The latest initiative in IATA's drive to take costs and complexity out of the airline industry is slated to go live next month, but an alarming number of carriers are unprepared, according to Neela Bhattacherjee, head of Kale Consultants' airlines strategic business unit.
The Simplified Interline Settlement program aims to dispense with the 160 tons of paper invoices and supporting documents that are shipped annually among airlines around the world each year to support the industry's interline billing and settlement process.
Instead, electronic billing files will be submitted and processed in a way that avoids duplication and minimizes the need for reconciliation with individual revenue accounting systems.
SIS will deal with both passenger and miscellaneous settlement.
Kale is the prime technology supplier for the development of the SIS platform.
IATA is aiming for 100% compliance, with all IATA Clearing House transactions processed through SIS, by April 2013.
Bhattacherjee said the move is similar to the migration to electronic ticketing several years ago. In some cases, she said, small carriers may be dealing with a mere handful of interline invoices each month and can continue to process them outside the system.
But the vast majority of airlines will need either to make changes to their in-house legacy revenue accounting systems or, if they are using a third-party system, ensure that it is SIS-compliant.
Otherwise, Bhattacherjee said, they could be facing chaos.
SIS will ease the pain of trying to reconcile billing and settlement files and invoices.
The separate systems used today — ARC Compass, IATA ICH, ATA ACH and other entities that make up the industry's alphabet soup — will be integrated with new systems to offer a single point of communication for the carrier.
The settlement file will be automatically created from the billing file and will always reconcile perfectly.
Bhattacherjee noted that passenger revenue accounting is very centralized. "It's only executed at the airline's head office," she said.
But interline settlement of miscellaneous items, such as catering, is "highly decentralized, coming into different stations all over the world. You sign, the money is paid and you hope they are not taking you for a ride."
Carriers know what they settle through the ICH and ACH, but miscellaneous items are another story. SIS will shed some light on them.
Unlike electronic ticketing, the switch to electronic interline settlement has not gotten much press attention. Bhatacherjee said that is probably because it will have no tangible effect on passengers.
But even though airline financial officers are well aware of the issue, some revenue accounting managers are "in denial about what it entails," she said.
And she believes some carriers may take the same approach as Continental Airlines, which helped to drive the electronic ticketing issue home by telling its interline partners it would no long do business with them unless they adopted e-ticketing.
"Airlines will just tell their partners they will not do business with them" unless they get with the SIS program, she said.