Sunday, December 7, 2008

Travel industry copying the appliance industry: American Airlines Fly Now / Pay Later

I have written before about how travel is competing with appliance retail for the consumers dollar. In one post I quoted a report from Tourism Research Australia that said as much. In that post we saw evidence of JetStar (AU low cost carrier owned by Qantas) trying to fight this trend with a promotion tied to prizes from a white goods and appliance retailer.

Thanks to an email from an equity research analyst I have become aware of another airline's efforts in this retail battle. Below is a shot from the American Airlines site with a very common appliance store tactic of buy now pay later. In the case of American Airlines they are offering Fly Now Pay Later with six months interest free.


There are restrictions here. Firstly it applies to air only (ie the areas on directly under American's control). The consumer has to apply for an AA credit card, combining financing with credit card customer acquisition. Most outrageously if the amount is not paid in full within six months interest is accrued and back dated at a Mafia like level of 25.96%.

The execution and interest rate may be bordering of scandalous but I expect this to be the first of many appliance retailer like activities from travel suppliers and online agents. Even in these times of credit crunches there is just too much money in financing, extended warranties (insurance) and flexirent style products for margin pressured suppliers to resist the lure of appliance retailer practices. The BOOT will be tracking and posting on these as I see them. If you spot some let me know.

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