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Optimizing revenue integrity: Critical for airline success

By Raghunathan Thyagarajan

Optimizing and enhancing revenue integrity is critical to an airline, not only from an audit compliance perspective, but also
to protect the interests of all stakeholders. Unfortunately, today for a large number of airlines, revenue integrity is focused
only on a few dimensions such as external audit, compliance audit and basic sales audit. This approach is largely based
on the traditional model which focused on

 Balance sheet (Forward Sales Liability validation)

 P&L (Revenue is consistent with operational data)
 Validating Revenue and Yield by Sector, Class, Passenger Type and Fare Audit to identify violations committed
by ticketing agents at the time of ticket issuance.

Significant time and effort is spent by revenue accounting teams in most airlines to deliver on these traditional parameters.
The challenge is accentuated if the airline is using a legacy PRA system consisting of several sub-systems, with multiple
hand-offs and interfaces. Airlines are clearly challenged in terms resources and the systems to focus on identifying and
plugging actual and potential revenue leakages. This has prompted several airlines to take the first step of moving to new
software platforms as well as seeking partners that can deliver higher levels of accuracy, thus meeting compliance
standards such as ISO, PCI, DSS, SOX among others.

If the above is the traditional approach, what is the contemporary one? What is a cost-effective approach to enhancing the
value of a revenue accounting function?

Several leading airlines are leveraging business process outsourcing as a cost-effective alternative strategy to deliver
higher efficiencies in the PRA processes. Experience suggests that when PRA processing is moved to an experienced
service provider, airlines not only reduce the cost of processing but get clear visibility into all key operational and financial
metrics of revenue accounting. This enables the airlines to work with the vendors to improve the metrics – and thereby
their bottom lines. To quote real-life examples:

 When interline billing for an airline was improved by just 1 percent, it resulted in a direct benefit of 1.5 million Euro
 Ability to manage seasonal fluctuations in outward billing volumes reduced backlog and improved cash flow in
one instance by almost USD 35 million in one month

Once day-to-day transaction processing is outsourced, revenue accounting teams can focus to identifying and plugging
revenue leakage. They can also enforce compliance and protect against revenue dilution.

There are several examples within WNS and the BPO industry, whereby airlines has leveraged the efficient Revenue
Recovery solutions (software combined with experience) in auditing and tracking revenue dilution through ticketing
violations and fraudulent practices. Airlines can recover losses due to RBD violations and travel validity violations. What’s
more, the services offered are usually through a ‘contingency model’ - the airline pays only if recoveries are identified and
billed to the agents. Lead time to set up is also very short, with minimal set up costs.

Airlines today have access to systems and service providers who can significantly reduce the cost of processing and thus
enhance revenue integrity. Such an approach will allow revenue accounting teams to take center stage within an airline;
especially when modern airline operations are severely affected by geo-political economic crises.

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