Mike Premo, President and CEO – ARC

2. Travelport
CTD Event
Mike Premo
2

3. © Airlines Reporting Corporation (ARC)
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ARC by the Numbers
3
400
Employees
12,000
Accredited Agency
Locations
(incl. 148 CTDs)
208
Participating Carriers
$85.6B
2016 Air Sales
164M
Tickets Processed

4. Test Your
U.S. Airline Distribution
Knowledge!

5. © Airlines Reporting Corporation (ARC)
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The “Big Three” airlines represent how much of
ARC agency ticketing?
5
54%
72%
91%
A
B
C

6. © Airlines Reporting Corporation (ARC)
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The top 25 agencies represent how much of
ARC airline ticketing?
6
5%
35%
75%
A
B
C

7. © Airlines Reporting Corporation (ARC)
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Cash sales processed by ARC in 2016 were:
7
US$19B
US$9B
US$900M
A
B
C

8. © Airlines Reporting Corporation (ARC)
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This ARC transaction type had the greatest
numeric increase:
8
One-Way Tickets
EMDs
Exchanges
A
B
C

9. © Airlines Reporting Corporation (ARC)
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This ARC transaction type had the largest
percentage increase:
9
Refunds
EMDs
Exchanges
A
B
C

10. © Airlines Reporting Corporation (ARC)
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ARC Locations 1965–2016
10
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Total Locations
STPs

11. © Airlines Reporting Corporation (ARC)
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ARC Agency Sales (US$ Billions) 2002–2016
11
$-
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
2002 2004 2006 2008 2010 2012 2014 2016
Billions
Cash Credit Total

12. © Airlines Reporting Corporation (ARC)
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ARC Total Transactions (Millions) 1965–2016
12
0
50
100
150
200
250
Millions
Total Transactions

13. © Airlines Reporting Corporation (ARC)
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Electronic Miscellaneous Documents (EMD)
Transaction Volume by Month
13
0
20,000
40,000
60,000
80,000
100,000
120,000
Aug-12
Oct-12
Dec-12
Feb-13
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Oct-15
Dec-15
Feb-16
Apr-16
Jun-16
Aug-16
Oct-16
Dec-16

14. © Airlines Reporting Corporation (ARC)
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Electronic Miscellaneous Documents (EMD)
Sales by Month
14
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
$4,500,000
$5,000,000
$5,500,000
$6,000,000
$6,500,000
$7,000,000
Aug-12
Oct-12
Dec-12
Feb-13
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Oct-15
Dec-15
Feb-16
Apr-16
Jun-16
Aug-16
Oct-16
Dec-16

15. © Airlines Reporting Corporation (ARC)
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Where To From Here?
15
• Still minimal ancillary sales via agencies
• US Airways/Sabre litigation outcome
• New Distribution Capability (NDC)
• Unbundle, unbundle, unbundle
• Commitment by majors to compete across the market spectrum
• Pretty darn profitable 2016
• Delta: $6.6 billion pre-tax
• American: $4.3 billion pre-tax
• United: $2.3 billion pre-tax

16. © Airlines Reporting Corporation (ARC)
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16
Evolutionary
S C E N A R I O

17. © Airlines Reporting Corporation (ARC)
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17
Chunky, Cherry Picking
S C E N A R I O

18. © Airlines Reporting Corporation (ARC)
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18
S C E N A R I O
“The Full Lufthansa”
16

19. © Airlines Reporting Corporation (ARC)
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NDC ACCOUNTS FOR 15% of AMERICAN AIRLINES’
U.S. POINT OF SALE TRAVEL AGENCY VOLUME.
19
“That makes it [our]
second-largest source of
volume behind Sabre.”
– Cory Garner, American Airlines
Speaking on The Company Dime webinar, September 8, 2016

20. ARC’s
Competitive
Landscape
2
0

21. Our biggest
competition?
Our owner
airlines!

22. © Airlines Reporting Corporation (ARC)
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U.S. Airline Distribution
22
ARC
• 45% of U.S. tickets / 50% of revenue
• Best customers
• Business / first class
• Corporate / last-minute travel
• High-end leisure
• International
• Marginal cost: $0.20 to process a ticket
Airlines
• 55% of U.S. tickets / 50% of revenue
• Using their website:
• Utilize loyalty status
• Customize offers
• Build brand
• Growing international sales
• Cost? Not tracked – must have to do business

