Etihad Introduces 60-Month Payment Plans (Including For The Residence)

While I appreciate the concept of being able to finance things (like houses, cars, etc.), I think collectively we’ve become way too reliant on it, especially for smaller purchases. For many the question of whether or not to buy something changes from “should I spend $1,000 on this?” to “can I afford to pay $16 per month?”

On that note, we haven’t seen very many airlines offering financing options, though Etihad has introduced something along those lines.

The Telegraph writes about how Etihad has introduced payment plans for their flights, which allows customers to pay for their ticket over five years. This is something that’s facilitated by PayFort, and as of now is only available to those in the UAE, Saudi Arabia, and Egypt. Now, I can see value in this for someone who doesn’t have a lot of money and wants to finance an economy ticket to visit their family, but an Etihad executive is suggesting this could be just as useful if wanting to fly The Residence:

Justin Warby, its vice president of digital strategy and innovation, said the service, made possible through online payment service PayFort, would help people spread the cost of travel but also allow more passengers to “attain [the] dream] of flying in The Residence, Etihad’s three-room aircraft suite on its A380s

“When we were designing this product we were really looking at how we can assist those low to medium income travellers and families, but of course, spreading the payment over a period of months is also a great way to indulge in Etihad Airways’ famous premium cabins,” he said.

“Etihad is committed to continually enhancing the travel experience by providing greater choice and flexibility to our guests. We understand travel can be a significant expense, especially for families and those on a tight budget, so this new initiative is a great way for people to book and enjoy their travel without having to worry about paying in one large sum.”

With many tickets in The Residence costing ~$25,000 one-way, that would be like having 60 installments of ~$417 (before any interest).

What do you make of the concept of financing flights? Would you like to see more airlines offer it?

(Tip of the hat to Brad B)

Comments

  1. So Etihad, going from another disaster to another, now wants to be a subprime lender? Or would this risk be assumed by PayFort? I dont really understand how it’d work but it could be a recipe for disaster.

  2. In fact this is not unique
    In Brasil it’s possible to pay for airline tickets via a payment plan
    KLM also offers to pay by upto 4 instalments

  3. That is just sketchy. If someone needs 60 months to buy an airline ticket then they probably shouldn’t be sold the ticket to begin with. I can see too many people doing this who don’t have the finances to make these payments in the long run and will default. I could see spreading out payments over a one year period but that would be the most it should be spread out.

  4. @Bill

    I take it you’re not at all familiar with how migrant laborers are paid in the areas with this service is offered. Your sense of their financial situation is complete nonsense.

  5. With this setup, do you fly first and then make the payments? Or do you fly after you’ve made all the payments (more like what we call lay-a-way)? Lay-a-way has been a moneymaker for over a century with department stores and things like furniture stores. I think K-Mart or Wal-Mart still do it. But, if you make half the payments and then stop, the store keeps all the payments made, but owes you nothing. Pure upside for the seller.

  6. Actually I think this is a great idea. This will make the Residence affordable to many people and they will get more buyers. I would definitely be interested in arranging a payment plan to fly on the plane.

  7. Agree 100% with Lucky on financing becoming too widely available. Obviously $25,000 is not a “small” purchase, but if you can’t afford to drop $25k on that ticket straight up, you shouldn’t be flying the Residence. Far, far too many Americans use their credit cards as if they’re paying with Monopoly money.

  8. Interesting as my understanding (though no expert) is that loans are against the Muslim faith. Or at least interest charges are. So it seems locals wouldn’t get this. Perhaps just for the migrant workers?

  9. I can see people using this for Hajj. Some people may want to do the Hajj but can’t afford to do so. This way they can make their way to Mecca and fulfill their lifetime dream. Makes sense to me.

  10. @Mark loans are certainly not against the muslim faith. The prophet himself borrowed money. I do believe they are not supposed to pay interest and if you don’t pay back your loan you don’t get into heaven. In terms of people using the money for Hajj I can see that, but in that situation the pay over time option should ONLY be for economy seats. Actually I think Islam says you can’t be borrowing money for extravagant things and flying in the residence would certainly qualify as that I believe.

