Airlines Clearing House, inc
., an airline-owned not for profit corporation established in 1943 by 18 Charter/ Stockholder Member Airlines, provides a simplified and inexpensive facility for expediting clearance and net settlement of inter-airline (interline) accounts receivable billings with scheduled airlines worldwide arising from the sale of interline passenger and freight transportation; transportation related goods and services provided by one airline to another such as maintenance, ground handling, catering, rentals, among other things; and charges arising from Universal Air Travel Plan transactions (a mutual airline industry charge program under which participating airlines issue UATP cards that cardholders may use to pay for airline tickets and other travel services).
The first ACH settlement took place in January 1944 with interline receivable billings totaling $2 million. The value of the settlement process to ACH participants is reflected in the volume of transaction billings settled through ACH. In 2008 transaction billings presented for settlement between ACH participants totaled nearly $9 billion. In addition, through an interclearance arrangement between ACH and the International Air Transport Association (IATA) Clearing House, whose membership is comprised of international scheduled air carriers, participants in one clearinghouse are able to settle interline accounts with participants in the other. In 2008 ACH participants’ billings against IATA Clearing House Members through the interclearance totalled over $2 billion.
The clearinghouse settlement process works like this – Airline A sells a ticket to a passenger who requires travel on Airline B, as well as A, to reach his destination. Airline A is authorized to sell transportation on Airline B under an interline traffic agreement between Airline A and Airline B. Airline A is obligated to pay Airline B its portion of the fare. Airline B submits a statement of charges (Recap Sheet) to the ACH Clearing Bank (JPMorgan Chase Bank) showing the amounts it has billed to Airline A (and every other ACH participant with which it has done business). Airline A submits a similar Recap Sheet showing the amounts that it has billed to Airline B and other ACH participants. On the basis of the Recap Sheets submitted, the Clearing Bank prepares for each participant Settlement Sheets showing the amounts the participant has billed to others, the amounts others have billed to the participant and the participant’s net settlement position. Each participant that is in a net debtor position is required to make funds available for the ensuing settlement. Each participant that is in a net creditor position is entitled to receive funds through the Clearing Bank.
The ACH Settlement between ACH participants and the ACH/IATA Interclearance between ACH participants and IATA Clearing House participants occur on different days, four times a month. Although settlements are performed on the basis of the dollar amounts presented for payment, the underlying flight coupons, air waybills and related billing documents supporting such interline billings are dispatched by the billing participant to the billed participant on monthly interline invoices. The billed participant then performs a post-audit of such billings and, in a subsequent clearance, the billed participant submits an adjustment billing for any overstated charges