You have to have a heart of stone not to
feel some sympathy for the airline industry because of the enormous
amount of money it pays to credit card companies.
True, it's only 3%
or so, but a major airline that gets 85% of its payments by credit
card could easily pay more than $50 million a year in merchant fees
to Visa, MasterCard, American Express and all the rest. Small
wonder, then, that airlines have been looking for ways to reduce
that cost, and small wonder that ARC has been exploring an
incentive program to get corporations to pay in cash.
The math, however,
simply isn't on the airlines' side.
Let's say the
airlines offered a cash rebate of 1.5% to commercial accounts that
switch from plastic to cash. The buyer loses the float from the
card and the data stream from the credit card company, and its
travelers lose the benefit of all the perks, points or
frequent-flyer miles that come with the card.
It's hard to see
how that's worth one-and-a-half points. On a $1 million account,
it's $15 grand -- a close call.
If there's a travel
agency in the mix, it gets worse. The agent has to extend credit to
for at least one reporting period and probably several, or talk the
client into setting up a cash reserve. And then there's the
question of whether the agent will get to keep any part of the
For agent and
client, 1.5% just doesn't cover it. The airline, of course, could
offer more. It could offer 2%, but at that point the program might
not be worth the bother.
This suggests to us
that the credit card companies have priced their services just
The airlines, of
course, could counter that it's unfair that agents and clients
derive benefits from the use of plastic without incurring anything
near the costs that the airlines have to pay. This is true. Life is
But it's unfair to
everybody. Every merchant, everywhere, pays the credit card
merchant fee. Memo to airlines: It's called a cost of doing
We might be more
sympathetic to the airlines' plight if they were a little more
Like a lot of
airline "cost-cutting," a rebate program such as this doesn't
really reduce costs at all. Rather than create some new efficient
process, the rebate idea would simply move a cost item off the
airlines' ledger and onto somebody else's, while creating extra
work for others -- a stratagem that should be all too familiar to
experienced airline agents, employees, customers, GDS providers and
While the rebate
idea was pushed to the back burner, we have no doubt that it will
return, along with other ingenious airline proposals to rid
themselves of what they see as this pesky "distribution
might find a more sympathetic audience if they introduced new
efficiencies into the process.
In the meantime,
hold on to your wallets.
you need a reminder that our aviation security apparatus is still
encumbered with window-dressing and feel-good policies that don't
add much in the way of security, refer to the news item that the
TSA is lifting the ban on cigarette lighters in commercial
We are now being
told that lighters, once a security threat, are no longer to be
treated as such. This comes after the government confiscated 11
million lighters from air travelers last year. Yes, 11
How's that for
fraud, waste and abuse?