survey report simplified interline settlement (sis) - airline preparedness survey wave 2

Simplified Interline Settlement Airline Preparedness Survey – Wave 2

Industry Research

Executive summary

Participants detail

Airline’s priority for SIS compliance

Understanding of changes required for SIS Compliance

Training requirements and dependencies

Status in terms of readiness for SIS

Approaches to SIS compliance

Estimated time and budget

Survey objectives & methodology

About IATA’s Simplified Interline Settlement (SIS)

............................................................................ 3

4

5

6

7

8

9

10

11

12

.............................................................................

..................................................

....................

..........................................

..................................................

..........................................................

...............................................................

.....................................................

Contents

2

............................

Industry Research I Simplified Interline Settlement : Airline Preparedness Survey - Wave 2

Executive Summary

The deadline for International Air Transport Association's (IATA) Simplified Interline Settlement (SIS) project is fast approaching. Come September 2011, airlines globally will move to the revolutionary new platform that aims to streamline the interline settlement process. Starting with the passenger revenue accounting and miscellaneous (non-transport) billing processes, SIS will also encompass the cargo and UATP processes.

The SIS Airline Preparedness Survey is a Kale initiative to assist the airline industry in its transition. Carrying forward from its learning in the first edition, Wave 2, is built on insights gathered from airline revenue accounting professionals to identify the airline industry's readiness for SIS. The Airline Preparedness Survey - Wave 2 saw a record participation of 82 respondents from 66 airlines across the globe.

The survey shows that majority (82%) of the airlines have initiated and finalized their course of action and budgets for becoming SIS compliant. However, there is still a clear lack of understanding towards the changes required in 'Miscellaneous billing' and 'Cargo' areas. Without proper training and assistance for the implementing the required changes, the industry is currently behind schedule in their SIS compliance initiatives.

During the survey and related interactions with the industry we have found that airlines globally are approaching SIS compliance in various ways. From developing in-house solutions, dependence on vendors for changes, to outsourcing their interline requirements – the options available are multifold. But it is more important to realize that SIS is an ideal opportunity for airlines to relook at their systems and undertake significant business process re-engineering in order to derive the maximum benefits of this industry change.

The breadth and depth of these survey findings help paint a big picture view of the IATA's SIS project, more than just a quick snapshot, the information shared by participants has enabled us to provide fresh insights to all those associated with the airline industry today.

Kale Consultants Limited would like to thank all those who participated in our survey.

Key findings from Wave 2:

ä91% consider SIS compliance as high to very high priority

äOver 50 % respondents are still not clear about the required system changes to become SIS compliant

ä64 % respondents expressed training need to understand changes required for SIS compliance

äOver 50 % of airlines are beyond Initiation and budget finalization stage of SIS readiness

ä53 % respondents shown dependency on RA vendor for implementing technology change

äOnly 19 % respondents expect their system to be SIS compliant before Sep 2011

3


SIS Preparedness Survey -Wave 1

JUNE 2010

SIS Preparedness Survey -Wave 2

JANUARY 2011

SIS Survey -Wave 3

JULY 2011 (proposed)

Preparedness

SIS Airline Preparedness Survey - Wave 2

The SIS Preparedness Survey - Wave 2 saw active participation from airlines across the globe. A total of 66 airlines ranging from network carrier to low cost carrier participated in the survey. The online survey was conducted between January and February 2011. The survey data analysis was done in March 2011.

Participants Detail

No. of Airlines from each region Respondents Profile

Size

Annual PAX Count

Tier 1

Tier 2

Tier 3

Above 15 Million

Between 3 - 15 Million

Below 3 Million

4


Wave 1 Wave 2

Airline

Individuals

56

71

66

82

Participation : Wave 1 vs. Wave 2

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

South America, 7

Middle East + Africa, 8

Asia, 22

Europe, 20

North America, 9

91%consider SIS

compliance as high

to very high priority

The Simplified Interline Settlement (SIS) project aims to

standardize, facilitate and expedite interlines billing and

settlement in the airline industry. IATA's SIS initiative is

expected to bring substantial business benefits across both

top-line and bottom-line. However it has varied degrees of

prioritization in terms of importance as well as

implementation timelines. There are significant regional

differences, 88 % of the respondents from airlines in Middle

East and Africa region consider SIS as very high priority,

whereas SIS compliance is high priority for American and

Asian airlines. From the last survey – Wave 1 to present Wave

2 there is no drastic shift observed. However, priority level has

certainly increased.

