A report suggests that airlines and other travel-related industry players could boost growth in demand by launching buy now, pay later schemes as it could motivate and facilitate travel by two of the most promising categories of travellers.

For a few years before the pandemic outbreak, travel industry stakeholders, notably destinations, airlines and hotels, had identified that the future growth of the industry would come from younger travellers as growth among baby boomers and other older segments of travellers had begun to peak.

After 30 months of a near-total disruption, as travel resumes across the world, though yet in bits and spurts, the focus seems to be settled back on the younger population to drive demand. But to get that demand kick-started, the industry may need to look at delayed payment schemes such as buy now, pay later, to allow the consumers time to repay for their travel.

A report by GlobalData, a data aggregator, says that Millennials and Gen Z will be the two cohorts driving demand for buy now, pay later schemes as they were hit particularly hard by the pandemic. The report says that airlines partnering with fintech companies to offer these schemes could attract price-sensitive millennial and Gen Z travellers looking for flexible, low-cost payment methods.

According to Q4 2021 Consumer Survey by GlobalData, 34 pc of Gen Z and 36 pc of millennials stated that they were ‘extremely concerned’ regarding their personal finances. Of all travellers of different age groups, the two segments were the most worried about their financial security. In such a scenario, buy now, pay later makes good business sense as it allows companies to bring the revival of demand ahead of the natural curve. For instance, Uplift, an American buy now, pay later firm has deepened its partnership with US carrier Southwest Airlines and customers can book their Southwest flights to the Hawaiian Islands with interest-free payment options through the partnership.

Uplift’s tie up with Southwest Airlines is just one example. Full-service carriers like Delta have also launched similar schemes. The accessibility that this payment solution offers means it is not only low-cost carriers (LCCs) taking advantage of this scheme.

“Uplift’s use of the terms ‘interest-free’ and ‘no late fees’ will no doubt attract price-sensitive millennial and Gen Z travelers that are looking for flexible, low-cost payment methods. Most importantly for airlines and their recovery timelines, buy now, pay later enhances accessibility as smaller payments can be made over several months, which translates to higher load factors,’’ says Ralph Hollister, Travel and Tourism Analyst at GlobalData.

Delta’s flexible payment option allows for Amex customers to break up their air travel purchases into monthly payments for an additional fee. “Airlines such as Delta can’t afford to only be seen as a premium service, as it will struggle to attract Gen Z and millennial passengers. Through this payment option, Delta can get its foot in the door with these younger cohorts, then try to create repeat custom through its loyalty programme,’’ says Hollister.

“Buy now pay later could play a key part in the recovery of airlines that have adopted this payment method. Flexibility and affordability are key influencing factors for younger travelers, and this solution could even inspire a lifetime of loyalty,” he adds.