PYMNTS Topic TBD

AirHelp’s Out To Smooth The Turbulence In Airline Reimbursements

No one likes to sit on the tarmac. No one likes to chase their luggage across time zones due to logistics snafus. No one likes to be bumped from a flight.

But just about everyone likes an apology when those things happen. And money, too.

As many as 234 million people will take to the skies worldwide this summer alone, according to stats from industry trade group Airlines for America. With so many flights, delays and snafus are to be expected, and in fact, 25 percent of people experience some sort of delay. Most of them are not egregious, clocking in at perhaps just a few minutes. But then again, flights do get cancelled, bags do get lost, connections do get missed and passengers do get inconvenienced — and sometimes, trips are ruined. Social media has been in a whirlwind in recent months as airlines have come under fire for the way passengers are treated.

Amid all this, AirHelp, a three-year-old startup, has sought to smooth the process through which passengers are compensated for their troubles. In the past, the company acted as a litigator against the airlines, and in recent weeks launched an app that tracks information via boarding pass to notify passengers of cancellations and delays, informing them of their rights even as they sit on the tarmac — with an eye on getting claims in place and ultimately getting money in the bank.

In an interview with Karen Webster as part of the continuing Topic TBD series, Ashley Raiteri, chief information officer of AirHelp, said that all airlines have a bill of rights in place that determines how people are recompensed if a delay becomes unacceptable.

But customers, said Raiteri, are generally unaware of the rights they have. “We, along with other companies in the industry,” he said, “do our best to inform passengers of those same rights,” but it is left to fine print on tickets and contracts to spell out those rights in the event passengers look at all. Social media has helped too.

But really, in the United States, there are only three fundamental rights that are held by travelers. Among them: Airlines cannot keep passengers on the tarmac more than three hours, else they face a $27,000 fine per passenger, paid by the airline to the Department of Transportation; if bumped from a flight, the customer is entitled to more than cash (and, in addition, lost or damaged luggage has a compensation rule in place too for similar amounts). And the third rule is the right of information about the fares. Compensation, in general, is governed by the Montreal Convention.

Technology, as in so many other areas of life, has played a role here. The airlines are experimenting with text messages and alerts and offers ranging from vouchers to mileage credits to acknowledge inconveniences.

But who gets what in terms of mea culpas from the airlines is segmented a bit, noted Raiteri. It should be noted that airline passengers are generally defined as higher value and lower value customers. The former designation includes people who fly all the time with the same airline. There are also potential high value airline passengers, which include people who fly often but not always with the same airline. Then there are just the people “who fill the seats,” said the executive, and there is not much in the way of incentive for an airline to compensate those people, since they’d likely chosen to travel based on the fare price alone. Yet Webster noted that these could be repeat customers, if left feeling satisfied by the airline. So, in essence, money is being left on the table.

And here may be a rub. The airlines, said Raiteri, have been operating with a kind of hubris, aided by machine learning and AI that makes them think they know their customers, but “they can do much better at knowing the lifetime value of any individual passenger.”

The airlines still use loyalty membership as a primary metric, which he termed a mistake. He explained that there is a breakage rate with delivering vouchers to customers who never claim them — well over 80 percent — and with little satisfaction derived from that offering, which tends to be viewed “as an apology.” The breakage rate is so high because there are restrictions in place that govern how a voucher can be redeemed.

He further explained that the offer of a cash reward, instead, would prove to be of little cost to the airlines — as “the biggest cost to them is moving the aircraft around” (and maintaining infrastructure). So payouts that, for example, range from a $50 deposit in a PayPal account, or even a link where people can collect and use those payments, could help salve and salvage relationships broken by poor customer service.

Noting that airlines have embraced technology to varying degrees when it comes to interacting with customers, Raiteri said that his firm is working with several airlines in Latin America, Europe and the United States to establish a premium customer service level, enabling passengers to be notified of their rights and also providing opportunities for goodwill compensation. At the moment, the payments technologies leveraged for goodwill compensation are tied to rather traditional practices, such as codes entered to a website, or where an airline sends a payment to a bank account (real-time payments seem a ways off).

AirHelp is also in beta tests to help facilitate instant payments through an app where the company would be notified of a delay by the customer and they would send, for example, $100 to a bank account — good news for anyone frustrated from a delayed flight. “You’d be surprised what $100 does to your stress level when you are sitting at the airport waiting to find out if you are ever going to fly,” he said.

Also, he said, while the compensation is mandated by law, often there needs to be help enforcing the law. AirHelp has set up offices in over 14 legal jurisdictions, and Raiteri noted that small claims court cases on a global basis proves to be too expense for airlines to battle, so settlements are usually in the offing for a vast majority of travel cases.

Raiteri stated that one obstacle discovered was that once money was won on a consumer’s behalf, more often than not that money went unclaimed. Up until recently, the firm was using a payments service that required an additional account set up. AirHelp found that passengers did not want to set up a new, third-party account and switched to payment systems that allowed the firm to collect account information and make transfers on the same day, paying them in their domestic currency.

AirHelp has partnerships in place with online travel agencies (which see bookings from 35 percent of travelers), and if a delay is experienced, the travel agency sends an alert to the passenger notifying them of their rights and a link to AirHelp’s site, getting the ball rolling.

The challenge that lies ahead for the company, he said “is getting all passengers informed of their rights” in the very first place, said Raiteri.

And lest you think that the folks at AirHelp are immune to the vagaries of air travel, Raiteri relayed a story that had him traveling from the states to Europe, while his luggage went everywhere he wasn’t.

And, he added — tongue in cheek (perhaps only just a little) — that the moment employees come on board with AirHelp, they experience all manner of flight disruptions. Perhaps no small matter, but then again, perhaps no small windfall, as each incidence can bring hundreds of euros or thousands of dollars in compensation.

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