23. © Airlines Reporting Corporation (ARC)
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Airline Distribution – Indirect Channel Today
23
Agent / CTD
Carrier
Availability
GDS
Builds Content
Customer
Schedule
3rd Parties
Fares & Fare Rules
ATPCO
OAG
Innovata

24. © Airlines Reporting Corporation (ARC)
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Airline Distribution – Indirect Channel Today
24
Agent / CTD
Carrier
Availability
GDS
Builds Content
Schedule
3rd Parties
Fares & Fare Rules
ATPCO
OAG
Innovata
SPRF
Interactive Agent
Reporting (IAR)
BOS

25. © Airlines Reporting Corporation (ARC)
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ARC Settlement Plan Mechanics
25
Carrier
Interactive Agent
Reporting (IAR)
CASH SALES
Debited from agents’ bank accounts
Travel Agent / CTD
BOS
SPRF
CAT
Global Distribution
System (GDS)
ARC Data Warehouse
Credit Card Billing
Credit Card
Processors

26. © Airlines Reporting Corporation (ARC)
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Airline Distribution – Carrier Channel
26
Customer
Dynamic
Airline
Shopping
Airline
Website
Product
Price and
Availability
Engine
Internal
Airline
Ticketing
Process
Carrier

27. © Airlines Reporting Corporation (ARC)
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Airline Distribution –
Indirect Channel with NDC
27
Customer
Dynamic
Airline
Shopping
Airline
API
Product
Price and
Availability
Engine
Internal
Airline
Ticketing
Process
Carrier
GDS Agent
Agent
Direct Connect

28. © Airlines Reporting Corporation (ARC)
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What Are We Doing About This?
28
Mitigation
• Call out benefits of ARC’s cash sales processing to airlines
• Create advocacy with agency & CTD customers for efficiency of ARC settlement
• Settlement Council
• Improve ARC processes to meet or exceed airline internal options
• Anticipate future carrier needs and deliver solutions
• Don’t wait on industry resolutions to solve problems
• Upgrade business technologies
• Faster, more reliable delivery
• Reduce costs
We Need Your Continued Support!

29. © Airlines Reporting Corporation (ARC)
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Airline Distribution –
Agency Channel With NDC & ARC
29
Customer
Dynamic
Airline
Shopping
Airline
Website
Product
Price and
Availability
Engine
Carrier
GDS Agent
Agent
Direct Connect
SPRF

30. CTD Census: 2016 and Current
(Change from 2013)
30
CTDs as of Dec 2016
• Total Locations: 148 (152)
• Independent:126 (123)
• Homes:6 (8)
• Branches: 13 (17)
• STPs: 3 (4)
• Number of new CTDs in 2016: 9
• Number of Vol. Del. or
Terminated CTDs in 2016: 4
• Number of CTD’s Leaving
program to become TRA:0
CTDs as of Apr 2017
• Total Locations: 149
• Independent: 127
• Homes: 6
• Branches 13
• STPs: 3
• Number of new CTDs in 2017: 2
• Number of Vol. Del. or
Terminated CTDs in 2017: 1
• Number of CTD’s Leaving
program to become TRA:0

31. YTD CTD Volumes and Demographics
31
Total
Transactions
Jan - Dec 2016
Total
Sales
Jan – Dec 2016
CTDs
$0 - $5M
CTDs
$5M-$10M
CTDs
$10M-$20M
CTDs
Over
$20M
2016 1,837,143 $1,420,601,890 109 15 11 13
Change
from 2013
(382,640) ($199,629,031) 6 (3) (3) 1

32. © Airlines Reporting Corporation (ARC)
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Summary
32
Continued Divergence of Product on Airline Web-Sites vs. GDS is a problem
• Airline interest in growing ancillary revenues via unbundling or new offerings isn’t receding
• Hasn’t SEVERELY affected corporate travel - yet
• Evolution MAY reduce this friction
• Continuing pressure from airlines (and travelers?) to take direct content
• ARC offers efficiency and value to agencies & CTDs (and GDSes / e-Commerce Platforms)
No Guarantees That the Future Contains ARC Ticketing

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33
Thank You. Questions?