SINAGAPORE, 30 November 2017: A core channel used by travel agents to transfer ticket sales payments to airlines since the 1970s is about to undergo a major remake.
The International Air Transport Association (IATA), that represents the majority of airlines operating worldwide, manages what is known as the Bank Settlement Plan, but a recent resolution by member airlines will now herald the full adoption of the so-called New Generation of IATA Settlement Systems (NewGen ISS).
Roll out of NewGen ISS will start in March 2018, although some of the core pillars are already functioning in specific markets.
Last year, the BSP processed USD219 billion in airline payments with 100% on-time settlement between travel agencies and airlines.
“Implementation of NewGen ISS is a critical step forward by the global air transport industry in ensuring that the BSP continues to serve the industry’s financial settlement requirements for years to come.
It is the culmination of a multi-year engagement with participants in the air travel value chain, including airlines, travel agents, and IT and system providers. It will bring greater options and flexibility to our travel agent partners, while providing even more financial security to airlines,” said, IATA’s senior vice president, financial and distribution services Aleks Popovich.
Last year, IATA airlines approved the introduction of three core pillars that make up NewGen ISS.
The first introduces three levels of travel agency accreditation, offering greater flexibility. Travel agents will be able to choose the model most applicable to their business, as well as to convert across models as their business evolves.
The second pillar is the adoption of IATA EasyPay – a voluntary pay-as-you-go e-wallet solution for issuance of airline tickets in the BSP that offers a lower cost per transaction. As a secure form of payment, IATA EasyPay transactions are not part of a travel agent’s cash sales at risk.
The third pillar is a global default Insurance scheme – an optional financial security alternative for travel agents that presents a cost effective and flexible alternative to bank guarantees and other types of security.
To these three pillars IATA has now added a fourth. The Remittance Holding Capacity (RHC) is a risk management framework to enable safer selling and mitigate losses resulting from travel agency defaults.
For the majority of travel agents, the RHC will be calculated based on the average of the three highest reporting periods of the previous 12 months plus 100%.
Measures will be available to allow travel agents to manage to their RHC, and to continue selling in a secure manner should their RHC ever be reached. A joint travel agent and airline group has been working collaboratively on RHC over the past year.
“Remittance Holding Capacity is about safer selling. Airlines have no desire to restrict or limit travel agent sales. At the same time it is important to have agreed-upon, prudential safeguards in place to protect airline revenues. The RHC levels are the outcome of a collaborative process involving airlines and travel agents, to ensure that travel agents have the flexibility they need, while protecting airline ticket sales,” said Popovich.
NewGen ISS and Transparency in Payments will be rolled out progressively from March 2018. Certain pillars, including IATA EasyPay and Global Default Insurance (GDI) are already available in some markets. GDI has been implemented in more than 20 markets worldwide, while IATA EasyPay is being piloted in Norway, Sweden, Finland and Iceland.