THE BLOG

Airlines on Board with New Distribution Channels

28/03/2014 10:18 GMT | Updated 26/05/2014 10:59 BST

Payments can be a complicated business, and the airlines industry is no exception.

Airlines need to manage a complex system of payment currencies, types and distribution channels. Their customers can book tickets in one country with an airline based in another country, in order to fly to a third country, and pay in the currency of another country, sometimes using the preferred payment method of a fifth country.

It's no wonder that 83% of airlines say that improving payment technology is a major business priority.

We recently surveyed 68 global carriers to find out their thoughts on the trends and challenges of distribution channels in the airline industry. The results show that in a fast-moving landscape, airlines are recognising the power of the new, and are seeking to better align payment offerings with customer expectations to gain competitive advantage.

Mobile firmly on the radar

With three-quarters of the world's population now having access to a mobile device (according to the World Bank), it's no surprise that airlines are focusing heavily on mobile as both a distribution channel and a means of payment.

71% say the future of airline payments lies in mobile - 50% see mobile payments as a way to keep up with competitors and 45% see them as a way to increase revenues. Mobile payments (those carried out through a mobile browser or app, or using a mobile device) offer benefits for passengers, but also improve internal processes such as data submission and handling.

Mobile payments are now accepted by 25% of airlines (up from 10% in 2012), and 32% say they plan to accept them within the next two years. The majority of airlines already offer mobile check-in facilities, and many offer mobile flight bookings. We'll now see more airlines extend their existing mobile services to offer ancillary purchases; by 2016, 55% of airlines will offer mobile seat reservations, 55% booking management, 47% upgrades, 42% baggage allowance and 28% onward travel bookings.

Mobile is not without its challenges - carriers cite increased fraud risk, integration with current systems and processes and mobile platform diversity as some of their biggest concerns. But with so many people around the world now with access to a mobile device and smartphone penetration on the rise, airlines simply can't afford to ignore this high-growth channel.

Inflight connectivity takes wing

Connectivity is a priority for passengers and this can only be good news for airlines, as it increases the range of inflight services that can be offered. For example, 45% of low cost carriers say they will offer inflight internet usage in the next two years, with 27% offering inflight telephone usage.

The increase in connectivity also means carriers can offer a wider range of on-board payment methods. Cards are still the most popular payment method used by passengers to pay for goods and services on-board, but alternative payment methods are growing in popularity. The number of airlines offering on-board mobile payments will increase from 5% to 36% in the next two years, and 18% of airlines plan to accept e-wallets on-board by 2016.

The social media opportunity

Many carriers already have a presence on global social media sites, such as Facebook and Twitter, and domestic social channels such as Sino Weibo in China. Facebook is currently the most popular network - 95% of airlines have a Facebook presence, followed by 74% on Twitter and 40% on LinkedIn. Just 17% are currently active on Google+, but this will rise to 40% in the next 12 months.

Social media is now also seen as a high potential sales enablement channel. Nearly a third of airlines will enable sales via social media channels in the next 12 months.

An example of social media innovation is that of KLM Royal Dutch Airlines, which has already developed a payment method to allow customers to make payments through Facebook or Twitter.

KLM customers have already been able to arrange extra services through social media, but the actual payment has taken place over the telephone. Now, passengers can book flights, make seat reservations and arrange extra baggage exclusively through Facebook or Twitter. KLM sends a link to the customer in a private message. The customer then selects their preferred method of payment and completes the transaction. KLM then receives a message to say that payment has been received and the customer in turn receives confirmation of the payment.

With these new payment technologies set to edge out traditional channels, such as self-service kiosks, where investment is in decline, it's vital that airlines to ensure they're prepared.

The benefits of these new distribution and sales enablement channels are many, but they come with their own set of challenges. To navigate this new landscape and ensure clear skies ahead, airlines should look to work with a payment partner that has a wide range of products and expertise to improve payment processes and maximise global reach.

To download a copy of the Alternative Payment and Distribution Landscape: Airline Distribution Channels report, visit www.worldpay.com/reports/airline-distribution-channel.