March 17, 2009, 12:00 AM

Online thieves take off with $1.4 billion from airlines, CyberSource says

Global airlines lost over $1.4 billion to online fraud in 2008, about 1.3% of online revenue, says a new survey from CyberSource. Online fraud is a particularly crucial issue with airlines as 33% of airline revenue today comes from online transactions.

Airlines worldwide lost over $1.4 billion to online fraud in 2008, about 1.3% of online revenue, says a new survey commissioned by payments processor CyberSource Corp.

Online fraud is a particularly crucial issue with airlines as 33% of airline revenue today comes from online transactions.

Airlines’ business models influence their fraud approaches, CyberSource says. Airlines that focus on business travel, with higher ticket prices, are more concerned with protecting revenue and reject more transactions than bargain carriers, which focus on capturing as much revenue as possible.

Business-oriented airlines used the most fraud- detection tools (6.5 per airline), had the highest rate of manual review (47%), and rejected more bookings due to suspicion of fraud (3.6%). Low-cost carriers used the least number of automated screening tools (4.9 per carrier), were less likely to manually review bookings (13%), and rejected fewer bookings due to suspicion of fraud (2%).

The result of these differing strategies, CyberSource reports, is that in 2008 business airlines lost 1.1% of revenue to fraud, while low-cost carriers lost 1.6%.

Fraud management tactics vary widely by region. North American-based companies relied more heavily on detection tools, employing an average of 7.5 versus a European average of 5.4-the overall world average is 5.8.

North American airlines manually reviewed only 3% of their bookings whereas Middle Eastern-based airlines manually reviewed 81%. European and Asia Pacific-based airlines manually reviewed 22% and 49% of their bookings, respectively.

The data for the Airline Online Fraud Survey was compiled between Dec. 1 and Jan. 16 in an online survey conducted by Mindwave Research in the U.S., and phone interviews by Vanson Bourne Ltd. in the U.K. It is based on responses from 99 airlines.

CyberSource’s Dave Glaser, vice president of global services, is speaking at the Internet Retailer Conference & Exhibition, June 15-18, 2009, in Boston in a session entitled Pay attention; Payment security is important to small retailers.

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