What is next for Interline?

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Improvement Opportunities in

Interline Billing and Settlement

RAWG

What is next for Interline?

Daily settlement ?

Not for a while – we want the SIS process to stabilize first

However we have to remember that at some point in the near future it is not going to be the settlement process itself that is going to be the obstacle of achieving the vision of daily settlement

Passenger billings and rejects, including any attachments, are submitted electronically and can today in theory be handled day by day

It is time to look at the internal settlement process for passenger

billings in order to optimize cash flow and deliver correct information

13 September 2012 BS Improvement opportunities in Interline Billing and Settlement 2

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Challenges for Revenue Accounting

The complexity, competition, and dynamic nature within the airline industry requires more frequent and correct

Commercial Information in order for the airlines to make the right decisions

Decisions are made on a daily basis based on the latest available information

Revenue Accounting is a natural and integrated part of the commercial and financial decision making process within the airline

Revenue Accounting must deliver correct and fast information

at a low unit cost

Challenges for Revenue Accounting

Part of the revenue is of course interline, and we all know that the present interline settlement process can take up to 2 years after flown month. SIS has made it possible to reduce this timescale.

Other ways to speed up the settlement is using one of the

optional simplified billing processes like First & Final, and Simplified FIM Agreements.

Alliances and airlines also try to reduce complexity by negotiating Special Prorate Agreements or using some specifically designed processes like Request & Response

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Challenges for Revenue Accounting

Majority of revenue is settled at prime billing stage even with no special arrangements in place.

However, we still see 1st stage rejections raised for about 10

-15 percent of prime billing values, for various reasons.

Most of these are common reasons and are typically reflected in the P items submitted every year by different carriers.

In order to optimize cash flow and revenue quality, we need to address these issues and remove the need for rejections.

SIS Web gives you the opportunity to follow up on RMs.

SIS 1st Stage Rejection Overview

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1st Stage Rejections: Valuation Error

This rejection reason code is used for more than half of the 1st stage RMs in the industry.

Valuation Error seems to be used for various types of rejections.

Approximately 50 percent of all valuation errors relate to only one value type (i.e. taxes, ISC).

In order to streamline the audit of rejections, the industry should make better use of the reason codes available.

1st Stage Rejections: Tax Reclaim

(1/2)

This rejection reason code is used for 20 percent of the 1st_stage

RMs in the industry.

Rejections raised as in many cases the billing airline do not check the entire itinerary to assess whether exceptions apply (e.g. transit exemption)

In addition:

Disparity between TTBS and RATD creates discrepancies between collected and billed amounts

TFCs imposed by government/airport authorities are often conditioned by information not readily available on the ticket.

Increased volume of operating carrier exceptions not recognised in RATD leave ticketing carrier out of control

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1st Stage Rejections: Tax Reclaim

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TTBS – RATD difference (continued)

Numerous agenda items were raised over the years to reduce the consequences of the discrepancy but often failed to attract sufficient support.

Questions for discussion

Is RATD the best single data source for the settlement of interlineable taxes, or

Should we revert back to using TTBS, and if we do,

how do we address the issues that made us create RATD in the first place?

1st Stage Rejections: Fare Reclaim

1/2

This rejection reason code is used for 15 percent of the 1st_{stage RMs in the industry.}

A rather large part of these rejections concern the interpretation of RAM A2 Paragraph 3 - Applicable fare The movement from tariff coordinated fares to carrier

owned fares contributed to the increased disputes in this area.

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1st Stage Rejections: Fare Reclaim

2/2

Numerous agenda items have been raised over the

years address any concerns but often failed to attract sufficient support.

Question for discussion

Are the RAM A2 rules on applicable fare selection still in line with the changes happening in the industry for issuance of fares?

1st Stage Rejections: FIM Rejection

1/2

This rejection reason is used for 3 percent of the 1st_{stage RM}

volume in the industry. However

The value of these rejections is 34 percent of the total rejection value, therefore represent a significant cash flow issue.

