Introduction to SIS

1
Introduction to SIS

• Simplified Interline Settlement
• RA42 Miami 9 September 2008
• Nicholas Coote
• Director, Industry Clearing Services

2
Introduction
This presentation was published in Sept 2009. See
SIS website for updates.

• The Simplified Interline Settlement (SIS) project
  aims to simplify interline billing, and remove
  paper from the entire process, delivering
  tangible financial benefits to the industry.
• Upon endorsement by the IATA Board of Governors,
  use of the Integrated Settlement solution will be
  required for carriers settling payments through
  the IATA Clearinghouse.
• The presentation of SIS this week is purely
  informational there will be no related items put
  up for a vote.

3
Todays Goals

• To Understand
• Todays settlement processes and the vision for
  SIS
• SIS Phase 1 The basis of the project
• SIS Phase 2 Our progress this year, including
  project objectives and structure
• The basics of SIS solution Integrated
  Settlement (IS)
• SIS Phase 3 The future of the project
• Next Steps SIS this week and through the Board
  of Governors meeting

4
Interline Settlement Today
5
Interline Settlement - Today
Paper invoices, with coupon listing, coupons,
rejects, supporting documents (monthly)
Recap sheets - weekly
Settlement sheets (weekly)
Billed Airline
ACH
Billing Airline
F12 (weekly) F1 net amounts of inv F2 -
summary
F3 (weekly)
ICH
ATPCO
Cargo IDEC File (monthly)
Cargo IDEC File (monthly)
Pax IDEC File (monthly)
Pax IDEC File (monthly)
(incl FF pre IDEC Validation)
prorate engine
prorate engine
ARC-Compass (NFP storage)
Previously released sales record
GDSs BSPs
AIA FF
FF receives NFP value
6
The need for SIS

• Interline billing settlement process is highly
  paper-based
• Billing, supporting documents, rejects, re-bills,
  second rejects, sample forms, adjustment forms,
  reject correspondence, and lots more
• ICH was the same
• Forms 1, 2, Summary 2, and 3, but has been
  paperless since 2006
• Prime billing for Passenger and Cargo was
  automated in the 1980s (IDEC), but progress was
  slow
• Since its mandatory use for IET, Passenger
  membership has accelerated, but the technology
  cant cope and billings are out-of-sync with ICH
  Weekly settlement
• Weekly settlement has added to processing effort
  in airlines, and reconciliation problems have
  increased

7
The SIS Projectbackground
8
SIS Phase 1 Overview
Phase 1 Feasibility
Phase 2 Requirements Development
Phase 3 Implementation

• Summer 2007
• RAWG carriers created a proposal for a paperless
  billing and rejection process
• FinCom commissioned a feasibility study focusing
  on FIRST FINAL and accelerated settlement
  which was conducted with input from RAWG, IATA,
  AIA, and key airlines
• This concept was found to be feasible after
  changes to ICH and AIA processes, with further
  evaluation and prioritization required

9
SIS Phase 1 Overview
Phase 1 Feasibility
Phase 2 Requirements Development
Phase 3 Implementation

• September 2007
• Two papers presented at RA41, and joint breakout
  session covering the concepts held for all
  participants
• Papers and plans also shared with ACH and key ACH
  Member airlines
• Overwhelming support for concept of paperless
  interline billing at RA41
• General support for an early migration
• Support from First Final airlines and others
  for simplified billing and settlement processes

10
SIS Vision

• Fundamentally change, simplify and integrate the
  interline settlement process, delivering tangible
  financial benefits to the industry.
• Invoices are electronic and not backed by paper
• Prime passenger billings do not require paper
  invoices or coupon listings
• Passenger rejects, including any attachments, are
  submitted electronically without paper
• Cargo and Mail billings are electronic and
  paperless
• Miscellaneous billings (including any supporting
  information) are electronic, whether as data or
  with attachments
• IDEC formats are maintained with increased record
  types
• Settlement action directly from ET systems is
  enabled

11
SIS Phase 2 Overview
Phase 1 Feasibility
Phase 2 Requirements Development
Phase 3 Implementation

• January 2008 Phase 2 begins long-term vision
  formed for entire project
• February June Five SIS Working Groups meet to
  examine the interlines settlement processes which
  need to be changed, prioritize those changes, and
  produce functional requirements.
• June
• Working Groups (except for E-Invoicing) finish
  meeting
• IATA creates the Business Solutions Design (BSD)
  with combined requirements as set by all Working
  Groups

