Transformation in Revenue Accounting

World Financial Symposium 2014 World Financial Symposium 2014

Transformation in

Revenue Accounting


Chair Opening Györgyi Szantner Head of Finance Services

British Airways


NDC – Impact on Revenue Accounting

Bryan Wilson Director, Industry Architecture, Financial & Distribution Services

(FDS), Transformation

IATA

New Distribution Capability Impact on Revenue Accounting

Bryan Wilson Industry Architect - IATA

© International Air Transport Association 2014

Overview

What is NDC?

Industry architecture changes

Focus on NDC processes

What this means for Revenue Accounting


What is NDC?

3

NDC is a travel industry-supported program (NDC Program) launched by IATA for the development and

market adoption of a new, XML-based data transmission standard (NDC Standard).

The NDC Standard will enhance the capability of communications between airlines and travel agents and

will be open to any third party, intermediary, IT provider or non-IATA member, to implement and use.


From Flight Distribution…

Travel agents only have access to limited airline

information that essentially

commoditizes the airline to schedule

and price


… to Air Retailing

5

Travel agents want access to all of an airline’s product offering as available in airline web sites


6

NDC is about giving travel agents the same capability as the airline website


NDC - Air Retailing Tomorrow

Airline Offer

Management

System

Content Aggregators

(GDS | New

Entrants)

Travel Agents

(TMC | OTA | Independent)

Travelers only access & accept airline offers Airline systems to keep control of all data

Revenue Accountants to have good data at last!

Travelers

NDC

NDC

Airline

aggregation

NDC


Regulatory

8

“Comparison shopping under the current system is generally limited strictly to comparing fares, and it is difficult to make price quality comparisons of different carriers’ product offerings (...)”

“The modernized communication standards and protocols and the marketing innovations that [Resolution 787] could facilitate would be pro-competitive and in the public interest”

DOT Approved Resolution 787


NDC Technical Development November 2013

NDC Shopping schemas (v1.0) released for testing

December 2013 Live transaction | Hainan Airlines & TravelSky

1

9

September 2014 Candidate Release NDC Shopping schemas (v1.1)

Mid 2015 Updated NDC schemas New NDC complete interline capabilities

November/December 2014 Candidate Release NDC Booking, Payment & Ticketing 1st Implementation Guide

3

July 2014 Draft End-to-End schemas (v1.1) (except interline)

2

4

5


Overview

What is NDC?





12


Overview

What is NDC?





The Full NDC Process

Own ticket stock

7 NDC Steps 0. Setup 1.Shop 2.Order 3.Pay/Ticket 4.Report sale 5.BSP Confirmation 6.Payments

Files for Credit Card Remittance

IATA BSP

$$$ $$$

Billing 5c

6a

5a

Own Sales

6b

4

3d or 5b

Airline Profile

0 Passenger

Cash credit check

Credit Card Authorization

Airline Agent Aggregator

Pay 3a

Shop 1a

Order 2

3b 3c

BSPLink Agents & Airlines

Message types: • Proprietary • NDC ex Airline • NDC ex Agent • NDC ex Aggregator

ET Server Profile

Distributor

Offer 1b


The Full NDC Process

Own ticket stock

7 NDC Steps 0. Setup 1.Shop 2.Order 3.Pay/Ticket 4.Report sale 5.BSP Confirmation 6.Payments

Files for Credit Card Remittance

IATA BSP

$$$ $$$

Billing 5c

6a

5a

Own Sales

6b

4

3d or 5b

Airline Profile

0 Passenger

Cash credit check

Credit Card Authorization

Airline Agent Aggregator

Pay 3a

Shop 1a

Order 2

3b 3c

BSPLink Agents & Airlines

ET Server Profile

Distributor

1b Offer


The Interline Process 10 steps for Interline NDC 0. Setup 1. Shop with ORA 2. ORA relays Complementary Shop RQ to POA 3. ORA consolidates POA RS into its Aggregator RS 4. Agent sends Order RQ to ORA 5. ORA accepts POA’s offer with Order RQ & confirms with Agent 6. Ticketing & Payments all with ORA as Validating Carrier (incl BSP reporting & settlement) 7. ORA as Validating Carrier advises ET# to POA 8. ORA as Validating Carrier manages ET/EMD coupon(s) with POA 9. POA claims flown revenue through SIS-IDEC (not NDC messages)

