A potential Centralized Ticket Data Processing Solution for airlines

Transcription

1 A potential Centralized Ticket Data Processing Solution for airlines

2 Table of Contents 1. Executive Summary - Centralized Ticket Data Processing Solution Revenue Accounting Background... 6 Traditional Passenger Revenue Accounting Processing Industry Centralization Opportunity Concept for a Future of Revenue Accounting Overall Process Map Sales Process Sales Processing General Sales Processing Original Sales Sales Processing Exchanges (Other Airlines (OA) and Own sales) Sales Processing Refunds (OA and Own sales) Sales Processing Miscellaneous Carrier Documents (non-transport) Sales Processing Duplicate Sales Usage Process Lift Usage Payable Usage Unearned Revenue (Spoilage / Aged Usage / Outdating) Unmatched Usage Valuation Interline Process Receivables: Prime Billings invoiced by the Billing Carrier Payables: Prime Billings invoices received by the Plating Carrier Rejections Codeshare Commission Handling Data Aggregations for Posting Accounting Files Sales Accounting Usage Accounting Interline Accounting Common Modules Used by the Centralized Process Proration Central Ticket Database and Transaction Viewer International Air Transport Association 1

3 9.3. Master Data Tables Non-Functional Processes Dashboards and Key Performance Indicators (KPI) Management Information Files Archive and Purge Audit trail Disaster Recovery Appendix A - List of FoRA Task Force Participants Appendix B - FoRA Central Process Development List Appendix C - Carrier Development List Appendix D - Open Items Appendix E - Out of Scope Items: Appendix F - Glossary Note: the preliminary work under the Future of Revenue Accounting (FoRA) initiative has led to the description of a potential IATA service based on a central ticket database integrated with existing industry services, now referred to as the Centralized Ticket Data Processing Solution. The term FoRA has been used throughout the document when describing the proposed solution International Air Transport Association 2

4 1. Executive Summary - Centralized Ticket Data Processing Solution The goal of this document is to provide the Revenue Accounting community with a description of the proposed processes for an industry solution as an alternative to current systems, to present potential industry solutions to mitigate current operational challenges and to be used as a foundation for a Request for Information (RFI) document as a next step. Revenue Accounting is a challenging component of airline accounting because it encompasses an extremely large volume of transactions, and each transaction can include multiple unique reporting requirements for liability, revenue, taxes, fees, commissions etc. There are various types of transactions each associated with special rules on how to handle them that are a result of the way air travel is distributed, sold and reported. Financial standards define the manner in which accounting must be performed for every transaction. As airlines move to unbundle multiple ancillary items from the base fare, the volume of transactions continues to increase. While the industry has constantly worked to improve the way transactions are reported, the current processes and systems are still labor intensive and costly to maintain. There is a desire among Finance Department executives to evaluate the potential for a centralized and streamlined method of approaching the revenue accounting process in order to achieve reductions in both cost and complexity. The Future of Revenue Accounting Task Force (FoRA) was established to consider currently available technology and industry services as they relate to revenue accounting industry practices, determine the feasibility of managing revenue accounting functions without requiring a dedicated revenue accounting system and to propose how current functions would divide into general data processes running centrally and carrier specific requirements performed in-house. The Task Force has identified the core functional areas that could be centralized and will be required in order to successfully process transactional data as follows: Feature Centralized Sales Reporting Industry Proration Engine Centralized Ticket Database Centralized capture and storage of industry standard data Benefits Replace system support costs in multiple systems with one centrally maintained process fed by ARC and BSP data, and by airline ticket data files Reduce development costs by having a single point for system updates as industry reporting standards change Remove differences in proration values used for interline billings that are the result of system variations Facilitate the ability to cleanse the sales data to improve accuracy in valuation for both online revenue and interline settlement Reduce the cost of storing copies of the same transaction in multiple databases Optimize Interline settlement functions Provide the opportunity for benchmarking analysis Reduce the capture of standard industry data into multiple systems thereby reducing headcount costs and minimizing introduction of errors 2014 International Air Transport Association 3

