Airlines spend 78% of sector's net profit on payments costs, claims Nium

Airlines spend 78% of sector's net profit on payments costs, claims Nium

The travel payments specialist says modern 'closed-loop' systems reduce fines and acceptance issues and allow a more equitable sharing of costs between operators and sellers 

A new report by travel and aviation payments specialist Nium has found that airlines spent $20.3 billion on payment costs in 2019.

The firm claims this is equivalent to 78% of the entire aviation sector’s net profit and is down to carriers using inefficient ‘double-loop’ systems that incur surcharges and fines and suffer from acceptance issues and declined payments. 

The findings are published in a new free to download report by Nium entitled ‘Closing the loop for air travel: A new payments model for airlines and online travel agencies’.

The firm says a ‘closed-loop’ B2B payment solutions that shares payment costs between airlines and travel sellers more equitably “could provide a much-needed economic boost for the industry”.

It estimates that airlines could save a potential $2 billion annually by adopting new ‘closed-loop’ payments technology that “closes the door on damaging surcharges and business restricting non-acceptance policies”.

Spencer Hanlon, head of travel at Nium, said: “One of the biggest airline distribution conundrums of the internet era has long-since been: do I increase my distribution at the price of accepting high payment fees, or limit distribution to those with low payment costs but reduce overall sales opportunities? 

“This problem goes away with the development of closed loop payment solutions, allowing airlines and travel sellers to collaborate in a sustainable and more equitable fashion – and save airlines up to $2 billion a year at a time when returning to profitability is more important than ever before.” 

Nium launched its closed-loop system Nium Airline Payments powered by Universal Air Travel Plan (UATP) last year and Air Europa has become one of the first to sign up to use it.