Offer Responsible

Airline (Validating Carrier)

Agent

Passenger

3

Participating Offer Airline

Interline Shop/Offer

IATA SIS/ICH

Airline Profile incl Interline markets

0

2

Shop 1

Order

Interline Settlement

9

Aggregator

Interline Order

8

7 5 Tkt Nr

Tkt /EMD Msgs

Ticket 6

4

BSP

Offer


Overview

What is NDC?





1) With NDC you keep control - Offer Airline sets the Offer Rules - Only Offers can get Ordered - Only Orders can get ticketed Much less scope for fictitious bookings held in a GDS No scope for ticketing data to be manipulated Less revenue integrity checking, Less ADMs

2) NDC simplifies interline tickets/EMD - Each interline participant states their price & product code - No need for complex ‘through fare’ filing or proration - No need to use 30 pages of industry ancillary codes - No confusion of the pax order between the players

Good News for Revenue Accounting


1. Embrace the Offer ID? - It’s your offer or your interline partner’s proposal - Don’t check it, just ensure its used

2. Stop ticket issuance to defaulted agents? - IATA now provides ‘ticketing authority’ status files - Files sent every 2 hours as with GDSs

3. Report sales to the BSP?

- IATA offers NDCLink service to airlines reporting sales to BSPs - Just 1 file in DISH/RET format required for all BSPs

4. Use new formats for reporting RET and IS-IDEC - No more RBDs or Fare Construction data elements - Instead you will want to record NDC Offer IDs

Are you ready to…


and a final tip

• Irregular operations - More pax will be travelling on fares which lack a fare

construction - Time to re-assess more of the default use of Y fares? - Or time to negotiate more bilateral ‘prorates’?


www.iata.org/ndc

http://www.iata.org/ndc


The Operational Opportunity

for Revenue Accounting

Györgyi Szantner Head of Finance Services

British Airways

The Operational Opportunity for Revenue Accounting

Gyorgyi Szantner Head of Finance Services, British Airways

Traditionally Revenue Accounting has been… relying on.. travel agents & other sales offices created sales reports to learn a ticket

has been sold airports to collect and send flight documentation to account for revenue perceived as late at providing sales and revenue information either delaying speedy implementation of commercial initiatives, or not evaluating and reporting sales / revenue in line with commercial

expectations reactive

2

Transformation in Revenue Accounting – Operational Opportunity 2

and that was because…

3 Transformation in Revenue Accounting – Operational Opportunity 3

History


But now …

Supported by operational databases containing reservation, e-ticketing, flight and departure information that communicate with each other on a real time basis


So what can revenue accounting take from these changes &

what can it give to the business?


Meeting and Name of Presentation 7

Opportunity: Receive sales data immediately when

a ticket is sold anywhere in the world Know the revenue from a flight as

soon as the aircraft door is closed

End-to-end view of a customer’s journey

Syncronised data Common use of reference data to

sell, manage the flight and account

Benefit to business: Sales monitoring, improved forecasting

(revenue and cash), risk management, fraud control

Improved decision making effective monitoring of operational

controls tactical or strategic adjustment to flight

capacity Facilitate recovery of service failure by

customer’s first point of contact no back end reconciliation needed immediate response to market changes

- ’what you can sell, you can account for’

Tapping into this rich data available in all airlines’ operational systems will create

Meeting and Name of Presentation 8

Opportunity: NDC ticketing – airline controlled

Interline messaging at offer stage for

interline price

Benefit to business: Revenue integrity - eliminate need for

sales audit

Interline settlement based on price agreed at time of offer – improved ‘supply and demand’ management

… and the standards coming with NDC also provide

So the questions are… Do airlines value this opportunity and the potential benefits it can bring,

and, if they do,

How can the revenue accounting system providers respond to this

challenge?


