The Effects of Electronic Ticketing On Revenue Accounting
19 Jun 2006
Reducing Costs Through Standardization and Better Data
The airline industry continues to be plagued by spiraling costs, making cost-cutting a necessary survival tool. One sure method for airlines to realize cost savings is by increasing the use of electronic ticketing – phasing out paper tickets. Often considered the “holy grail” of the airlines – the use of technology for electronic ticketing provides significant cost savings for all major carriers. Paper tickets costs up to $10USD to process, electronic tickets (e-tickets) costs approximately $1USD to process. For good reason, The International Air Transport Association (IATA) is targeting 100 percent electronic ticketing by the end of 2007.
What Are the Next Steps In Cost-Cutting?
More Ways To Reduce Costs
The airlines can reduce overall costs of revenue accounting by working with partners that can implement efficiencies such as TCN exchange, electronic ticketing, interline electronic ticketing, and First and Final settlement. Costs are further reduced by implementing business process outsourcing services, which provide more cost effective labor resources.
Typically, the next steps in cost-cutting focus on reducing labor costs. Electronic ticketing not only cuts distribution costs, it also reduces back-office accounting work and the need for some back-office support personnel. Airlines can shrink their labor pools – and payroll – by working together and standardizing available automation technologies, by improving data quality, and by considering outsourcing for areas such as revenue accounting.
The Shrinking Pool of Revenue Accounting Support
At some airlines, with the increase in automation and the use of electronic data, revenue account support staff has decreased by as much as 50 percent. But whatever the savings, e-ticketing and data exchange are not the end of back-office accounting support. Staffing is still required to work exceptions in various areas of accounting, including interline settlements, travel agency audits, refund requests and fraud prevention. In spite of the various effects of electronic ticketing on the revenue accounting process, there are ways airlines can achieve their cost-cutting goals sooner through business process outsourcing (BPO).
Maximizing Electronic Data
Airlines need to understand revenues as early as possible in the process to forecast profitable routes and to understand the revenue impact as soon as the plane departs. As the use and percentage of electronic data and ticketing at airlines climb, revenue information is available much more quickly to use in business decisions.
The Labor Factor In Exception Processing
Readily accessible electronic revenue information can have a positive influence on an airline's bottom line. The data's availability, however, does not resolve complex problems that require manual intervention – such as interline billing disputes based on differences in pricing and proration, incorrect fare construction, or agency audit exceptions. A variety of factors contribute to the need for exception processing, which continues to drive labor requirements in many revenue accounting processes. Important factors include:
- Data availability
- Pricing and proration
- Manually priced or manually driven tickets
- Poor data quality
Partnership Speeds Savings
One way many airlines improve their accounting processes for faster recognition of revenues is by partnering with an industry technology leader like EDS. We have already established expertise and best practices in its work with airlines across the globe.
EDS can evaluate and implement a complete revenue accounting solution which builds from our Business Process Outsourcing Services as well as our Transportation Applications. EDS has the expertise to implement efficiencies such as TCN exchange, electronic ticketing, interline electronic ticketing, and First and Final settlement processes.
EDS revenue accounting services takes the ticket information, which is available from multiple resources, and analyses the data. As a result, airlines are able to use this data to make informed decisions, quickly and with confidence. Benefits also include the swift determination of revenue, boosted productivity and efficiency, slashed accounting costs and refined processes.
Truly, the benefits of partnership with EDS are many. For over 40 years, EDS has been at the forefront of providing business process outsourcing solutions. Just as revenue accounting applications provide valuable financial and strategic information – EDS provides valuable revenue accounting back-office support, allowing airlines to compete effectively in increasingly crowded skies. Contact EDS today to discuss your revenue accounting needs.