<B>E-Tix Savings Evasive</B>
By David Jonas
As corporations continue to increase their usage of electronic tickets, long-anticipated service and cost savings benefits remain elusive. Plans recently revealed by several carriers to further e-ticket interlining in the months ahead promise the service advances, but so far buyers have had to be content with the internal efficiencies derived from a paperless environment, rather than a share of the airlines' reduced paper ticket processing costs.
Because a lack of interlining impedes full utility and ubiquity of paperless tickets, carriers must establish a bevy of bilateral e-ticket interline links with competitors or participate en masse in industrywide interline systems. So far, such industrywide initiatives by several parties have not yet come to fruition nor attracted the largest airlines.
Instead, major carriers--particularly in the United States--just now are beginning to work together to provide e-ticketed travelers with the same flexibility as paper tickets. In doing so, they must overcome compatability and training issues, as well as resource shortfalls.
Continental Airlines has progressed the furthest by activating bilateral links with both America West Airlines and Northwest Airlines, and is planning to connect with all majors by year-end. A beta test is underway with United Airlines.
"We want to get into place the bilateral agreements with the big guys to help the most passengers possible," said Jim Young, Continental managing director of distribution planning.
Northwest-Continental e-ticket interlining is up and running for direct channels and through Worldspan. The functionality will be extended to Sabre and Amadeus next month and to Galileo in August. Northwest is planning to have interline tie-ins with Delta and United by 4Q and Alaska and KLM Royal Dutch Airlines early next year. KLM does not offer e-ticketing, but expects to begin piloting paperless tickets in the fall with a large client.
For its part, United has interlined e-tickets with Star Alliance partner Air Canada and now is working to develop links with two additional U.S. carriers by year-end. "We are determining how to work with the most carriers to be the most effective for our core customers," said Elizabeth O'Hara, United director of distribution planning.
But the most important links for many U.S.-based frequent travelers will be those established among the Big Three--American, Delta and United. United confirmed it is in discussion with the other two, but Michelle Weeks, Delta general manager of e-tickets, estimated those bilaterals won't surface until early next year. Delta is moving forward with interline capabilities and looking at potential partners. It expects to have the first linked system up by year-end.
Weeks, meanwhile, is involved in discussions at the Air Transport Association and the International Air Transport Association. "We have had interline rules in place for several years, but the hold up has been systems development at the airlines and travel agencies," she said. "As carriers develop the process and begin to deploy the product, we are finding where the standards need fine-tuning."
In related news, Continental's Young, who also is chairman of the Open Travel Alliance's board of directors, said that group will address e-ticket interlining in OTA's version 2001c, expected by year-end.
Deborah Harvey, project manager for interline e-tickets at United, said overarching systems can be as challenging as bilaterals. "Industry solutions mean additional complexities you don't find in bilaterals, specifically relevant to security and to some degree incremental costs related to the third party," she said.
Nevertheless, once interlining is more widely available, e-ticket usage numbers undoubtedly will soar even higher than the 70 percent range now reported by most major carriers.
Airlines have said for years that significant cost savings won't be apparent until e-ticket usage reaches critical mass. But even now, most are reluctant to divulge how much they are saving and are unwilling to share any of that.
That doesn't sit well with many buyers who watch their preferred airline suppliers pass along labor and fuel costs in the form of fare increases and surcharges. "Airlines probably have the ultimate coup from e-ticketing," said Christopher Staal, director of corporate travel at Stamford, Conn.-based Thomson Corp. "They singularly derive the ultimate benefit and probably share next to nothing in the savings equation with corporate customers."
Kevin Iwamoto, global air and car supplier manager at Hewlett-Packard, also recognized the associated e-ticket cost savings for the airlines, but said from a traveler perspective more refinement is needed. "If the airlines get the interlining part of e-tickets buttoned up to provide the same kind of transferability as paper tickets, we will probably be able then to justify even higher percentages of e-ticket utilization," he said. "Sharing in those savings is yet to be explored but is on the radar for discussions."
Hewlett-Packard is one of 49 Corporate Travel 100 companies Business Travel News recently surveyed that reported a combined e-ticket usage of 69 percent of all tickets and 76.6 of all eligible segments last year. That level of penetration can start driving a corporation's own internal cost savings.
San Francisco-based Chevron, for example, has pushed e-ticketing to 70 percent and has benefited significantly. "It has been a huge savings for us by not having to pay for paper ticket stock or FedEx charges," said Jack Chu, the company's project manager of travel systems and head of the National Business Travel Association technology committee. "We have cut at least $7 or $8 per transaction."
According to Thomson's Staal, in the first quarter alone, his company saved $95,000 by cutting out overnight shipping costs.
United's O'Hara added that some clients also are beginning to benefit from savings at their travel agency. "In the electronic mode, many costs go away," she said. "Agencies are beginning to consolidate fulfillment, for example, because they no longer need to be physically located nearby."
Such internal efficiencies should be sufficient without added incentive from airlines, according to Dave Bartels, senior director of corporate programs at Continental. "We know some other carriers incentivize--maybe adding a few percentage points to the discount--but our people tell us the economics are not there and usage among our clients is quite high anyway."
Indeed, Paul Tomaszeski, executive director at Novartis in East Hanover, N.J., said there is no reason for his company to retreat from its 80 percent e-ticket penetration. "So, I am not quite sure why the airlines would want to give me something for that," he said. "But I have pitched the idea of us increasing our e-tickets to X percentage in return for something, but have had no response on that from our main carriers."
Other carriers contacted by BTN also do not incentivize corporate accounts to drive e-ticket usage, though some have explored the idea. "We still have to fund systems and people to handle both paper and e-tickets, so we have not yet achieved the economies of scale needed to gain enough savings to consider that," said Scott Slater, Delta general manager of corporate programs.
Meanwhile, problems reported by passengers--namely inconsistencies at the airport--are being addressed. "In meetings with other carriers, agents and the Airlines Reporting Corp., we have identified technology issues that are being resolved with the GDSs," Delta's Weeks said. "We are not saying airline systems are perfect."
She added that a majority of these problems can be eliminated by creating awareness through training for agency and airline personnel.
Moving forward, e-tickets will continue to enable convenient passenger services. "We have on the drawing board an automated system to handle exchanges," O'Hara said, adding that e-ticketing played an important role in the migration to the Internet and corporate booking tools. "Our whole strategic direction of streamlining purchasing and the airport experience has e-ticketing as the foundation.