Cross-Border Ticketing: STPs Yield Savings

<B> Cross-Border Ticketing: STPs Yield Savings</B>

By Amon Cohen

Lehman Brothers director of business services for Europe David Kerr has good reason to be grateful to the International Air Transport Association. Two years ago, IATA made cross-border satellite ticket printing legally permissible in the European Union. Kerr reckons the change takes 10 percent off the investment bank's travel bill wherever he introduces the technology.

Cross-border satellite ticket printing is the booking of a ticket in one country and the printing of it in another. At Lehman Brothers, for instance, all employees in Frankfurt and Paris call Hillgate Travel in London to book their air tickets, which are delivered by STP straight into their offices. The Milan office is to join the network shortly; Madrid is also under consideration.

There are obvious benefits: reduced overheads and consolidated purchasing and management information. Yet despite the apparent advantages, European travel professionals remain distinctly wary of cross-border STPs. Their hesitation is evident in the numbers who have adopted the technology. It is believed that the only companies to have tried it so far are Lehman Brothers; Lego, transmitting from Malmo, Denmark to Zurich; and the European Parliament, from Brussels to Strasbourg, France.

However, at least two more projects are in the pipeline. Seagram is working on establishing a pan-European reservations center in the United Kingdom in collaboration with its travel management company, Carlson Wagonlit Travel. And InterIKEA, the organization that looks after the marketing, design concepts and treasury for the IKEA chain of furniture stores, is collaborating with Business Travel International to build an STP link from its travel office in Waterloo, Belgium, to another office in Delft, Netherlands. A third office in Sweden will be linked to Waterloo in October or November.

InterIKEA travel services manager Yves Galimidi said he believes the arrangement will help him control travel policy in the Netherlands and Sweden and will bring down air fares in two different ways. First, he will be able to consolidate the spending power of 50 travelers in Belgium, 80 in Netherlands and 50 in Sweden. Secondly, he will transfer his purchasing to the cheaper market. For the Stockholm-Brussels route, for instance, he will buy SAS tickets in Brussels, where fares are lower than in the carrier's hub at home.

Even though all bookings will be processed through InterIKEA's Belgian IATA number, Galimidi said SAS is fully aware of his plans. "SAS Belgium is very pleased, but SAS Scandinavia is afraid and is putting on some pressure," he said. "But they have no choice because they know that if they don't give us a good deal, we will use different suppliers."

While STP tickets are issued in the local currency of the satellite office, InterIKEA is unlikely either to gain or lose through exchange rate fluctuations. Most EU countries are joining Economic and Monetary Union on Jan. 1, and parity between those that do not also is expected to stabilize.

Although Galimidi has been ready to introduce cross-border STPs for well over a year, the computer reservation system companies have not. InterIKEA's internal travel system can run on either Galileo or Amadeus--yet ironically only Sabre was able to offer a solution. Reluctant to change his entire system to accommodate a third CRS, Galimidi waited until Amadeus declared itself ready to service InterIKEA beginning in September.

The inability of the CRSs to handle cross-border ticketing has played a significant role in retarding the progress of cross-border STPs, according to BTI head of product development Marc Hildebrand. "All of them are able to do something, but none of them is able to offer standardized solutions throughout Europe," he said.

The CRS problem is one reason that Hildebrand has mixed feelings about cross-border STPs. "I do take them seriously because they could change the way business is done. They offer a completely different dimension to the management or transaction fee and could take out costs for everyone," he said. "When people first heard about the IATA regulations, they were very excited because of the new savings opportunities they presented, such as economies of scale and centralizing of administration. However, if you look at the details, there are a lot of limitations."

Among these are the geographical restriction to EU countries plus Norway and Iceland, leaving out key travel markets such as Switzerland. Another is the anomalous situation that Europe has a single aviation market but a separate Billing and Settlement Plan (the equivalent of ARC in the United States) for each country, making administrative procedures much more cumbersome. Yet another factor is fear of the unknown.

Hildebrand has found that many clients are waiting for more pioneers to blaze a trail before they follow through. He therefore is delighted that InterIKEA is taking the plunge. BTI will conduct live tests of the project for six months.

Given the lack of real examples until now, BTI constructed a model of what it thought cross-border STPs would do for a real client that spends $45 million annually across 13 European countries. BTI concluded that if the client channeled all its reservations through a call center in a low-cost area of the United Kingdom, it would produce operational cost-savings of $200,000--though much of that would be offset by an increased number of international telephone calls.

"Our preliminary conclusion was that the enormous amount of additional costs and inconvenience means cross-border STPs are not appropriate for real multinationals with significant volumes in each country," Hildebrand said. "However, there would be a benefit for customers with large volume in one country and smaller volume in a limited number of other countries. This would be an opportunity to include satellite countries in better deals."

Even here, however, the problems do not end. Although the IATA regulations are relatively clear and it should theoretically be possible to make arrangements with local bank settlement plans and a CRS provider, in practice, Hildebrand said, "the difficulty is to put it all together." The client also has to maintain relations locally with a travel agent to supply additional travel products, such as rail tickets.

Indeed, even before the September start of his program, Galimidi already has encountered yet more problems. For one, the system cannot be used for net or consolidated fares to countries outside the EU. Still, "the savings we can make with these tickets are so great that it is worth our paying to send them by DHL," he said.

A second problem is that the IATA rules only allow tickets to be printed for journeys that originate in the country in which the satellite ticket printer is located. Galimidi is devising ways to circumvent the problem. For instance, if a Swedish traveler wants to fly from a few miles across the water in Denmark, Galimidi issues a fictitious segment from Sweden to Denmark and then cancels it.

Despite the nagging problems, though, David Kerr of Lehman Brothers has no doubts about the tangible savings that cross-border ticketing has produced for the firm. "It has cut our overheads, helped us consolidate our purchasing and improved our management reporting," he said.

Kerr added that the operation works smoothly and that travelers in Frankfurt and Paris receive a better service than before, because they are being issued tickets on-site for the first time.

The only difficulty he has had is convincing suppliers that the system really works. "Sometimes, suppliers have not been aware of cross-border satellite ticket printing and have therefore been rather skeptical," he said.

What has not been a problem is the increase in international telephone charges. "There have been incremental costs on the communications side but they do not outweigh the benefits," he said.

For the time being, Kerr remains a relatively isolated enthusiast of cross-border satellite ticket printers. Carlson Wagonlit vice president of industry relations for Europe Frederique Camus said he believes they are useful for improving productivity but not for buying cheaper tickets. At Carlson Wagonlit client the European Parliament, which relocates one week per month from Brussels to Strasbourg, for example, introducing a satellite ticket printer means Carlson Wagonlit staff no longer have to pack their bags for the monthly trip across the Franco-Belgian border.

In any case, Camus thinks that the problems will soon be a moot point.

"The existence of satellite ticket printers will be threatened by the advance of electronic ticketing," he said. "Internally, we no longer think that satellite ticket printers will be the universal solution that they appeared to be a few years ago.