5 Facilitate adoption of new industry initiatives Streamline the implementation of new industry standards such as New Distribution Capability (NDC) Explore the potential to create the proration values at time of fare filing Engage industry organizations working with data suppliers to set standards and to improve the quality and consistency of the data A centralized Sales Reporting process would provide a single point of change to maintain compliance with Airline Reporting Corporation (ARC) and Billing and Settlement Plan (BSP) reporting standards which reduces the cost of updating multiple systems and can streamline testing and implementation timelines. Sales data processing can be improved by providing central cleansing of sales data and by enriching the ticketed data with information from other industry standard data sources. A new industry standard will be established to enable reporting and processing of all airline direct sales e.g. web sales, call centers, airports etc. This will require development or alternatively, enhancement of an existing module from a revenue accounting system provider to fit the purpose. Proration can be performed by a single utility rather than by separate individual processes maintained by each individual airline, which may yield differing results. This functionality exists today as the industry standard Neutral Fare Proration (NFP) engine used for the First & Final service. It would need to be enhanced to accommodate additional requirements specific to carriers online proration needs (carriers are hesitant to change proration methodologies because of the complexity of explaining year over year changes in market/entity revenue results that will occur). The existing service employs a single method of converting transactions in foreign currencies to the carrier s home currency and would need to be enhanced to accommodate a multiplicity of methodologies used by carriers today. The scalability of the service will need to be assessed to handle the increased volume of online transactions (interline transactions typically constitute less than 25% of the volume of transactions processed by an airline). Central processing would also reduce the workload for capturing industry standard data that still requires manual data input e.g. the terms of provisos and tax application rules. A Centralized Ticket Database (CTD) will reduce the costs of multiple copies of a transaction being stored individually in separate data stores. A CTD can be used to optimize billing and settlement activity between airlines, reducing the volume and timeline of disputes. Linking the data via SIS to the Clearing House will enable the expedited settlement of interline billings by linking the billing and clearance processes. In order to accommodate the needs of multiple carriers that could participate in a single transaction, the use of a single database will require the addition of a number of fields for every transaction. The database must also serve as the foundation for matching all transaction usage to a reported sale in order to comply with revenue recognition requirements. While there is currently a centralized data store provided by ARC to facilitate the First & Final service, it is unclear at this point if that database is appropriate for these new requirements. A technical architecture evaluation will need to be conducted to determine the optimal solution. Centralized processing of flown ticket data is a service that was developed for use by the Simplified Interline Settlement (SIS) solution and can be engaged for the FoRA service. This functionality is used to process all uplifted coupon usage sent directly by the carriers for both online and interline 2014 International Air Transport Association 4

6 transactions. The service will send the information to the CTD. This is not deemed to be a major enhancement. The service does not control or perform accounting. It will process data and aggregate it according to specific rules and output the results in data files to enable airlines to do the accounting according to their own requirements. The expectation is that today s sophisticated Enterprise Resource Planning (ERP) systems, in use at most airlines, can accommodate these requirements. The Task Force has also identified components that will need to be developed in order to deliver a completely functional infrastructure such as: An online ticket viewer, A rules engine and master data tables to support carrier preferences, Processing specifications and data access/security rules, An additional data extract to support the airlines need for Management Information Systems (MIS) data to be utilized by their internal systems, A disaster recovery solution to ensure business continuity plans, A migration strategy for transactions in existing systems. There are processes that are deemed to be out of scope due to a number of reasons that are detailed in the service description. (Refer to Appendix E) The conclusion is that it is technically feasible to develop a centralized service that would deliver cost savings to the industry at a macro level. This preliminary analysis by the Task Force has also highlighted some areas of complexity that will require further study. In order to proceed with a more detailed assessment, the Task Force participation must be expanded to include a more diverse group of carrier representatives and should also include more technical expertise to advise on the best options for the development required centrally and locally as well as to help establishing the corresponding costs and timelines. An assessment by external auditors should be solicited to ensure the design is deemed acceptable to them. IATA would like to thank the participants on the Task Force for their valuable time and contributions over the four months during which this project was run. The participants were: Air France Air New Zealand China Southern Airlines/ACCA Delta Airlines Etihad Airways Qatar Airways ACH ARC ATPCO Oracle Corporation SAP AG Names of individuals are published in Appendix A 2014 International Air Transport Association 5

7 2. Revenue Accounting Background Why is airline revenue accounting special? It encompasses a huge volume of sales transactions, each with multiple individual values for travel, taxes and commissions, variable by date and actual usage, requiring specialised rules for processing them. A ticketing transaction is the foundation for all of revenue accounting. In addition to the main passenger tickets, it includes accounting for the sales documents for every type of ancillary service that can be provided from Change Fees and Frequent Flyer Charges to Baggage Fees and Special Seating Charges. The actual ticket data processing for revenue accounting adds no value in itself; the value comes from information derived from the data processing. In order to function effectively, down-line systems require accurate and detailed revenue and sector information for e.g.: revenue management, route profitability, sales tracking and customer relations. Electronic tickets (etickets) became universal in 2008, although some paper tickets are still issued by carriers, and while this innovation removed the paper it did not fundamentally improve processing in the revenue accounting environment. It substituted a system generated file of data for the one that was manually captured. The improvements in sales reporting are primarily the result of increasing the rate of automated sales reporting (now available daily) and expanding the number of data elements reported. The current problems are mainly caused by a lack of process controls in the ticketing systems which provide the critical data that a revenue accounting system needs to function effectively. These problems are derived from both agency use (or misuse) of GDS systems and airline ticketing systems which are also a major source of data process errors requiring manual intervention. This is why the current processes and systems are so labor intensive and costly. Ever-increasing pointof-sale options and the resulting system complexity adds to industry costs. It creates a need to constantly maintain and enhance carriers own systems or buy the necessary services from other providers. An example is the failure to deploy the Structured Fare Calculation. Tickets are issued using Fare Rules filed by the carriers that are not specified by segment. This means that the fare calculation portion of a ticket is a critical element required to determine the amounts applicable to each fare component, and from that, the applicable value per segment based on proration rules and carrierspecific bilateral agreements. The Ticketing System Service providers and GDSs are still using free text for this data field and do not have a compelling business reason to make the improvements that would address the problems. The cost is substantial, and most carriers have not been in a position to invest in those improvements. The introduction of Simplified Interline Settlement (SIS) and more recently Electronic Miscellaneous Documents (EMDs) have had direct impacts on airline revenue accounting as those changes have required adaptations in the existing systems. While streamlining parts of the process, particularly in interline, they do not address those upstream challenges International Air Transport Association 6

