TMR Exclusive: ARC to Enable Airline Merchandising

In this exclusive interview with Travel Market Report, ARC director of Strategic Communications Allan Mutén reveals that ARC plans to introduce the Electronic Miscellaneous Document (EMD) late in this year’s third quarter, accommodating merchandising/ancillary products and replacing the remaining paper documents in the ARC system. While 99.5% of tickets are paperless e-tickets, ARC won’t be totally paperless because Amtrak and a few carrier exception transactions will still be on paper. This interview with TMR editor at large Nick Verrastro was in response to TMR’s recent report on the increase in ARC’s fees in which one retailer questioned the value ARC provides. Mutén responds here.

TMR: With JetBlue and WestJet, how many carriers now participate in ARC’s settlement plan?

ARC: We have been hovering around a record level of 190 carriers. At the moment, we have 189 ARC participating carriers, as airlines are added (and sometimes deleted) on a near weekly basis.

TMR: Are these carriers mainly North American airlines and railroads?

ARC: Just 30 carriers are North America-based while the remaining are based abroad. Three are rail carriers. A growing number are off-line carriers, meaning that they do not serve the U.S. but want to market their services through ARC and the ARC-accredited agent community (See chart at http://www.arccorp.com/carriers.pdf).

TMR: Why do these carriers participate in ARC? What is ARC’s sales pitch to them – what benefits do they get from participation and what value does ARC add to both vendor and travel seller?

ARC: The value proposition to the prospective carrier is first and foremost easy access to the almost $70 billion U.S. travel market as represented by the ARC-accredited travel agencies and CTDs (Corporate Travel Departments). ARC offers the carrier a reliable and robust reporting and settlement system that also meets the data needs of the most sophisticated sales and marketing structures.

Moreover, ARC offers a tailored participation program for every size and carrier business, model affording different types of carriers from around the globe similar access to the single largest travel market.

The benefit to the travel seller is the broad selection of suppliers as represented by the roughly 190 carriers and the ease of reporting and settlement through a uniform system where the alternative would be the creation and maintenance of individual supplier relationships. The ARC-accredited travel agency, CTD and VTC (Verified Travel Consultant) also enjoy the broad industry recognition and wide visibility of the ARC agency code number travel, as well as the benefit of ancillary ARC programs, such as the Travel Agent Service Fee program and ARC MarketPlace.

TMR: How will airline merchandising via direct connections between agencies and airlines affect ARC’s relationships with travel sellers – would sales still settle via ARC?

ARC: ARC’s work to develop the IATA-standard Electronic Miscellaneous Document (EMD) will enable ARC-accredited agencies to sell and service merchandising/ancillary products through both direct connections and traditional distribution.

ARC expects to deliver the EMD, which is designed to replace the remaining paper documents in the settlement system like Miscellaneous Charge Orders (MCOs), in late third quarter 2010.

However, the specifics of airline decisions of which merchandising services they will permit travel agencies to sell and which GDSs or other technology providers will be ready to support such sales remain open.

We believe that there is strong evidence that suppliers who choose to utilize the ARC agency channel outperform their competitors in terms of revenue generation and average sale value.

As recent events with airlines that have recently chosen to participate in ARC demonstrate, we expect that agencies and customers will continue to prefer the efficient electronic settlement and data flow that ARC provides. While we also expect that many flavors of “direct connections” may evolve, including ones that may not employ ARC for settlement, we expect the majority – and the most successful – to choose ARC for settlement and agency back-office system feeds.

TMR: Agency marketing groups – co-ops and consortiums – recently have introduced air programs on the leisure side. Can these groups leverage ARC’s services in any way to maximize the efficiency and productivity for participating agencies?

ARC: The air programs with direct links… typically do not include a settlement component. They may be search and book only or would settle direct with the supplier thus losing the value of the collective ARC settlement. However, providing the agent is ARC-accredited, they can still use the ARC service fee program (either TASF which is GDS based or Agents’ Choice which is Web-based and independent of GDSs) to link a service fee to their individually settled air sale. ARC does have a number of direct settlement feeds in addition to the big GDSs that include carrier agent portals, as well as “Alternative Distribution Channels” such as Farelogix and ITA Software so maybe the air programs you refer to are not far behind.