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Executive Vice President, Head of Americas, Airlines, Amadeus IT Group
Have you ever thought of a CFO as a grey man in a grey suit doing a grey job? The answer is probably yes. But banish that thought. An airline CFO can be much more than the person leading what is perceived as a back-office function. In fact, I believe that the financial department of an airline can have a huge impact not just on improving the bottom line of the company – in some instances more so than the commercial activity – but also, in improving the passenger experience.
It all starts with revenue leakage prevention. Industry figures regularly report that financial leakage can cost airlines as much as 3% of their revenues. Amadeus has the tools to help airlines monitor fraudulent behaviours in real time, as well as automate complex and manual processes, which can reduce this leakage drastically. In an industry long known for its tight margins, we could be talking about the difference between profitability versus a loss.
It all starts at the point of sale, where agents are issuing tickets. Some agents are often looking for ways to “bend the rules”. For example they may try to ignore ticketing time limits or avoid fuel surcharges. And every time they do this, an airline is leaving money on the table. It’s impossible to avoid all of these situations. However, identifying these issues in real time, and specially being able to take action immediately, is critical. Leakage is much more difficult to deal with post flight, and sometimes it’s impossible.
After the sale, changes and refunds come into play. Here there is a need for accurate data and specially automation, since the process to apply fare rules for changes and re-pricing is complex, and mostly manual. As a result, it’s often not applied, or not applied correctly, resulting in huge losses per ticket, amounting to up to $45 USD per ticket changed. Ouch that hurts!
The same problems with fraud and manual reconciliation apply to the payment process. Between $6 and $11 USD are lost per passenger. And finally we get to revenue accounting, when an airline will need to figure out how much to bill and pay to interline partners. This is where a financial system that allows for a fully automated revenue reconciliation and auditing process is needed.
The good news is that this system already exists. Amadeus is working with numerous airlines with extremely positive results. 100% revenue integrity is possible. If this represents around 3% of revenue for any given airline, which would go straight to the bottom-line, then imagine the impact on its financial performance. And not only that: streamlined, automated financial processes (such as interline billing, tax management or sales auditing) mean that around 30% of both the workload effort and the overall IT costs of financial departments can be reduced.
How about cash flow management? With a system that tells you exactly how much money an airline has made for a given flight the moment the plane door closes, with collection of the cash a few days later, a CFO could revolutionise cash flow management!
In case all of this wasn’t enough, CFOs could also play a big part in making and supporting strategic decisions of an airline. Believe it or not, a finance department can enhance or even generate new revenue opportunities. It could determine the success of a marketing campaign or help improve customer experience.
It all boils down to data. With automated and streamlined financial processes, the finance department is capable of providing real time data for marketing and commercial teams to decide, with the relevant data at hand, if their strategies and campaigns are successful or not.
And if we’re talking about loyalty, think about what a comprehensive picture of traveller behaviour that feeds personalisation and loyalty systems could mean. This accurate and real-time information could help an airline actually design their products.
All of these are issues should be top of mind for any CEO of any airline in the world. If the CFO can improve financial performance while also helping generate new revenue and improve the customer experience, then the CEO just found a new best friend.