8 Traditional Passenger Revenue Accounting Processing A standard revenue accounting system must deliver fast accurate passenger revenue and segment data to management and MIS systems. To achieve this, a segment value must be assigned to each coupon using industry standards which are mandated for interline billings. Additionally, on a bilateral basis, carriers may agree, for interline billing purposes, to use values agreed in a Special Prorate Agreement (SPA). For wholly online journeys airlines may use all or part of the industry standard process for valuation, or may apply its own standards. They may also use different segment calculations for non-revenue accounting uses such as yield and cost management. The system needs to be accurate and flexible, and provide maximum efficiency in processing ticket data, determining and billing accurate values. It should validate all transactions and initiate a correction process for errors and identify circumstances in which fraud may have occurred Lastly, a core function of a revenue accounting system is to provide accounting files to the company s General Ledger (G/L) following the airline s own specific requirements and local government rules. Historically the system serves as the Sub-ledger to the G/L owing to the massive volume of transaction data which it is not practical to store in the G/L. While the actual account postings typically occur at the end of a defined accounting period (usually a calendar month), systems provide daily summary reporting of the accounting for all transactions for both daily and month-to-date time frames. This enables the accountants to monitor activity and take corrective action in the event of any anomalies. Typically the core revenue accounting functions are defined as: 2014 International Air Transport Association 7

9 3. Industry Centralization Opportunity To reduce the industry cost of the revenue accounting activity airline Finance executives seek to evaluate the potential of a centralized approach that would simplify and standardize this back-office process. The FoRA Task Force has been set up to drive the successful implementation of such a service and to evaluate the exceptions needing manual intervention that currently prevent full automation. The feedback from the industry to date endorses the approach of the Task Force. The process will be designed to support the New Distribution Capability (NDC) by enabling a simple, industry-wide implementation as well as reducing future investment needs for the industry by leveraging the infrastructure of existing industry solutions and the core strengths of industry organizations. This model will also be adapted to support all future industry changes that impact revenue accounting centrally. There are many opportunities arising from a central solution including: A centralized Sales Reporting process provides a single point of change to maintain compliance with Airline Reporting Corporation (ARC) and Billing and Settlement Plan (BSP) reporting standards, along with Simplified Interline Settlement (SIS) and any other industry standard formats that require changes in a revenue accounting system. This reduces the cost of updating multiple systems and can streamline testing and implementation timelines. Sales data processing can be improved by providing central cleansing of the data and by enriching the ticketed data with information from other industry standard data sources. This will also allow more robust identification of industry wide reporting issues and enable industry driven solutions. Proration and taxes can be performed by a single utility rather than by separate processes customized for each individual airline which may yield differing results. This can streamline interline processes and reduce workload for processes that can be handled centrally e.g. capturing the terms and conditions of SPAs, provisos and taxes centrally so that all participants are using a common version. Expanding the volume of transactions handled by the NFP engine and increasing the number of carriers using the service will allow the industry to focus on improving the quality of proration engine results for all participants. A CTD will reduce the costs of multiple copies of a transaction being stored individually in separate data stores. The use of the reported sale information can enhance the segment valuation for all parties in an interline transaction. If a ticket is re-issued by a different carrier, it can be prorated using the original data from the CTD. A CTD can be used to optimize billing and settlement activity between airlines, reducing disputes and the timeline for managing disputes. Linking the database to the Clearing House via SIS will also enable the expedited settlement of interline billings by linking the billing and clearance processes. An Industry-owned service will provide cost saving opportunities: Lower cost of operation one central operation will cost a fraction of hundreds of local operations and it can be operated on a cost recovery basis. A uniform application of standards will reduce disputes and costs associated with managing them. Service standards and quality will be managed by the industry which will provide greater resources and increased market strength. Lower cost of implementation as some of the infrastructure already exists International Air Transport Association 8

