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| | | OUR MISSION - Accounting Solutions for Legacy, Low Cost or Hybrid Airlines
Provide consulting to assist travel industry clients through complex accounting and financial decisions. We are dedicated to building long-term customer relationships using quality analyses, recommendations, training, customer support, project management, departmental re-engineering and model development.
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| US DOT Notice of Proposed Rulemaking (NPRM): Reporting Ancillary Airline Passenger Revenues (Docket ID: RITA-2011-0001Agency: RITARIN:2139-AA13)
The public comment period closed September 13. There are 278 comments from Airlines, Lobbiest, Travel Organizations and Individuals. I have grouped the comments into three catagories: Legal (Can the DOT legally require airlines to perform the NPRM)Technical (Are IT system currently set-up to meet NPRM requirements) Operational (Medical equipment) See the link (above) for all the Public Comments. In my opion the NPRM mentions, but it does not included quarterly O&D Survey reporting as a requirement. If one goal is to identify ticket level costs, the current NPRM only requires quarterly Form 41 reporting which does not provide ticket level costs. The NPRM states "... Ancillary charges often are omitted from the total costs of tickets reported in the Passenger Origin-Destination Survey. ...".
Passenger Revenue Accounting (PRA) – Background
Passenger revenue accounting can be divided into three periods: Paper, Semi-Automation and Transition. In the beginning airlines issued paper documents (tickets) that included travel information. To coordinate passing information between airlines they created an organization called the International Airline Transportation Association (IATA).
PAPER PERIOD When first introduced a paper ticket was hand written. A ticket establishes a contract between an airline and a passenger. The ticket is a document that includes a receipt (passenger coupon), accounting data (auditor coupon) and passenger boarding authorizations (flights coupons). The original paper ticket used carbon to transfer information between coupons. Airline passenger revenue accounting organizations did the accounting manually using the audit coupons attached to sales reports from selling locations and flight coupons sent in lift envelopes for each flight departure from boarding cities. .....
For more read Darryl Jenkins new release of Handbook of Airline Economics which will include my Passenger Revenue Accounting Model for Unearned Transportation Revenue (UTR) or Airline Transportation Liability (ATL).
The Passenger Revenue Accounting Dilemma {MY OPINIONS}:
Third party passenger revenue accounting system suppliers include some of the GDS’s providers and they may offer some or all of the PRA system choices. There are also non GDS third party suppliers. The dilemma is the ticketing record (IATA standard vs Non-IATA standard). Most PRA system suppliers cannot handle both types of ticketing records. GDS PRA system suppliers are limited to the ticketing record type their GDS creates: IATA standard or Non IATA standard. Although there are some non GDS third party provides that can handle both ticket record types.
Most Passenger Revenue Accounting system are based on IATA standard ticket records. However, the passenger revenue accounting principles apply to ticket records that are not IATA standard. The problem for non standard passenger revenue accounting systems is industry sales distribution systems are based on the IATA standard ticket records: IATA Billing Settlement Plans, Airline Reporting Corporation and ACH/IATA Interline Settlement. If an airline GDS does not use the IATA Standard GDS ticketing record, the industry sales distribution systems cannot receive/use these ticketing records.
Airline Pricing Model - Issues {MY OPINIONS}:
Airlines and DOT revenue statistics are a problem, as each airline has their own “pricing” and “reporting” rules. In my opinion, a free market model does not properly address the airline industry which is “unique”. I do not have a definition for “unique”, but the airline industry is both capital intense like manufacturing and price elastic like the service industry. I am not proposing we bring back the CAB, BUT the Western Airlines/Governments need to think outside the current “model Box”.
A look at the China airline business model it is creating a new approach by incorporating both government control (capital investment) and a free market based on price competition between Chinese airlines should be looked at.
I am not a strategist, but the accountant trying to understand what marketing is selling. I try to put individual airline revenue reporting into perspective by comparing their statistics without having to make W.A.G. assumptions.
As a commodity issue, what about the network carriers that are trying to compete with a “joint fare”? For accounting, in my opinion, the IATA Ticketing Standards makes Interline possible. Without it we would be back to unilateral airline billings – A nightmare of the first order. Is interlining history, like the horse and buggy?
There is more to consider than direct cost of third parties. The current unbundled fare has created a complex audit trail. Audits identify lost revenue. The ability to identify lost revenue is both a system cost (system enhancements) and real revenue (rules are not followed, prices are wrong, etc). And, this does not even address the strategic issues other than the “Garbage-In, Garbage-Out” which the accountant is responsible to explain.
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| Background: What is outsourcing? | 2 |
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| Components: Inhouse, ASP & BPO | 3 |
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| Guidelines: Seven concepts | 4-9 |
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Our Consulting Approach: Define, Quantify, Analyze & Recommend Research & assess current processes, procedures, systems, staff levels & skill sets Develop baseline units of measure Compare to industry norms
Our Experience: Forty five plus combined years in the travel industry.
MBA’s from the University of Detroit & the University of Tulsa and BA’s from Michigan State University.
Goss & Associates, LLC
Mobile: 317.213.3757
Fax: 508.210.0637
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