In his mind’s eye, John Noel sees a man sitting in coach — a middle seat in the back — on a plane parked on the tarmac for an hour and 59 minutes.
Everyone around him is grumbling and unhappy, but when the two-hour-and-one-minute mark is reached, the man lets out an involuntary cheer. He has just received a text indicating that $1,000 has been wired to his bank account.
That money would have come courtesy of AirCare, a “travel protection” product that Noel is announcing today in his new role as president of Berkshire Hathaway Travel Protection (BHTP).
It is perhaps no coincidence of timing that Noel, founder of insurance company Travel Guard International, is also just 19 days beyond the lapse of a noncompete contract he signed after selling Travel Guard to American International Group in 2006.
AirCare, which Noel hopes to sell through travel agents, tour operators and other industry suppliers as well as directly to consumers, presents travelers with a simple proposition: Pay $25 per one-way or roundtrip ticket — “the cost of checking a bag,” Noel said — and if at any point you’re stuck on the tarmac for more than two hours, $1,000 will be placed into your PayPal account or wired to your bank.
Other payouts include: $50 whenever a traveler experiences more than a two-hour flight delay; $500 for missing a connecting flight because of a delay; $1,000 if their baggage is lost or stolen; or $500 if the bags are simply delayed for more than 12 hours. Since the coverage is additive, a lucky/unlucky traveler could get multiple payouts on covered events.
There is a bit of fine print. The product must be purchased at least one hour before the originally scheduled departure time. And if a plane on the tarmac returns to let passengers off before two hours and one minute and then returns to the tarmac, the clock is reset and the two-hour waiting period begins anew.
(Airlines are fined by the Department of Transportation for keeping passengers on the tarmac for more than three hours.)
Payment without claims
AirCare is not insurance, Noel asserted. No claims need to be filed because his company will track each flight and automatically pay when a listed event occurs.
Once received, he said, the funds could be used by an inconvenienced traveler to cover costs associated with canceled or delayed flights.
For example, $1,000 will take some of the sting out of replacing a lost or stolen bag and its contents; $50 for a two-hour delay will pay a traveler’s way into an airline lounge; and $1,000 might come in handy if a tarmac-delayed flight is ultimately canceled and a passenger needs to buy a walk-up ticket or is unexpectedly stranded and staying in a hotel.
Another company Noel founded could also come into play in this protection model.
Shortly after selling Travel Guard, Noel launched two companies — MyAssist, a live-agent and telematics assistance company for the automotive and travel industries, and Insure America, a niche program administrator for insurance facing the travel industry. He sold both companies to Berkshire Hathaway Specialty Insurance last January.
MyAssist is now also linked to AirCare, proactively reaching out to distressed customers with a phone call or text to offer assistance. Additionally, travelers could contact the company by tweeting to @bhtpassist. Or they can choose to contact the agency that booked the original travel to put their plans back on track.
BHTP’s COO, Mike Meeks, said it was conceivable that a “bridge” could be developed with MyAssist that would link any new activity back to the agency that made the original booking, though that potential feature is not currently in development.
A year of record disruption
Current patterns for travel disruption would seem to support Noel’s belief that the timing is good for launching this product. BHTP said that data from the live flight-tracking website FlightAware indicate that 2014 is shaping up to be the worst year on record for domestic flight cancellations, with almost 90,000 flights cancelled so far.
The company also pointed to MasFlight, which monitors airline operations and which recorded 300,000 weather-related flight delays in January alone. Already this year, some 30 million U.S. passengers have been affected by delayed or canceled flights, resulting in an estimated $2.5 billion in lost productivity and extra travel-related expense.
“There are 640 million flight segments a year,” Noel said. “If you calculate that half are booked by travel agents, that means this has the potential to turn into a multibillion-dollar market.”
Noel said he hopes agents will provide the backbone of his distribution, and BHTP is offering them a 10% commission. Consumers who currently use agents, he said, indicated that they were more inclined to stay with an agency that offered the product vs. one that didn’t.
“Selling AirCare makes an agency more attractive,” he said.
Because of secrecy surrounding the development of AirCare, Noel said he had not yet shown the product to agency executives, but he said he would now seek preferred-supplier relationships with large agencies and agency groups.
“It’s a simple product, and we are going to make this a seamless technology for agents,” Noel said.
It is currently available for “one-off” sales, but BHTP plans to develop group or enterprise or annual plans for frequent travelers, possibly as soon as seven weeks after this launch.
An app for purchasing the BHTP service is available for Apple iOS devices and Android, or the product can be purchased at www.bhtp.com.
AirCare is currently available only for domestic flights, but Meeks said the company plans to expand to international service, which will sell for more than $25 and which will offer higher payouts. Also in development is a parallel product for cruise passengers.
Competing with Travel Guard?
The concept of protecting travelers against delays and cancellations is not completely without precedent.
In 2000, Rosenbluth Interactive’s Biztravel.com offered travelers $100 if a flight was 30 minutes late, $200 if it was an hour late and a full refund if a flight was canceled, at no additional cost but only on certain carriers.
Meeks said that part of the motivation to develop AirCare was consumer sentiment expressing unease about travel insurance.
“They worry that there are always loopholes,” he said. “We wanted to make this a very simple product from the consumer perspective as well as simple to manage.”
Will AirCare put Noel in head-to-head competition with another company he started, Travel Guard? “This puts us head to head with no one,” he said. “No one else is doing what we’re doing.
“We’re trying to create the travel-protection industry, not insurance,” he said, though he added that he expects competition from his former company and others. “We’re looking forward to it.”
Follow Arnie Weissmann on Twitter @awtravelweekly.