10 Enable future opportunities to reengineer the revenue accounting business process at the industry level. Much of the associated business framework already exists in the industry: AIA The First & Final infrastructure created by ARC, IATA and ATPCO includes a Neutral Fare Proration (NFP) engine and centralized data storage for prorated sales data. SIS Auto-Billing provides automatic flown coupon data processing for other airline tickets, revenue recognition postings and corresponding outgoing invoices. SIS also facilitates audit of incoming invoices and coupon data. Powerful modern Enterprise Resource Planning (ERP) systems e.g. Oracle and SAP can handle additional inputs and sophisticated processes International Air Transport Association 9

11 4. Concept for a Future of Revenue Accounting The FoRA Task Force proposes the creation of a central service that will provide a framework for automated passenger ticket data processing that can deliver the functions and outputs required for revenue recognition. This service will generate the necessary data to support accounting within ERP systems and provide the detailed data required by carriers MIS systems. This initiative aims to identify a simpler and more cost effective manner for handling ticket data processing in an all-electronic environment so as to manage the revenue accounting process without requiring specialized revenue accounting systems. The sales reporting function is the first step in determining what accounting will occur as a result of processing the Sales Reports. FoRA will therefore include a processing service for all sales reports that can accommodate reporting from various sources such as ARC and BSP as well as a carrier s direct sales reporting. Edits will be performed to ensure that all sale transactions are in balance and need no further enhancement. Transactions with errors must be either systematically enhanced or manually corrected either by a centrally sourced service or in-house. While industry standard sales reporting processes have been greatly improved, resulting in more reliable sales reporting, there still exist a number of issues with direct sales reports. The service will also include a sales report receipt tracking function to ensure that all expected reports have been submitted and enable month-end accounting accruals. The common practice is to complete the proration of transaction prior to determining the accounting values for reported sales. Sale transactions are then matched to prorated ticket data to obtain segment values and coupon level taxes. The industry NFP engine will be used to provide prorated coupon values for all passenger transactions based on the accepted industry processing rules and any SPA filed by the participants. Additionally it will attribute values to the applicable coupons, including gross fare, surcharges, sales discount, sales commission, ticket taxes, fees and charges including fuel and other surcharges. Data enhancement will provide additional levels of accuracy for processing the transaction data. A module to allow for manual data entry when required will be provided. There are two main areas that contribute significantly to the population of transactions requiring further enhancement prior to valuation; faulty ticket data in the Fare Calculation field, which is critical to determining how to apply the fare rules to the transaction, and tickets that have been reissued either at the request of the passenger or as a result of changes made by the carrier e.g. irregular operations and schedule changes. While the volume of transactions with errors is not a statistically large percentage of the overall population, it is a material volume for the purposes of revenue recognition and MIS reporting. The Task Force proposal is aimed at addressing these issues as described in the Sales Processing section of the document. The process will use a CTD e.g. the current AIA First & Final prorated sales data storage infrastructure (if it meets requirements) which will be expanded to allow for other types of passenger sales transactions. Participants will be able to view the transactions in the database based on viewership parameters coded in the system. Interline processing will be enhanced by incorporating the use of the existing Auto-Billing functionality of SIS. This will enable users to have their billings automatically submitted as a result of providing all of 2014 International Air Transport Association 10

12 their lift data. The use of the NFP throughout the process eliminates rejections from other carriers participating in the service. Daily and month-to-date accounting aggregation files will be provided to carriers for management monitoring. The system will prepare and provide files containing data for account posting that the carrier will upload into their ERP G/L system based on configurable aggregation levels e.g. by posting period, by sales source, by account type and other attributes that may be deemed essential for the carrier s business needs. This will need to be further defined by the Task Force. The Task Force suggests having also the option of a file with detail level for those carriers that wish to perform aggregation based on an internally developed module for reporting into their ERP G/L. Following is a diagram of the proposed process which includes the core functions that are required to produce outputs for carrier ERP systems. A more detailed explanation of the various functions follows in sections 5 through 10. Overall Process Map 2014 International Air Transport Association 11

