Airlines See Ticketless Future with Smart Cards

At the same time that banks are starting to eye the smart card as a replacement for cash, airlines are sizing it up as a way to eliminate tickets and streamline other aspects of their payment systems.

A number of major airlines are experimenting with ticketless procedures. A recent survey by Air Travel Card, the corporate payment system affiliate of the Air Transport Association, showed a majority of corporate travel managers expect most airlines to institute them within several years.

Industry insiders say card-based or paperless ticketing may be the tip of the iceberg with smart cards - conventional plastic cards enhanced with computer chips - eventually incorporating many information-processing and purchasing needs of frequent fliers.

"Smart card technology has a wide range of applications. Airline ticketing is just one aspect of their use," said Alison Clements, a spokeswoman for Delta Airlines, which is testing smart cards made by AT&T Corp. on its Washington-New York-Boston shuttle routes.

"An incredible range of information can be stored on smart cards, so they have a wide variety of potential uses," she continued. "That's the beauty of it."

Jerome Svigals, a consultant and smart card advocate based in Redwood City, Calif., envisions a future in which business travelers use a single card to order plane tickets, rent hotel rooms and cars, pay for gas and phone calls, make incidental purchases, and even take in plays and movies.

As a model, he cites the Lufthansa Senator Card, currently available on a shuttle between Frankfurt and Berlin, which encompasses many of these functions.

The most spectacular smart card possibility, according to Mr. Svigals, is combining their transaction power with the identification function traditionally served by passports. A step toward this latter application, dubbed the "electronic passport," is being tested at Newark (N.J.) International Airport by the U.S. Immigration and Naturalization Service.

"It's a smart card that identifies you when you come in through the airport," said Mr. Svigals. "You put the device in a terminal and put your finger on a scanner. If the image on the finger scanner corresponds to the image stored on the card, then you go right on through."

But airlines remain focused for the moment on ticketless travel. Companies support the move, seeing opportunities to control processing, administration, and shipping costs.

Of 200 travel executives polled by Washingon-based Air Travel Card, 52% said they expected most carriers to offer ticketless options in three to five years. Also, 40% predicted that tickets would eventually be eliminated on all airlines.

Smart card technology is seen as a key element, with 71% of those surveyed indicating airlines will utilize smart cards in their ticketless procedures.

"Ticketless travel is here to stay, and its development is progressing faster than people realize," said Ralph L. Bernstein, director of marketing and industry relations for Air Travel Card. "Everyone in the industry is beginning to take a much closer look at how ticketless procedures will affect their business."

"We believe, as most carriers do, that this is a direction that the industry is going," said Rick Larsen, vice president of marketing at American Trans Air in Indianapolis. "It is gathering momentum at a rapid pace."

American Trans Air has not begun ticketless operations but "will be monitoring things closely" as the trend develops, Mr. Larsen said.

Neal Chambliss, group vice president at Payment Systems Inc., the Tampa, Fla.-based research firm, agreed that widespread ticketless smart card implementation is on the way. But he questioned the optimistically rapid projections in the Air Travel Card survey.

"There is so much cost involved in ticket processing that anything automative will be adopted," he said. "I would tend to be more conservative about the time frame. That seems to be such a radical change that I think it would take longer" than the survey would suggest.

For starters, airlines have strong unions that would not yield quietly to changes that could reduce employment.

"When you talk about eliminating costs, you are talking about eliminating jobs," said Mr. Chambliss.

Mr. Svigals does not view worker resistance as a significant obstacle.

"Anyplace you try to apply the smart card will run into people who made their fame on the prior solution," he said. "Airlines have cost and productivity problems. They understand they must do better."

A more serious barrier, he believes, will be travel agents embittered by reductions in their commissions.

"Will they cooperate? They're angry at airlines, and they want to go back to their old commission rates," he speculated. "Just to cause problems, they could conceivably direct customers to airlines who don't have smart cards."

Delta aims to be in the forefront of the move toward new technology. Since October, its Delta Shuttle Card, carrying the contactless chips of AT&T Smart Cards, has been issued to 50 frequent fliers on the short-haul Northeast-corridor flights. Delta plans to make the card available to all shuttle fliers on request by the end of the month.

The card has the size and thickness of a credit card. The interrior computer chip contains the data necessary to create a Delta reservation and charge the passenger's credit card.

The passenger, who does not need a reservation, presents the card to an agent at the Delta Shuttle gate, who then inserts it in a reader. The transaction is completed "within seconds," said Ms. Clements, the Delta spokeswoman. An upcoming version of the test will eliminate the need for agent intervention.

"Reaction has been very positive," said Ms. Clements. Other business travelers "have asked when they can get theirs."

Those frequent fliers are the sole focus of current smart card ticketless initiatives. The general public remains largely unaware of the technology, and industry experts acknowledge it may be difficult to reach them.

Mr. Svigals claims that for many, psychological factors may outweigh any convenience provided by smart cards. Ticketless options "obviously are productive, but lots of people want something in their hand when they head to an airport," the consultant said.

"Look at what happened when ATMs were first introduced. Even though they were more convenient than going to a teller and cashing checks, many people chose to continue (their old ways). Consumer behavior cannot be changed overnight."

In mid-April, Continental Airlines will bring its own ticketless option to its shuttles between Houston, New Orleans, Dallas, and San Antonio. Continental insists that the program, which it will call "E-Ticket," is not experimental but a launch. It will be reviewed periodically to see if it should be expanded.

"When a customer calls us and books a flight, they give their credit card number," said Peggy Mahoney, a spokeswoman for Continental. "We tell the customer a confirmation number, and then mail or fax them a copy of that number."

Upon arriving at the terminal, the customer can obtain a boarding pass by simply swiping the credit card. A seat can then be selected, if it hasn't been already.

The Delta and Continental programs reflect the preliminary nature of the ticketless initiatives. Only 23% of the executives responding to the Air Travel Card survey said their employees regularly fly on airlines using or experimenting with ticketless procedures.

Still, once the concept makes headway, it seems unlikely that ticketless options will lose momentum. This should open the door to further high-tech smart card developments.

"I think there will eventually be very heavy uses of multiple application cards," said Mr. Svigals. "Airlines are going to want to convince their fliers to use smart cards. Credit companies will want to convince fliers to use the cards.

"They need to offer one card that can handle several requirements."

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER