Fortnightly BSP Remittance.
Why Moving to a Lodge Card is the
Best Solution for a TMC.
AIRPLUS. WHAT TRAVEL PAYMENT IS ALL ABOUT.
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AIRPLUS. FORTNIGHTLY BSP REMITTANCE.
Introduction.
Here to help you manage your
BSP change
> Why, when you make that change, AirPlus
International is the partner you should choose
For decades, BSP remittance for UK-based travel
agents has been monthly. On 1 June 2016, that will
almost certainly shorten to fortnightly remittance.
For the many travel management companies which
invoice their clients monthly, the rule change poses
a major, worrying threat to their cashflow.
Here at AirPlus, we don’t think of ourselves as a
financial services company. We consider ourselves
first and foremost a travel service provider – and
at a time like this, you need partners from inside
your industry who understand what you are going
through. Come and talk to us about how we can
help you through your transition.
The good news is there is a solution. By switching
your clients’ air payments from invoicing to a
lodge card, you can end your concerns about
cashflow overnight.
Time to switch to card
At AirPlus International, we would argue it’s time
to switch to a lodge card anyway. By moving off
invoicing, your processing costs will drop dramatically,
you’ll never have to worry about chasing non-payers
again and you can concentrate on doing what you
do best – running a top-class TMC.
We understand that making a change – even when
the business case is overwhelming – isn’t easy.
That’s why we hope this paper will make the task
a little bit easier. It sets out:
> What the new fortnightly remittance means
for your TMC
> Why the solution is to move to a lodge card
Caroline Haywood
Managing Director
AirPlus International Ltd
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AIRPLUS. FORTNIGHTLY BSP REMITTANCE.
The Background.
BSP Remittance Goes Fortnightly.
What is BSP?
BSP is the International Air Transport Association’s
Billing and Settlement Plan. It is a worldwide scheme
which enables travel management companies (TMCs)
and other IATA-accredited travel agents to make a
single regular remittance covering all sales of tickets
on IATA member airlines.
260
Number of IATA airlines,
accounting for 83
per cent of total global
air traffic
What is changing?
Barring any last-minute surprises, IATA’s governing
Passenger Agency Conference will, in October 2015,
ratify a December 2014 recommendation to shorten
the regular remittance period for UK-based agents
from monthly to fortnightly. The switch is scheduled
for 1 June 2016.
Fortnightly or even weekly remittance is now the
standard in most countries. New agencies in the
UK are already required to remit weekly. In the
USA, which uses a different settlement scheme
administered by Airlines Reporting Corporation,
remittance is daily.
83%
(Source: www.iata.org)
Why Fortnightly Remittance
Creates a Problem for TMCs
Going fortnightly will fundamentally impact the way
many TMCs handle their finances. Flights on airlines
paid for through BSP account for up to 90 per cent
of the total travel sales of some TMCs.
In particular, moving remittance fortnightly creates
a major cashflow problem. TMCs which pay airlines
via BSP usually invoice their clients to recover the
money on a monthly basis as well. It means money
would go out from the TMC to BSP two weeks or
more before the TMC invoiced their clients in turn.
That is less than ideal at a time when interest rates
are expected to rise again.
Dec
2014
IATA Agency Programme Joint Council
recommends to move UK travel agents
from monthly BSP remittance to fortnightly
Oct
2015
1st Jun
2016
IATA Passenger Agency
Conference expected to
approve APJC decision
Scheduled date for move
to fortnightly remittance
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AIRPLUS. FORTNIGHTLY BSP REMITTANCE.
The Options Available.
The TMC-airline-corporate client money flow
There are two basic ways that corporate clients can pay for an IATA
published fare booked through a TMC:
Client books
with TMC
TMC invoices
the client
The BSP Route
BSP pays
the airline
Client books
with TMC
The client
pays the TMC
TMC makes
single monthly
payment
to BSP
The choice
The move to fortnightly BSP
remittance leaves TMCs with three
options for managing clients whom
they currently invoice monthly.
Option 1 – Stick with monthly invoicing
Advantage
> Keeps client happy with generous credit terms
and no disruption to existing arrangements
Disadvantages
> Potentially leaves TMCs out of pocket. Major
cashflow problems can occur because TMCs will
have to remit to BSP before receiving payment from
their clients. There is also a risk of non-payment by
the client.
> Using BSP is expensive for the TMC. Although
there are no fees to pay, the hidden operational
costs of accounting through BSP amount to £17
per invoice (see Solution section below).
> Staying on monthly invoicing is financially unviable
other than for a handful of TMCs with very limited
BSP business or that are in a position to fund
the shortfall.
Lodge card
used to confirm
payment
The Card Route
Client pays
the card
issuer
Card issuer
immediately
pays the airline
Card issuer
invoices the
client
Option 2 – Move clients to fortnightly invoicing
Advantage
> Overcomes the threat to cashflow by resynchronising invoicing with new fortnightly
BSP remittances.
Disadvantages
> Alienates clients accustomed to paying monthly.
> Risks losing business to TMCs which opt to retain
monthly invoicing.
> Using BSP is expensive for the TMC. Although
there are no fees to pay, the hidden operational
costs of accounting through BSP amount to £17
per invoice (see Solution section below).
Option 3 – Move clients to payment by lodge card
The third option is to move your clients off invoicing
all together in favour of their paying airlines by card.
There are two fundamental reasons why this is the
best solution:
> Card avoids the risks and heavy costs of invoicing.
> There are many positive additional benefits to using
cards, both for the TMC and the client.
The next section explains why in more detail.
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AIRPLUS. FORTNIGHTLY BSP REMITTANCE.
Why Switching to Card
Payment is the Solution.
£17
Estimated cost for a TMC
to process a client invoice
Card payments work better than invoicing for the
overwhelming majority of TMCs. IATA’s change from
monthly to fortnightly BSP remittance simply makes
a strong case for cards even stronger. Here’s why.
Benefits for the TMC
Reduce your payment processing costs
The BSP/invoicing route is a very expensive
one for most TMCs. Since it is not wrapped into
a single line on a balance sheet, invoicing is very
much a HIDDEN cost. But based on our research
with TMCs, we estimate that the full cost of
processing an invoice is £17 per transaction.
Among the elements making up that cost are:
> Invoice issuance
> Statements
> Credit control
> Accounts payable
> Reconciliation
> Bad debt or insurance against non-payment
> Provision of lines of credit
> Delay to payment (generally, TMCs don’t charge
late payment fees)
The cost of each of these elements is either
reduced or eliminated completely by switching to
card payments.
No fees to the TMC for published fares
Card companies make their money by charging a
merchant fee, but on published fares it is the airline
which acts as the merchant and therefore pays the
fee. TMCs do not pay anything to the card company.
(TMCs are, however, the merchants for net fares.
For more on this, see below.)
No need to worry about non-payment
TMCs have to pay BSP on time or they default.
Unfortunately, clients do not always pay TMCs
on time. When clients pay late, your cashflow
problems multiply. When clients don’t pay at all,
you end up severely out of pocket. Switching to
card eliminates all these problems in one stroke.
Lodge card or plastic
corporate card?
There are two basic types of card solution that
TMCs can use to book air tickets for their clients.
The TMC can either enter the traveller’s plastic
corporate card number, or they can use a lodge
card solution, also known as a company account,
centrally billed account or ghost card. We call our
version the AirPlus Company Account. The process
is very simple:
Step 1 – For each of your corporate clients, AirPlus
creates an account with a 15-digit card number.
Step 2 – Every time one of your client’s travellers
makes a booking, the transaction is paid for
through that central account.
Step 3 – AirPlus pays the the airline.
Step 4 – AirPlus sends your client a single monthly
invoice covering all reservations made by all their
travellers through your TMC.
In nearly all cases, lodge is the ideal route to go
with your clients for air bookings:
> You have less admin because the same account
number is used every time.
> Lodge strengthens your relationship with your
client because it can be used to pay for bookings
by all travellers, not just those who have
corporate cards.
> It makes travellers more loyal to booking through
the TMC channel because payment is so easy.
> Management information quality is enhanced
(see below for more details).
> The booking process remains the same from
the client’s perspective.