13 5. Sales Process The service will include the receipt and tracking of all applicable sales reports for the carrier regardless of the reporting period. Sales reports should include the various control amounts such as: Gross Value Amount, Total Remittance Amount, Total Commission Value Amount, Total Tax/Miscellaneous Fee Amount, Total Late Reporting Penalty and Total Tax on Commission Amount. All documents will be handled, including but not limited to, Passenger Tickets, EMDs, Agency Debit / Credit Memos (ADMs/ ACMs). The Task Force will determine the best practice in regards to the use of carrier specific documents such as Special Service tickets, Vouchers etc. All passenger accountable documents will be registered, validated and reconciled to the reported control amounts. The outcome of the sales process is the reporting of the data necessary to enable the required accounting entries for all types of sales transaction. These will include determining unearned liability, creating revenue entries for ancillary services, determining commission and credit card fees, creating expense account entries and tax liability entries. Unprocessed sales at accounting month-end should also be reported to allow for accounting of sales accruals Sales Processing General The system will support reporting from all sales channels that carriers currently use including ARC, BSP, Carrier Own/Direct Sales including Manual Reports, as well as the Industry Sales Record (ISR). All sales files containing Credit Card data that is subject to PCI security rules must be masked before reporting to FoRA. ARC and BSP sales reports will be processed using the most current reporting standards. These will be updated as standards are modified, saving costs for all participants. As direct sales reporting is provided in a number of ways, a standard file format will be designed that will accommodate the reporting best practice from the carriers. An optional conversion process can be created by the central service to transform carrier s files from their own format to the FoRA standard. The process will be designed based on the sequence of the time zone of their head office in order to ensure that all closing periods can be met. Data enhancement of the transaction detail can be provided from ATPCO sources and services including items such as: Codeshare and schedules data Use of proprietary schedules data, e.g. OAG and Innovata, to more accurately assign codeshare flight information and the addition of schedules information for down-line use. Examples include arrival day/time and equipment type (the inclusion of arrival day/time also improves accuracy when determining applicable taxes) International Air Transport Association 12

14 Bulk Tickets and Inclusive Tours (BT/IT) ATPCO is researching the possibility to use the existing ATPCO fares/rules data to ensure the net fare is accurately populated for BT/IT tickets so that financial data is fit for use. A lifting carrier has no visibility of the values on these tickets when trying to re-accommodate a passenger; this impedes accurate interline billing and leads to rejections. ATPCO could use their existing fares/rules data and all of its service fees filed by the carriers to ensure that accurate data is available for reported tickets and be used for coupon level allocation when detailed data is not available on the ticket. ATPCO can perform validation of some ticketed fields using edits based on the ATPCO specifications that they have developed. They are also evaluating the possibility to perform systematic cleansing routines to the Fare Calculation data in order to improve automated proration and reduce the need for manual data correction. Transactions that cannot be automatically corrected will require a solution to enable error corrections either by a centrally sourced service or in-house. Sales transaction reporting includes accounting for all fare, taxes, fees and charges, commissions, discounts and forms of payment, along with all items reported on a sales report such as Agency Debit/Credit Memos and adjustments. All control totals provided in a sales report should be used to verify proper account totals when provided. Validations will be performed to ensure that all sale transactions are in balance before sales data for accounting is generated for the transaction. Proration will provide coupon values for all reported sales transactions such as fare, surcharges, taxes, fees and charges YQ/YR fees, commission and discounts, ISC etc. Today the NFP engine uses the IATA Five Day Rate (FDR) of exchange based on the month of issue to convert transactions into USD whereas carriers require that the system provides coupon values in various currencies to meet their reporting requirements. A CTD will require up to four different currency types to be maintained per transaction. These include: The currency of the coupon amounts as ticketed. The carrier s host currency e.g. a German carrier would require all transaction values be stored in Euros as their internal accounting currency. The lift value currency which is used to recognize revenue and to identify variances. In the case of an interline coupon, values must also be available in the billing currency which uses the applicable FDR or Monthly Mean Rate (MMR) for the billing period as per the Revenue Accounting Manual (RAM) International Air Transport Association 13

15 There are no standard rules to advise which rates of exchange must be used by an airline in their internal processing and so various rates are currently used by carriers. Some may use one of the industry provided rates that are based on tariff and ticketing rules: IATA Rate Of Exchange (IROE) which is used for converting different fares to a single currency, Banker s Selling Rate (BSR) used to convert Fares and Taxes to the currency of payment, and FDR used for interline billings, while others prefer to use internal Treasury Rates. Carriers will expect the conversions for sale and lift transactions to be executed using their preferred rate of exchange. This will necessitate the maintenance of a number of conversion rates and the ability to apply the various rates based on a rules engine that caters to carrier specifications. EMDs will be prorated where applicable (i.e. based on carrier filings) and accounted for using the appropriate accounting determination based on the Reason For Issuance Sub-codes (RFIS) provided in the transactions. Processing the various non-transport documents that have not been migrated to EMDs (e.g. vouchers, which are still in use and reported by the carriers) will be included. Where the service needs to process a document that was issued manually, the airline will need to capture this data for inclusion in a Sales Report file. Data will be provided to carriers to enable them to manage their sales accrual process at monthend. The basis will be a comparison of sales reports processed versus the Master Data Sales calendar (see Error! Reference source not found.) for the carrier. All transactions will be stored in the CTD Sales Processing Original Sales Original sales of tickets, EMDs, non-transport documents such as excess baggage, denied boarding compensation and other types of vouchers will be processed by the system, providing tax assignment at the coupon level as applicable. Recognition of reported commission and net fare reporting supplemental amounts, as defined in the BSP Data Interchange Specifications Handbook (DISH), will be accommodated. Carriers will be able to specify their preferred method of accounting for these values e.g. commission expense vs. net revenue Sales Processing Exchanges (Other Airlines (OA) and Own sales) When an exchange transaction is reported, the value of the surrendered coupons will be established based on the values previously stored in the CTD. The value of the new coupons will be calculated based on the value of the new ticket less the value of the surrendered coupons plus or minus any fare adjustment. Net calculation for Fare/Tax/Change Fee will be performed. The coupons that were surrendered for the new ticket are closed in the CTD as exchange usage International Air Transport Association 14

