UATP Opens Its Network to Third-Party Internet Payments Processors

Universal Air Travel Plan, which processes corporate travel payments for some 200 accepting airlines around the world, is opening its network to third-party Internet transaction processors as part of a strategy that could significantly boost network volume and bring consumer transactions through its settlement system for the first time. Ralph A. Kaiser, president and chief executive of the Washington, D.C.-based company, says UATP is a month or two away from signing its first deal with an unnamed processor, adding that transactions should start flowing in the first quarter of 2006. “It's exciting,” he says. “It's going to be very big for our airline members.” The new strategy at UATP comes at a time when the beleaguered airline industry is seeking to accept more and more payments through e-commerce, a less costly channel than traditional card-present venues. Under UATP's so-called alternative payment processing initiative, which the 69-year-old network began hammering out last October, processors of Web-based transactions can link to UATP's data center to gain one-stop access to the company's client airline merchants and online travel agencies. Kaiser won't say which companies he's talking to but says the potential market includes Western Union Holdings Inc., I4 Commerce Inc.'s Bill Me Later, and others that are processing airline fares online. UATP charges a transaction fee, which Kaiser refuses to disclose. “It will be very easy for somebody to build a business case,” he says. Because UATP processes transactions through its own clearing system as well as through proprietary clearing houses built by the airline industry, Kaiser argues its transaction costs significantly undercut the acceptance costs of the credit card networks. Although UATP will provide the network links, it will be up to the processors to sell their services to the airlines under terms that will be between them and the merchants. “We will facilitate sales introductions, but we're not mandating that any airline has to do any form of alternative payment,” Kaiser says. “We've solved the connection problem. We can bring the airline industry as a whole to a player.” UATP, which got its start in the 1930s with one of the first multi-merchant charge cards (its account numbers start with “1”), has 20 airline companies as shareholders, 15 of which are issuers. These include most of the major carriers around the world. The company processed $7.7 billion in transactions last year, a number Kaiser says should grow by 10% in 2005. The 200 carriers accepting UATP represent more than half of the world's airlines and 96% of worldwide seat-kilometer capacity. About a quarter of UATP's volume originates in the U.S., with 55% coming from the Europe/Middle East/Africa region and 20% from Asia/Pacific. Airlines may or may not issue a physical card, with executives' travel expenses being charged to a UATP account. Kaiser says he has no volume projection for the alternative payment initiative, but he says any revenue UATP can earn from third-party processors will relieve the pressure on his airline members, all of which are grappling with spiking jet-fuel costs and cut-rate fares. “It's an alternative revenue stream that can help offset the costs to the airlines of participating in the network,” he says. But the plan could also benefit UATP by driving up volume on the network, allowing economies of scale to drive down per-transaction costs. “We thought, 'We have this network that the airlines built, so how can we use it?'” he says. Since UATP has historically processed transactions flowing from corporate-travel use, links to Internet processors will also mean the company will be handling consumer-based payments for the first time, without bearing the risks of fraud. “It's a way to get some consumer volume over the network without putting cards in consumers' hands,” says Kaiser.