The New Generation of IATA Settlement Systems (NewGen ISS)
In the 1990s, as a Travel Management Company (TMC), we saw the introduction of the Billing and Settlement Plan (BSP), the electronic billing system for airline tickets. This brilliant concept saved a lot of work and offered benefits for all parties involved. It eliminated the need for manual overviews of the tickets we printed, and monthly bank transfers to airlines (by telephone!) became a thing of the past. The system offered airlines even more benefits, such as payment security, thanks to the associated bank guarantee, and improved liquidity. Time has not stood still, and IATA has now further modernised the system. In two months’ time, a new BSP system will be rolled out in the Netherlands, which eventually will also affect our customers.
The rollout of the new BSP system started in 2018 under the name of the New Generation of IATA Settlement Systems (NewGen ISS). In the Netherlands, it will be launched on 15 July 2019. The new IATA programme aims to limit any damage suffered by airlines if a travel agent gets into financial difficulties. There will be a distinction between agents who only take credit card payments and agents who sell tickets on account. There will be more (and more frequent) creditworthiness checks, depending on the type of agent. In addition, the number of tickets some TMC’s can print will be capped. In the event of high demand, this may lead to us running out of tickets. If we then request a new supply of tickets, a higher bank guarantee may be required. One of the developments that goes hand in hand with this is IATA EasyPay. In the light of PSD2 and open banking in the UK, IATA is developing its own payment method for transactions, which will ensure quicker and more secure payments to airlines. One thing is sure: payment terms will get even shorter (going down from two weeks to one week), and credit limits will be tightened.
ANVR, the Dutch Association of Travel Agents and Tour Operators, has followed these developments with great scrutiny, and has voiced the opinion that while the new programme sufficiently protects airlines, those same airlines and IATA are doing nothing to prevent damages suffered by TMCs when airlines go bankrupt. Representing our interests, ANVR has suspended the Dutch consultation with the airlines, because the bankruptcy of airlines, which seems to be commonplace these days (think of Insel Air, WOW air and the financial problems Jet Airways is facing), has a huge impact on us as a TMC and on you as a customer. Despite these objections, the implementation in the Netherlands in three months’ time will go ahead as planned.
Obviously, in the longer term, such fundamental changes in market circumstances may also affect companies booking a lot of business trips. The shorter, one-directional payment terms will put pressure on companies’ profitability, and the subsequent improvement of airlines’ liquidity will weaken their customers’ liquidity, including that of TMCs and their business customers. We will keep you informed of developments.
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