ancillary fees & the electronic miscellaneous document (emd)

ARC PROPRIETARY AND CONFIDENTIAL. This document includes confidential information that is proprietary to Airlines Reporting Corporation (ARC). Disclosure of this document or any information contained herein to third parties is prohibited without the prior written consent of an authorized ARC officer. Obsolete versions of this document should be destroyed in a manner to prevent compromise of the information, e.g., shredding.

© 2010 Airlines Reporting Corporation (Unpublished Work)

Ancillary Fees & the Electronic Miscellaneous Document (EMD)

ARC Advisory Council – June 24, 2010

Michael Premo | VP – Marketing, Sales & Customer Care | ARC



Ancillary Fees

•  We all know what they are! •  The question for airline / agency /

corporations alike is: •  How do we manage them? Or don’t we?

2



The Current Ancillary Fee Process

Nightly ECCB CC Processors

Fed Reserve

Carrier

Kiosk or Carrier.com

Traveler

CC Statement



Ancillary Fees -The Problem(s):

•  ARC agencies can’t sell or service non-ticketed products from the airlines:

•  No GDS content available •  No Record of Sale (like an e-Ticket)

•  Sales opportunities are being missed by the carriers and/or customer service hassles are being created because agencies can’t sell them.

•  Corporations’ business practices are disrupted: •  Expense management •  Policy development and enforcement •  Supplier negotiations

6/24/10

4



Will This Get Fixed?

•  I used to say “yes, but…it will take a while.” •  Nowadays, I say “maybe.” •  Why?

•  The airport / onboard charges problem. •  The standards problem. •  The desperation problem. •  The transparency problem.

6/24/10

5



The Credit-Card Myth

•  There’s a growing “conventional wisdom” that the credit-card companies will “solve” this by collecting the data and reporting it. You’ll probably hear this at NBTA.

•  We are hearing that investment will only be made by the major cards when industry standards are set. That’s not happening.

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What’s ARC Doing About It?

•  Our aspirations are to help the industry with “merchandising” in the broadest sense.

•  This means, to start, implementing the new IATA Electronic Miscellaneous Document standard or EMD: •  First new traffic document in 50 years? •  First new document to NOT start as paper! •  Designed specifically with merchandising and ancillary

fees in mind.

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Limitations

•  We recognize that in today’s world, ARC agency EMD sales only apply to a portion of the ancillary sales.

•  There will be many other sales taking place outside the ARC agency channel.

•  However, our belief is that agencies must start somewhere and that bag and preferred seat fees can be a good beginning.

8



The EMD – What is it? •  New industry document type developed by IATA

•  Considered the long-term solution for the collection and settlement of ancillary fees via ARC and BSPs

•  Electronic document replacing remaining miscellaneous/paper documents

•  Miscellaneous Charge Order (MCO)

•  Pre-paid Ticket Advice (PTA)

•  Other paper based documents

Electronic Miscellaneous Document (EMD)



Two Types of EMDs will exist:

•  EMDS – Stand Alone •  Used independent of an E-Ticket for services such as ground

transportation, deposits and residual value

•  EMDA – Associated •  Linked to an E-Ticket at the coupon level •  Multiple EMDAs can exist for one ticket •  Considered used once associated flight coupon is used

EMD Types

E-tkt CPN 1 EMDA CPN 1 Bag Fee EMDA CPN 1 Preferred Seat



What’s So Special About the EMD?

•  The specifications have been slaved over by an IATA industry committee (including the GDSes and ARC) for years! They are highly sophisticated and detailed.

•  For example: Reason for Issuance Codes (RFIC) codes have already been established in great detail.

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A Sampling of RFIC Codes

12

RFIC A – Air Transportation B – Surface Transportation (Non-Air) C – Baggage D – Financial Impact E – Airport Services F – Merchandising G – In-Flight Services

RFIC Sub-Code Descriptions 0A5 – Pre-Reserved Aisle 0BV – Stand-By 0BJ – Upgrade 0AB – Electric Cart 0BR – Transfer 0DE – Airport Parking 0CD – 2nd Checked Bag 99Y Excess Pieces 99S – Baggage Oversized 0BG – Trip Insurance 0BU – Lost Ticket Fee 990 – Booking Fee 0AG – Lounge Access 0BH – Unaccompanied Minor, Wheelchair 0BB – Adult Polo Shirt – SM 0BF – Toy Airplane 0B3 – Meal 0A0 – Kosher Meal 0CL – Internet Access 0AE - Headset



Whoa!

