Approximately 160 tons of invoices and supporting documents are being shipped amongst airlines around the world each year to support the industry’s interline billing and settlement process. In addition, activities such as invoicing and rejections are still largely manual and paper driven. The potential for considerable environmental and monetary savings, as well as greater efficiency throughout the process is yet to be realized. And as annual interline transaction volumes continue to grow, the need for simpler processes is more crucial than ever.
Financial Committee has therefore mandated IATA to develop a plan to enhance the interline settlement process and to migrate the industry to electronic billing in line with the move to 100% electronic ticketing (ET). The Board of Governors warmly endorsed this initiative in December 2007 and confirmed their support in 2008 and 2009.
How SIS Works
Under SIS, electronic billing files are submitted and processed in a way that avoids duplication and minimizes the need for reconciliation with individual revenue accounting systems. Moreover, the current Clearing House activities are streamlined to allow for more effective exchange of transaction information between billing entities and their interline partners.
What SIS Offers
The principal component of the Simplified Interline Settlement (SIS) vision is the removal of paper from the billing and settlement process. A carrier will
submit a single electronic billing file that will be converted into an invoice and a settlement file, sent to the billed airline, and cleared through the relevant clearinghouse.
The vision and benefits below are subject to change based on cost and demand.
Integrated Settlement (IS)
The proposed solution will be tightly integrated into a single platform called Integrated Settlement (IS). Today’s separate systems - including ARC COMPASS®, IATA ICH, ATA ACH, NFP engines, and others - will be integrated with new systems to offer a single point of communication for the carrier.
Rather than requesting a value, receiving it, then creating and sending additional files, a carrier can optionally send a single file to IS which will then internally create and deliver all necessary files in a process known as
A major benefit is that the settlement file will be automatically created from the billing file - they will always reconcile perfectly. Today the billing and settlement files and invoices are often created in different systems and at different times, causing problems with reconciliation.
More Transmission Options
Today carriers must send coupon listings via IDEC and enter settlement files manually, or submit them in the F12 format. In the future, additional formats will be offered based on the requirements set by the working groups. The three primary methods for uploading and downloading data will be IS-IDEC, IS-XML, and via IS-WEB (similar to ICH Web).
IS-IDEC: Where possible, the new IDEC format will be compatible with the existing format. However, new records such as rejections and tax detail breakdowns for a prime billing will be added.
IS-XML: Many IT departments are moving toward an XML-dominated environment. While not always appropriate for the needs of interline settlement, XML is compatible with many third-party applications (such as SAP) and is perpetually extensible. Additionally, XML offers the ability to easily encapsulate large amounts of data, such as digital signatures or supporting document images.
IS-WEB: Not every carrier will be able to justify systems development for every record type that they may have to submit (e.g. mail interline charges). And some carriers may not have the capability to submit or receive IDEC or XML. As an alternative, carriers will have access to a web interface to manually enter records and upload supporting documents. Similarly, billed carriers will be able to use the web interface in order to view and print invoices and supporting documents.
The web interface will also offer reporting and analytics. Shortly after a carrier submits a file (IS-IDEC or IS-XML), an optional report will show the results of validation. The web interface will also offer an audit trail of rejections, showing each rejection including correspondence, the date entered, and any messages or supporting documents submitted.
No need to reconcile
An inherent problem in today’s process is the difficulty that a billed carrier has in reconciling the data provided in the three different streams (billing file, settlement file, and paper invoice) by the billing carrier. With Integrated Settlement, only the billing data will be submitted. The internal IS processes will then create the invoice and settlement file from the billing data, ensuring that the billed carrier will not need to reconcile incoming data.
Paperless Invoices and Supporting Document Storage
With the new and enhanced transmission methods, every Passenger, Cargo, and Miscellaneous billing will be completely paperless, including rejections.
The Working Groups have defined the documents that will offer value in a structured
e-electronic format. The supporting documents for
electronic presentation will be uploaded as a standard image or PDF to a file repository. The repository will offer a central location for carriers to exchange and store supporting documents.
The central file repository will store documents for as long as they are needed for operational reasons. While the repository is not meant to be a legal archive, carriers will be able to request longer-term storage for a nominal fee.
One of the primary benefits of documents being stored long enough for operational purposes is that the rejecting carrier will not need to re-upload any received documents (as it would re-attach them today); since the new rejection memo will reference the old, the supporting documents are also referenced.