Meeting and Name of Presentation 10 10

Thank you


ERP – General Ledger Perspective

Simon Lescarcelle-Evin, Head of T&T APJ Services,

Deputy Global T&T Services Hub Head, SAP

Baljeet Nagi, ERP Sales Dev & Strategy leader – Gulf &

Saudi Cluster, Oracle

Beyond ERP Airlines Back-Office SAP Ready for Departure!

Simon Lescarcelle, VP & Global Head of Transportation & Manufacturing Services, SAP World Financial Symposium - Abu Dhabi, UAE, September 17, 2014

© 2014 SAP SE or an SAP affiliate company. All rights reserved. 2 Confidential

Airlines – Words from the Floor Piecing together the Picture

“Lots of high cost manual processes, many time consuming”

“Poor data governance, risk and compliance”


Standardization Shared Service

Real time reporting

Automation

Airlines Experience Best Practices

What does Finance Excellence means for an Airline?


Impacting the New Business Environment Comprehensive End-to-End Finance Back-Office Solutions from SAP

Accounting and Financial Close

Financial Planning and

Analysis

Treasury and Financial Risk Management

Collaborative Finance

Operations

Enterprise Risk and Compliance

Management

Collaborative Invoice to Pay

Travel Management

Receivables Management

Enterprise, Risk Management

Controls and Compliance Management

Access Governance

Accounting

Entity Close

Corporate Close

Develop and Translate Strategy

Planning, Budgeting and Forecasting

Profitability and Cost Management

Payments and Bank Communications

Cash and Liquidity Management

Debt and Investment Management

Monitoring and Reporting

Reporting and Disclosure

Financial Close Governance

Commodity Risk Management

Financial Shared Services

Financial Risk Management

International Trade Management

Fraud Management

Audit Management

Airlines Industry Extension

Route Profitability

IATA Clearing House (SIS)

Fuel Management

Flight Order


Drive business innovation

Keep the lights on

28%

72%

Forrester IT Survey, 2013

Drive business innovation

Keep the lights on

“

”

Limited Ability of CFOs to Support the Business

76% of Finance executives believe at least half their time should be on high-value planning and analytic activities, though only 55% achieve this Source CFO.com Research 2013


Beyond Airlines Finance Excellence Back-Office Integrated Revenue Analytics for Airlines

Ability to analyze passengers revenues based on the year comparison of issued revenue and flown revenue.

Analyze billions of PNR records and forecast future booking based on trends, weather condition, seasons (vacations), geography, gender, type of traveler, etc.

Effectiveness of promotions based on region, season, etc.

Ability to build predict fares for tickets with inputs like seasons, competitor reactions, customer choices, direct / hopping flights, code share, load, etc

Customer travel, choice, frequency, destinations, type of traveler trends from customer loyalty programs.

Analyze and predict passengers requirements, passenger in-flight purchases, music, movies, games, beverages, … to enhance at the end the Passenger Experience.


ERP

SAP has Evolved Significantly We are challenged by Similar Dynamics in Other Industries & have responded

Old Model

Times have changed

INFLECTION POINT

NEW SAP: New Business Outcomes

Legacy Company

ERP ERP BA

BA

Others1

2002 2007 2010

Cloud

Mobile

Analytics

Applications

Database & Technology

Powered by SAP HANA Product Solution Value

Industry & LOB

Solutions

2014

Airlines Excellence Back-Office Integrated Analytics for Airlines


SAP’s Next Generation Accounting(s) Solutions SAP HANA is delivering Integrated Revenue Analytics for Airlines

Operations Documents

Totals & Indices

Financial Accounting

Totals & Indices

Management / Sales Reporting

From … Stability

Processing

Analytics

Management / Sales Reporting

Financial Accounting

Flexibility

HANA Views

on the Fly

Pre-Defined Aggregates

Flexibility

Stability

Processing

Analytics Logical Documents

Operations Documents

… To

Airlines Benefits • Harmonized

internal and external reporting

• Account driven data model

• Significantly reduced reconciliation effort

• Higher flexibility in reporting and data customization

• Significantly reduced memory consumption

ERP

BI

HANA


Thank You Run Simple

fly… Simon Lescarcelle VP & Global Head of Transportation & Manufacturing Services SAP France 35, rue d’Alsace 92 300 Levallois-Perret M +33/615941017 F +33/146177988 mailto:[email protected]

mailto:[email protected]

Copyright © 2014 Oracle and/or its affiliates. All rights reserved.

