The 'me-tooism' of the US is, however, tempered with a more philosophical 'how-will-the-future-work' approach, driven by concerns such as cost, security and effectiveness without industry-wide compatibility and the lack of international standards, which prevent European carriers with small home markets from operating pilot schemes.
Estimates of revenue generation and cost saving potential, amounting to billions of dollars industry-wide, have led carriers into studying and developing three common areas in the electronic distribution revolution: ticketless travel, distribution over the Internet, and distribution using dial-up, on-line products. But here the commonality ends, with differing concerns and views emerging as the carriers seek to adopt the innovations.
Lufthansa leads the way in ticketless travel in Europe, both in terms of its product, the ChipCard, and its ambitions. As the name suggest, the German carrier has developed a 'smart' card, which acts as a boarding pass and ticket.
After trials last year, the airline had distributed almost 100,000 cards to its most frequent flyers for domestic travel by the end of July and plans to distribute the ChipCard to a further 250,000 travellers in its loyalty programme during the fourth quarter of this year, says ChipCard product manager Dr Anselm Eggert.
Lufthansa's approach is aimed at the high-yield end of the market which Eggert contrasts with that of the US carriers, including partner United Airlines. 'There is a difference: one direction is the simple electronic ticketing used by Southwest, United and ValuJet and then there is the high-value side for the frequent flyers using chip cards. But both are based on the same principle.' Nevertheless, Eggert does not rule out using 'simple electronic ticketing.'
KLM is pursuing a similar strategy to its German rival and plans to start trials of its own 'smart' card among frequent flyers or corporate clients by the end of 1997 or beginning of 1998, with roll-out across the entire network planned within a year. 'Completely intangible electronic ticketing, like in the US, is not applicable to Europe. We need to identify individuals and decided the best way was with a chip,' explains Jaap Favier, marketing channels consultant at KLM. Favier says the total investment amounts to some DFl10 million ($6 million).
SAS disputes the pioneering role of Lufthansa in European ticketless travel, after launching its Travelpass in the Swedish domestic market last September. The Scandinavian carrier's product is a pre-paid swipe card that give holders a year's unlimited travel for SEK95,000 ($14,000).
The carrier has sold over 1,000 cards, accounting for some 2 per cent of its domestic volume, says Bjorn Boldt-Christmas, SVP information systems division. Boldt-Christmas refuses to comment on whether SAS will eventually adopt the ChipCard of partner Lufthansa but stresses: 'The Travelpass will exist alongside one-stop interline ticketless travel.'
British Airways has joined the ranks of ticketless travel providers in July with the launch of a pilot scheme on the London/Gatwick-Aberdeen domestic sector. Dubbed E-Ticket, the carrier uses reconfigured self-ticketing equipment to identify a passenger's booking from the magnetic strip of a credit card, whose details have been given to the carrier in advance. BA aims to put the E-Ticket on its entire domestic network during the course of next year.
KLM's delay in starting trials of its 'smart' card is in large part due to its almost non-existent domestic market. Unlike, Lufthansa, SAS and BA, the Dutch carrier intends to run the pilot scheme on its international network, starting with the North Atlantic, but will first have to overcome the same hurdles Lufthansa could face when the German carrier goes network-wide with its ChipCard in 1997.
The common problems facing the two carriers are not insurmountable - indeed French independent Air Jet started 'smart' card-only operation on Paris/Charles de Gaulle-London/City last year and Alaska Airlines is also offering electronic ticketing internationally (see p22) - but the Warsaw Convention still requires airlines to make passengers aware of the conditions of carriage on international routes. Iata says industry-wide acceptance of its unlimited liability initiative will help simplify the problems and Carlos de Pommes of dPA Consultants suggests a simple solution would be to print the conditions on a piece of paper. Another hurdle is that immigration rules in many countries require proof of a return ticket.
The other main sticking point is the lack of international standards, which has led to a fundamental debate in Europe whether ticketless travel should be used as a competitive tool or to benefit the industry globally. Both KLM and Lufthansa hope to achieve full implementation of their 'smart' cards in conjunction with their international alliance partners.
But KLM is waiting for Iata to produce common standards before starting trials. These could emerge from an Iata meeting in October when five working groups are due to report on electronic distribution. Favier says KLM is not interested in 'using electronic ticketing to its competitive advantage', driven by the recognition that interlining will not work unless all airlines can access 'ticketless information' on a passenger.
Chris Muntwyler, Swissair's general manager pricing and global distribution, shares this view. An avid proponent of the electronic distribution revolution, he readily admits 'Swissair is not investing at all in electronic ticketing. It is of no use to the consumer and unless we have a common industry standard we will be wasting our money.' He points out that the US carriers could afford to follow their own strategies in electronic ticketing because '98 per cent of their traffic is not interline.' But the proportion of interline traffic in Europe is much higher.
