The state government of Lower Saxony in Germany is looking to abolish prepayment for flights. Transport Minister Bernd Althusmann is urging payments for plane tickets to be processed upon check-in and migrate to a Pay-as-you-fly (PAYF) system.

The move comes as thousands of flights have been canceled across Germany and the world, with customers frequently waiting for significant lengths for a refund. The process would be similar to how hotels currently take your card details and charge the final bill after checkout.

In an interview with German newspaper Handelsblatt, Althusmann urged that Airlines should only process payments for airplane tickets at check-in. The move, he argues, would significantly improve consumer protection for travelers and reduce the bureaucracy around canceling ticket bookings and issuing refunds to customers:

"The implementation of our initiative would only result in minor additional costs for the airlines. On the other hand, travellers would be spared a lot of hassle.”

An initiative on the subject may even be on the agenda of the federal chambers at the next Federal Council meeting on September 16th.

Pay As Your Fly

The concept has been used sporadically over the years. Most notably, Germany Flag carrier Lufthansa introduced the model of not paying until departure in 1997. The program debuted with Siemens as its launch customer and has since expanded to other corporate clients. It is now available on domestic and EU-EU point-to-point and transfer flights of Austrian Airlines, Brussels Airlines, Lufthansa, and Swiss.

For ordinary passengers, introducing a Pay as you fly (PAYF) scheme could help reduce the number of customer funds held by airlines. Travelers would either pay a deposit with the balance due at departure. This means travelers would lose their deposit should they not travel and avoid potentially lengthy refund battles.

The German Business Travel Association (VDR) has long called for airlines to move from the prepayment system to one where customers pay upon check-in. VDR President Christoph Carnier welcomed Lower Saxony's plan to use a Federal Council initiative to ensure the abolition of advance payment for flight tickets:

"Advance payment for air travel is an outdated standard that should be replaced by timely electronic payment."

"This would not only correspond to legitimate consumer interests, but the airlines could also make current processes more efficient or even eliminate them."

Potential negative consequences

The current booking system and having the payment come out in advance helps create an incentive for passengers to board their flights. There is also the potential for a price differential to emerge in the sector. Much like with hotels and car rental companies, there could be a significant difference in the cost of the fare for prebooking versus paying at check-in.

This trend may result in a discount being offered for payments at the point of booking and a higher charge for those who only pay when the flight takes off. However, this could be a price worth paying for some customers, as fares on flexible tickets remain much higher than non-refundable ones in the same cabin of the aircraft.

Star Alliance member Lufthansa previously said it would continue to make payment on departure the exception rather than the rule. The airline cited the fact a fundamental short-term payment practice would lead to a situation in which the utilization of flights would be much less plannable:

“As a consequence, flying with half-empty aircraft would not make sense ecologically or economically. It should also be taken into account that advance payment is a global practice in international air traffic. A national change would not only be associated with competitive disadvantages for Lufthansa, but would also present the airline with considerable booking and billing problems.”

What do you think the future of Pay as you fly is? Let us know in the comments.

Source: Handelsblatt, Business Travel News Europe