The rest of this paper focuses specifically on lodge
cards as a solution, although many of the same
benefits would hold true for plastic cards too.
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AIRPLUS. FORTNIGHTLY BSP REMITTANCE.
Reduce your BSP IATA bond
Since BSP is a line of credit, TMCs pay a bond to BSP
as surety. Paying by card removes transactions from
the BSP system, which means TMCs reduce their credit
requirement and can therefore reduce their bond.
Guarantee your transaction fee revenue
It’s not just the ticket that is settled by card. You can
take payment for your transaction fee at the same
time. This eliminates the risk of fee non-payment
through invoice and what’s more, leads you to being
paid quicker.
Focus on your day job
You’re a TMC, not a bank. Your speciality is arranging
and consulting on travel for your clients. Switching
to card cuts out all the non-core bureaucracy involved
in being both a provider (to clients) and recipient
(from BSP) of credit. Instead you can concentrate
on what you do best, and leave the task of payments
to those for whom it really is the day job – like
AirPlus International.
Benefits for your corporate clients
Allow your clients to carry on paying monthly
Instead of receiving one monthly statement from
you, they receive one monthly statement from
their card company. That means no need to face
the difficult conversation of moving your clients
fortnightly. What’s more, AirPlus International
undertakes to match the credit terms you currently
offer to your clients wherever possible.
Weekly BSP remittance?
It is widely expected that over the next few years
BSP will move UK agents to weekly remittance,
as is already the case in 88 countries worldwide.
Switching to cards now saves the problem of having
to change payment terms with your clients not once
but perhaps twice.
Give your clients better management information
Top-class MI drives better policy control and supplier
negotiations for your clients. And when you give
them the AirPlus Company Account, you ensure they
receive uniquely detailed MI no other card provider
can offer. See the next section, Why Choose AirPlus
International?, for more details.
Give your clients automated feeds into their
expense management tools
For clients with an automated expense management
solution, such as SAP, Concur or KDS, card
payments are the natural choice. Each transaction
made through a card can be uploaded directly into
the online expense report of the traveller – a huge
time-saving.
Give your clients automated feeds into their
accounting and finance systems
BSP was built for the benefit of airlines. The financial
data flows neatly into their systems. Cards are
corporate-focused, not airline-focused – they are
designed to integrate seamlessly with your clients’
systems. A single monthly AirPlus Company Account
statement can be uploaded directly into their
accounting and financial packages, leaving a clear
audit trail.
In addition, your clients can specify supplementary
information which can be collected in unique
reference fields and will appear next to the
transaction in their statement. All of this can be
built into client profiles so that the work flow is fully
automated with the TMC.
Changing is easy
Setting up a lodge card such as an AirPlus
Company Account involves minimal work not
only for you but also for your client. The booking
process remains unchanged.
Are there any costs involved in
switching to card?
TMCs pay no merchant fees on card payments for
published fares, but there are two potential cost issues
to bear in mind when considering the card route.
Net fares
When a TMC sells a net fare, it always settles with
the airline through BSP. Therefore, when the TMC
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AIRPLUS. FORTNIGHTLY BSP REMITTANCE.
sells the fare on with a mark-up, it is the TMC which
is liable to a merchant fee by accepting a card
payment from the client.
Is the merchant fee a price worth paying? In almost
all cases, yes. For short-haul and for economy
long-haul fares, the merchant fee is less than the
total processing cost of raising an invoice. For
premium long-haul fares, the cost of the merchant
fee may be greater. However, it is crucial to
remember the many other important benefits of
card over invoice, including guaranteed and faster
payment by your clients.
We recommend taking a closer look at your total mix
of air business, both published and net. If a large
majority of the fares you sell are long-haul premium
net, then we can look at alternative solutions for you.
For any other business mix, card will almost certainly
be a major money-saver.
Airline card surcharges
Most airlines offset their merchant fee costs by
imposing surcharges on card payments. For
example, British Airways’ current surcharge of £5
per card payment.
It is not TMCs which pay this surcharge but their
clients. But the question of course is whether it will
cause your clients to object to moving from invoice
to card?
