Aviation:

Issues Associated With the Theft of Stock Used to Create Airline Tickets

RCED-99-219: Published: Jul 30, 1999. Publicly Released: Jul 30, 1999.

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Pursuant to a congressional request, GAO provided information on issues associated with the theft of stock used to create airline tickets, focusing on: (1) the number and value of the airline ticket stock stolen annually; (2) financial implications associated with the use of stolen ticket stock; (3) issues that are potentially associated with the use of stolen ticket stock; and (4) technological interventions and other initiatives designed to detect the use of stolen ticket stock.

GAO noted that: (1) definitive information on the amount and value of airline ticket stock stolen annually does not exist; (2) however, from 1989 through 1998, worldwide suppliers of ticket stock reported 11.3 million pieces of stolen ticket stock to Aeronautical Radio, Incorporated; (3) the Airlines Reporting Corporation reported the majority of these losses--8.2 million pieces; (4) the Corporation, for a variety of reasons, tracks only 27 percent of the stock it reported and, based on this information, identified over 447,000 pieces of its stock that were stolen in 1997 and 1998; (5) in the event that all of this stolen ticket stock is used, GAO estimates the potential value (loss) attributable to the Corporation's ticket stock could range between $116 million to $302 million, depending on the number of pieces of stock used to create each airline ticket; (6) the airlines bear the financial risk for most situations involving the theft of ticket stock; (7) for the airlines, however, the losses are relatively small compared with their total annual revenue and their losses from other airline-related fraud; (8) in contrast, the losses incurred by travel agencies that did not adequately safeguard the Airlines Reporting Corporation's ticket stock can result in serious financial hardships; (9) if all of the Corporation's ticket stock stolen in 1997 and 1998 were used for travel, which is unlikely, GAO estimates that the airline and travel agency industries could lose about $151 million each; (10) in practice, however, travel agencies would likely incur significantly smaller losses because airlines frequently settle for far less than the amounts the travel agencies owe; (11) U.S. tax officials believe that the financial consequences to the federal government from the use of stolen ticket stock are minor and of limited interest for auditing purposes compared with higher-risk tax issues; (12) the travelling public does not appear to be at any greater risk from individuals who use tickets created from stolen ticket stock than they are from individuals who travel on legitimate tickets; (13) federal law enforcement and intelligence officials and airline officials were unaware of any individual who had travelled on stolen ticket stock to conduct terrorist activities; (14) the airline industry's centralized database on fraudulent ticket stock is the principal means for detecting the use of stolen stock; and (15) while this database is an effective tool, many airlines do not subscribe to it because the time required to manually query it delays passenger processing.

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