  11. It’s not uncommon for people to save for a few years for a holiday, putting a bit away each month. I guess this is just another way of doing it. I know I dip into my holiday savings every now and again, whereas a payment plan with an airline might help to keep the budget on track.

  12. Common in Brazil. Virtually all airlines (locals and foreign) offers between 3-10 installments with no interest. I mean, is already included, that’s why tickets out of BR can be expensive.

  13. People probably shouldn’t be flying The Residences on credit. That said, I’m sure plenty of people put first class flights on credit cards and pay interest too. If Ethiad thinks they can fill a few more seats that way, why should I object to consenting adults being offered another option to finance a flight?

  14. @kevinh it would not be permissible in Islam to borrow money with interest to go on Hajj. If you can’t afford to go you are not required to complete the pilgrimage.

  15. Depending on the terms of financing, there’s no reason why one shouldn’t finance even if you can afford it in one lump sum. Money has time value and if the interest rate is close to 0%, it would be foolish to insist on paying everything up front, at least from a financial perspective.

    That said, it’s likely the interest rate would be quite high and hence not worth it to finance in this instance.

  16. Why are so many comments so downbeat/deadbeat ?, whilst amongst the very many who cant afford to fly very often and certainly wont be able to rack up points/staus and shoot for the moon etc, being able to say fly Business as a once in every 5 year treat would appeal, shorter say 3 year payback to experience life at the sharp end would be very attractive.
    Dont get me wrong, going head on into The Residence if this idea is only aimed at the Residence then even being able to buy a €25,000 licket over 5 years to say go visit friends and family in Oz then I’d very much more be inclined to buy a new car ! Lol.
    Surely Etihad have thought long and hard about this and wont just offer it to any tom dick or harry without running some kind of financial background check otherwise as does frequently happen with rental properties the incoming tenant makes the deposit, first payment then sits back and pays nothing more whilst thinking thank you very much.
    I’d suggest the aforementioned lay away system doesnt really compare since I’d guess that most purchases laid away are christma toys and the like.
    But give me 3 years and a Business class to Oz and I’d be a very happy bunny, sod the one off points gained they could keep them.lol

  17. I think this is a good idea what Ethihad did. It help lots of Indian’s who residing in Gulf countries with their families and of course those suffering to buy the tickets for them would be a great help to visit their homeland.

  18. Financing EVERYTHING is pretty common here in Brasil, including air ticket (economy, business and First). I dont see why not do it… So, good move for Etihad 🙂

  19. Soon, we would be seeing luxury hotel chains offering financing plans to vacationers to stay at their properties. Perhaps too much competitive pressure from Airbnb would eventually require them to take such drastic action?

  20. @Mark I thought the same thing. But it might work like this:
    -Ticket retails for $25k
    -Payfort has negotiated discount of, say, 35%, on Etihad flights
    -Customer essentially borrows money from Payfort to buy a $25k ticket “interest free”
    -Payfort pays Etihad $16k

    No interest is charged — or one could argue. Customer is agreeing to borrow $25k and will only pay back $25k.

  21. American Airlines own credit card (which is issued by Citibank) routinely offers 6 month, no interest financing on flights over $150. Before the AmEx Platinum 5x points on airfares changed the equation for me, I used it all the time to spread payments at no extra charge. That said, I preferred to use it for tickets bought well in advance, so that generally I had paid for the flight by the time I took it. And I never took more than 6 months to pay, because even for someone with excellent credit the interest rate was punitive (>20%).

    Mention of The Residence always gets everyone’s attention, but at the end of the day I agree that this is just another financing option whose value will depend on the details. And like installment financing in many countries, it may make extended payment accessible to folks who don’t otherwise have access to credit products.

  22. Cool idea – I would take it since I’d rather take the earnings from the investment of the lump-some and use that to pay the installments and still make money off of it considering my average ROI has been about 31% in the last three years.

  23. On one hand I find it insane that you have to finance airfaire, but people finance TV’s and tires now, so I fully expect all airlines to jump on this.

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