In our experience, very few do. The benefits and
efficiencies of using a card – better MI, seamless
integration to expenses and financial systems –
are so overwhelming that most consider the price
well worth paying. After all, we sell directly to
the corporate market, and every client we (or our
competitors) sign directly has made the cost-benefit
calculation in our favour. And AirPlus has many
TMC customers which operate very successfully
with most or even all their clients paying by card.
The lower processing costs of cards also give TMCs
greater scope for flexible pricing. In other European
countries, for example, TMCs commonly charge lower
transaction fees to clients which pay by card than
those which pay by invoice.
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AIRPLUS. FORTNIGHTLY BSP REMITTANCE.
Why Choose AirPlus International?
We hope we have set out the overwhelming case
for switching from invoicing your clients to a lodge
card. Here’s why your lodge card issuer should be
AirPlus International.
Why AirPlus International is best
for TMCs
Work with a travel specialist, like yourselves
You are a specialist travel company. So are we.
To put it bluntly, our competitors are not. They are
banks who focus on both consumer and commercial
finance, and T&E is not always their top priority.
At AirPlus International, all our products are
exclusively designed for the corporate travel market.
And because it is the only thing we do, we are laserfocused on doing it very well.
A tailored service
As part of the travel industry ourselves, your business
is much more than another financial transaction to
us. Our philosophy is to build a truly consultative
relationship that understands how to create the right
payments structure to fit the shape of your business
– your unique processes, business mix and financial
arrangements. That’s why many of the people we
hire are from travel industry backgrounds.
We will offer the same payment terms
As an example of respecting the sensitivities of
change, we will ease the way by offering the same
credit terms to your clients as you do today for
your invoicing wherever possible.
We provide UK-based customer support
Do you hate finding yourself speaking to a helpdesk
on a crackly line thousands of miles away? So do
we. That’s why your AirPlus customer support adviser
will always be right here in the UK. The same goes for
your clients. All customer support for them is based
in the UK too.
We work with your technology partners
AirPlus International is not tribal. We work with
more of your technology partners – including GDSs
and online booking tools – than any other issuer.
We integrate with existing industry technology or
your own bespoke solution to ensure the booking
process remains the same.
Why AirPlus International
Company Account is best for
your customers too
There’s a reason AirPlus International has won
Best Corporate Card Provider at the UK Business
Travel Awards for four out of the five years since the
category launched. Quite simply, our DNA is different
than all our competitors, and that allows us to offer
features for the corporate travel market which no
one else can match.
Uniquely rich data
We are the only UK issuer to operate our lodge card
on the UATP platform. UATP is airline-owned, which
means our customers gain unique access to direct
airline data. Examples include:
> Level 3 data – Enhanced information includes
booking class, whether the fare was negotiated
and whether there was an upgrade.
> Pro-rated data – Data split out for each leg of a
multi-sector booking.
> Flown data – For certain airlines, we also offer
data based on what was actually flown rather than,
as with other payment systems, what was ticketed.
Flown data is exceptionally useful for supplier
negotiations. It also helps identify unused tickets.
> Tax summary data – Full airline tax and fees
breakdown. Again, no other issuer offers this data.
Flexible invoicing
Your clients can choose from a multitude of layouts,
including fully customisable sorting criteria and subtotalling options, to find the format that uploads just
right for them. And our patented FlexEbill tool takes
integration even further, individualising formatted
electronic data to the precise technical requirements
of your clients’ financial systems.
10
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AIRPLUS. FORTNIGHTLY BSP REMITTANCE.
Next Steps
Start planning for change
Change is coming, and you need the right partner
to help manage your way through it. Please contact
us directly to arrange an initial consultation or if
you would like further information on any of the
changes highlighted in this paper:
E: [email protected]
T: +44 (0) 20 8994 4725
We will help you understand how fortnightly
BSP remittance will affect your company and talk
you through your options based on the unique
circumstances of your business.
AirPlus International Ltd.
Building 4
Chiswick Park
566 Chiswick High Road
London W4 5YE
T +44 (0) 20 8994 4725
F +44 (0) 20 8987 6113
[email protected]
www.airplus.com