•  Yes, it’s a little OCD, but how else are we going to track and account for these items?

•  Interesting thought – the airlines seem to have spent a LOT of time on this. Seems like it’s not going away…far from it.

13



OK – Sounds Like It Has Potential. What Has to Happen to Launch?

14



Slow Down There, Pardner…

…. A LOT has to change.

15



To Understand the Future, Let’s Recall How We Got to Today

•  Apologies to you “old hands” who know this all by heart…

16



The Airline Ticket – circa 1951

Source: www.gasolinealleyantiques.com



Travel Agents were Appointed by Airlines

Tickets

+ $

Airline Agent



Travel Agents were appointed by Airlines are

MMI Travel appointed General Sales Agent for Kingfisher Airlines in Dubai

Kingfisher Airlines has appointed Dubai-based MMI Travel as General Sales Agent (GSA) for Dubai. The contract was signed between (right seated) V. Raja - Global Sales Head, Kingfisher Airlines and (left seated) Pradeep Havaldar, Head of Regional Business MMI, standing is Iain Andrew, Divisional Senior Vice President, Dnata Travel Services.

Source: www.ameinfo.com/139023.htm



This Worked Well Until…

+ $ + $ + $ + $ + $ + $

+ $ + $ + $ + $ + $ + $

+ $ + $ + $ + $ + $ + $

+ $ + $ + $ + $ + $ + $



The Universal Ticket

Phoenix HP

PHX

HP

PHX PHX

PHX



How Did You Make It Valid?

“Plate” it with a validator!



The Universal Ticket

Phoenix HP

PHX

HP

PHX PHX

PHX



So What?

Phoenix HP

PHX

HP

PHX PHX

PHX

This airline gets ALL the money on this ticket. Everyone else has to bill them after they lift the ticket.



So What?

Phoenix HP

PHX

HP

PHX PHX

PHX

This airline ALSO has to pay the credit-card fee on the WHOLE amount.



The Automated Ticket

DELTA AIRLINES

420.00

SIMPSON/BART MR 123 TRAVEL CO

49-599989 BARTMANN/GARY MR

1 001 23987329873 5

42.00 38.00 500.00

ATLANTA DALLAS/FT WORTH DALLAS/FT WORTH

ATLANTA DL 1234 Y 21NOV 930AM OK

DL 1234 Y 21NOV 930AM

10C NO



The E-Ticket



Outside the US

•  IATA processes travel agency sales outside the US •  Global standards for tickets / IATA-ARC numbers

•  One very fundamental legal and process difference outside the U.S.…



The Area Settlement Plan Today (est. 1964)

•  Apologies to the “front-office” side •  They do TONS

•  ATPCO – fares & rules •  GDSes – inventory, faring, ticketing •  OAG / Innovata – schedules •  Carriers – the decisions and data behind it all

EMD Ready!



The Area Settlement Plan Today (est. 1964)

Sabre Travelport Amadeus

Travel Agencies

Alternative Distribution (Farelogix, Portals)

SPRF

Ticketing

ARC Reporting & Settlement

Carrier

Federal Reserve

Cash Report (Weekly) Credit Card

Processors

ARC COMPASS™

Data Warehouse

Money

Money

Money

IAR Web-Based Sales

Reporting

CAT (Daily or Weekly)

ECCB (Nightly) “GDS”

Agency Bank

Account

BOS Back-Office System File IUR

MIR TAIR



Thanks for the History Lesson: So What?

•  Well, the EMD is actually a very sophisticated specification. •  Interlinable •  Refundable

•  It is designed to be easy and flexible – once implemented! And that’s the trick, isn’t it?



Who Has to Play to Make EMDs Work?

