By Abdul Hadhi Of DOW JONES NEWSWIRES

As fuel costs continue to rise on the back of soaring oil prices, airlines are under increasing pressure to protect their profits by slashing costs. One area in which the industry has taken rapid strides is electronic ticketing, or e-ticketing.

According to the International Air Transport Association, e-ticketing can generate US$3 billion in savings for the aviation industry each year.

To begin with, each e-ticket offers a US$9 saving as a paper ticket costs US$10 to process while an e-ticket costs just US$1 to process, IATA spokesman Albert Tjoeng said.

The IATA, which represents around 265 airlines comprising 94% of international air traffic, is aiming to achieve 40% e-ticketing industrywide by the end of the year, up from 18.8% last year.

As of June, about 33% of tickets issued globally were e-tickets, with Asia-Pacific slightly behind at about 30%, according to IATA data.

Cost savings can potentially be even higher; savings can go up to US$25 a ticket if administrative costs such as courier charges are factored in, analysts say.

In a period of rising costs for airlines, savings from measures such as e-ticketing may not mean reduced fares but would at least slow the rate of airfare hikes, according to analysts.

High fuel prices have cut into profits at Singapore Airlines (S55.SG) and Hong Kong's Cathay Pacific Airways (0293.HK) and contributed to losses at Japan Airlines (9206.TO), Korean Air (003490.SE), Thai Airways International (THAI.TH) and Malaysian Airline System (3786.KU) in the June quarter.

SIA, which first adopted e-ticketing in 1997, is aiming to completely eliminate paper tickets by mid-2007.

While not quantifying savings because ticket numbers are variable, SIA spokesman Stephen Forshaw said the processing costs of an electronic ticket are around 90% lower than those of a paper ticket.

"So as penetration rates for e-ticketing rise, there's a quantifiable decrease in processing costs, which is important in a time of needing to closely contain expenditure," he said.

The take-up rate of e-tickets on e-ticket enabled routes in Singapore was about 30-35% until 2003, when SIA introduced a S$30 surcharge for a paper ticket where an e-ticket was available.

That move led to an almost immediate jump in the penetration rate to over 80%, and has progressively climbed since to over 90%, Forshaw said.

Painless Cost Cutting

The few stumbling blocks that remain before the airline can abandon paper tickets entirely include the regulatory environment in some countries and the lack of technology at smaller airports in remote areas of countries like Cambodia, India and Indonesia.

Other journeys can't yet be e-ticketed, because they may involve travel on multiple airlines with system incompatibilities across the carriers.

However, even those barriers are being broken down.

On Wednesday, SIA expanded its interline electronic-ticketing program with its Star Alliance partners.

From September, SIA passengers with connections on Air Canada (ACN.YY), Air New Zealand (AIR.NZ), ANA (9202.TO), Asiana Airlines (020560.KQ), Austrian Airlines (AUA.VI), bmi, LOT Polish Airlines (PLL.YY), Lufthansa (LHA.XE), Scandinavian Airlines (SAS.SK), Spanair and Thai Airways, will require only an interline electronic ticket for the entire journey.

Compared with other ways of reducing costs, such as staff layoffs or increasing the fuel surcharge, the conversion to e-ticketing is relatively painless and much easier for airline customers to accept.

"It means you don't have to worry about lost tickets or waste time making multiple trips to the travel agent," said Aziff Ameen, a manager with a regional manufacturing firm, who travels occasionally for holidays, explains.

"You can do it over the Internet," he said.

Customers across the region are demonstrating a preference for e-tickets in increasing numbers, said Don Birch, chief executive of Abacus International Ltd., Asia's largest ticketing and air reservations company.

More than 2.86 million e-tickets were issued through the Abacus system in 2004, and as of July 2005, 2.58 million e-tickets have been issued in the year to date; an 85% increase over same period in 2004.

E-tickets currently account for about 23% of the total number of tickets issued through the Abacus system.

"In particular, e-ticketing growth for the year to date has been stellar in the Philippines and Thailand" which have seen year-on-year growth rates of 3,092% and 710%, Birch said.