Simplified
Involuntary Reroute
Settlement
Presented by
Lori Tully
A4A and ACH
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Simplified Involuntary Reroute Settlement
• Background:
• In 2012, interest expressed by industry to
develop simplified approach for settling invols
• In 2014, simplified involuntary reroute settlement
(“SIRS”) process launched for worldwide
adoption
• ACH carriers mandated to settled involuntary reroutes
using simplified approach since 1981
• ACH process is aligned with SIRS process
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Simplified Involuntary Reroute Settlement
• What is SIRS?
• A Multilateral Agreement and process that allows
two participating airlines to agree to settle
involuntary reroutes at a % of the IATA Weighted
Mileage Factor (“WMF”), based on the origin
and destination of the lifted involuntary reroute
coupon or FIM
• Managed by ACH
• Supported through AIA Services
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Simplified Involuntary Reroute Settlement
• Why do we need SIRS?
• Involuntary reroute settlement procedures are
complex, time consuming, and prone to dispute
• Settlement rules for involuntary reroutes state:
“…the airline(s) carrying the passenger over the
revised portion of the routing...shall receive the
value which would have accrued to the original
carrier…”
• But then they also state:
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Simplified Involuntary Reroute Settlement
“…if the issuing carrier cannot supply an official
tariff reference…then the uplifting airline will bill on
the basis of the lowest applicable official fare of the
original receiving carrier(s), available, for sale to
any carrier. In order to determine the fare owner,
apply the standard fare selection rules for the
original routing.”
To which the revenue accountant says:
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Simplified Involuntary Reroute Settlement
“Huh?”
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Simplified Involuntary Reroute Settlement
• The challenge:
• The new receiving carrier is entitled to validate
that the fare of the original ticket was:
• An applicable fare based on the published fare basis
of the original ticket, and
• Filed in a tariff available to the general public, if not:
• New receiving carrier is entitled to bill the issuing
carrier of the involuntary reroute ticket the lowest
applicable published fare
• Resulting in…..
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Simplified Involuntary Reroute Settlement
Disputes!
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Simplified Involuntary Reroute Settlement
• Consider this:
• 1 Million Rejection Memos are billed between
airlines each month
• 40% estimated to relate to involuntary reroutes
That’s 4.8 million
rejections just for
involuntary
reroutes every
year!
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Simplified Involuntary Reroute Settlement
• How is the SIRS % of WMF calculated?
• Derived from 1% sample of participating carriers’
sales from which each coupon’s MPA prorate
amount and IATA WMF are determined
• Results separated into one of 10 global regions
based on the O & D of each coupon
• The sum of the prorates are compared to the
sum of the IATA WMFs to derive a % for each
participating carrier and for each global region
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Simplified Involuntary Reroute Settlement
• Excluded from 1% sample:
•
•
•
•
•
•
Non-passenger type tickets
Zero fare tickets
Tickets with fare = “Q”
Coupons with prorate <$5 or > $20K
Reissued tickets
Non-Revenue/ID tickets
• MPA Proration
• YQ/YR amounts excluded
• Provisos included
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Simplified Involuntary Reroute Settlement
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Simplified Involuntary Reroute Settlement
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Simplified Involuntary Reroute Settlement
Example: Invol Ticket Issued and Invoiced in 08/2015
Orig
LAX
JFK
FRA
14
Dest
JFK
FRA
MUC
Region
D
E
F
WMF
3264
4785
474
% Rate
11%
10%
11%
Settlement
$359.04
$478.50
$52.14
Simplified Involuntary Reroute Settlement
• The application of percentages:
• Percentages calculated and distributed monthly
• No later than the 15th calendar day each month
• Applicable to next month’s invoices
• Example: Sales from January are used to calculate
rates applicable to March
• FIMs use rates applicable to invoice month
• Involuntary Reissues use rates applicable on
date of reissue
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Simplified Involuntary Reroute Settlement
• Benefits:
• Eliminates lengthy rejection stages
• Reduces prior period adjustments to revenue
• Disputes can last years with little or no informational
value when finalized
• Internal customers receive accurate flown
revenue data upon initial posting
• Reduced costs in Revenue Accounting
• Leading to…..
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Simplified Involuntary Reroute Settlement
Everyone’s Happy!
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Simplified Involuntary Reroute Settlement
• Governance:
• Steering Committee responsible for general
administration of Agreement and may authorize
amendments
•
•
•
•
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Six Airline Representatives
Accelya, ATPCO, IATA and ACH Representatives
Formed in April 2015
Three meetings to date
Simplified Involuntary Reroute Settlement
• Evaluating SIRS:
• AIA offers a free test file to prospective SIRS
participants
• Online and/or OA stock
• Maximum 500 tickets
• Results contain industry involuntary reroute
settlement value and SIRS settlement value
for easy analysis
• Contact AIA at [email protected] to request test file
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Simplified Involuntary Reroute Settlement
• AIA Solution:
• AIA enhanced to apply SIRS during proration
• Robust filters allow airlines to isolate involuntary
reroute transactions for SIRS application
– By Plating, Marketing or Operating Carrier
• Offers quick, easy and low-cost implementation
• AIA Transaction fees apply, but
– AIA minimum fees waived for SIRS processing!
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Simplified Involuntary Reroute Settlement
• Implementing SIRS:
• Execute and return to ACH:
• Multilateral Agreement and Appendix C
• Appendix E to authorize your sales to be included in
calculation
• Appendix D to concur with other signatories to settle
in accordance with SIRS
• Cost is $1,500 annually
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Simplified Involuntary Reroute Settlement
• More Information:
• IATA Revenue Accounting Manual
• Agreement
• www.airlinesclearinghouse.com
• Presentations
• Overview Document
• Historical Rates
• List of Signatories and Sales Data Suppliers
• Matrix of Concurrences
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Simplified Involuntary Reroute Settlement
• Final Thoughts:
• When evaluating SIRS consider both payable
and receivables as well as the long term
advantages of the Agreement
• A single involuntary reroute transaction, with two
stages of correspondence, is estimated to
consume one hour of your staffs time
• Don’t they have something better to do?
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Simplified Involuntary Reroute Settlement
Let’s All
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Simplified Involuntary Reroute Settlement
Thank you
Terry Delaney
IATA Revenue Accounting
Manager
Lori Tully
ACH Managing Director Revenue
Accounting
AIA
[email protected]
[email protected]
[email protected]
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