Eggert feels Lufthansa may have the answer. 'We are leading the way on chip cards and could produce de facto standards for the industry,' he suggests. Dr Roland Conrady, Lufthansa's manager new media, goes further, suggesting that standards among international alliance groupings could diverge. 'I think various airline groupings will build competitive advantage into their group standards,' he says, stressing that this is his personal opinion.
A true global electronic ticketing system can only really emerge with common standards, as responsibility for the technology needed to ensure complete coverage extends beyond carriers to travel agents and the many airports around the world, where monopolistic handling practices still persist.
Electronic ticketing may deliver savings from reduced ticket handling costs, but one other major benefit that would come from a comprehensive, electronic system is fast financial reconciliation for interline traffic.
On the other side of the electronic distribution network lies both the Internet, more specifically the World Wide Web, and dial-up, on-line booking products. Most European carriers have home pages on the Web, but only one carrier has taken the step into on-line booking through this medium. Indeed, UK independent British Midland was the first carrier in the world to offer an interactive booking site on the Web.
The shift of control in the distribution chain away from airlines towards travel agents, together with the inability to gain any competitive advantage from 'off-the-shelf' CRS products, designed in conjunction with airline owners, is of particular concern to smaller carriers like British Midland. 'So we made a decision to widen the distribution to the maximum number of channels,' explains the carrier's IT manager Des Butler. He admits that there is a degree of experimentation about British Midland's site and that the bookings 'aren't exactly knocking the spots off the accountants.' On average the site generates 250 PNRs a month, with between four and six passenger segments per PNR.
Monitoring of the site has thrown up a number of concerns. Butler is particularly worried about the transaction costs, as the site has a much lower booking conversion rate than the 25 per cent attained by travel agents. One of the other problems is the slow rate of interaction at the site, as the Web becomes 'overcrowded'. Telecommunications companies are already offering solutions, providing those prepared to pay with wider bandwidths for faster access. The result will be a 'two-tier' Internet.
Simplicity is another major factor in ensuring a viable Web site. Booking by computer remains unattractive if users find that their travel agents can still provide answers and tickets quicker. 'If you go to the supermarket to buy milk you don't need any help but if you want French cheeses you go to the deli counter and ask for advice,' observes Boldt-Christmas at SAS.
As long as doubts about data security on the Web persist, airlines and the public alike will continue to shun bookings on the Internet. Nick Gassmann, BA's Internet consultant, refuses to predict when the airline will start to sell tickets on the Web, but stresses that the new SET protocol being developed by Mastercard, Visa and Microsoft will make a big difference. He hopes to start trials for staff ticket sales this year.
Similarly, Lufthansa's Conrady suggests booking on the carrier's Web site could start by the end of the year, but warns security issues must be resolved first. In contrast to British Midland, however, the German carrier will offer schedules and bookings for all carriers though its link to Amadeus.
Amadeus itself was set to open a basic site on the Web in July with schedule listings and will consider extending this to interactive products, including on-line booking, from the end of this year. The CRS also plans to develop an electronic mall as an extension of its site, offering branded sites for both airlines and travel agents.
KLM is planning to offer a 'neutral' site similar to Lufthansa's in terms of booking options. The Dutch carrier is currently running a pilot scheme on a secure network in a joint project to develop 'intuitive systems' with Galileo. The next stage will be a dial-up, on-line booking product, related to the likes of United's Connection, before a related site is developed on the Web.
Swissair, another Galileo shareholder, is also planning to launch a dial-up product over the next nine months, but Muntwyler acknowledges 'that eventually the Internet will be the way forward', once access stops being a privilege and becomes a part of everyday life. He points to such innovations as the cash dispenser, which has all but removed the need for customers to go into a bank for cash.
The tendency is to opt for the dial-up, on-line booking products first before venturing on to the Internet with interactive sites. Although BA already has software available in the US, Lufthansa is the first European carrier to test its product, which like its planned Web site will offer availability and booking options for all 700 airlines held on Amadeus. If successful, the airline plans to distribute the software to 250,000 frequent flyers, before offering it for sale at a unit price of DM30 ($20).
The charging principles applied to some of the products now available in the US and through the Internet are causing some concern in Europe, with anecdotal evidence suggesting carriers are having to pay twice - for the booking in cyberspace and in the 'real' CRS world.
Any new technology will have its teething problems but any extra costs in the short-term have to be balanced against the potential savings of the impending electronic revolution. And come it will. As Eggert confidently predicts: 'Electronic ticketing will be standard in five years among the major airlines in Europe and the US.'
Source: Airline Business
