Universal Air Travel Plan (UATP), a payment network owned by major international airlines such as American Airways, British Airways and Lufthansa, has partnered with bitcoin payment processor Bitnet.
The integration allows over 260 of UATP's airlines to accept bitcoin through Bitnet, starting today. Introduced in 1936, UATP is credited with issuing the first-ever charge card. As of 2014, the company processes around $14bn in payments from corporate customers, travel agents and retail consumers.
Additional UATP merchants include JetBlue, Qantas, US Airways and United Airlines.
Akif Khan, vice president of solutions strategy at Bitnet, said he expects the airline's clients to enable the payment method given the high cost of credit card processing, challenges with fraud mitigation and the need for improved cross-border payment tools.
Khan told CoinDesk:
"It's very much in the airlines' interest for the consumer to pay with bitcoin given that the airline will have cheaper fees and they know that money can't be taken away in a fraudulent transaction."
UATP vice president of marketing and communication Wendy Ward said her company's decision reflects the "interest shown by many carriers" in bitcoin. Notably, UATP has long been an advocate for emerging payment methods, adding PayPal integration in 2009 and partnering with Alipay in 2013.
Though no airlines will accept bitcoin at launch, Khan expects the partnership will do much to encourage these businesses to enter commercial agreements with his firm.
"It's putting a foundation in place that enables this global network of airlines to have a much lower barrier to entry if they wish to accept bitcoin," he added.
UATP will not charge added fees for bitcoin processing, however, it did confirm that Bitnet is compensating it for the ability to process transactions through its network.
Khan suggested Bitnet is currently in talks with a number of UATP partner airlines. During this process, he added, the company will emphasize its payments industry background and ability to channel this knowledge into an improved product.
"We all understand the payment ecosystem," Khan said. "This partnership sends a clear message to airlines we're not coming in to see you to talk about how great bitcoin is, we understand how your airline payment systems work, we understand the legacy airline ecosystem and we understand how hard it is to make changes to those systems."
Khan explained that bitcoin transactions enabled through UATP's 'lightweight integration' with Bitnet will appear the same as other UATP transactions. This means airlines can refund customers in bitcoin through Bitnet while avoiding the need to build special reporting capabilities for the new payment method.
Ward, in turn, suggested UATP carriers may be interested in bitcoin because of its ability to drive new global customers, while noting the benefits of Bitnet's integration.
"Carriers interested in accepting bitcoin now have an easier method of acceptance - basically allowing a new form of payment to be processed ... as if it is a more traditional form of payment," he said.
Echoing recent discussion in the industry, Khan conceded that certain UATP demographics may be better suited to the program than others.
For example, while bitcoin may be appealing to merchants in general, its ability to compete in the developed world against more mature payments offerings may be farther off, he said.
Still, Khan noted that the UATP program is aimed at general consumers, as it will enable merchants to simply add a 'pay with bitcoin' button to their website. Further, he suggested the option could become popular for airlines serving areas where local payment methods are susceptible to competition.
"In emerging markets, the ability to pay with bitcoin gives a way for an airline to take a payment online from a consumer in a way that they cannot do today."
This point was also touched on by Ward, who noted "Bitcoin users are global," and that "some merchant carriers may be attracted to a global payment option such as bitcoin."
Khan added that his company is talking to airlines in more developed markets about ways to incentivize users to pay with bitcoin, noting that the option could be paired with perks such as fewer fees, more airline points or free in-flight services.
Solving real problems
Though careful not to overstate the immediate impact of the program, Khan did stress that he sees bitcoin as an attractive prospect for the airline industry, given its recent revenue struggles.
"All it takes is just a few seats to be sold fraudulently and it could make that whole flight unprofitable. So for the airlines, bitcoin's fraud mitigation aspects are also interesting."
This benefit could extend to the wider travel industry, Khan said, which sometimes turns down potentially lucrative sales because of fraud concerns.
"One online travel agency we spoke to gave the example of a first-time customer who was booking a round the world ticket costing tens of thousands of dollars and they declined the transaction because it was too risky," he explained.
Overall, Khan suggested that the UATP deal signals the change in tone his company is bringing to the bitcoin industry, with its strong emphasis on traditional payments.
"This sends the message to others that we're coming to help you take bitcoin payments in a way that fits in with your existing legacy infrastructure. We're coming at the bitcoin space as payments professionals."