E-ticketing pains

Airline industry body International Airport Transport Association (IATA)'s decision in June to extend its electronic ticketing deadline to May 31, 2008 was good news for regional carriers, many of which would have struggled to meet the original deadline of December 31, 2007.

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By  Michele Howe Published  August 29, 2007

Airline industry body International Airport Transport Association (IATA)'s decision in June to extend its electronic ticketing deadline to May 31, 2008 was good news for regional carriers, many of which would have struggled to meet the original deadline of December 31, 2007.

The deadline, which was established three years ago, is the final date for airlines around the world to have converted from issuing paper tickets to electronic ones, and a major deal for the airline industry as after it has passed, IATA's 60,000 affiliated travel agents will no longer issue e-tickets.

The Middle East was to start with slow in making the conversion, trailing the rest of the world with the exception of the CIS region in undergoing the transition.

In August 2006, regional airlines had only a 12% e-ticketing penetration rate - the measure used by the body to chart progress - versus a global average of 60.7%. By July 2007, the latest figures available, the region had caught up, with a penetration rate of 58.4% but this was still much lower than the global average of 84%.

At the time it made the deadline extension, IATA estimated that by the end of the year the region would have an e-ticketing penetration rate of 89%, versus an overall average of 92% and short of its overall target of 100%.

Part of the reason why airlines in the Middle East have been slow in making the switch is that they have had less time to prepare for the conversion, points out Abdul Wahab Teffaha, the secretary general of the Arab Air Carriers.

"Europe and the US have been doing e-tickets for the last ten, fifteen years and it was a natural evolution for the airlines serving these [areas] to be able to shift from a data environment to an e-ticket environment. For the Arab airlines...it was something they needed to do within a time span of three years," he says.

Not all of the region's carriers are behind, some, notably Emirates Airlines and Royal Jordanian, have made good progress on the migration to e-ticketing, but others, including Saudi Arabian Airlines, have only recent started issuing electronic tickets.

Most of the airlines have started to issue e-tickets from their own offices, but have not yet started from the travel agencies, which is the major distribution channel used by airlines nowadays, notes IATA's regional vice president MENA Dr Majdi Sabri.

He is less understanding of the slow progress. "Some airlines thought that when the deadline was set, they had plenty of time so they started late," he tells ITP.net. "They started late in finding a service provider, in concluding interline e-ticketing agreements, in making sure that the ground handling agencies are electronic ticketing enabled. The whole process was delayed," he says.

Hossein Hosseini, director marketing at Iranian carrier Mahan, admits that some regional carriers, including his own, didn't immediately appreciate the time needed for the conversion.

"I think the airlines didn't believe that the date is a serious one and by the time they realised it was serious then they had to make a choice between the providers of the software, that takes time and I think that is why some of us are a bit behind," he says.

In addition to getting the right technology, switching to electronic ticketing also means upgrading revenue accounting systems, ensuring the airport and ground handling agents are capable of managing electronic ticketing, and dealing with interline agreements for airlines.

The interline system proved to be a particular headache. Interlining is where airlines accept a booking for a passenger's entire journey then liaise with onward carriers for the destinations they cover.

In order to issue e-tickets for interline journeys, airlines have to create links between the different reservation systems - which is complicated given the large number of interline agreements many airlines have - and have to both be geared up to deal with e-ticketing.

This has been a huge source of frustration, says Lars Denlew, Gulf Air's head of distribution and e-commerce, as the situation has necessitated interdependency between the carriers. One of its major partners was late starting, he says, while another didn't even plan to do electronic ticketing.

As well as being frustrating, there are also huge cost implications connected to the interline agreements, which account for 15% of an airline's business on average, according to Dr Sabri.

Not having interline or losing interlines can be a big loss of revenue for carriers, but with the deadline looming several of those contacted by ITP.net prior to the extension said cancelling agreements was exactly what they would have to do.

Gulf Air said it expected to cancel around 100 of its 200 interline agreements if the deadline held, while Saudi Arabian Airlines said it expected to convert no more than 70 of its approximately 200 interline agreements.

Following the announcement of the deadline extension, Denlew said Gulf Air would now be able to complete more of its interline agreements. "We will now only cancel the Interline agreements that do not make sense financially, due to very low volumes of interline exchange," he said.

Not all airlines will stop dealing with paper tickets completely beyond the deadline. Some will abandon the paper ticket system altogether, while others may maintain it for a while during a transitional period.

Mahan's Hosseini said his airline will adopt electronic ticketing for international flights but will continue to use paper ticketing for some time for domestic ones.

"In Iran penetration of internet is not that high, we feel that tickets will still be a big part of the business in the domestic market," he says. "We feel that if we go totally electronic it will probably harm our business," he adds.

If an airline doesn't convert, it can continue to operate, but will have to print and issue its own tickets as IATA will not be handling paper ones after the cut-off date.

But this doesn't really make sense, says Dr Sabri, as in addition to the loss of revenue from interline agreements, it is more expensive to issue paper tickets than electronic ones. An e-ticket costs US$1 to process versus US$10 per paper ticket, according to IATA.

Airlines that don't switch to electronic ticketing will gradually find themselves pushed out of the market, predicts Hosseini. "Within 18 months from the 2008 deadline, we will see everybody, at least 97-98% to have to got in and the rest probably squeezed out," he said.

In an increasingly electronic world, it is a foolish airline that would choose to stand alone on this particular issue.

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