16 5.4. Sales Processing Refunds (OA and Own sales) Refunds issued by sales outlets i.e. received in a sales report, will be processed. Coupons are matched to sales data (use-matched) and are closed-out in the system as refund usage. Data outputs will allow unearned revenue to be relieved and refund usage to be recorded. Appropriate accounting entries are determined for revenue, taxes, penalties and commission. Requests for refund adjustments such as involuntary downgrades, processed internally by the carrier, have been deemed out of scope as they require exception accounting Sales Processing Miscellaneous Carrier Documents (non-transport) Most non-flight related sales that are not issued on an EMD are recognized as revenue at time of sales processing. They do not follow the unearned-to-earned concept, e.g. change fees and cancellation penalties, and items such as kennels, oxygen tanks, etc Sales Processing Duplicate Sales The system will use the issue date and point of issue in conjunction with the complete ticket number in order to accommodate the recycling of ticket numbers as proposed by the IATA Ticketing Committee. In the unusual event that true duplicate sales reporting occurs (same transaction reported twice), the system will handle these transactions by recording the appropriate sales value in both cases (based on ticket numbers and sales date) and matching any usage to the appropriate transaction by comparing ticketed data to actual flight information for processing both in the CTD and the accounting files International Air Transport Association 15

17 6. Usage Process Accounting standards typically require a service to be performed before the revenue is recognized. This is referred to as coupon usage. This requires a ticket database to be maintained that allows for the storage and matching of usage to sales records. (See Section 9.2) There are a number of ways a ticket coupon can be used. Each type is detailed below. Uplifted by the plating carrier (Lift) Uplifted by another carrier and billed to the plating carrier (Payable) Exchanged for a new ticket (voluntarily or involuntarily) Refunded Not used (spoiled or aged) Usage reported in error (unmatched) 6.1. Lift Usage This is the primary usage that occurs for a ticket. When it is successfully matched to a sale transaction it enables the correct revenue recognition for the service provided. Lift usage is produced from a carrier s real-time system, eticket Database (ETDB), Departure Control System (DCS) or from another area of the Passenger Service System (PSS). Lift files will be transmitted by the carrier to FoRA for processing. A conversion process will be developed in order to handle multiple file format submissions. In order to include any paper ticket lift information (whether originally issued as a manual ticket or as an eticket that has been printed), the carrier must capture the required data elements and provide them in a lift file. For this a standardized file template will be developed. Lifts of Other Airlines (OA) plated tickets are discussed in Section 7. A standard process for capturing and reporting of Flight Interruption Manifests (FIMs) will also be required Carriers will require the ability to correct the detail flight data or to amend it with a pseudo flight number for specialized processing. An interface to enable manual updates to usage by the carrier will be developed to allow for exception processing e.g. reversal of erroneous usage. Processed lifts are matched against sale/ticket data stored in the CTD to retrieve the values to be used for revenue recognition. When online lifts have been matched and valued, the values from the CTD are reported to enable the airline ERP system to relieve the Forward Sales Liability account and recognize revenue In addition to ticket and EMD lifts, ancillary services that are sold on traditional nontransport documents and associated with a flight related service e.g. excess baggage, upgrades, services related to a flight (preferred seat assignments, meals, etc.) are usually recognized as revenue when flown. Carriers have developed a number of workarounds to accomplish this that may need to be accommodated. The Task Force will evaluate the options and agree a standard method of reporting Some eticket database providers supply all final usage in a single file, i.e. lifts, blocked space, codeshare, exchange and refund usage etc. while others only provide flown data. The Task Force will determine if the process should only rely on the lift data format or if the solution should be able to process all of usage data as a preferred option when available International Air Transport Association 16

