Article
Cut costs, grow margins: Driving revenue growth for airlines
Airlines operate in one of the most competitive margin environments in the world. But payment innovations enable airlines to reduce costs, boost passenger experience, and drive revenue growth.
Airlines operate in one of the most competitive margin environments in the world. With rising fuel prices, volatile demand, and pressure from intermediaries, protecting profitability has never been more critical.
Yet one of the biggest drains on margins is often overlooked: payments. Globally, airlines spend more than $20 billion a year on payment costs – an astonishing 78% of the industry’s net profit. When every percentage point matters, this hidden expense threatens long-term sustainability.
Fortunately, there are a range of things airlines can do to reduce the costs associated with payment processing. Many of these initiatives also provide a better passenger experience and boost revenue growth, so they can really move the needle from payments being a cost center to a driver of revenue.
Here are some key initiatives airlines can take.
Adopt local acquiring to lower transaction costs
Many airline transactions are cross-border. Unfortunately, cross-border transactions carry higher interchange fees due to increased complexities like currency conversion, compliance, and risk.
By routing as many transactions as possible through local acquiring, airlines are able to effectively reduce transaction costs. Our research shows that local acquiring helps businesses save an average of 59%.
In addition, local acquiring boosts:
Transaction approval rates by reducing risk
Passenger experience by processing payments in their local currency
Airline cash flow with faster settlements
For example, when Vietnam Airlines rolled out local acquiring with Adyen, not only did they substantially reduce transaction costs, it also helped drive an overall lift of 5% in their authorization rate.
Add local payment methods to drive down costs and improve the payment experience
Credit cards are critical for airlines. Up to 79% of travelers say they prefer to pay with credit and debit cards, and they are used for around 70% of airline retail transactions.
However, supporting this preferred payment method comes with a price. Up to 90% of total costs come from credit card transactions, making them the most expensive payment method for the industry.
Local acquiring can help reduce costs, but supporting local payment methods (LPMs) such as WeChat Pay, Pix, and Cartes Bancaires is equally important. With LPMs, businesses save an average of 49% in fees per transaction as compared to credit and debit cards. And they are good for conversion – according to our report, 78% of consumers are deterred from making a purchase if their preferred method is not available, and 41% will abandon their purchase altogether.
In an industry with razor thin margins, LPMs provide two levers for growth-reducing transaction costs and converting a greater share of potential passengers. Win-win.
Vietnam Airlines serves a diverse base of domestic and regional travelers, each with distinct payment preferences. Through partnering with Adyen, Vietnam Airlines is able to offer relevant LPMs like Alipay and WeChat Pay for Chinese passengers, Konbini and KCP for Japanese and Korean markets, and Momo, Vietnam’s leading digital wallet.
With Adyen’s global reach and advanced payment solutions, we can offer travelers around the world a smooth, secure, and flexible payment experience – supporting major card networks and emerging payment methods alike. This collaboration enables us to elevate the passenger journey while boosting operational efficiency and fostering innovation.
Bui Tran Cuong
Deputy Director of Finance and Accounting, Vietnam Airlines
Use one integration for more efficiency, less complexity
Airlines use multi-acquirer setups for good reasons, such as to gain payment reliability and be able to route payments to the most suitable acquirers. Nonetheless, with a fragmented technology stack it becomes challenging to onboard relevant LPMs that passengers trust or new features to create better payment experiences.
While a multi-acquirer setup will normally be preferred, reducing the number of integrations with a partner such as Adyen has a number of benefits. For example, with a single integration, airlines can:
Activate the latest payment methods with a click (and deprecate them just as quickly)
Integrate with innovative partners and existing systems easily
Access the latest payment innovations like Tap to Pay, network tokens, and Real Time Account Updater
This streamlined approach is already proving valuable for leading carriers. For example, Vietnam Airlines first partnered with Adyen for our payment gateway in 2017. As the airline expanded, cost optimization and seamless payment experiences became key priorities in markets like Australia, Europe, Japan, and the US. With Adyen, Vietnam Airlines is able to support all relevant payment methods to meet passengers in these markets when, where, and how they want to pay.
Turning payments into an engine to drive revenue
Airlines don’t have to accept high payment costs as a fixed part of doing business. By localizing acquiring, offering preferred payment methods, and simplifying integrations, carriers can transform payments from a cost center into a source of growth and passenger loyalty.
