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Until now Airlines Reporting Corporation (ARC) had focused on settling transactions between travel agencies and airlines. Yet incoming CEO Lauri Reishus sees a new growth area for the company, namely, helping serve bookings that travelers make directly with airlines.
ARC said Thursday that Reishus, executive vice president and chief operating officer, will become CEO, replacing Mike Premo. The transition will happen in 2021.
The CEO change comes at a time when ARC’s role has become murkier.
ARC settles more than $94 billion in transactions a year between 240 airlines and about 12,000 travel agencies. Yet some airlines are more eager to drive direct bookings than indirect ones. Direct bookings poses a challenge for ARC, which in 2018 made a majority of its approximately $140 million in revenue from fees for settling plane tickets booked through agencies.
“Corporations are letting their road warriors book directly on the sly,” Reishus said. “We want to help set a stage to make it an approved activity for certain travelers and help agencies bring it into an environment with transparency and accountability.”
ARC, which is owned by airlines, hasn’t settled an airline-direct transaction in more than a decade — after a brief trial with American Airlines. In July, after a strategy review, it decided to try again.
ARC sees 10 functions related to direct bookings. The company will address a few of those functions, Reishus and Premo said. It will partner with other vendors to address the others.
As a first step, ARC built a data integration service with the itinerary management company Traxo. This week, ARC said it had participated in an undisclosed equity investment in the startup. Traxo, which is continuing to raise funds. Traxo previously announced about $14 million in fundraising.
“We really like their business model,” Reishus said of Traxo, where she’s now on the board of directors.
Airlines, starting with United, will be able to use ARC and Traxo to provide to their corporate travel clients the itineraries from direct airline bookings to travel risk management software.
Here’s how it works: If a corporate traveler books a flight on, say, United’s site or app, the itinerary will go to their corporate email address. Traxo will know about the email and forward the details to the service the company may use for so-called “duty of care.”
More Deals Planned
Reishus and Premo said ARC hopes to announce the next partnership related to direct bookings by the end of the year.
“I don’t want to convey that the suite of services is all directed at agencies and that somehow they have to pay for that because that’s not the case,” Reishus said. Airlines and corporate buyers will share the burden.
The company may also use blockchain-based technology to help with some services. Earlier this year, ARC tested if blockchain technology could help with its core function of the reporting and settlement of airplane tickets partnering with the startup Blockskye.
Why Direct Bookings Are A Growing Agency Headache
Here’s some context to this story. Some business travelers now find it more appealing to book tickets via an airline’s mobile app than through an agency. That’s especially true in the U.S., where carriers have boosted their route share in many cities through consolidation.
A classic case of why a road warrior may prefer to book direct is with preferred seating. Airlines may set aside first-choice dibs for some seats as a perk for having elite status. Airline apps make these easy to select. Corporate booking tools, on the other hand, are often clunkier to use and usually don’t come with seamless, real-time trip updates.
For travel management companies, direct bookings pose a problem. Corporations hire these agencies to ensure transparency, accountability, and policy compliance. But direct bookings sit outside of the picture.
Corporate travelers risk frustration, too. If a problem comes up with a directly booked ticket, agencies often can’t dive in to help.
ARC spies an opportunity.
ARC will need to manage the effort carefully.
In the past, the airline-owned company’s approach to agencies has been controversial. In 2008, agencies took it to arbitration and won a ruling that its hikes in annual administrative fees weren’t justified. Since 2011, Premo has led an effort to engage agencies as valued customers.
That’s an effort that, starting in 2021, Reishus intends to continue as the new CEO.
“I’m bullish on agencies, though I know that they have to navigate changes,” Reishus said. “At ARC, we just spent millions to overhaul our technology, and we, too, were constrained from our legacy tech to do things customers were asking us to do. So we’ve get how heavy the lift can be in energy, and we’re empathetic. We see opportunities to grow the pie for the agency community.”