________________ P assenger R evenue A ccounting PRA 101S

1. Return to Home Page ________________Passenger Revenue AccountingPRA 101S Prepared by: Goss & Associates, LLC

2. Return to Home Page Table of Contents • Introduction to Passenger Revenue Accounting (PRA) • Recording/Auditing Revenue - Pending Delivery • Recognizing/Verifying Revenue - Delivered • Risk from Poor Accounting Control Prepared by: Goss & Associates, LLC

3. Return to Home Page 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 Prepared by: Goss & Associates, LLC

4. Return to Home Page 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 Prepared by: Goss & Associates, LLC

5. Return to Home Page 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. Prepared by: Goss & Associates, LLC

6. Return to Home Page 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 Prepared by: Goss & Associates, LLC

7. Return to Home Page For more information, email: joseph.goss@gmail.com _______________Passenger Revenue AccountingPRA 101S Prepared by: Goss & Associates, LLC