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BBT March/April 2019 cover
March/April 2019

Aeroflot refuses card payments in GDS bookings

Russia’s national carrier Aeroflot has stopped taking corporate card payments directly through the GDS as part of cost cutting at the airline.

The move means all TMCs in Russia will be unable to pay for tickets directly with a lodge or corporate cards through the GDSs.

Travel management firms will now pay for Aeroflot tickets through a processing centre after arranging an agreement with the bank.

Prior to this move Aeroflot would pay for all extra costs relating to card payments – processing to the bank and then to the processing centre. Now TMCs will pay by invoice so the money will go to the TMC and then to the airline, which means the TMC will pay for all extra costs or pass it onto the customer.

The move follows Lufthansa’s decision last month to start charging a €16 fee for all bookings made through the GDS. British Airways also announced a move to open up its data to encourage start-up technology firms to build new distribution channels so customers can search for flights, prices and process bookings.

Earlier this month Air Astana CEO told BBT that he expects other airlines will follow Lufthansa’s move and last week the German airline’s UK & Ireland director Christian Schindler gave his response to the criticism that has come from many parts of the industry.

Vadim Zelenski, general director of Zelenski Corporate Travel Solutions (and publisher of sister title BBT Russia) said the decision which came into force last week has left TMCs in a difficult situation.

“Aeroflot’s decision to stop direct centralised acquiring in the GDS has affected us already,” said Zelenski. “The main risk the airline forces agencies to take is the loss of customers that work with corporate cards or other payment systems.

“According to the requirements of international payments systems for the Russian market, TMCs are not allowed to collect their processing costs from the customer. It means that we will have to pay these expenses from our revenue, thus increasing our service fees.

“For direct processing in GDSs, agencies costs were minimal, and so could offer a reduced service fee. Now it will have to be higher by 2 – 5 per cent of the ticket price."

Zelenski added that the decision will lead to a revision of contracts with corporate card customers. “Either we increase the fee, which will definitely not be understood and approved by our customers, or we return to bank payments, which is undesirable for us, because we will start crediting our customers again.”

He added that as Aeroflot’s sales amount to more than 50 per cent of the industry it cannot recommend its customers travel with another airline.

‘Archaic methods’

BBT Russia understands that some of the country’s largest business travel agencies and company travel buyers are meeting with Aeroflot to discuss the impact of this decision.

FCm Travel Solutions Russia, executive director, Olga Belusenko, said: “What can we say about all this? In fact, Aeroflot did not accept credit cards in the CIS, and in particular, in Kazakhstan and Azerbaijan, so this decision just takes Russia from the group of ‘developed’ countries in terms of card acceptance to the group of ‘underdeveloped’ ones.”

Belusenko said she was “disappointed” by the timing of Aeroflot’s decision, as contracts have already been signed for the year and budgets agreed.

“The airline seems to be pursuing its own aim, and does not necessarily confine to cost cutting, although this is exactly what has been declared,” she said.

“What are we doing? Together with our customers, we are looking for decisions that will satisfy both us and them. The aim is to bring down to zero acquiring losses without recourse to bank transfers.

“This decision will affect Aeroflot’s sales in general and on the territory of Russia in particular. And when it realises the effect of this step, Aeroflot will once again start direct centralised acquiring, but this may take some time.”

Stanislav Kostyashkin, general director of TMC Continent Express said the decision is returning Russia to “archaic” settlement methods.

“It is strange, because the airline itself is very interested in increasing its corporate segment,” said Kostyashkin.  “These sales let it plan flight occupancy and the share of higher class sales is larger with TMCs. At the same time the airline evens up the corporate and the individual market by taking this decision, knowingly putting TMCs in a very hard and unprofitable situation and making it impossible for them to use a convenient payment solution that is widely used all over the world.

“As a result, the effects may be negative. The return of the credit burden will be a great pressure on TMCs.  

“Agencies are not banks and are not ready to offer loans in the present conditions. So corporate cards will be used by agencies, but the price of Aeroflot’s tickets for the ultimate customer will increase. And it means customer outflow for the airline. There will be no bankruptcy, of course, but the after effect is absolutely evident.”

BBT has approached Aeroflot for comment and will update the article once a reply has been received.

To read more articles on the airline-GDS-distribution debate click on the ‘GDS’ tag below.

This article has been updated to show the airline has stopped taking card payments only through the GDS.

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