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  • Shawn Kousha

What is BSP? An introductory view to IATA's Billing and Settlement Plan (BSP) for Airlines and Agents

billing and settlement plan stakeholders shown in this image

The Billing and Settlement Plan (BSP) is an innovative system developed by the International Air Transport Association (IATA) to streamline the interactions between airlines and travel agents. By simplifying selling, reporting, and remitting processes, BSP enhances efficiency and financial control, serving over 370 airlines in 180 countries. This post will look into the core advantages and workings of BSP, highlighting its significance in the aviation industry.

1. Centralization of Transactions on BSP

BSP acts as the pivotal point where all sales transactions between airlines and agents are consolidated. This system allows agents to issue one sales report and make a single payment for all transactions, regardless of the number of airlines involved. Conversely, airlines receive one comprehensive settlement from BSP, covering sales from all agents. This centralization significantly reduces administrative burdens and enhances financial accuracy.

2. Financial Efficiency and Savings

The streamlined approach of BSP means fewer resources are needed for billing and collections, leading to significant cost savings for both airlines and agents. Additionally, the electronic distribution of billing reports and automated generation of adjustments (such as debit or credit memos) further reduce operational costs and improve the speed of financial transactions.

3. Enhanced Financial Control

With centralized processing, BSP offers improved financial oversight by enabling better cash flow management and consolidated document flow. This arrangement not only speeds up quality control but also ensures that all process stakeholders are monitored by a neutral body—enhancing transparency and trust among participants.

4. Simplified Electronic Ticketing

Agents are provided with electronic ticket numbers for issuing tickets on behalf of any BSP airline, facilitated through an IATA-approved ticketing system like a Global Distribution System (GDS). This capability simplifies the ticketing process immensely, making it seamless for agents to sell transportation across multiple airlines without the need for separate ticketing agreements.

5. Governance and Continuous Improvement

BSP is governed by the Passenger Agency Conference Resolutions, ensuring that the system operates under a uniform set of standards globally. This governance structure includes various consultation groups that allow for ongoing feedback and enhancements, ensuring the system remains responsive to the needs of both airlines and agents.

In conclusion, the Billing and Settlement Plan (BSP) offers a robust framework for managing the sales and ticketing operations between airlines and travel agents. By enhancing operational efficiency, reducing costs, and improving financial control, BSP not only supports the business objectives of airlines and agents but also contributes to the overall health of the aviation industry.

a flow chart showing the BSP process through card
BSP card payment workflow

What would happen if there was no BSP?

Without the Billing and Settlement Plan (BSP), the airline and travel agency sectors would face significant challenges in managing their interactions and financial transactions. Here’s a look at the potential impacts of not having BSP in place:

1. Increased Administrative Burden

Without BSP's centralized system, each travel agency would need to manage individual relationships and settlements with each airline. This would involve separate contracts, billing systems, and settlement processes for each airline they do business with, drastically increasing the administrative workload and complexity.

2. Higher Costs

The lack of a streamlined and centralized billing and settlement system would likely lead to higher operational costs for both airlines and agents. More resources would be required to manage multiple billing systems, track payments, and handle disputes. These increased costs could ultimately be passed on to consumers in the form of higher ticket prices.

3. Slower and Less Reliable Financial Transactions

The speed and reliability of financial transactions between airlines and agents could be compromised. Each transaction would need to be processed individually, increasing the likelihood of errors and delays. This could affect cash flow, especially for smaller travel agencies and airlines that depend on timely settlements.

4. Reduced Financial Control and Increased Risk

Without the oversight and centralized control provided by BSP, there would be greater potential for financial discrepancies and fraud. Airlines and agents would have a harder time monitoring transactions and ensuring all payments are accurate and timely, leading to potential financial losses.

5. Fragmented Ticketing Processes

In the absence of BSP, the ticketing process would become more fragmented. Agents would need to manage separate ticketing systems or interfaces for different airlines, complicating the booking process for customers and potentially leading to issues with ticket issuance and validity.

6. Decreased Market Efficiency

The overall efficiency of the airline ticket market could decline, with slower transaction processing and increased difficulties in offering coordinated services across airlines. This inefficiency could hinder the industry’s ability to provide competitive and convenient service options to travelers.

BSP plays a crucial role in maintaining an efficient, cost-effective, and secure environment for airline and travel agency transactions. Its absence would not only complicate the operational aspects of selling airline tickets but also affect the broader dynamics of the aviation industry, potentially reducing service quality and financial stability.

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