5

Airline’s priority for SIS compliance

Priority : Wave 1 vs. Wave 2

Priority:Regional differences

* Base: Those respondents answering - unweighted


Low priority High priority Very high priority

50%Respondents are still

not clear about the

required system

changes to become

SIS compliant

SIS compliance is arguably the most significant and largest

impact to airline accounting in decades. It is mandated for any

airline that settles interline through either ICH (IATA Clearing

House) or ACH (ATA Airline Clearing House). Most airlines are

aware about changes required in passenger revenue

accounting. However, awareness is limited for changes

required in miscellaneous billing system to be SIS compliant.

Over 43 % of respondents understand the changes

required in passenger revenue accounting

Only 17% respondents are aware what changes are

required in miscellaneous billing system to be SIS

compliant

Significant changes observed among airlines in

understanding the system change for passenger revenue

accounting; however this understanding is missing

towards Miscellaneous & Cargo.

ä

ä

ä

Over

6

Understanding of changes required for SIS Compliance

Understanding System ChangesWave 1 vs. Wave 2



64%respondents

expressed the need

for training to

understand changes

required for SIS

compliance

Airlines across the globe have found different ways to be SIS

compliant. Nevertheless, the basic tasks which need to be

accomplished are the same for all airlines. The results of this

survey give us a representative picture of the status of

training needs among airlines. Training programs need to been

designed in order to meet airline needs.

Only 5 % of the respondents understand SIS related system

changes, whereas other are not sure or to some extent require

training to understand changes in their present system to be

SIS compliant.

Airline respondents who have vendor

provided RA system depend on vendor for

hand holding/training needs. Irrespective of

the approach taken by the airline to become

SIS compliant training need observed across

airline. There are very few airlines have opted

to purchase off the shelf module or replace the

current RA system

7

Training requirements and Dependencies

IATA36%

RA Vendor38%

Dependance for Training/ Hand-holding

Both26%



At present, Airlines across the globe do not have infrastructure (System) to support the industry change.

SIS compliance is steadily gaining momentum in the airline industry since airlines are aware of the overall impact and the return on investment (ROI) which can be obtained by adopting such technology.

äEurope and Middle East and Africa region based airlines are ahead of others in readiness

äMajority of airlines in South America & Asia are lagging behind in term of readiness

äKeeping the go-live date stated by IATA, airlines are found to be at nascent stage of their preparation level.

Significant regional changes observed are:

8

Status In term of readiness for SIS

50%of airlines are

beyond Initiation and budget

finalization stage of SIS readiness

Readiness Status



Over

In rapid changing air transport environment, technology has

emerged as a key component in solving complex strategic

issues. Airlines are becoming increasingly dependent on

technology to improve their performance and have found

different ways of implementing technology change to become

SIS compliant.

äMajority (44%) respondents from North American airlines

take lead in developing in-house solution to become SIS

compliant

äAirlines from Middle East and Africa region completely

depend on RA system vendor to provide solution.

äFew respondents from South America region plan to

outsource their interline billing to a 3rd party vendor

äEuropean airline look forward to replace their current RA

system with SIS compliant RA system

Significant regional changes observed are:

9

Approaches to SIS Compliant

53%respondents shown

dependency on RA

vendor for

implementing

technology change

Approach to become SIS Compliant



respondents expect

their system to be

SIS compliant before

Sep 2011

IATA has set a fixed timeline for all members for their

passenger revenue accounting and miscellaneous billing

system to go-live as Sept 2011, Timely and successful

implementation of IATA's SIS project holds the key toward

future success of this ambitious mission.

