A Magazine for airline executives
2013 Issue No. 3

Close The Revenue-Leakage Floodgates

New Back-Office Services Significantly Improve Revenue-Accounting Processes

When migrating from one reservations system to another, often the primary focal point is on customer-facing processes rather than the bigger picture, which includes back-office areas such as revenue accounting. Ultimately, this oversight leads to revenue leakage. However, new services are now available that improve back-office processes and reduce unnecessary revenue losses.

Metaphorically speaking, migrating from one airline reservations system to another falls somewhere between performing a heart transplant and planning a wedding reception for more than 100 guests. Addressing technical aspects, restoring interfaces and conducting a post-migration “health check” can be likened to the heart surgery, while trying to remember all the many details is like planning a wedding reception. Most airlines do this only once in their lifespan … or so they hope.

Not surprisingly, the primary focus is on frontline, customer-facing business processes at the airports, call centers and airline websites. In most cases, the impacts to revenue accounting are “minimized” with false beliefs and assumptions that somehow, revenue accounting staff will “figure it out” or “take care of” unusual circumstances like flights that are not closed or reconciled properly, electronic tickets that are checked in as paper, and improper ticket exchanges or refund processing.

Having performed numerous migrations during the past 15 years, Sabre Airline Solutions® understands that newly migrated carriers need more guidance in the back-office areas, especially revenue accounting. As such, it is essential for airlines to fully comprehend the revenue-accounting capabilities of SabreSonic® Customer Sales & Service (SabreSonic CSS), especially:

  • Electronic ticket validation, business-rules enforcement and overrides;
  • The vast revenue accounting data and insights.

Consultants for the SabreSonic CSS delivery and implementation process spend significant time with each carrier, recommending and planning best practices for SabreSonic CSS across a wide array of reservations, ticketing, and airport transactions and scenarios. Although there is intense focus on the financial integrity and revenue-accounting implications of these transactions, user frustrations arise when:

  • They don’t understand data flows and system relationships between SabreSonic CSS and the revenue-accounting system,
  • Third-party revenue-accounting providers are unable/unprepared to accommodate SabreSonic CSS data formats,
  • They cannot confidently calculate earned and unearned revenue,
  • They cannot confidently close their books for the accounting period.
Back-Office Services Improve Revenue-Accounting Processes

As part of its post-system migration process, Sabre Airline Solutions offers services that improve back-office processes and reduce unnecessary revenue losses. Philippine Airlines was the first to take advantage of the new offering, followed by Virgin Australia and Etihad Airways.

Introducing Financial-Close And Reporting Services

Late last year, Sabre Airline Solutions introduced financial-close and reporting services as part of the standard SabreSonic CSS migration process, with several objectives including:

  • Assist newly migrated carriers with their first, two month-end financial closes after the migration,
  • Provide accounting interpretation of SabreSonic CSS transactions and the many data sources,
  • Build client confidence in their earned and unearned revenue numbers,
  • Develop client self-sufficiency in repeating the steps and analysis required to arrive at their earned and unearned revenue numbers,
  • Ensure analysts have a sufficient understanding of the reservations and ticketing-data flows and system relationships among all sales channels, intermediaries (such as Bank Settlement Plan service providers), SabreSonic CSS, airport/day-of-departure transactions, and the revenue-accounting system.

“The partnership we have with our customers goes beyond the migration to SabreSonic CSS and the stabilization period,” said Hugh Jones, president of Sabre Airlines Solutions. “We take extra steps to ensure that our airline customers have confidence in recognizing their post-migration revenue and can confidently complete their financial close.”

Last October, Philippine Airlines became the launch customer, followed by Virgin Australia in January and Etihad Airways in February. Sabre Airline Solutions empowered the finance and revenue-accounting teams of the three airlines with several insights, tools and best practices to:

  • Monitor/identify flights that have not been closed properly, a step of vital importance to ensure flown flight coupons are marked as “used” and are then automatically passed to the revenue-accounting system to be recognized as earned revenue.
  • Identify and investigate root causes of electronic tickets that are checked in as paper ― the “TktEdit” problem. As a result, flight coupons cannot automatically be marked as “used” without unplanned manual intervention.
  • Monitor manual coupon status changes from “final” back to “open/OK.” Some airlines experience fraud and abuse when this process is not carefully controlled via specific keyword authorization.
  • Perform a “clean sweep” of the Sabre® ticketing data warehouse to identify all air and electronic miscellaneous document coupons expected but not yet in “used” status.
  • Monitor/identify by selling station, agent sales reports not closed in a timely manner, which results in a delay in sales reporting and unearned revenue calculation for the balance sheet.
  • Perform sales reconciliation between the revenue-accounting system and SabreSonic CSS, with discrepancy drill down to the individual station or agent.
Confidence In Flown/Earned Revenue

To ensure airlines achieve maximum results following a system migration, Sabre Airline Solutions has developed a four-step process that helps airlines arrive at flown/earned revenue. Sabre Airline Solutions experts work with airlines, repeating and analyzing these steps, until the airline is confident about the process and able to attain an optimal outcome.

Quantifying The Value

Numerically, the above value propositions translate into:

  • Reduction of non-post departure closed flights from as many as 20 per day during the first week to zero per day by the third week.
  • Decrease of the “Tkt Edit” problem from 300 per day to less than 100 per day by using the financial close and reporting practice and partnering with the airport operations team to drive rapid behavior changes.
  • Identification of more than 10,000 mishandled flown coupons during the first week after cutover, enabling timely revenue recognition instead of the traditional revenue-recognition process that was spread over 12 months.
  • Identification of thousands of interline-flown coupons that might never have been billed, resulting in permanent revenue leakage.
More Benefits To Come

Future services, which will be added this year, include interline receivables tracking. When an airline transports passengers on another carrier’s ticket stock, an invoice must be generated to collect payment. In the initial days after migration, agents may inadvertently fail to generate an invoice, resulting in the unpleasant prospect of the carrier ultimately flying a passenger for free.

The transporting carrier is responsible for initiating interline billing and tracking payment receipt. Without close attention, these types of tickets are vulnerable to re-use by the issuing party, resulting in a permanent loss of revenue. To limit this revenue leakage, the financial-close practice will be expanded to include validation of interline billings to other carriers.

While back-office areas such as revenue accounting can easily become lost in the throes of a system migration, the new financial-close and reporting services will enable airlines to focus on these areas as well and subsequently close the revenue-leakage floodgates.