The sum was defrauded from payments from travel agents in Thailand from January 2005 to August 2009 before the money could reach IATA’s international clearing house in Bangkok that is responsible for collecting payments for tickets from travel agents.
The fraud was covered up through counterfeiting bank statements, falsifying bank account reconciliation and destroying transaction records, says IATA.
An investigation was launched into the matter in August 2009, but in a bizarre twist the unnamed employee was found dead by police shortly there after. The employee’s death is still being investigated by Thai police, says IATA.
The topic marred IATA’s annual meeting held in Berlin last month as relations between IATA and its members have been soured by the incident, a representative from an Asian carrier who wished not to be identified, told Payload Asia. IATA has informed the nearly 84 affected carriers that they are contractually bound to cover the losses resulting from this fraud.
Particularly hard hit are Thailand’s two largest carriers – state-owned flag carrier Thai Airways International (THAI) and Bangkok Airways (BA), Thailand’s first privately owned carrier. In THAI’s case the loss amounts to more than Bt100, while BA’s share is about Bt55 million.
“Airlines have understood this contractual obligation which recognises the fact that the system operates on a cost recovery basis,†said IATA.
The representative said the issue has severely shaken the confidence of carriers in the billing and settlement system, known as BSP. “If this can happened in Thailand, it can surely happen just as easily in other locations around the world. IATA must step up and conduct a thorough review of its settlement mechanisms for both passengers and freight around the world, and it is a process that must be initiated immediately,†he said.
THAI president Piyasvasti Amranand and Bangkok Airways chief executive Puttipong Prasarttong-Osoth were not satisfied with the explanation delivered by IATA director-general Giovanni Bisignani at the Berlin conference.
“If we were satisfied with IATA’s explanation earlier, it would not be necessary for us to have a dialogue with him [Mr Bisignani],†Dr Piyasvasti told the Bangkok Post.
“What happened to the IATA annual audit all these years? Why did they just discover the fraud last year?†The heart of the matter is more about how the system works and its transparency than the money,†he added.
Aleksander Popovich, IATA’s former head of cargo that stepped into the role of senior vice-president for industry distribution and financial services earlier this year, defended the BSP system, saying it had a successful collection rate of 99.97 per cent.
The BSP – known as the billing and settlement plan – was first introduced in 1972 and handled US$1.6 trillion in transactions between 2002 and 2009. IATA has said it is trying to recover as much of the money as possible, as well as filing a claim with its insurance provider, but its policy only covers US$4 million in losses from criminal acts, less than a third of the amount stolen.
Popovich estimates the carriers may get back “around 40 per cent-plus†of the defrauded amount, according to the Bangkok Post.
“We are very concerned of this breach of our systems by a suspected fraudster. A full internal investigation is forming the basis for better controls and processes,†IATA said.
IATA has since transferred the operation of the scheme to its regional office in Singapore from Thailand after it discovered the financial irregularities. “A number of measures are underway globally in consultation with the airline experts and IATA governance groups,†IATA added.