Only 3 % of the airline respondents expect their system to

be SIS compliant within 3 month.

From Wave 1 to Wave 2, there has been progress in

estimated time taken for compliance

However, a very small percentage of airlines are confident

on getting compliant by September 2011

ä

ä

ä

19%

10

Estimated time and budget

Estimated Time


Airlines have to follow stipulated methods for settling their

dues, if some airlines have not upgraded their operating

system, it will result into dilemma, Wherein SIS compliant

airline will be using Integrated Settlement (IS) unit and Non

SIS compliant airlines have to go via traditional way which

will intensely affect the settlement process.

Majority (60%) respondents mentioned that, they are

unaware about the budget to be considered. This is primarily

because of the ambiguity on requirement and step wise

process. Almost 1/4th of them kept the budget on lower side

i.e. less than $50,000.

Only

The survey objectives are to monitor the airlines preparedness

towards IATA’s Simplified Interline Settlement (SIS) Project

which includes:

ä

ä

ä

ä

ä

ä

Airline’s priority for SIS complianceUnderstanding of changes required for SIS complianceTraining requirements and dependenciesStatus in terms of readiness for SISApproaches to SIS complianceEstimated time and budget

The survey was first launched in 2010 and comparisons are

made where appropriate with previous surveys, although the

sample may vary between years. Questionnaires were sent to

senior revenue accounting heads and other high-level

executives during (1st Quarter) January 2011.

Most of the questions used simple check box, multiple choice,

or ranking format, but there were several open ended

questions as well. The extensive nature of the question set

was intended to maximize depth of information rather than

breadth of responses.

A total of 82 responses from 66 airlines

received, providing an even and

representative share of the world’s top

airlines

11

Survey objectives & methodology


Simplified Interline SettlementAirline Preparedness Survey - Wave 2

The Simplified Interline Settlement (SIS) project aims to simplify interline billing, and remove paper from the entire settlement process, delivering tangible financial and process improvement benefits to the industry.

About IATA’s Simplified Interline Settlement (SIS)

IATA states the vision for SIS project as follows:

ä? Invoices are electronic and not backed by paper

ä? Prime passenger billings do not require paper invoices or

coupon listings

ä? IDEC formats are maintained with increased record types

ä? Passenger rejects, including any attachments, are submitted

electronically without paper

ä? Cargo and Mail billings are electronic and paperless

ä? Miscellaneous billings (including any supporting information)

are electronic, whether as data or with attachments

ä Settlement action directly from Electronic Ticketing (ET)

systems is enabled - Auto-billing

Source: IATA Presentation

The Integrated Settlement solution will encompass Passenger, Cargo, Miscellaneous and UATP interline billings and ICH, ACH as well as bilateral settlements.


12

CORPORATE HEAD OFFICE

GLOBAL OFFICES

INDIA

USA

UK

Other Offices and Delivery Centres

3rd Floor, Modi House, Naupada,Eastern Express Highway,Thane (W) - 400 602.Tel : +91-22-6780-8888Fax : +91-22-6780-8899Email: [email protected]

33, 150 Morris Ave. Suite 203Springfield, NJ 07081Tel : +1-973-376-8002Fax : +1-973-376-8006

100A High StreetHampton TW12 2STUnited KingdomTel : +44-20-8783-2392Fax : +44-20-8783-2391

USA: Chicago - IL, Brasstown - NCIndia: Mumbai, Pune, GoaNew Zealand: Christchurch

©2011 Kale Consultants Limited. All rights reserved. The ‘Kale’ logo and product and services mentioned herein are either registered trademark ortrademarks pending registration of Kale Consultants Limited, or its affiliated entities.No part of this document may be reproduced in any form or by any means without the prior written permission of Kale Consultants Marketing Team.

Mar

201

1

survey report simplified interline settlement (sis) - airline preparedness survey wave 2

Business