18 6.2. Payable Usage Exchange: If the eticketing system of the plating carrier provides all final usage as described in then advance notification of the intended billing will be available for analysis. The billings from other carriers processed through SIS will automatically create the payable exchange usage Reissue: Typically the usage related to the surrendered document coupons will be recorded at the time the reissue transaction is processed in sales processing. The Task Force will evaluate the potential to use additional data if the eticketing system of the plating carrier provides all final usage as described in Refund: Usually the usage related to the surrendered document coupons will be recorded at the time the refund transaction is processed in sales processing. The Task Force will evaluate the potential to use additional data if the eticketing system of the plating carrier provides all final usage as described in Unearned Revenue (Spoilage / Aged Usage / Outdating) Coupons that have not been used within a specified time-frame can be closed out (often referred to as outdated, spoiled, spoilage or aged ) and accounted for as revenue. The ability to spoil certain coupons may also be dictated by the carrier s own rules. The carrier s auditors may advise on criteria to follow for recognition of the aged coupon revenue. Rules around the accounting for all other coupon values, e.g. taxes, must be accommodated. A process to identify tickets that are candidates for outdating will be performed by evaluating the transactions in the CTD based on the carriers rules Unmatched Usage Unmatched usage occurs during the use-match process when a sale record was not found for the reported usage which can include lift, exchange, refund and other airline billings. It also includes usage against void and/or surface coupons and duplicate usage, where more than one usage is reported against a sale coupon. Cases of unmatched usage will be processed in different ways All exceptional usage must be corrected to ensure proper accounting. The rules engine should determine the elapsed time between the triggering event and the time when investigative action will commence. This cycle should accommodate the desired result by carrier as some types of usage may need to be handled more quickly than others. For example: For an OA billing, the carrier may want to correct the record in a timely fashion as it may require a rejection if there is an incorrect value being billed. A case of a lift usage against a ticket issued by a station that only reports periodically will be deferred to allow time for the sale to be processed. For duplicate usage, the carrier may want to reverse the original usage in the event the second usage is the proper one or have the ability to delete the usage and create an entry to the accounting file for any required write-off. A user interface must be provided to allow carrier personnel to determine the appropriate action to be taken and to capture the data required for accounting International Air Transport Association 17

19 The system should provide optional calculation of a default value for unmatched lifts based on criteria in the Carrier Profile Table Valuation To recognize the most accurate accounting value for each event, a Data Use Hierarchy Table will be developed. The recommendation is to use the prorated value based on the source of the data available at time of processing: 1. Value calculated based on reported sale and/or applicable fare for the reported sale 2. Value calculated based on a TCN/ISR record 3. Value calculated based on proration using the lift file 4. System assigned default value 2014 International Air Transport Association 18

20 7. Interline Process The implementation of SIS provided all carriers with a greatly enhanced process to handle their interline billings, rejections and settlements. It streamlined the existing Interline billing process by ensuring a robust and standardized reporting method for all carriers. The usage of a centralized process ensures that invoices between carriers can be efficiently generated and submitted to the Clearing Houses based on required data elements. Additionally, the Auto-Billing functionality enables a carrier to submit a usage file to SIS that is processed to create the interline billings and invoices to other carriers automatically based on the values stored in the CTD. In order to clarify the various interline processes between a Plating Carrier and a Billing Carrier, it is helpful to identify whether these carriers are on FoRA or not: Scenario Billing Carrier Plating Carrier A FoRA FoRA B Traditional FoRA C FoRA Traditional not in scope D Traditional Traditional 7.1. Receivables: Prime Billings invoiced by the Billing Carrier A FoRA carrier (scenarios A and C) will transmit their usage files (see section 6) to SIS and the Auto-Billing functionality will automatically process the flown coupons to produce a billing file and an invoice based on values stored in the CTD. The billing carrier must always have a value to bill, therefore for any missing ticket data the application of a default value as determined in the Carrier Profile Table will be required (see Usage Valuation, section 6.5) in a process to be reviewed by the Task Force Scenario B is not applicable Payables: Prime Billings invoices received by the Plating Carrier In Scenario B, the traditional billing carrier submits the invoices via SIS. The FoRA solution routes the transactions through the CTD for matching the coupons and generates an accounting entry to decrease the cash flow for the plating carrier. In Scenario A, the FoRA billing carrier submits a usage file to SIS that triggers a single valuation and matching process into the CTD. This process will generate simultaneously the revenue recognition data for the billing carrier and the cash flow reduction accounting data for the plating carrier. Scenario C is not applicable Rejections For Scenario A, the assumption is that rejections would not occur for transactions provided by the NFP engine as carriers are on FoRA and the coupons are evaluated simultaneously for both carriers. For Scenario B, automatic rejections can be created within SIS based on NFP values, RAM rules and carrier preferences. If the rejection is the result of unmatched usage, it will be flagged for user intervention rather than auto rejection International Air Transport Association 19

