<B> Pay As You Fly Takes Off</B>
<I>Lufthansa Moves Beyond Siemens Test To Include More Buyers</I>
By Jay Campbell
<i>Frankfurt</i> - After two years of hard work in testing with Siemens AG, Lufthansa German Airlines this spring introduced its Pay As You Fly program to six more large corporate buyers and is hoping to expand to 30 by year-end.
The concept, soon to be tested in the United States by Continental Airlines and one of its corporate accounts, has saved Siemens 50 percent on its travel agency transaction fees by eliminating changes and refunds. It works by playing off e-ticketing and only charging for a flight after the traveler has taken it.
"Our experience overall has been good and we're trying to convince Lufthansa to bring it to international routes as soon as possible," said Thomas Mietzsch, travel manager for Siemens in Germany. "It's quite the right thing."
The program currently applies to all Lufthansa domestic routes where e-ticketing is available, each of which has a special negotiated, flat, net fare for fully flexible tickets in business and economy. Lufthansa's global key account manager in charge of the program, Steffan Niesel, said the airline is working through the issues required to internationalize it.
"We're told we can start Jan. 1," Niesel said. "Our computer specialists are doing the programming to allow our internal res system to load more complex fares."
Pay As You Fly would become available on international routes with e-ticketing, which now number more than 40 for Lufthansa.
Among the six other German companies that have implemented Pay As You Fly since April 1 are BMW, Bosch and Deutsche Babcock.
Although Siemens is using individual American Express corporate cards to book its tickets and is booking through Amadeus either traditionally or via its online system, Lufthansa is encouraging other companies to use a ghost version of its own AirPlus corporate card.
"Using individual cards was our prerequisite because our expense reporting system relies on individual cards," said Siemens' Mietzsch.
Participating companies' designated agencies are given access to Lufthansa's host res system within Amadeus using a code special to their client.
In order to allow the agency to maintain the booking and make any necessary changes--and since there is no involvement of the Billing Settlement Plan--Lufthansa sends to the agency via Amadeus a file that includes passenger information such as the name, origin and destination, fare and credit card.
Travelers use their personal credit cards to get boarding passes from automated machines at the airport. If there are no flight cancellations, those boarding cards are processed at Lufthansa's revenue accounting office in Hamburg. Cards, which are flagged as "Pay As You Fly," then signal the airline to charge the appropriate credit card.
Siemens, which helped Lufthansa iron out problems in the program during a four-month pilot in 1997, now has more than 1,000 passengers a day using Pay As You Fly in Germany.
Mietzsch said his company is trying to encourage 100 percent coverage on its domestic flights, but occasionally there are reasons to buy fares normally, such as on certain connecting flights with baggage checks and when the most senior executives request it. Siemens' Pay As You Fly contracts are good for a year.
Siemens' online bookings through its Scenic IT booking system, called Siemens Travel Net in its internal pilot test, account for 15 to 20 percent of the Pay As You Fly bookings. In such cases, the travel agency simply monitors quality.
One nice unexpected bonus for the buyers, Mietzsch said, is that Lufthansa's domestic competitors now are matching the airline's special Pay As You Fly fares.
"Where the competition has been high, the rates are lower," he said. Siemens also has benefited from better cash flow.
Continental Airlines, which has been sharing some ideas with Lufthansa as two of the co-owners of Amadeus, plans to incorporate some of Lufthansa's revenue accounting procedures.
"We've been talking about FlightPay for two years," said Continental staff vice president of distribution planning Steve Cossette, referring to Continental's patented name for its version of Pay As You Fly. "We've signed up one corporation to test it this year. We have no schedule yet, but we're deep in discussions."
Cossette said one unique feature of Continental's plan is that it will offer direct reporting to ARC using the carrier submission program it has in test with Andersen Worldwide (<i>BTN,</i> Oct. 26, 1998). That program now is processing $8,000 to $10,000 a week in purchases.
"In that case, a designated CTD could use FlightPay and generate only one sales report," Cossette said, noting that Continental is putting resources into additional technical development for FlightPay. The airline is "moving carefully but methodically forward, and it's okay to do that because the market isn't ready yet."
Andersen Worldwide, meanwhile, also is pursuing Pay As You Fly through its Via World Network unit, which calls the program Bill At Use. However, no Andersen representatives returned calls last week for this story.
Like Continental, Northwest Airlines is working with the Via unit. "There is an appeal to this kind of system because there are a lot of hidden costs that are incurred between booking and travel," said Al Lenza, vice president of distribution planning at Northwest. "But as airlines we need to balance that with the no-show risk and the cash flow. We at Northwest have an open mind to it."
One warning from a source familiar with the Lufthansa-Siemens test: "It's really intriguing, but don't think it's easy. In fact, it's very complicated--yet I expected them to have it together sooner.