Clearing House Services Benefits
Some of the key drivers that result in the IATA Clearing House benefits are:
Through multi-lateral, multi-currency netting of members' & associates' receivables a 'netting ratio' of more than 80% is achieved. This translates into an 80% reduction in the credit risk exposure of members & associates, significant acceleration in collection of outstanding credit and reduction in the foreign exchange risk exposure.
Simplification & 'one window' operation
Through a single net receipt from the Clearing House or payment to the Clearing House each week, Members & Associates settle their accounts with all other participants. Cross-remittances, follow-up for credit collection and delays are eliminated. Members & Associates receive full accounting and reconciliation statements.
Clearing House provides the robust, cost-effective infrastructure for members & associates to settle accounts with other airlines, travel partners and service providers - to enable members & associates to focus on providing integrated, quality services to their customers.
The calendar of ICH clearances is notified to members & associates up to one year in advance. Members & associates can plan their billing, receivables and cash management activities in advance. Clearing House notifies each member & associate of its net accounts with all other participants and the net payable or receivable amount, in advance. Settlement is assured on the designated ICH dates. Members & associates are able to plan and optimize the usage of their financial resources.
Currency Exchange and Bank Transfers
Multi-currency transactions are translated into the clearance currencies at the Clearing House Rates of Exchange. After netting, settlement of the net balance is effected by/to the members & associates concerned through a single payment in the settlement. Members & associates avoid commissions/brokerage on multiple foreign exchange transactions, international bank transfer charges and float losses.
Protection on Devaluation of a Debtor's Currency
For miscellaneous transactions, use of the Clearing House ensures that in the event of a devaluation of a debtor's currency the creditor is wholly protected, and any loss of exchange falls on the debtor. The debtor's loss will be restricted, however, to the exchange loss on the balance after offset of miscellaneous charges.
Although membership of the Clearing House implies no credit status whatsoever, Clearing House monitors the payment history of each participant. Where necessary, security deposits are taken to cover future transactions. In the event of a default in settlement by a member or associate of the Clearing House, all other members & associates are notified concurrently and at an early date. To ensure continued wide interlining capabilities and efficient customer service, members & associates tend to pay their Clearing House balance on priority over other bilateral arrangements.
The enhanced security and efficiency of settling transactions through the Clearing House enables members & associates to generate more credit than would otherwise be available to them - thereby substantially improving their working capital management.
A number of airlines are subject to stringent exchange control regulations and central bank approval requirements in their country of residence on remittance of hard currency funds. This leads to delays in settlement to interline and travel partners or service providers, resulting in business constraints.
Membership of Clearing House greatly reduces the requirements and delays: by reducing the need to only one exchange control application to settle a net balance instead of numerous applications for greater individual sums - and on account of the established reputation of the IATA Clearing House for settlement of interline dues. In certain instances, need for exchange control approval is entirely eliminated due to consistent net settlement balances in that member's favor.
Inter-clearance with ACH
The IATA Clearing House has an inter-clearance agreement with the Airlines Clearing House (ACH) of the US, enabling members & associates of both clearing houses to settle their respective claims by and against each other.
For more than 300 members & associates of the IATA Clearing House (ICH) and just under 100 members of the ACH, this means that each participant can settle with more than 400 other parties through these services.