Simplified Interline Settlement A fundamental change… Nicholas Coote Project Sponsor

KUL – Oct ICH UG Meeting2 SIS is the project….  Board of Governors, IATA Top management  IATA people and money  IATA StB mobilisation  Workshops at IATA regional offices

KUL – Oct ICH UG Meeting3 Why SIS is important?  Hitting the core of the process: paper  Changing the way industry works

KUL – Oct ICH UG Meeting4 Any organization, not only airlines

KUL – Oct ICH UG Meeting5 Not just an IT project  Business re-engineering  Re-think global processes

KUL – Oct ICH UG Meeting6 Spread the message in your organization  Service providers  Invoice creators  Finance team  Treasury

KUL – Oct ICH UG Meeting7 Big, industry wide, global  IATA: $millions, 4 years, 20 people  400 Airlines  80 industry suppliers  +5,000 people $ +700 m SAVINGS

KUL – Oct ICH UG Meeting8 SIS Vision  Invoices are electronic and not backed by paper  Prime passenger billings do not require paper invoices or coupon listings  Rejects, including any attachments, are submitted electronically without paper  Cargo and Mail billings are electronic and paperless  Miscellaneous billings (including any supporting information) are electronic, whether as data or with attachments  IDEC concept maintained as IS-IDEC but with extended record lengths and new types  Settlement action directly from ET systems is enabled – Auto-billing Fundamentally change, simplify and integrate the interline settlement process, delivering tangible financial benefits to the industry.

KUL – Oct ICH UG Meeting9 Integrated Settlement (IS) - A new way  Everything is data, with the choice being how you send or receive it  Your choice of format does not affect your partner’s choice of format  The e-invoice is the driver for settlement, not the ICH Web claim  Miscellaneous claims now have their own format – IS- XML  Because everything is data, invoicing can be done at the point of delivery, and monitored centrally

KUL – Oct ICH UG Meeting10 Think about your IS Implementation  You’ll save money by replacing today’s processes with IS  But the greatest potential of IS comes from completely rethinking your processes (especially in Misc)  Going forward, you should think about IS holistically

KUL – Oct ICH UG Meeting11 Important aspects to think about  There is substantial business re-engineering to be done at the outset, as invoicing is often originated from many sources  Person in charge of invoice not usually from the business end, unlike Revenue Accounting. This is an extra challenge  The structure of invoices needs to be changed in order to invoice electronically and enable compliance with IS-XML standards  Legal and financial management aspects of e-invoicing  The concept of Charge Category and Charge Code  Remember: more than 80, each with their own mandatory field contents  There are major changes to UATP processing

KUL – Oct ICH UG Meeting12 Miscellaneous billings  Misc billing is subject to the biggest changes of all  No data standards currently in use – no IDEC equivalent  Huge variations in invoices compared to passenger and cargo  Over 80 business types have been identified and encoded in the design  IS-XML serves the same purpose as IS-IDEC, but designed to work in conjunction with financial systems  Revenue Accounting Manual chapter A13 has been rewritten, and has gone from 5 pages to nearly 100 pages

KUL – Oct ICH UG Meeting13 Principles of the Charging Model  Cover costs – SIS will be run as a revenue-neutral service – which means no profits but also no losses  Fair and transparent to the end users – possible for IS users to calculate costs in advance; no surprises  Flattening cost curve – The largest members put far more than ten thousand times the number of invoices through SIS than the smallest; their SIS fees cannot be proportional

KUL – Oct ICH UG Meeting14 SIS Fee Components ComponentICH Member ICH Web FeesSame as today ($1,500 annually) ICH Web/SIS Migration Surcharge Declines over time as Transaction Fees build up Dependent on type of member and # of invoices processed ($4,000 – $22,000 annually) IS Annual Fee Alternative to the ICH Web/SIS Migration Surcharge Dependent on type of member ($1,000 - $4,500 annually) Transaction Fees (Invoice, Coupon, AWB, supporting document kb, etc.) Per transaction dependent on previous years history. Additional 25% if entered through the IS-Web

KUL – Oct ICH UG Meeting15  After SIS go-live  Before you sign-up  After you sign-up  Before full migration  After full migration*  Through eternity ICH-WEB Fee SIS Migration Surcharge Transaction Fees IS Annual Fee SIS Fee Timing * “Full migration” means that you no longer submit claims outside of SIS (via the ICH-WEB)

KUL – Oct ICH UG Meeting16 The timer is running  SIS goes live in less than a year  Initial feedback is that 25-50% of members will migrate in 2011 itself  That means that members doing business with them also have to be prepared

KUL – Oct ICH UG Meeting17 Don’t forget…  Your SIS billings are standardised for both ICH and bilateral settlements  Means that once migrated you can use SIS to bill any airline, whether or not they will settle through ICH  Standardisation reduces costs and expands opportunities – look for the benefits

KUL – Oct ICH UG Meeting18 Thank you. SIS Website: 