title: Black hat revenue generation
author: Oliver Ranson
contenttype: article
publication: Airline Revenue Economics
published: 2026-03-03T07:30:23+00:00
sourceurl: https://revman.substack.com/p/black-hat-revenue-generation
word_count: 1016
In the world of computer hacking there is a distinction between so-called “white hat” and “black hat” activities. The former are “good” – they involve breaking into computers to identify weaknesses and figure out how to better protect electronic infrastructure. The latter are “bad” – they use their skills to deceive, steal and harm. Most of the time and across most airlines, things are done strictly by the book. But when an airline is deeply in trouble and the only thing that matters is to survive, unethical “black hat”-style practices might be tempting. In this article we will be exploring what these might be. There are no secrets here – troubled airlines can and do work these out for themselves. I am putting on my “white hat” to help you see where the weaknesses are. You can then recognise and respond appropriately to protect your airline if you ever see another carrier trying on something a bit dodgy out there in the market. Advertisement: When might an airline be tempted to generate cash flow unethically? Cash is king for airlines. Without cash they cannot buy fuel or airport services, pay salaries for flight and cabin crew, or pay their bills to the selling platforms that generate their income. Airlines cannot fly without a healthy pile of cash behind them. When airlines get in trouble, cash flow can get gummed up fast. If banks suspect an airline is in trouble they may not pass on the funds from ticket sales until flights have been taken. That protects the bank against claims under regulation like the United Kingdom’s so-called Section 75 protection. This clause of the Consumer Credit Act (1974) makes a credit card provider jointly and severally liable with the merchant to cover the services paid for. Put simply, if the passenger does not fly the bank must give a refund regardless and good luck to them recovering the debt from an airline. So banks protect themselves by holding onto funds. Understandably, airlines will do almost anything to avoid getting their bankers into such a situation. What are the early signs that an airline is in distress? One of the first signs that an airline might be struggling for cash flow is when they start selling off the family silver. Relinquishing valuable assets like slots at London Heathrow can raise reasonable amounts of cash quite quickly. Reducing fleet size by handing aircraft back to lessors is another sign. As a result, routes could be dropped and smaller bases closed. A lessor might well be prepared to accept an aircraft return before it’s contract expires if they see it as a matter of survival. They are then more likely to get paid for the aircraft which remain in service with a troubled airline. None of these points are necessarily unethical. Neither would be unbundling certain services or raising servicing fees to generate ancillary revenue. But they are things that other airlines should be aware of, as they can suggest troubled times ahead. There may be red flags appearing in the media. Reports of regulators looking at an airline’s finances or operating licenses might appear. If things are getting really bad, airlines might start missing payments to their caterers or ground handling partners. They might start delaying their payment of subscriptions to IATA, ATPCO and other industry bodies. Airlines should listen out for industry chatter to this effect. That all would be unethical, but it would be on the cost side and not revenue related. So what revenue related practices are unethical “black hat” methods that well-behaved airlines need to defend themselves against? I think there are four. Together these could plausibly generate a million Dollars of cash flow a month for a small-ish airline, around $250k each. That might well make them tempting. Read on to recognise the signs and protect your airline… “Black hat” revenue one – overbilling airline partners All IATA airlines have the ability to sell tickets on one another’s services. All IATA airlines agree to accept each other’s tickets. The process works because airlines agree to settle up later through the IATA Clearing House, which has standardised rules and a high degree of trust between members. For example, airline X sells a ticket that is valid on airline Y for a hundred Dollars. Airline Y accepts the ticket and a passenger flies. Airline Y then bills airline X for a hundred Dollars less a nine percent service charge. The potential unethical practice is for airline Y to overbill airline X, say by charging $150 rather than $100. Airline X trusts airline Y and pays the $150. Intuitive valuation for a small-ish carrier: 100k passengers a month, 5% on some kind of interline selling, $50 overbilling per passenger = $250k per month But roughly five to six weeks later, airline X will have audited it’s invoices, noted the discrepancy and recollect the $50 overcharged. Airline Y, if it still survives, has no choice but to repay through the Clearing House. If done consistently, airline Y would find their reputation totally shot. No airline would ever do business with them again. But if they survived, even if it was only long enough to make an extra few months worth of payroll, you might understand why they tried. You can recognise this risk if you start seeing invoices from partners that are higher than average without any clear business reason. Some backup documentation like fare basis codes and proration calculations might be missing or incomplete. And partners might start answering your questions in vague terms without clear references to your long-standing agreements. A regular random-sample audit of interline billings at the point of issue can help defend against this type of abuse. “Black hat” revenue two – delay ticket refunds Airlines often sell some tickets that can be refunded and others that can not be refunded. When a passenger takes a refund, cash that was sitting in an airline’s bank account makes it’s way back to the buyer. In principle an airline could support it’s cash flow by increasing the time taken to issue refunds. Read more