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International Air Transport Association
The newsletter for Airline Treasuries - May 2013 Edition
In the news

3 new airlines joined ICCS in April 2013:AeroGal, Air Greenland and Regent Airways Click to view full list of members

ICCS Reduction of Spreads - ICCS Foreign Exchange Policy : Following a review of the volumes and market conditions with our main banking partner, IATA was pleased to announce that the spreads applied to the spot mid-point Benchmark rates on 12 currencies, including JPY, were decreased effective March 1, 2013. These rates apply to all foreign exchange conversions carried out by IATA in the ICCS operations as instructed by the ICCS user airlines in their standard or ad-hoc instructions. Click to view in full the new ICCS FX policy

IATA Clearing House: a secure and predictive collection system - 100% Settlement Success Rate: IATA operates a Clearing House (ICH) which enables its 350+ participants (consisting of 250+ airlines and 100+ associated companies) to settle their billings by applying the principles of set-off to reduce risk, increase speed and minimize the amount of money that has to change hands. In 2012, ICH throughput grew by almost 5% to $51.9 billion in billing transactions processed. As a result of the offset provided by the netting service, the amount of cash required to settle these billings was only $16.1 billion, giving a net offset ratio of almost 70%.
The 2012 settlement success rate was 99.996% and 100% as of 10 May-13. Out of the US$17.3b processed so far in 2013, every single dollar has been paid in full and on-time to ICH participants. Combined with the new e-invoicing platform (SIS), the ICH  streamlines processes protects our participants’ interests and manages their credit risk by applying standard procedures and strict deadlines. If you are interested in joining the Integrated Settlement community please contact us at adoptIS@iata.org.
IATA Treasury Day April 23rd 2013 in Geneva:

IATA organized its first “IATA Treasury Day” for airlines on 23 April, 2013 in itsHeadquarters.12 airline representatives made the trip to Geneva. Three (3) key meetings took place that day: the first IATA Currency Coordination Working Group meeting of the year, the IATA Treasury Dashboard Project session and a session on SWIFT and the airline industry.

The Treasury Day was opened by the first IATA Currency Coordination Working Group meeting of the year. The group’s objective was to review the results of the annual survey of the industry’s “blocked funds” situation and establish the group’s 2013 work plan.

After a networking lunch, a presentation of IATA’s new Treasury Dashboard project, including a live demo of the prototype, took place.  This second meeting included a feedback session for airlines to provide input and advice on the dashboard prototype which would assist IATA in obtaining the final go ahead on this project and the development of the final live system.

The day was closed by a session on SWIFT that included an update from SWIFT followed by a group discussion on whether an airline SWIFT focus group should be created to benefit all airlines using or considering the use of SWIFT in their financial operations.  Although a growing area of importance for many corporates and airlines worldwide, the group decided that IATA should have an annual event on SWIFT issues, but not under the formal structure of a focus or working group. A first such event is being planned for the next IATA Treasury Day later this year in October.

Participants of the IATA Treasury Day, April 23, 2013, in Geneva

Some reflections following the meeting, from Tony Pietrangelo, Assistant Director, Industry Cash Management Services at IATA:  “The airline Treasury community has become a key stakeholder group within airlines as they are seen more than ever as having a growing impact on the success of their airline.  We believe it is important that we help in bringing together airline treasuries to provide a platform to share best practices, latest market news, new products and services; and for the valuable networking benefits it has proven to bring as witnessed with our experience at the annual IATA Treasury Conferences. Through our ICCS service, IATA has been serving airline treasuries for the past 20 years and this is a logical extension of our support for this community of professionals.  Our first attempt in April was built around the ICWG meeting, which was being held in Geneva and we leveraged the presence of the ICWG airlines by adding 2 sessions we needed some airline feedback on urgently. This was very welcome by the participants as it added value to their meeting.  Future IATA Treasury Days will have a more complete and varied program and will beheld in other regions also whenever possible.  The next IATA Treasury Day is already being planned for the 8-9 October, 2013, in Geneva. Preliminary details can be found in the special announcement section of this newsletter.”