12
SIS Phase 2 Overview
Phase 1 Feasibility
Phase 2 Requirements Development
Phase 3 Implementation

• July
• IATA creates Request For Information (RFI) and
  sends to potential vendors
• Communication campaign begun to inform carriers
  of SIS website, webcasts, etc
• August Business case with high-level plan is
  created from BSD and results of RFI responses
  from potential suppliers
• September 2008 Presentations to RA42 and IATA
  Financial Committee

13
Phase 2 Objectives

• The creation and co-ordination of Working Groups
  composed of airline experts to review and develop
  the specific requirements
• Obtaining appropriate industry buy-in and
  agreement
• Documentation of functional business requirements
  and an overall business solution design
• Developing an RFI with IATA Procurement based on
  the detailed and agreed design
• Managing the resulting responses such that a
  valid business solution design, high-level
  timeline and costing can be obtained
• Preparing a business case to support SIS Phase 3.

14
Phase 2 Project Organization
SIS - Project Executive Sponsors Tom Murphy,
IATA Ayaz Hussain, IATA
Project controlling
Project content
SIS - Project Sponsors Nick Coote Terry Delaney
IATA Project Controller
SIS - Project Manager Gianna Monsch, aerwise
SIS Paperless Support WG
SIS E-Cargo WG
SIS IDEC WG
SIS E-invoicing WG
SIS Pax Billing WG (incl. AIA and non FF
carriers)
Industry Expert Groups

• UA (chair)
• AS, BA, IY, NW, NZ, SQ
• IATA, aerwise

• EK (chair)
• AC, BA, CV, LH Cargo
• IATA, aerwise

• BA (chair)
• AA, AF, LH, EK, KE, TP, VS
• IATA, aerwise

• LX (chair)
• AF, CO, DL, IB, IY, JL, LH, NZ, OS
• IATA, aerwise

• LH (chair)
• BA, DL, EK, NW, RO
• IATA, aerwise

15
Working Groups (1/2)

• The SIS Steering Group guides the working groups
  and the SIS project team and is responsible for
  setting the overall direction and scope of the
  project and ensuring that the project remains
  aligned with the business goals.IATA (chair),
  AF, NZ, AA, BA, EK, IB, LH, LX, UA, ACH
• The Passenger Billing WG has removed the paper
  from all primary passenger billing processes,
  including FIRST FINAL and Sampling.LX
  (chair), AF, DL, IB, IY, JL, LH, NZ, OS
• The Paperless Support WG has concentrated on
  standards for Passenger Rejection Memo, Billing
  and Credit Memo, including any supporting
  documents for these processes.UA (chair), AS,
  BA, IY, NW, NZ, SQ

16
Working Groups (2/2)

• The E-Cargo WG has ensured that interline cargo
  can be processed completely electronically,
  including both original and reject transportation
  billings, and cargo-related fees and charges. EK
  (chair), AC, BA, CV, LH Cargo
• The IDEC WG has expanded the IDEC standard with
  new record types in order to include additional
  transaction types and the ability to link to an
  image repository of supporting documents.BA
  (chair), AA, AF, LH, EK, KE, TP, VS
• The E-Invoicing WG is setting standards for
  paperless miscellaneous invoices, supporting
  documents and will monitor the legal and
  financial control aspects. The working group
  will continue meeting through Nov 08.LH (chair),
  BA, DL, EK, NW, RO

17
High-level Project Plan SIS Phase 2
18
Phase 2 SIS Deliverables Overview
19
RFI process

• RFI developed with IATA procurement and sent out
  to a number of possible solution providers with
  the BSD
• Covered by a strict NDA we cant even say how
  many
• Structured in modules to segregate responses and
  costs
• Responses reviewed and analysed, and a series of
  QA sessions organised with providers
• Responses ranked against experience, structure
  and content of solution offered, IT
  infrastructure issues, etc
• Most suitable solution proposers have been
  advised they will be asked to respond to the RFP
• These include AIA, NiiT/Softec, Kale, Accelya,
  InvoiceWorks
• Responses will be used to build an industry-level
  business case for the Financial Committee

