract with one of its largest corporate accounts put the number of users at more than 500. Card-holders on the Shuttle have reduced their preboarding time from an average of two minutes to under five seconds, the airline said.
Siemens is up against a slew of possible competitors, including EDS, Schlumberger, Motorola, IBM, MasterCard, Visa, American Express and Airlink Systems.
In the Siemens system, the traveler makes a reservation by entering it into a radio frequency-based airline reservations terminal. The terminal produces an itinerary and receipt, and a boarding pass is stored on the smart card. Upon checkin, the traveler simply waves the card over a reader.
This contactless system developed with Lufthansa is different than the one offered by the Delta Shuttle, in which travelers actually dip the cards into a machine. Delta's card holds all the necessary information, while Lufthansa's card is simply an activator of information contained within a database.
Such differences in available systems have raised concerns about how passengers can use one card for all airlines after smart card use proliferates. A smart card committee of the International Air Transport Association, Air Transport Association, Air Travel Card and others is addressing that and other concerns, including security. The group is working to recommend global standards by October (BTN, Feb. 12).
Siemens said it is developing a company travel card that would include partnerships with a bank, credit card provider and travel suppliers. "We want the card to store all travel expenses," Hammerschmidt said.
Lee Macenczak, director of distribution planning for Delta. said the technology "is not cost effective yet." But Hammerschmidt said he expected the price of smart card readers, which currently cost about $50, to drop next year. "Everyone knows it saves money by speeding up the process and reducing error," he said. "And new chips are coming that have more memory and will accelerate the process even more."
In addition to airline boardings, potential applications for smart cards are enormous, and the more that are identified and implemented, the faster the price will drop. The technology can be used as a calling card, which is how Siemens' program got started in Germany 10 years ago through German Telecom. That program has since spread to Venezuela and England, with 180 million cards in circulation, Hammerschmidt said. In England, pay phones are being used as ATMs to transfer money. That program could lead to business travelers downloading money transfers via a telephone or other communications station as cash advances.
Payment systems vendors also are getting into the game, and in some ways are ahead of it. Visa, MasterCard and Europay said they would release standards for smart credit cards this month.
Some companies are using the cards as security passes in their offices, something Hammerschmidt said he "knows for a fact" American Airlines is thinking about. And, at the Olympics this summer, stored value cards will be provided to international visitors for use as payment in local stores and restaurants, including McDonald's.
"The real application is a multi-application," said John Shanley, secretary of the IATA smart card subcommittee. "For example, you'll have your credit card, calling card and airline pass all in one. I think electronic ticketing will help drive this, but it has to be accepted by the consumer.