Airline corner   Market corner

American Airlines News


Congratulations to Peter Warlick, American Airlines’ new VP & Treasurer!

Special announcement – IATA TREASURY DAY OCTOBER 8 (PM) – 9, 2013:
Save the date!

The annual IATA Treasury Conference will be postponed to 2014 where it will be brought under the umbrella of a larger IATA Financial conference.  For 2013, IATA will instead hold its second  “Treasury Day” of the year, in Geneva on October 8th (PM) and 9th. The day and half event will focus on treasury related matters but will be a scaled down version of our regular annual conference.

The October event will include a training session for IATA Currency Clearance Services (ICCS) users, the IATA Currency Coordination annual meeting and various sessions on Treasury topics and Economic updates including one by IATA’s Chief Economist.  A formal agenda will be sent by mid-June.  IATA will host these meetings at its Conference Centre in Geneva on the afternoon of October 8th and on October 9th.  The event is opened to all IATA Member airlines. If you wish to register for this complementary event, please contact Lamyâa Khattabi at khattabil@iata.org

There are three preferred hotels located near the Geneva Airport and IATA offices where delegates can book their hotel reservations if needed: Hotel Starling, Hotel Movenpick and Hotel NH Geneva. Please contact us for more details.

Stay up to date on Treasury matters and bring value to your airline! Don’t miss this opportunity to get updated, network and exchange ideas on best practices with airline treasury professionals and other treasury experts form around the world.

SWIFT for airlines (by Urs Kern, SWIFT)

There exists only a few industries with bigger treasury challenges than the airline industry! According to the recent Airline Treasury Survey from IATA an airline has to manage worldwide 88 bank accounts on average. Nearly half of the airline industry does not yet manage cash online. But even managing different electronic banking channels requires significant treasury and IT staff resources. However, in times of increasing cost pressure, regulatory burdens cash visibility and intraday, reporting is becoming key. To address these challenges; rationalizing bank channels, centralizing payment and collection while achieving greater automation through standardization becomes more and more compelling. SWIFT enables corporates to obtain financial services (payments, treasury and securities orders, reporting) with all their financial institutions through one single, highly secure, standardized communication platform, as opposed to multiple connections. SWIFT’s internationally recognized standards help airlines to reduce costs and risks, increase funds visibility and improve automation. This leads to easier regulatory compliance. By joining SWIFT, airlines have access to over 9,000 financial institutions in more than 200 countries.

Different case studies have proven that corporates from different sectors have achieved an ROI of up to 600% over five years when implementing SWIFT by reducing cost of operating different bank messaging system and the re-allocation of resources following centralization of banking messaging activities previously handled in the local offices.

The easiest and most cost efficient way to connect to SWIFT is via Alliance Lite 2 a cloud-based solution to connect to the SWIFT network. All you need is a standard Windows PC or laptop, browser and internet connection, and the secureAlliance Lite2 USB token provided when signing up for the service. Alliance Lite2 provides access to all SWIFT message types (MT and MX) and flows. Both, automated and manual entry of transactions, are available – giving an additional flexibility in line with the business needs.

Beside bank connectivity via a single window and message standards SWIFT offers a couple of additional services & solutions which might be useful for the airline industry. Particularly to be mentioned is a suite of reference data packages (e.g. BICs and IBAN schemes) to ensure SEPA compliance.  More information can be found under www.swift.com/corporates/index

Insight on ICCS
FAQs   Know your service   Tip of the month
Can I instruct ICCS to permit payments to suppliers on my behalf? The answer is yes! Click to see how.
Why ICCS is not available in certain countries?
How can I implement ICCS in a specific country?

