As a result of the unprecedented financial emergency confronting the U.S. airline industry, ARC announced that it will initiate…
As a result of the unprecedented financial emergency confronting the U.S. airline industry, ARC announced that it will initiate immediately a consultative dialog with travel agents focused on identifying and implementing business process improvements necessary to maintain the continued viability and integrity of the ARC system.
David Collins, ARC president and CEO, said two key areas that ARC and the travel agents need to address together are the need to provide its airline customers with more accurate and timely financial information through a daily transmission of data and the abuses of the voiding function in the ARC system.
Although we have truthfully said on a number of occasions in the past that we had no plans for instituting daily reporting, that situation has now changed as a result of the prolonged crisis in the airline industry that threatens the viability of air transportation in the United States as we know it, Collins said. We will not be talking about daily remittance, although we will be looking at the current disparity between the billing of credit transactions daily and the settlement of cash transactions 10 to 17 days later, he added.
The industry dialog will focus on the need to expedite the flow of accurate data to the carriers. Across all industries today, management needs and expects to get daily data of what transpired in the business the day before, Collins said. While airline management gets daily transaction data from other distribution channels, they don’t receive the accurate reported transaction data from the ARC system in as timely a fashion.
Under the current system, up to two weeks can pass before data is transmitted to the carriers. Collins said, In today’s business environment, no management, and in particular, no airline management with the unprecedented financial challenges they currently face, can afford to wait weeks before they receive data on what is going on in their business. Under ARC’s preliminary view of such a system, and based on the standard workweek, transaction data would be sent to each ticketing carrier five times a week.
The voiding function was designed to cancel out a transaction where an error had taken place or where for some other reason the transaction had not actually taken place. The system is now being abused because the functionality is being used widely to cancel out transactions that did take place, Collins said. He said ARC has been experiencing increased fraud associated with the use of this function, including cases where travel agents have been voiding out all their cash transactions.
With the increasing losses the airlines have to underwrite resulting from improper voiding, the airlines are seriously questioning the integrity of the system, Collins said. We need to address these concerns about our processing system with the industry. The dialog we are initiating will focus around shortening the time available for voiding transactions.
Both airlines and travel agents have benefited for many years from the existence of the system that ARC manages, Collins said, and ARC wants to ensure that all the efficiencies of the system continue to be available to all participants. For a system that processes over $1 billion each week, continued belief and confidence in the integrity of the system by all participants is critical, he said. By addressing these issues, ARC’s goal is to make sure that the airlines continue to see the travel agency distribution system as an attractive and viable system in the future.
The dialog being launched will take place through ARC’s existing consultative mechanisms including the JAB-ARA (Joint Advisory Board – Agent Reporting Agreement), and particularly the Travel Agent Working Group.
ARC is targeting to implement these changes in 2003. More specific implementation dates will be announced in due course.
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