In any business, it’s crucial – for obvious reasons – to get paid what you’re owed. While it takes a special kind ofpersonality to truly enjoy pursuing unpaid invoices, it is for the most part a straightforward task. There’s rarely any mystery about who owes money to whom, and whether they have paid or not. That is, unless you’re a member of the airline industry.
Maximizing revenue recovery and minimizing revenue leakage is a particularly complex task for airlines. Interline billing, booking partnerships and expanded networks undoubtedly grow an airline’s profit potentials, but also increase the labyrinthine processes that so often lead to leakage and loss.
For decades, the industry has tried to stem revenue leakage, employing methods ranging from manual reviews of select flights to simple software scripts that checked capacity and tweaked pricing parameters. We’ve come a long way since then, but some consider revenue leakage an inevitable part of doing business in this industry.
We disagree. While airline industry accounting will never be simple or straightforward, there are certainly policies, practices and IT solutions that make key processes easier and more efficient. Begin by leveraging these seven best practices to plug the leaks and create sustainable new revenue streams.
- Rely on airline revenue accounting solutions to track payables and receivables, discover errors, and reconcile financial reporting across all touch points and distribution channels. Revenue leakage, among other anomalies, can be efficiently identified through solutions that offer Fare Audit and BSP rejections.
- Take a hard look at your interlining reconciliation processes. Is your airline incorrectly recognizing partner revenue as your own (increasing your tax burden and leading to untrustworthy financial projections)? Are you recording the full rates for partner-sold tickets, rather than the correct discounted price? Are receivables regularly delayed due to non-standardized processes? A robust IT solution will help your airline avoid these and other common errors.
- Utilize solutions that are industry-specific. An airline that deploys a solution that doesn’t, for example, facilitate interlining revenue collection and isn’t compliant with IATA standards, adds unnecessary complexity to the system. Look for solutions that support industry-recognized controls to minimize revenue leakage, and include capacities such as Charges Correction Advice (CCA), automated validation and processing of transactions.
- Automate key processes: Removing the possibility of human error from key processes will dramatically reduce the inaccuracies that often lead to revenue leakage, from an ill-placed decimal point to intentional attempts to cheat the system.
- Make revenue management smarter: Is your airline confidently making the right demand-supply decisions, both for the long-term and in response to unfolding situations? Are you ensuring that your key IT solutions communicate across all critical touch points, and sharing the data that drives smart decisions? It’s crucial to monitor and flag the inconsistencies that often indicate errors in revenue management.
- Extract business intelligence: Does your airline’s financial management solutions provide you with actionable intelligence? Do you know which partners are profitable for you and which are not? Can you spot and manage risk effectively based on historical and near/real time data? A mature airline accounting system should contribute new learning, which can be leveraged to increase profitability.
- Find the right IT solution: In addition to the features noted above, the right solution should fully support revenue accounting best practices; monitoring bill payable dates, alerting on irregularities associated with revenue leakage, reconciling accounts payable and receivables, providing intelligence for confident forecasting, and helping an airline better manage risk.
Modern airline revenue IT solutions are proactive, not reactive. They enable airlines to avoid money-wasting mistakes, restrict revenue leakage, and maximize recovery of revenue through standardization and adherence to best practices and policies. There’s no longer any need to accept leaks as an inescapable cost of doing business in the airline industry.