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Western Union Flying High With Cash Payments

New outlet for airline tickets taps underbanked market.

Cash-loving fliers now have a more convenient outlet for purchasing their airline tickets. Thanks to a deal between Denver-based Western Union, a subsidiary of payments solutions provider First Data, and American Airlines (AA), consumers can pay for their AA tickets at local Western Union locations.

Traditionally, when consumers wanted to pay for AA airfare in cash, they either would have to visit a local ticket office or trek to the airport, according to Joe Jackson, president of Western Union Payment Services. Now, Jackson says, people can visit any one of more than 46,000 Western Union locations throughout the country to pay their airfare.

Interested consumers either visit American Airlines' Web site, or call its toll-free reservation office to make their travel arrangements. They are given record locator numbers, along with the amount due and the date and time by which the tickets must be paid for. Then, they visit their local Western Union offices, fill out forms, and present their numbers and cash.

Western Union wires the money to the airline for a $14.95 fee. The consumer's information is validated through AA's reservation system, and an electronic ticket is generated. As with e-tickets purchased with credit cards, cash-paying consumers can take their e-tickets to an AA ticket counter or self-service kiosk on the day of their flights to receive their boarding passes.

According to Jackson, the service was born out of the customer inconvenience experienced by the closing of airline ticket offices after 9/11. "This was an opportunity for us and the airlines," he says. "We approached the airlines about this idea -- many were pretty receptive from the start, and others chose to take a wait-and-see approach."

Western Union struck its first deal with an airline about a year and a half ago and has similar deals with other airlines, including Continental, Aero Mexico, Lan Chile and Lan Peru. But the arrangement with American is particularly significant due to the airline's size, and Western Union anticipates making similar deals in the future. "We anticipate this list [of airline partners] will grow," claims Jackson.

Cash Only, Please
Since the Hispanic market often does not maintain relationships with financial institutions, Western Union's ties with the Latin American airlines in particular present a strategic opportunity. "It's a value-add to the consumer who wishes to pay in cash, especially with those from Mexico and South America, where there's a cash-paying tendency," asserts Jackson. Approximately 50 million people in the U.S. do not have credit cards, according to a study by Raritan, N.J.-based market research firm The Pelorus Group. Additionally, a recent report by New York-based Roper ASW found that almost one-third of U.S. consumers prefers to pay for major travel expenses with cash or check.

As another potential backdoor for reaching out to the underbanked market, the question is, Can banks engage the airlines with similar deals? "The banks could use their branches as distribution networks" for a similar service, Jackson surmises. "But no banks today do this."

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