20
Implementation Operational Costs

• Expectation is that IATA will cover the set-up
  cost, and charging will be set to cover operating
  and investment costs
• We have a number of guidelines
• Needs to be related to volume
• Needs to be related to the services used
• Needs to be simple to understand
• Needs to be simple to administer and verify
• Is likely to include a combination of
• Basic annual charge
• Some form of per-invoice charge
• Some form of per-item charge or data volume
  charge
• Proposals will be firmed up when we have
  contractual costs, and discussed with the
  Steering Group

21
The SIS Solution
Simplified Interline Settlement RA42 Miami 9
September 2008 Gianna Monsch Project Manager
22
SIS General Overview
Integrated Settlement
IS-WEB
IS-WEB
Billed Airline
Billing Airline
Digital Signature Company
IS-XML
IS-XML
Overall Processes
Overall Processes
Billing Invoicing Processes
IS-IDEC
IS-IDEC
Prorate Engine
Usage File
23
Key Features of IS

• Billing Carriers Input Format Doesnt Affect
  Billed Carriers Output Format
• Three major submission formats (depending on type
  of billing)
• Within available formats, billing carrier can
  choose any combination (one or more formats, but
  carrier is responsible to not submit duplicates)
• Format conversion takes place within IS and
  billed carrier can choose any combination (one or
  more formats which will contain identical data
  carrier is responsible to prevent duplicate
  imports)
• Validation occurs within Integrated Settlement
• Extensive validation occurs on submission,
  ensuring that data to be sent to billed carrier
  and submitted for settlement is complete
• ? Discussed in detail in Interface Formats
  Validation breakout

24
Key Features of IS

• Integrated Settlement stores digital copies of
  supporting documents? Discussed in detail in
  Interface Formats Validation breakout
• Airline Profile is centralized facility for all
  settings and preferences
• Web interface allows airlines to update system
  preferences, IS user access information, and
  settings (both carrier-specific and bilateral) to
  be used by the entire IS process
• All processes (billing, settlement, and
  invoicing) are based on the same information? No
  reconciliation problems!

25
Key Benefits of IS Billing Carrier

• Substantial savings due to
• Reduction in paper, postage and courier fees
• Reduction in internal paper handling and supply
  chain efforts
• No more loss of supporting documents and
  re-creation of invoices
• Automation of billing directly from uplifts (e.g.
  Auto-Billing)
• Optional à la carte service of Integrated
  Settlement

26
Key Benefits of IS Billed Carrier

• Substantial savings due to
• Reduction in internal paper handling and supply
  chain efforts(e.g. registration, and
  reconciliation of invoices to payment)
• Automated data
• Less manual intervention
• Data quality improvements on IS-IDEC
• Pax Rejection Memos, Billing and Credit Memo
  electronically
• Cargo Original AWB, Rejection and Charge Memo
  electronically
• Supporting Documents in electronic presentation

27
Key Benefits of IS

• Rejection Memo Correspondence process
  improvements due to
• Enforcement of RAM rules (RM stage and
  correspondence)
• Opportunity to detect duplicate rejections of the
  same original billing
• All rejections and correspondence link to
  previous billings information and supporting
  documents do not have to be re-uploaded
• Time-limit reduction possibilities for Rejection
  Memos and Correspondence
• Risk management and process improvements due to
• Fewer items outstanding for a shorter period of
  time
• Future potential time-limit reduction for prime /
  original billings
• Benefits to the environment due to reduction of
  paper and shipping
• Alliance objectives complemented by SIS

28
Airline Changes (where applicable)

• Change from IDEC to IS-IDEC
• 400 bytes instead of 160 bytes
• Follow rules in RAM
• Some detail records mandatory (e.g. taxes)
• Other elements mandatory (e.g. Source Code)
• Choose and implement other submission formats
  (IS-XML, IS-WEB)
• Prepare to scan and upload supporting documents
• Implement e-billing (possible legal implications)

29
Core Non-Core Functionality

• Core functionality of SIS enables paperless
  billing and settlement.
• The non-core functionality is considered by the
  SIS Working Groups to be value-added services
  its final inclusion is dependent upon
  implementation costs and airline demand and will
  likely be billed to carriers separately, based on
  usage.
• Non-core functionality includes (but is not
  limited to)
• Time of Sales Processes
• Some file formats for some processes
• Sampling-specific functionality for processes
  other than Provisional Billing and Rejections
  (basic Sampling functionality is core)

