Its reputation may be tarnished in the financial and investment worlds, but cryptocurrency— with its quick transferability, blockchain traceability, and low transfer fees—is finding a warm welcome in the charter community among a vanguard of providers and customers.
These advocates note that while the charter industry is built on the promise of being ready when you are, the pledge is conditional: airplanes don’t move until operators get paid. That, they say, can make cryptocurrency transactions the best solution for quick, low-fee bookings. Moreover, notwithstanding this year’s collapse in their values, an increase in customer demand, and in providers offering digital currency payment options continues.
“A growing number of individuals are holding cryptocurrencies and are willing to spend it, and they are ignored by many [charter] companies,” said Simona Moosar, business development manager at Ecommpay, a European e-payment processor that handles such payments for some two dozen charter firms.
The demand is reportedly driven by a younger, crypto-savvy clientele, and facilitated by payment processors like Ecommpay and many others that support the transactions. A CNBC survey of millennial millionaires released in June reported that 83 percent stored a portion of their wealth in cryptocurrencies, in contrast to the 4 percent of baby boomers and 25 percent of generation Xers.
But how many customers and how much charter is paid with digital coinage is unknown; payment processors don’t make the information public, and charter providers cite only rough uptake percentages, often without defining whether the figures represent customers or revenues.
But with recent data indicating between 23 million and 27 million Americans own Bitcoin, the first and still dominant cryptocurrency, the pool of potential spenders is large.
Crypto transactions came to air charter in 2014, five years after the digital currency’s introduction, when UK-based retail booking platform PrivateFly, now part of Directional Aviation’s OneSky portfolio, enabled charter payments in Bitcoin.
In the U.S., Florida-based Monarch Air Group introduced a crypto payment option in 2017.
“Traditional transactions still account for the vast majority of our flights, and will continue to do so in upcoming years,” said Monarch executive director David Gitman. “But our clients asked for this alternative, and we delivered. The digital nature of cryptocurrencies plays well with today’s digital charter booking systems.”
Boosters acknowledge cryptocurrency’s wider acceptance faces challenges, starting with its association with money laundering, financing illicit activities, large-scale scams, sustainability concerns, and most recently the cratering of cryptocurrency values and institutions. Countered Mauro De Rosa, CEO of Italy’s Fast Private Jet, which claims digital currency accounts for 30 percent of its transactions, “We are aware of the skepticism toward buying crypto. But paying with crypto is another story.”
As if to underscore that message, after European Central Bank president Christine Lagarde in May pronounced cryptocurrencies “worth nothing,” Dubai-based Jet Luxe cited her comment in announcing “newly enhanced digitized payment options” for access to its Bombardier Global 6000, via more than a dozen cryptocurrencies.
At LunaJets, another European charter operator that accepts crypto, CEO Eymeric Segard noted even after the recent devaluation, some customers “could still be making a profit when spending [cryptocurrency].” Meanwhile, he said, “We have seen no effect on crypto-paid charter following the recent loss of value of cryptocurrency.”
Concurrently, more U.S. providers are enabling cryptocurrency transactions. North Carolina-based charter, jet card, and fractional fleet operator FlyExclusive began accepting crypto payments last year for both charter and jet card purchases, “as another way to deliver value, convenience, and premium service for our clients,” president Mike Guina said.
Florida’s Stratos Jet Charters adopted the payment option this year, for security reasons. “We felt accepting crypto would dramatically reduce our risk versus credit cards,” CEO Joel Thomas said, alluding to the blockchain technology that provides traceability for cryptocurrency transactions.
Given the apparent demand coupled with the relatively low adoption rate among providers, Moosar pointed out another benefit for charter firms accepting cryptocurrency payments: “You can actually attract a completely new clientele.”
Fee-wise, cryptocurrency payments typically cost about one percent of the amount transferred, versus credit card fees that can range from about 3 percent to 6 percent. Bank wire transfer fees vary, but crypto transfers cost far less than a SWIFT or SEPA equivalent, processors say. Bank transfers can also take several hours, or one or more business days when sent internationally.
As for transacting with a currency subject to dramatic volatility, one simply transfers the requisite amount of crypto from their digital wallet to purchase the amount of fiat currency the charter contract is quoted in—typically U.S. dollars or Euros. Transactions typically take 20 to 30 minutes. As the charter provider is paid in the specified currency, they face no risk in fluctuating digital coin values.
“The private aviation company does not touch crypto at all,” said Moosar. “Payments processors usually [display data in] the Excel dashboard environment. The transaction looks just like a transaction made in euros or dollars.”
Said Segard at LunaJets, “We get an immediate message confirming the funds are in our account, and they are transferred to Central Bank-backed currency straight away.”
But some providers remain wary of potential risks. Last year California’s Amalfi Jets enabled Bitcoin payments for known clients, but charges them an additional 20 percent transaction fee to “cover the volatility of the market price” of the currency, the company said.
Also, with the growing regulatory emphasis on know your customer, know your business, and anti-money laundering (commonly shorthanded as KYC, KYB, and AML) rules, concerns among payment agents persist about the adequacy of identifying the individual or organization making the payment, and the propriety of the funds.
But reputable crypto payment processors “comply with the same regulations that any company providing Visa or MasterCard does,” Moosar and others say, though they also stress the importance of first performing due diligence on whatever processing company a provider works with to ensure it complies with these reporting requirements.
Nonetheless, “Traditional payment institutions feel the [charter] industry is risky as it is,” said Per Marthinsson, chief revenue officer at Avinode, and inserting cryptocurrency into the equation only creates more aversion to expanding payment options in the space. “Cryptocurrencies need to evolve further for that risk appetite to be at an acceptable level,” he said.
Avinode, a business-to-business charter booking platform, does not support cryptocurrency transactions through its PayNode processing service. But, Marthinsson noted, “Between brokers and operators for a wholesale transaction, there’s very little need for Bitcoin.”
Questions of value and regulatory oversight aside, the environmental cost of cryptocurrency, pegged in the public’s mind to the energy-intensive Bitcoin mining process, has also created blowback. But advocates point to the highly energy-saving Merge overhaul of Ethereum (the second most held cryptocurrency), completed in September, as proving the technology isn’t inherently unsustainable.
The “stickiness” of crypto transaction preference is also a question. Crypto pioneer Private Fly claimed they represented 20 percent of bookings at one point, but “payments made in this way currently account for less than 10 percent of transactions,” said European managing director Marine Eugène.
But if trends continue, charter customers may not only have more flights to spend cryptocurrency on but destinations to spend them in. This year Fast Private Jet published a list of the world’s most cryptocurrency-friendly cities, based on the number and variety of venues accepting the payment. Worldwide, Slovenia’s capital, Ljubljana, was number one, Prague the runner-up, and Buenos Aires took third place; New York ranked as the top U.S. destination for “crypto savvy” travelers.
Meanwhile, digital wallet apps that allow no-fee cash transfers, such as Zelle and Venmo, are growing more popular, and if transaction limits are raised, could also provide quick, no- or low-fee payment options. Additionally, Central Bank Digital Currencies—digital assets directly backed by governments and available to the public—now being discussed and adopted, could also serve the same purpose while perhaps inspiring more confidence.
In the interim, however, slow transfers and high fees for traditional payment methods are likely to spur more calls for crypto-friendly charter transactions.
https://www.ainonline.com/aviation-news/business-aviation/2022-12-12/charter-market-sees-demand-crypto-payments
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