Ad-hoc instructions: What, when and why?
Ad-hoc instruction refers to an instruction that is effective only for a specific ICCS clearance cycle and overwrites an existing standard instruction. The instruction has to be received and confirmed by ICCS by the end of the order day in order to ensure correct processing and it should mention the amount, the currency and the preformat ID of the account. Link to ICCS presentation PDF version p.35

  Avoid delays with your bank. Take advantage of the settlement flexibility available through ICCS by reviewing  your bank accounts on file and activated with ICCS to ensure an accurate settling of funds received through ICCS. Link to ICCS presentation PDF version p.41
Currency coordination news
RFB (Remittance of Foreign Balances Survey) for 2012 was finalized and has been distributed to all airlines that responded to the survey. If you didn’t participate and would like to purchase a copy please contact Lamyaa Khattabi at: khattabil@iata.org
IATA Treasury Day: As mentioned above, the first ICWG meeting for 2013 was held on April 23rd and was combined with two other sessions:  (1) the SWIFT discussion group and (2) the Airline Treasury Dashboard projects The ICWG meeting was attended by 12 airlines who reviewed the RFB annual survey and set out a working plan for the group’s areas of focus during 2013.   For more details on the outcome of any of these 3 meetings,  please contact Lamyâa Khattabi at khattabil@iata.org.

Main Highlights of April/May:

Cyprus:  After some significant turmoil, BSP settlements are back on schedule with minor delays. The BSP and CASS operations have been moved to a “ funds received” model until the market is stable. IATA is still waiting on the Central Bank of Cyprus’ decision in relation to its earlier request for the release of the funds blocked relating to BSP Billing period February P2 (16th-26th of February).  Until then, these funds will remain frozen in the IATA BSP hinge account. IATA is continuously lobbying the Cypriot Government and the Central Bank of Cyprus to provide an exception that in turn would allow for the full settlement of these funds to BSP participants.

Venezuela: As mentioned in our March 2013 newsletter edition, the Central Bank Governor confirmed to IATA that all airline company’s currency requests made to CADIVI before February 8, 2013 will be approved at the pre-devaluation exchange rate of VEF 4.30.  IATA is monitoring closely and requested a meeting with the new directors of Cadivi, in order to address all pending issues.

Egypt: The foreign exchange markets in Egypt have been affected directly by the economic and political situation in the past few months. Recently it has been witnessed that there is more foreign exchange liquidity in EURO and in GBP than in USD. Like other Corporates, IATA-ICCS has been converting the local EGP BSP settlements into EUR and moving EUR out of Egypt. Euro became the new base settlement currency for our ICCS operations in Egypt during this crisis period.

Malawi: There were signs of increased foreign exchange in the past month, during which IATA-ICCS was able to clear its 2012 sales backlog and all 2013 sales made up to 15 April 2013.  This is great news for the airlines after a long period of delays!  It is still unclear if the settlements will go back to a regular pattern or if these funds received are only due to a temporary spike in  foreign exchange availability in Malawi. The IATA team will keep our airline members informed.

Emerging Markets Highlights:

Argentina: Beginning of May, the illegal black market for the Argentine peso virtually ceased functioning due to concerns of a government crackdown. This followed a massive depreciation in prior weeks to a record low of 10.425 per U.S. dollar on May 8. Various reasons have been cited for the appreciation including government threats, a tightening of money market liquidity, bond sales by the state pension fund and official. But perhaps the key point is that even with this appreciation the ‘blue rate’ is still no stronger than it was on April 24. The ‘blue chip swap’ rate followed a not-dissimilar pattern in appreciating from a trough of 9.55 on May 8 to 8.90 on May 17th. The interbank rate depreciated just 0.1% on the week of 17th to 5.2375, a net depreciation of 6.2% since the end of 2012.

India: The year-on-year rate of wholesale price inflation, the benchmark measure of inflation in India, fell to a 41-month low of 4.89% in April from 5.96% in March and an upward revised 7.28% in February. Beginning of May, following the announcement of a cut in interest rates, the Reserve Bank stated that there was little scope for a further easing of policy. Not surprisingly, these figures have revived expectations of a further cut in rates.

For suggestions or comments for future editions please contact:

Lamyaa Khattabi,
Manager, Industry Cash Management Services
IATA Financial

Email: khattabil@iata.org

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