ARC Sees EMDs On The Wane, Basic Economy Is A Culprit

Mar 22, 2018 | News

The number of electronic miscellaneous documents processed through ARC has been declining on a year-over-year basis for much of the past half year. This followed several years of astounding growth rates, albeit from a very low base. ARC CEO Mike Premo said the rise of basic economy fare products, which restrict the purchase of ancillary add-ons, is a major factor.

EMDs serve as fulfillment and accounting documents for non-airfare purchases.

“With Basic Economy, most ancillary products are specifically prohibited,” said Premo. “You cannot pre-purchase a seat even if you want to—you get your seat at the airport—and 97 percent of current EMDs are seats. There is a very high correlation there.”

Premo doubts EMDs will make the advances he once hoped for, especially as some airlines turn their attention to the International Air Transport Association’s burgeoning One Order standard, which seeks to replace the passenger name record, e-ticket and electronic miscellaneous document with a single record.

In 2011, American Airlines became the first airline for which an EMD was issued via ARC. Since then, the carrier staked a claim in generating an outsize portion of EMDs issued via ARC.

American rolled out a Basic Economy option last year. Premo said it’s no coincidence EMDs began to fall from then.

Building on a miniscule base in 2011 and 2012, EMD transactions rose steadily: to nearly 44,000 in 2013, to 54,000 in 2014 and then to 236,000 in 2015. In 2016, EMD transactions rose 250 percent year over year. 2017 brought year-over-year growth, as well, but at a slower pace.

“We were having pretty good growth all the way through 2016,” Premo told The Beat this week on the sidelines of UATP’s Airline Distribution 2018 conference in London. “2017 was showing pretty good growth. Then, we started to see some decline.”

Peak EMD monthly issuance occurred about a year ago.

EMDs never got the penetration Premo had hoped for. He doubts ARC will recoup its investment in supporting them via its Bank Settlement Plan.

“I’m not sure I’m ever going to get my $2 million back because, frankly, what we’re starting to hear from the carriers is: They might skip EMDs and go straight to One Order—if that’s the ultimate solution,” he said. “We also hear arguments that say doing EMDs is a good step to understand all the processes that you’ll have to understand to do One Order. We may see a bit of both, but there’s quite a bit of talk, particularly with the U.S. majors: If we have to rewrite this process, let’s just go to the end; let’s just go straight to future state.”

As for ARC’s own adoption and support of One Order, Premo called it “very early days,” like the program itself. “We’re having conversations with carriers around: How exactly do ARC agency processes play in an NDC/One Order world?”

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