United says it cut debit memos by almost $5 million in one year

United Airlines has implemented several policies that in aggregate are saving travel agencies close to $5 million a year on debit memos, according to the carrier.

That reduction comes as ARC's Debit Memo Working Group continues efforts to reduce the volume of debit memos agents receive.

"We don't like issuing debit memos as much as the agencies don't enjoy receiving them," said Brian Miller, United's senior manager of sales communications and policies. "But we have the resources, the relationships, the intelligence now to make some informed decisions in policy changes that can help us really make a significant change in this space. We want to be an industry leader in coming out and saying, 'You know what? Let's try to the extent possible to eliminate debit memos.'"

One of the ways United is working toward that goal is by participating in the Working Group, according to Craig Miller, director of revenue accounting. (He is no relation to Brian Miller.) Among members of the Working Group, which began meeting in 2013, are representatives of carriers, agencies, IATA, ASTA, GDSs and the Airline Tariff Publishing Co.

Shelly Younger, ARC's settlement services manager, said the Working Group's focus is currently twofold: creating standard debit memo reason codes and establishing best practices "applicable to all phases of the debit memo process."

The Working Group has also created a subgroup to address various issues arising within the fare-filing process. It is set to begin work in a few weeks.

Debit memos have long been a major source of friction between agents and airlines. But according to Younger, the various carriers involved in the Working Group are willing and ready to work to reduce debit memos. For example, Delta Air Lines suggested creating the fare-filing subgroup to address those issues.

Younger called United's efforts "the gold standard" when it comes to carriers attempting to reduce the number of debit memos.

In addition to participating in the Working Group, Craig Miller said, United has taken several initiatives aimed at reducing debit memos that, on an annualized basis, have resulted in a reduction of some $4.73 million.

"The first thing we have to recognize is that the travel agency [channel] does a great job in issuing tickets," he said. "When we looked at our 3 million transactions a month, on average, the accuracy rate that we're seeing tickets being issued by the travel agency group is at 99.7%, so we applaud and commend the travel agency community for issuing tickets accurately."

Debit memos, however, result from that remaining 0.3%.

To help reduce them, he said United first reviewed policies and procedures to identify best practices. In doing so, the carrier reduced the manpower necessary to produce debit memos by about 20%, and passed that savings along to agents by reducing its debit memo administrative fee from $50 to $40. In the period of about a year, that move has saved the agency community about $113,000.

United has also taken several steps surrounding credit card chargebacks. First, when it comes to no-show passengers resulting in chargebacks, United previously wrote debit memos for the full value of the ticket. Now, the carrier has created a sliding scale based on the actual cost of no-show passengers.

While the least expensive tickets will likely result in a debit memo for the full cost of the ticket, debit memos written for more expensive air tickets are being issued at a reduced cost, Craig Miller said. On an annual basis, that change has saved agents about $1.4 million.

The carrier is also working with credit card companies -- first Visa, now American Express -- to fight false chargebacks in cases where the client actually did fly. The carrier provides the flight manifest to the credit card company, which can overturn the chargeback. From January through September, he said, this change saved agencies about $1.5 million.

In addition to those policy changes, United has taken several other steps. It does not issue debit memos in instances where agents have used incorrect waiver codes when handling tickets during involuntary situations, such as storms or strikes.

This has saved the agency channel about $1.1 million annually, United said.

The airline has also relaxed its policy on writing debit memos for class-of-service policy infringements during irregular operations. Craig Miller said this has resulted in annual savings of about $306,000.

"Sales can step in and be good partners with their travel agencies, and they can waive some debit memos if they want," he said, adding that sales waivers have resulted in about $315,000 in annual savings.

"We want [the sales team] to be able to focus on the relationship and take the opportunity sometimes to step into the debit memo process and waive it or reduce it," Brian Miller said. "What it comes down to at the end of it is the ability for sales, the customer and revenue accounting to work collaboratively on a solution. That's really our ultimate goal."

Other carriers, including Delta, are also working to reduce debit memos. Though Delta declined to elaborate on its efforts for this report, the airline said in a statement that it had reduced its volume of debit memos by half, adding, "While this is a huge win for our valued [travel agent] partners, we will continue to look for innovative ways to reduce debit memo volume with their input."

While carriers work to reduce the number of debit memos they issue, ARC's Younger had several pieces of advice for agents as well.

First, she said, agents should consider using automation tools that GDSs make available. For example, there are tools available that automate refunds, which can help eliminate human error that can result in debit memos.

Second, she urged education, arguing that what was needed was "some training internally -- especially those larger agencies that have a lot of turnover in their ticket agents. It's a struggle for them to keep up with training, but I think some targeted training based on the debit memos that they're getting would go a long way to help reduce debit memos."