Different regulatory bodies have varying requirements for what invoices - both paper and electronic - must contain. For example, electronic invoices in the European Union must include a digital signature to ensure the contents have not been modified. In other areas, certain text (such as VAT notification) is required. While Integrated Settlement will be designed to comply with any applicable regulations, it will ultimately be the
airlines' responsibility to ensure local compliance.
Reduced Rejection Timeframes
Without changing the amount of time for a carrier to evaluate a billing and prepare a rejection, the working groups have determined that the total necessary time can be reduced by several months.
Today, a carrier may wait up to one month between receiving the electronic data files and the paper invoice and supporting documents. With SIS, the billed carrier will receive the supporting documents at the exact same time as the rest of the billing and settlement data.
Services and Features
In addition to the key features of Integrated Settlement (IS) which support the vision, IS will make available additional services which carriers can choose to use. The features below are subject to change.
Stored Own Prorate and Own Prorate Forwarding
The selling carrier will be able to upload its prorate calculations to Integrated Settlement. At the selling carrier’s option, the prorates will either be forwarded to the planned uplifting carrier or stored for later retrieval on uplift.
The uplifting carrier will have the option to send a record of uplifts to Integrated Settlement. A billing file with prorates, an invoice, and a settlement file will then be created automatically based on the selling carrier’s stored prorates or on the Neutral Fare Proration (NFP) value.
In today’s environment, Auto-Billing would be most suited to
FIRST & FINAL™ carriers which have NFP prorates stored in ARC COMPASS®. However, it should be noted that there are actually three different types of prorate that may be stored in ARC COMPASS® in the future:
- NFPs calculated and stored under a
FIRST & FINAL™ agreement. These are referred to as NFP-final and are similar to what is done today.
- NFPs calculated and stored without a
FIRST & FINAL™ agreement (NFP non-final). While these values also come from the NFP engine, the billed carrier would be under no obligation to accept them. The SIS Working and Steering Groups feel that airlines will benefit from NFP non-final with fewer rejections.
- The sales carriers’ own prorate as uploaded to ARC COMPASS®, called Stored Own Prorate (see above).
The billing carrier will be notified of values being billed on its behalf with a daily revenue recognition file and a weekly pro-forma invoice report, but does not have to do anything other than post the values to its financial systems. The billed carrier will receive a complete invoice in the normal manner.
In recent years, carriers have invested significant sums to support the IDEC file format in order to send and receive an electronically readable copy of prime coupon (passenger) and original (cargo) billings. In defining the requirements for Integrated Settlement (IS), the steering and working groups sought to preserve this investment for carriers that would like to continue to use it.
Today’s IDEC file was created to ease the data entry requirements of the billed carrier. The IDEC file is inadequate for the future, where the billing file will be used to create a legal, completely digital invoice. While the existing IDEC format was the starting point, a number of significant changes were made to create what is now called IS-IDEC.
Additionally, a new file upload format, IS-XML, has been added which carriers will be able to choose to use this for some billing types. While they have different underlying structures and available record types, both formats are principally the same and will include the same fields and same validation requirements. (Similarly, where IS-WEB can be used for manual entry, it will include the same fields and validation as IS-IDEC and IS-XML will.)
Changes and features
New record types and breakdown records
In order to support the billing types that don’t exist today on IDEC (like rejection memos), additional record types and fields will be added. Additionally, breakdown records will be added that provide detailed and potentially repeating data to a record. An example would be a tax breakdown record to a prime coupon billing which allows the billing carrier to detail any potential number of taxes.
Source Codes will be mandatory
Source codes are necessary to differentiate the new record types and uses of those record types.
Greater use of mandatory and conditional fields.
With the reliance on the billing file to create the invoice and settlement data, it is now a necessity that the billing file "makes sense” and that there isn’t incorrect data like wrongly summed values. The published file structures in the IDEC will mandate the use of specific fields (much as today), but the Integrated Settlement process will validate the rules as well.
Integrated Settlement will validate technical rules (that, e.g., the airline code exists) but will not validate business rules (that, e.g., the billing carrier is charging the correct taxes).
Increased record lengths to provide room for more data (IS-IDEC).
A record in IS-XML, by the nature of the XML format, can expand to whatever length is needed.
IDEC, on the other hand, has a fixed length of 160 characters, which the
IDEC WG determined is insufficient for the new data elements and record types of Integrated Settlement. As a result, all records in IS-IDEC will have a length of 400 bytes, which includes a margin of safety for the future. Padding characters will be added to the end of records to ensure that each is 400 bytes long.