Survey Finds Airlines Lost $1.4 Billion in Online Fraud

New survey findings released today show airlines worldwide lost over $1.4 billion to online fraud in 2008, about 1.3 percent of worldwide airlines’ online revenue. The data comes from a new independent Airline Online Fraud Survey commissioned by CyberSource Corporation in association with Airline Information LLC and completed January.

Airlines are on the front line of the battle against online fraud –33 percent of the industry’s revenues derive from e-commerce, three times the proportion of sales transacted online by non-travel companies- so efficient management of the problem is of critical concern to the airlines.

According to survey data, the ways airlines manage fraud vary significantly by airline category. In 2008, business-class airlines, with higher-priced tickets to protect, typically embraced profit protection measures, whereas low-cost carriers tended to focus on revenue capture.

On average, business airlines used the most fraud detection tools (6.5 tools per business-class airline), had the highest rate of manual review (47 percent), and rejected more bookings due to suspicion of fraud (3.6 percent).

Conversely, low-cost carriers used the least number of automated screening tools (4.9 tools per low-cost carrier), were less likely to manually review bookings (13 percent), and rejected fewer bookings due to suspicion of fraud (2 percent).

The result of these differing strategies is that in 2008 business airlines lost 1.1 percent of their revenues to fraud and low-cost carriers, by contrast, lost 1.6 percent.