21 Scenario C is not applicable to first stage rejections. Any second or third stage rejections and correspondence would be handled via IS-WEB Codeshare Commission Handling Codeshare Commission Calculation based on identification of codeshare flights and application of rates is not a standard process amongst airlines and will need to be reviewed by the Task Force to determine if manual intervention can be avoided International Air Transport Association 20

22 8. Data Aggregations for Posting Each of the documented processes will generate the data necessary to enable the airline s ERP system to create individual accounting entries for every transaction. The majority of the resulting accounting entries are aggregated prior to posting to the G/L via upload files. This aggregation is required as the volume of transactions and the very large numbers of entries created during the life of a transaction could overload the ERP systems. 8.1 Accounting Files Files will be created and made available for carriers to download as needed: daily, weekly or monthly. There will be two options available for airlines to download the data files for accounting: A centralized module will be provided that will map events and generate data for accounting entries. The service will support a defined level of aggregation to be determined by the Task Force, requiring subscribers to agree to some standardization on the attributes needed to drive the aggregation routines Non-aggregated data will also be available as an option, which will require airlines to have their own mapping process to generate the accounting entries for their ERP G/L modules. A standard format will be designed that will include sufficient data elements to enable carriers to identify the types of transactions being reported and create appropriate accounting entries to their own requirements. This will also allow carriers more control over their specific accounting requirements as and when their business needs change Sales Accounting The accounting feed will include the Sales Report s control total entries as needed for the purpose of reconciling payment and receivable amounts between sales report and associated accounts in the carrier s G/L e.g. cash and receivable amounts. At a minimum, accounting information for reported sales will be produced daily based on the receipt and processing of the sales reports. Key features of Sales Accounting should include the following: Establish Unearned/Air Transportation Liability (ATL) (Forward Sales Accounts) for tickets and certain ancillary services Recognize revenue for defined ancillary services that are not associated with in flight activity e.g. transaction fees. Recognize commission expense Establish tax liabilities Create tax reserves for under/un-collected taxes Perform appropriate Form of Payment (Cash, Credit, Receivables, Other) data summarization for accounting Account for all Work-In-Progress transactions at end of period for accruals 2014 International Air Transport Association 21

23 8.3. Usage Accounting The usage accounting process will include the following features to feed accounting information reported daily to the ERP system: Recognize revenue for flown passenger tickets Recognize revenue for flown ancillary services Relieve Unearned/Air Transportation Liabilities (Lifts/Exchanges/Refunds/Payables) Provide Frequent Flyer revenue reporting Codeshare Commission reporting 8.4. Interline Accounting For the interline accounting portion, the following additional processes will complete the accounting reporting from the central solution: Recognize revenue for flown other airline passenger tickets, Create receivable for flown other airline passenger tickets, Relieve Unearned/Air Transportation Liabilities for other airline billed tickets, Recognize Payable expense for other airline billed tickets, Create reserves for rejection liabilities, Account for valuation adjustments International Air Transport Association 22

24 9. Common Modules Used by the Centralized Process The following are the overall process core components of the FoRA service and are utilized by the previously described processes. These include: The Proration module that can be used by the Sales, Lift and Interline processes The Central Ticket Database where all transaction data is stored for use by all of the main processes The Master Data Tables that will be required to store carrier preferences and rules used in processing 9.1. Proration Proration is the determination of segment values for a transaction and is required for nearly all transactions. Proration can be performed according to Industry standards which are mandated for interline billings or by bilaterally agreed SPA. For online journeys, each carrier may decide how to apportion the revenue for online sectors. The industry standard NFP engine will be used to provide prorated coupon values for all passenger transactions based on the accepted industry processing rules and SPAs. In addition it will assign collected values to the applicable coupons, such as: gross fare, surcharges, sales discount, sales commission, ticket taxes, fees and charges, including fuel and other surcharges. A data enhancement module will enable additional levels of accuracy for processing the transaction data. The Task Force will investigate the possibility of defining default rules to automatically process incorrectly ticketed data. The NFP engine will ensure the application of all appropriate proration rules including but not limited to: Straight Rate Proration based on both IATA and A4A rules (currently handled in the NFP engine). Application of SPAs (currently handled in the NFP engine). Carriers may update directly or use the services of the NFP provider for coding. Application of SPAs (currently handled in the NFP engine). When both carriers are using the FoRA service, the SPA only needs to be coded once. Exchange and reissue transactions. These are currently handled in the NFP engine but it will require enhancing to enable the complete evaluation of already flown segments of partially used tickets. Involuntary exchange ticketing rules (both IATA and A4A), currently handled in NFP, will need enhancement as today these tickets may not be successfully prorated due to incomplete ticket data. Today the allocation of the taxes at coupon level is only performed for interlineable taxes in the NFP engine. The industry is currently evaluating changes in the reporting of taxes 2014 International Air Transport Association 23