Airlines worldwide lost $1.4 billion in 2008 to online fraud, shows survey

Airlines across the world suffered a loss of over $1.4 billion in 2008 because of online fraud. The amount comes to around 1.3% of airlines’ online revenue worldwide.

This was revealed by an independent Airline Online Fraud Survey, commissioned by CyberSource Corporation, a company that provides a hosted fraud management solution for online retailers, and conducted in association with Airline Information LLC. According to data from the survey – completed in January 2009 – airlines are “on the frontline of the battle against online fraud” since 33% of the airline industry’s revenues come from e-commerce. This is three times the proportion of sales transacted online by non-travel companies, the website itexaminer.com quoted Akif Khan, CyberSource Corporation’s head of Client and Technical Services in the United Kingdom, as saying.

The survey revealed that, on an average, business airlines used the fraud detection tools most – 6.5 tools per business-class airline. Also, business airlines had the highest rate of manual review (47%), and rejected more bookings because of suspicion of fraud (3.6%) compared to low-cost carriers.
In contrast, the survey showed, low-fare carriers used the least number of automated screening tools – 4.9 tools per low-cost carrier. The low-fare carriers were less likely to manually review bookings (13%), and rejected fewer bookings doubting fraud (2%).

As a result of the differing strategies adopted by business airlines and low-cost airlines, Akif Khan added, while business airlines lost 1.1% of their revenues to fraud in 2008, budget carriers lost as much as 1.6% of their revenues.

The Airline Online Fraud Survey Fraud found that management strategies to tackle online fraud varied widely by region – while airlines based in North America depended heavily on detection tools, employing an average of 7.5 tools, the average for Europe-based carriers was 5.4. And, the overall world average was 5.8.

North America-based carriers manually reviewed only 3% of their bookings, the Middle East-based airlines manually reviewed 81% of their bookings, Europe-based airlines manually reviewed 22%, and carriers in the Asia-Pacific region manually reviewed 49% of their bookings.

The findings of the survey, according to Akif Khan, highlight the need for airlines to adopt “a more automated, holistic approach to fraud management – from initial screening through booking review and disposition.”

Improving the accuracy of automated screening holds the key, itexaminer.com quoted Akif Khan as remarking. In doing so, he added, overhead costs related to manual review could be reduced and loss due to fraud could be lessened and, “with the right tools, airlines can realise these benefits in a matter of weeks, not years.”

“The good news is that solutions exist,” the thestandard.com quoted Christopher Staab, managing partner of Airline Information, an airline industry organisation, as reacting to the findings of the Airline Online Fraud Survey. “Improving the efficiency of fraud management is one of the quickest cost-cutting moves that airlines have at their disposal,” Staab said.

According to aviation experts, online fraudsters generally use information from stolen credit cards to buy a ticket for themselves, or pose as a travel agent, or to buy a ticket for someone else. By the time the owner of the credit card reports the theft, the flight would have usually been taken, leading to the airlines losing 100% of the revenue.