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Want to book a flight but pay for it next year? Here’s how it works

Pic of a Kenya Airways Passenger plane. Courtesy

The demand for travel is still increasing, and so are aircraft ticket costs.

Some people are reducing their spending due to rising prices, but others are finding creative new ways to fund their holiday plans.

To give passengers the option of paying for their tickets in installments rather than one large payment, more airlines are collaborating with “buy now, pay later” businesses. Even before the whole cost of the ticket has been paid, some airlines let passengers fly.

Consumers are thrilled to be able to use “buy now, pay later” in travel since they have been accustomed to doing so in retail, according to Tom Botts, chief commercial officer of BNPL business Uplift.

However, he clarified that “this isn’t about offering customers excursions they can’t afford or inciting them to do travels they shouldn’t.” Helping consumers actually budget and pay for these fantasy vacations is the goal of this.

More than 30 airlines, including United Airlines, Lufthansa, Air Canada, and AeroMexico, have partnered with Uplift.

According to Daniel Vega, a director of AeroMexico, “Implementing BNPL was part of AeroMexico’s payments progression to provide our clients more complete payment choices.”

If people can pay for their vacation airfare in manageable payments rather than all at once, he said CNBC in an email.

According to Botts, Uplift is “100% focused on leisure travel.” He continued by saying that customers who can pay in installments like to treat themselves lavishly.

When ordinarily they wouldn’t have purchased such types of tickets, “we see them purchasing premium economy or even first class [tickets]… The cheapest tickets on the plane are no longer being purchased by customers, he claimed.

How it works

These companies work in several ways.

Some, such as Uplift, run a quick credit check on the traveler, which they use to determine interest rates and payment schedules. These are effectively short-term loans, which are decided in “literally a snap of a finger,” said Botts.

Botts said most of Uplift’s partners offer 0% financing. “In many cases, there’s not even a cost to the consumer to go ahead and take a seven-day cruise and pay for it over time,” he said.

However, rates vary according to the traveler’s financial health. Uplift’s annual percentage rates range from 0% to 36%, according to its website.

When asked about travelers who may cancel their credit cards before the loan is repaid, Botts said that’s “called fraud, and there are consequences.”

“By pulling out credit reports, we’re able to actually understand and ensure that the consumer has the financial wherewithal to actually pay us back.”

Others, such as a company called Pay Later Travel, work more like the classic layaway plan. There’s no credit check and no financing terms, but travelers must secure the flight with a deposit and pay the full fare before flying.

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