Transcript Passenger Revenue Accounting

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________________
Passenger Revenue
Accounting
PRA 101S
Prepared by: Goss & Associates, LLC
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Table of Contents

Introduction to Passenger Revenue Accounting
(PRA)

Recording/Auditing Revenue - Pending Delivery

Recognizing/Verifying Revenue - Delivered

Risk from Poor Accounting Control
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Introduction to Passenger Revenue Accounting
 The airline industry has developed a sophisticated distribution system that
integrates worldwide airline sales and reservations to provide a standard
travel document, the airline ticket. When a transaction is recorded, a
contract or ticket is created between passenger and airline:
 This ticket provides a wealth of information and services including:
– A promise to provide airline services
– Airline reservation information
– Travel documentation
– “One price” regardless of the number of airlines involved in the itinerary
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Introduction to Passenger Revenue Accounting
 Revenue is the financial term used to describe the accounting event
that occurs when a promised service is either
–
Pending delivery revenue
 Unearned Passenger Revenue - Money collected or a receivable established
at the time of ticketing (contract) is recorded as an unearned passenger
revenue liability on the balance sheet. The AUDIT COUPON is used to
record these transactions.
or
–
Delivered revenue
 Earned Revenue
 Reclassified Revenue
 Other Airline Payable
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Risk from Poor Accounting Control
 Passenger revenue accounting provides the required controls to identify
improper accounting transactions, which if they go undetected, an airline
risks loss of significant revenue and cash.
 Effective policies and procedures can identify the following transaction
risks:
– Inaccurate profits/loss statement from misstated earned revenue
 Out of period revenue recognition. As an example, electronic ticket files, VCR’s, are
mishandled. Earned revenue would not be recognized until the ticketing time limit
expires, normally 12 months.
 Incomplete or inaccurate procedures are used to calculate earned revenue
 Procedures to validate and correct unearned revenue are missing
 Fare structure and rules are complex
 Fares are not published
– Overstated profits from understated unearned passenger revenue when there
was not enough unearned revenue to cover unused tickets.
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Risk from Poor Accounting Control
– Lost cash and overstated profits when:
 Over billings from other airline are not rejected or rebilled
 When you do not bill a lifted other airline flight coupon
 When you under bill an other airline flight coupon
 Your BSP/ISC/ASP payment is given to another airline and you do not recover it
– Lost cash and overstated profits when travel agencies, GSAs or other agents use
improper business practices such as:
 Slow reporting of sales transactions to take advantage of cash flow
 Under collecting from passenger
 Changing the information on a ticket - “Card Boarding”
 Not reporting sales
 Taking excessive commission
 Improperly applying tariff fares and rules
 Honest processing errors by agents under-charging passengers for premium services
 Honest processing errors by other airlines under-charging passengers for premium services
 Agents taking advantage of the process complexity to make money at the expense of an airline
 Other airlines taking advantage of the process complexity to make money at the expense of an
airline
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For more information, email: [email protected]
_______________
Passenger Revenue
Accounting
PRA 101S
Prepared by: Goss & Associates, LLC