Transformation in Revenue Accounting

Baljeet Nagi- ERP Sales Development & Strategy Leader


Safe Harbor Statement

The following is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for Oracle’s products remains at the sole discretion of Oracle.

Oracle Confidential – Internal/Restricted/Highly Restricted 3


Oracle in Air Transportation

Over 60 of the world’s leading airlines use Oracle Applications

73 of the world’s top 100 airlines use Oracle Technology

47 of the world’s major airports (150 Airport sites) use Oracle Applications

20 of the world’s top 20 airlines get better results with Oracle


Strategic priorities for global CFOs: 2013-2015

CFOs Want to Modernize Finance

Restructure the Finance Skill Set

• Data analysis

• Systems expertise

• Business partnering

Leverage High-Impact Technologies

Improve Speed of Decision-Making

• Big Data

• Mobile

• Cloud

• Respond faster to internal and external clients

• Flex the business model in response to change

Source: Oracle-Accenture Research: Empowering Modern Finance: The CFO as Technology Evangelist, February 2014

5


Challenges in Airline Revenue Accounting

Revenue Accounting is a challenging component of airline accounting, encompasses large volume of transactions and unique reporting requirements for liability, revenue, taxes, fees, commissions etc.

• Lots of manual work in the processing of tickets / coupon • Multiple Data sources for Passenger Data(PNR data from global distribution systems,

alliance partners and other airlines) • Historical data and legacy system that need upgrading • Lack of real time revenue analysis from Reservation systems • Lack of real time posting to GL • Lack of real time analytics on performance and Management Reporting • Results in Higher Processing cost impacting P & L

Finance executives are tasked to evaluate the potential to centralise and streamline Revenue Accounting process in order to achieve reduce cost ,complexity and maximise ROIs


Transforming Revenue Accounting

• Oracle can work with IATA, the Airline community and our partners to transform traditional Revenue Accounting processing to modern Revenue Accounting, extending ERP Financials:

Provide Automation, Accuracy , Flexibility , Agility, Efficiency ,Performance, Security and Analytics.

• Deploy Cloud solutions for Tickets and Coupon processing (Order to Cash). Reduce infrastructure and outsourcing costs.

• Tightly integrated Revenue Accounting solution with General ledger and Account Receivables brings everything under one umbrella.

• Bringing the cost of own coupons processing at Zero cost.

• Reduce the cost of collection reconciliation (cash and credit card) process.

• Deploy SOA architecture to provide real time information to the business. This can be used to produce level 1 revenue result of a flight before it lands to destination.


Modern Finance Modern Cloud

Mobile Social

Analytics

8

Summary


Networking Break


Revenue Accounting –

Evolution of Systems

Raj Bhavnani, CFO, Mercator

Nick Coote, Director Strategic Development, Financial Exchange, IATA

Vipul Jain, CEO, Accelya

Joanna Thibault, Head of Ticketing & Finance, Amadeus

Transformation in Revenue Accounting

IATA WFS

| |

Is Revenue Accounting as we know it dead ?

2

| |

The answer depends on how we define Revenue Accounting

3

| |

The mandate has not changed

Report, protect and assure

4

| |

Long live Revenue Accounting !

5

| |

So, what has changed ?

6

| |

Heirarchy of Information

INSIGHT

INFORMATION

DATA

KNOWLEDGE

| |

So what is changing ?

Focus was on operations Deliver processes Manage costs Protect revenue Finance back office

Focus is on analytics Deliver results Eliminate cost Increase revenue Business partner

| |

• Skill sets of people • Move to a variable cost model • Anticipate what the business will need

What does this transformation mean ?

9

| |

The choice is yours !

Time is of essence – sense of urgency

Do you want to spend it solving operational problems that no one cares about ?