Travelport Amadeus

Travel Agencies

Alternative Distribution

(Farelogix, (Portals) SPRF

Ticketing

ARC Reporting & Settlement

Carrier

Federal Reserve

Cash Report (Weekly) Credit Card

Processors

ARC COMPASS™

Data Warehouse

Money

Money

Money

IAR Web-Based Sales

Reporting

CAT (Daily or Weekly)

ECCB (Nightly) “GDS”

Agency Bank

Account

BOS Back-Office System File IUR

MIR TAIR

Sabre

= Planned 3Q 2010 = Plans unknown

Farelogix



•  Implementation requires coordination between carriers, GDSes, Back-Office Vendors, BSPs/ARC, other third-party vendors

•  Implementation dates will vary depending on carrier, BSP and GDS

•  ARC completed requirements and estimates the initial phase of the EMD will be implemented in 3rd Quarter 2010: •  Will appear in IAR as an e-ticket •  Data feeds to agencies and card companies not yet

finalized •  Future phase schedule not yet available

Implementing the EMD



Current Public Commitments

•  AA to implement EMD via Farelogix (only) •  End of 3Q 2010 •  Coordination and test with ARC / FLX in progress •  EMD-S only

•  Amadeus – 3 carriers in 3 BSPs in early 2011 •  Travelport – “supports the EMD standard”

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What’s the Hold-Up?

•  Airline – GDS content agreements seem to be the culprit

•  Airlines: “We aren’t paying GDSes for ancillary content. We own it.”

•  GDSs: “We’re happy to implement EMDs as soon as airlines agree to contract terms.”

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© 2010 Airlines Reporting Corporation (Unpublished Work) 36

Sabre and British Airways Sign New Long-Term Global Distribution Agreement April 06, 2010 10:33 AM Eastern Daylight Time

“Our new agreement with British Airways meets the evolving needs of our agency customers”

SOUTHLAKE, Texas--(EON: Enhanced Online News)--Sabre Travel Network, the world’s leading provider of high performance solutions for the travel industry, and British Airways, the UK’s leading international airline, have signed a new three-year global distribution agreement, providing agencies and corporations around the world with continued access to the airline’s full content and inventory via the Sabre global distribution system (GDS).

Through this new agreement, Sabre-Connected agencies will continue to access all of British Airways’ published fares and inventory including those sold through other direct and indirect channels. The opt-in levels previously established by Sabre for the UK and Ireland remain unchanged.

John Mornement, Head of Selling and Distribution for British Airways, said: "Sabre is an important partner for British Airways and we're delighted that we've reached a global agreement for their agents, which allows them to continue to access all our published fares and inventory. We are pleased to be working with the team at Sabre to enhance how we sell British Airways through their GDS, both to demonstrate the value of flying with us and to increase the opportunities for selling ancillary services.”

British Airways will work with Sabre to introduce the sale of these ancillary travel products through the GDS. Corporations and agencies will be able to complete the sale using a new functionality based on industry technology standards known as Electronic Miscellaneous Documents (EMD). This new solution has been adopted by the travel industry to allow agents to sell, report on and accept payments for ancillary products. It ensures that travelers are clear about their options, and integrates into an agency’s existing back-office system. EMD is compatible with global financial settlement organizations Airlines Reporting Corporation (ARC) and Billing and Settlement Plan (BSP).



Other Fun

•  GDSs also are ALREADY supporting some types of ancillary sales for airline direct sites and airport kiosks •  They aren’t being hurt by delays •  To some extent, neither are the airlines.



Other Fun

•  Corporations have been vocal •  The agency community has been pretty

quiet on this topic •  Understandable to a point •  Airline view: If agencies want this content,

they need to speak up!

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Circle Back to the Credit-Card Myth

•  Given all you’ve learned, do you really think the credit-card companies are going to invest millions to solve this problem anytime soon?

•  Remember: they’re already getting the business!

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Our Beliefs

•  Airlines: You will benefit by having more sales when you open these up to agencies, less hassle for your customers at the airport and more flexibility in dealing with corporate and group clients.

•  You will also position yourselves for a more fulsome and valuable merchandising world save a lot of current costs. (Can you say “irregular operations vouchers?”)

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Our Beliefs

•  Agencies: You have survived by helping your customers solve their thorniest challenges. Ancillary fees are just another in a long line of opportunities to do just that.

•  A strategy of continuing to encourage your customers to go to the airline web-sites seems most unwise.

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What Should We Do?

•  ARC has been out in front on this topic: •  Active advocacy in media •  Active advocacy in public settings •  First organization worldwide to publish an EMD

implementation date of any kind •  ARC has published new CAT file specifications

and is soliciting airlines to begin testing



What Should We Do?

•  We can’t do it alone! •  Industry Education Day? •  Other ideas?

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Thank You!

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