Changes in the airline operating environment:

Carriers are now starting to follow the involuntary reissue procedures outlined in the resolutions

Carriers are starting to refuse the receipt of paper tickets including FIM’s

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1st Stage Rejections: FIM Rejection

2/2

Again numerous agenda items associated with FIM

billings are raised every year with more or less success. Question for discussion

The simplified FIM billing process outlined in RAM Chapter B11 can be used

The FIM replacement solution in an e-ticket environment is the partial exchange/reissue (IATA Resolution 735e, paragraph 6.5). Does that mean this issue is or will be automatically resolved or

do we need to discuss it further to find a better proposition?

Are there things we can improve now?

- Some common bad practices...

SIS billings rejected outside SIS 2% of monthly bill

Habitual billing at default full fare 5-8% of monthly bill

Incorrect migration of billings into SIS < 0.5% of monthly

Bills outside time limits without prior consent < 0.25% of monthly

Lazy rejection texts 5-6% of monthly bill "..reject prorate difference“

14

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These bad practices mean:

15

17% additional work and cost

……to correct bad habits and lazy processing by other carriers. ……a cost we all pay for every day.

BS Improvement opportunities in Interline Billing and Settlement 13 September 2012

How can airlines improve?

1. SIS billings rejected outside SIS

Serve notice on ICH after migrating to SIS

Tell the carrier what they have done….. Educate them Issue correction via billing memo

Instruct carrier to work original billings in IS-Web

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2. Habitual billing at default full fare

Audit item, identify correct fare, reject difference.

Tell the carrier what they have done….. Educate them

Alternatives – agree bilateral simplified billing, fixed rate SPA or Re-protection Agreement for involuntary scenarios

A2 Paragraph 1.1.1 and Paragraph 3

Bill right first time, save cost of receiving 1st_{stage rejection.}

How can airlines improve?

BS Improvement opportunities in Interline Billing and Settlement 17 13 September 2012

How can airlines improve?

3. Incorrect migration of billings into SIS

RM1 Billed Accepted Difference

100 67 33

RM2 Billed Accepted Difference

0 -33 33

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How can airlines improve?

4. Bills outside time limits without prior consent

SIS now flags rejections outside of time limits Carriers may increasingly auto-reject on this flag Courtesy will get you a long way….ask first

How can airlines improve?

5. Lazy rejection texts “..reject prorate difference”

Guaranteed to get you a rejection right back. Follow SIS RAM A10 paragraph 2.3

Use SFI 43 SIS Prorate Slip, use supporting documents Use SIS Rejection Reason codes

Tell the carrier what they have done….. Educate them

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So, to summarise (for billing carriers)

Bad practice will always mean the rejections will come back to you – it will increase your costs

You have to wait longer to complete your accounting You wait longer to publish your revenue

It will not save you money – it will increase your costs! Bill right first time, all the time.

So, to summarise (for billed carriers)

Use the flags and RM reason codes to your advantage Migrate to SIS as early as you can

Feedback the errors, suggest best practice.

Be clear in your rejections – educate as well as reject Consider bilateral agreements to simplify settlement

What is next for Interline?

Improvement Opportunities in

Interline Billing and Settlement

RAWG

What is next for Interline?

Challenges for Revenue Accounting

Challenges for Revenue Accounting

Challenges for Revenue Accounting

SIS 1st Stage Rejection Overview

1st Stage Rejections: Valuation Error

1st Stage Rejections: Tax Reclaim

(1/2)

1st Stage Rejections: Tax Reclaim

(2/2)

1st Stage Rejections: Fare Reclaim

1/2

1st Stage Rejections: Fare Reclaim

2/2

1st Stage Rejections: FIM Rejection

1/2

1st Stage Rejections: FIM Rejection

2/2

Are there things we can improve now?

- Some common bad practices...

These bad practices mean:

17% additional work and cost

How can airlines improve?

How can airlines improve?

How can airlines improve?

How can airlines improve?

How can airlines improve?

So, to summarise (for billing carriers)

So, to summarise (for billed carriers)

And Finally…

Bill right first time. Best

practice saves everyone

time and money