OR

Do you want to be part of the brain trust of your organisation ?

| |

The best way to predict your future is to create it

IATA Financial Exchange:

A vision of revenue accounting in the future

Nicholas Coote Director Strategic Development,

IATA Financial Exchange

Move away from the past History of paper documents Need for custom system development High cost of operation leads to corner-cutting,

and piecemeal out-sourcing, Leads to loss of control of costs

Manually-oriented processes, designed around said paper documents

2 Transformation in Revenue Accounting

Recognise the present Tickets may be electronic, but the concept is probably here for a while

yet We are all operating to standards, but may not be making the best use

of them We may not need to do revenue accounting the way we do it, but

revenue accounting we will need to do A huge industry has built up around the concept, and that encourages

inertia


Move into the future Much effort goes into basic data processing which

adds no value Turning data into information is the part that adds value

ERP systems of today are not the manual processes of the 50s, nor are they the batch systems of the 80s They can do a lot more

Split revenue accounting into industry-standard neutral data processing, and leave the ERP systems to deal with the accounting

Need to focus on customer value-add with NDC, rather than fighting over nickels and dimes in revenue accounting


We already have the infrastructure… …Let’s make more use of it!

ARC Compass is used in the AIA First & Final service, but it is a central ticket database of prorated sales values

ATPCO provides data enhancement services which can reduce the manual work of error correction on ticket data

SIS does interline billing and reporting, and can process billing automatically

Most airlines have modern ERP systems already Industry systems operate to industry standards,

maximizing consistency, simplicity and cost-effectiveness

And best of all, these are industry services, run for the benefit of the industry and managed with industry oversight!


So let us look at a simpler, lower-cost

future, where airlines can focus effort on

generating added value instead!


Future of Revenue Accounting

Vipul Jain

I N I T I AT I V E S I M PA C T E X P E C TAT I O N S

ACCOUNTING

- Should cover all revenues

- NDC will have a huge impact

- New forms of payments

- Agility to adapt to business needs

- Speed of Processing

- Cost & Productivity pressures

- Accounting Controls & Risk Management

ACCOUNTING

ASSURANCE

- Beyond conventional sales audit

- Cover full cycle- book to collected

- New forms of payments – newer

challenges

- Focus on prevention

- Co-partner in yield protection

ACCOUNTING

ASSURANCE

ANALYTICS

- Core to the function

- Not just a supplier of data, but also a

consumer

- Big data & sophisticated tools

• Strengthen the core function – Accounting

• Co-partner in managing revenue assurance

• Evolve with Analytics mind-set and

capabilities

© Copyright 2014 Accelya Holding World S.L. and its subsidiaries (hereinafter jointly referred as Accelya Group). All rights reserved. Contents in this document are confidential and proprietary to Accelya Group. No part of this document should be reproduced, published, transmitted or distributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, nor should be disclosed to third parties without prior written approval from Accelya Group.

THANK YOU

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IATA World Financial Symposium 2014

Let’s shape the future of travel

Joanna Thibault Head of Finance & Ticketing

Airline IT Solutions

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Page 2 Source: IATA, 2014 worldwide revenue forecast per passenger

departed

Industry net margins are very low…

… on average $5.42 per ticket

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Stand-alone solutions with limited integration & complex interfaces

Slow revenue reporting limiting decision making

Human-resource intensive activity area

Limited evolution capability to embrace new industry initiatives

Non optimized revenue recognition impacting cash flow & profitability

Airline revenue accounting still sub-optimal

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Turn revenue accounting into a strategic function

How can Amadeus help you?

Adapt to industry changes and to your evolving business needs

Thank you

Come see us at Booth #1

Or write us at

[email protected]

You can follow us on: AmadeusITGroup amadeus.com/blog amadeus.com


Revenue Accountants’

Perspective

Christian Albrespy, Director Financial Shared Services Center, Air France

Raghavan NRS, Head of Financial Reporting, Etihad Airways

Konda Reddy, Director of Finance, Qantas Airways

Kevin Thiel, Director Revenue Accounting, Alaskan Air


Track Closure Györgyi Szantner Head of Finance Services

British Airways


Transformation in

Revenue Accounting

Transformation in Revenue Accounting

Documents

Transcript of Transformation in Revenue Accounting