American Express Co. will join the smart card parade with a test of electronic ticketing for American Airlines passengers.
After standing on the sidelines while the banking industry announced pilots around the globe and the bank card associations created an industry standard, the charge card giant is finally entering the ring.
Using technology developed by IBM Corp., the program lets passengers insert a corporate charge card with a computer chip into a reader at American Airlines departure gates. They would receive a boarding pass, without presenting a paper ticket.
The chip will contain the passenger's identification and frequent-flier number, which will be matched with ticketing information in American Airlines' data base. The cards, with magnetic stripes, will also function as corporate cards that may be used at any location that accepts American Express.
Most major airlines, including Continental, Delta, Northwest, and United, are testing electronic ticketing. Lufthansa, which has such a smart card program in Europe, may be the only carrier with one in place.
Initially the pilot program will be modest, with just "hundreds" of corporate charge cards combining magnetic stripes with chips being issued to American Express and IBM employees. But the plans are ambitious.
Bill Hohle, smart card technology leader, described American Express' venture as "the first step to a comprehensive multiapplication travel and entertainment product."
He envisions that cardholders could book travel, purchase airline tickets, expedite car rentals and hotel check-in, and electronically insert travel information into an expense report for reconciliation.
The pilot is to begin by mid-December at 21 U.S. airports, including ones in New York, Los Angeles, Dallas/Fort Worth, and Chicago. American Express provides corporate cards for IBM in the United States.
Mr. Hohle said American Express also intends to test an electronic purse application for smaller purchases.
Rumors have it that American Express will purchase Proton, a stored value smart card program designed by Banksys of Belgium. But Mr. Hohle said it's "too early to discuss" those plans. Proton is in its pilot phase in several countries in Europe.
It might seem odd that American Airlines is American Express' new partner, given that American Express issues the cobranded Delta Sky Miles Optima Card, while Citicorp issues the American AAdvantage card. But the charge card firm gained a technological break from the deal.
American Airlines recently introduced a ticketless travel program, called AAccess, that uses magnetic stripe cards. To accommodate the program, the airline installed enhanced gate readers that can also read chip cards.
Piggybacking on that technology, American Express will avoid the costs of installing and wiring card readers. It will also alleviate the onerous job of persuading merchants to accept the cards.
Visa and its bank partners were forced to do that for the Visa Cash experiment, introduced in Atlanta during the Summer Olympics. Other bank smart card tests, such as the MasterCard program in Canberra, Australia, have been stymied by merchant resistance.
"I see it as big win" for American Express, said James Accomando, a Fairfield Conn.-based consultant. "Now it gets a relationship with a dominant carrier in the U.S. that it didn't have before."
Jerome Svigals, a card industry consultant in Redwood City, Calif., called the move a "willingness of American Express to explore new partnerships." He noted that all the card organizations are searching for "the best way to move forward" with smart cards.