30
Moving Forward
31
SIS Phase 3 Proposed Overview
Phase 1 Feasibility
Phase 2 Requirements Development
Phase 3 Implementation

• September 2008 (after FinCom)
• Phase 3 begins
• Revised Business Solutions Design (BSD) finalized
• Request For Proposal (RFP) sent to potential
  suppliers
• January 2009 Supplier selection finalized
• February 2009 Integrated Settlement
  implementation begins
• March 2010 First carriers implement IS
• December 2011 All carriers potentially mandated
  to implement IS

32
Potential Timeline SIS Phase 3
Sep 2011
Apr 10 - Sep 2011
Mar 2010
Jan Feb 10
Nov Dec 09
Jun Oct 09
Mar May 09
Feb 09
Oct 08 Jan 09
High-level Project Plan

• SIS Phase 3a - RFP
• RFP Response Evaluation
• Vendor Selection
• SIS Phase 3b - Implementation
• Project Set-up
• Project Set-up
• Design and Implementation
• Requirements finalization review
• Development
• UAT User Acceptance Tests
• Pilot run
• Go - Live
• First carriers (pilot carriers)
• All carriers
• Potential mandated implementation SIS
• SIS Phase 3c - Implementation
• Project Set-up
• Review Functionalities

33
Potential Project Timeline

• Phase 3a - RFP (October 2008 January 2009)
• Phase 3b Implementation (February 2009
  September 2011)
• Pilot Carriers Begin Implementing March 2010
• All Carriers Begin Implementing April 2010
• Integrated Settlement Mandated September
  2011(based on Board of Governors approval)
• Carriers will have until September 2011 to fully
  implement IS and remove all paper from the
  process

34
Carriers Planning
Sep 2011
Apr 10 - Sep 2011
Mar 2010
Jan Feb 10
Nov Dec 09
Jun Oct 09
Mar May 09
Feb 09
Oct 08 Jan 09
High-level Project Plan

• Budget system changes
• Pilot Carriers (impl. January 2010)
• Carriers implementing 2010
• Carriers implementing 2011
• Change Documentation
• Receive Record Structures and Change
  Overview
• Implementation Go Live
• Pilot run
• Go - Live
• First carriers (pilot carriers)
• All carriers
• Potential mandated implementation SIS

35
Airline Budgeting Migration

• Carriers implementing in 2010 (including RAWG,
  SG, WG carriers and others) must plan for system
  changes and/or operational costs from the 2009
  budget-year onwards
• Carriers with own RA systems must budget for
  implementation and operational costs
• Carriers with third-party RA systems to consider
  operational costs and ensure that the system will
  be capable
• Migration (between March 2010 and September 2011)
• No big-bang
• Carriers can migrate in steps (Pax prime, Pax
  non-prime, Cargo, etc) over time
• ? Leads to parallel submissions through
  Integrated Settlement and F12
• Possibility to remove paper invoices on a
  bilateral basis

36
Next Steps Sep to Dec 2008

• RA annual meeting (September 08) - NOW
• Presentation and breakout sessions
• FinCom (September 08)
• They strongly support the initiative
• Board of Governors (December 08)
• They wish to see radical change
• They will be looking for initiatives that reduce
  operating costs, improve data quality, and help
  to meet environmental objectives

37
SIS at RA42

• WednesdayRA42 Breakout Sessions
• Passenger Prime Coupon Billings
• Passenger Non-Prime Coupon Billings
• Interfaces to IS (IS-IDEC, IS-XML, IS-WEB, etc)
• Cargo Miscellaneous Billings
• Thursday
• Introduction to E-Invoicing Legal Aspects of
  E-Invoicing
• Breakout Sessions Wrap-up
• Friday
• FIRST FINAL with Integrated Settlement
  (presented at the 5th Annual FIRST FINAL
  General Meeting)

38
Q A

• Detailed questions will be addressed in the
  breakout sessions
• Please ask questions about the project
  organisation and plan, benefits of IS, Phase 3,
  etc
• All presentations can be downloaded from the
  Revenue Accounting extranet.

39
Thank you.

• Email
• sis_at_iata.org
• SIS Website
• ?www.iata.org/whatwedo/finance/clearing/sis/index.
  htm