IATA, BSP & ARC Explained: Airline Risk, Cash Flow & Accreditation for Travel Agents and Tour Operators

The big picture: who actually does what

At a high level, airline distribution is held together by a small number of organizations that sit between you, as the seller, and the airline, as the service provider. They are not sales platforms but are financial and regulatory infrastructure.

International Air Transport Association (IATA) is the global trade association for airlines. Its role is to set industry standards and to accredit travel agents so they are authorised to issue airline tickets on behalf of member airlines.

The Billing and Settlement Plan (BSP) is the settlement system operated by IATA in most countries outside the United States. It is the mechanism that collects money from agents and distributes it to airlines.

In the United States, this role is performed by the Airlines Reporting Corporation (ARC). ARC combines both accreditation and settlement into a single system for the U.S. market and a small number of associated territories.

Together, these bodies form the financial plumbing of airline sales.

What IATA accreditation really means

IATA accreditation is, in practical terms, a licence to issue airline tickets directly. Without it, you cannot issue a ticket yourself. You must purchase tickets through someone who is accredited, typically a host agency or a consolidator.

For travel agents, accreditation becomes essential if the business model depends on high-volume ticketing, corporate travel, or complex itineraries involving multiple airlines where full control over ticket changes, reissues, and refunds is required.

For tour operators, accreditation is often unnecessary and sometimes undesirable. Many tour operators deliberately avoid IATA accreditation because of the financial guarantees it requires. Instead, they buy seats at net fares from consolidators or directly from airlines under commercial agreements. This approach often produces better margins for packaged travel.

There is also a lighter option called TIDS, the Travel Industry Designator Service. TIDS provides industry recognition and an IATA numeric code, which allows access to hotel and car rental commission programmes. However, it does not allow ticket issuance. The cost and compliance burden are far lower than full accreditation, but the functionality is limited.

The Modernization of Risk: NewGen ISS

Historically, IATA accreditation was a binary choice: an agent was either fully accredited, and requiring massive bank guarantees to insure against default, or they were not. Recognizing that this high barrier to entry stifled innovation, IATA introduced the NewGen ISS (New Generation of IATA Settlement Systems), which offers tiered accreditation.

The most notable innovation here is the "GoLite" accreditation. This tier allows smaller agents or startups to issue tickets without providing a financial security bond. The trade-off is that these agents cannot float cash; they must pay for tickets instantly using a system called IATA EasyPay (a dedicated e-wallet) or a corporate credit card. In contrast, the "GoStandard" accreditation remains the choice for larger corporate agencies, granting them a credit limit, or "Remittance Holding Capacity", that allows them to issue tickets now and pay later, provided they pass a rigorous financial assessment.

How BSP really works and where agencies get into trouble

If you operate outside the United States, BSP governs how airline money moves.

Instead of paying each airline individually, you make a single consolidated payment to BSP. BSP then allocates the funds to the relevant airlines. On paper, this looks efficient. In practice, the timing is where risk enters.

BSP operates on remittance cycles, which may be weekly, fortnightly, or monthly depending on the market. This creates a cash-flow gap. You may sell a ticket and collect the customer’s money today, but you are not required to pay BSP until a future settlement date.

The danger is obvious. If that cash is used to fund operating expenses before settlement, the agency risks defaulting when BSP calls the funds. This is precisely why IATA requires bank guarantees or insurance bonds. The financial security is not theoretical. It exists to protect airlines from agency cash-flow failures.

IATA EasyPay is a newer development that reduces this risk. It operates as a prepaid wallet rather than a credit system. Because airlines are paid immediately, the required financial security is lower. For smaller agencies or those with limited balance sheets, this can materially change the economics of accreditation.

How ARC differs in the United States

In the U.S., ARC plays a broader role than BSP. ARC both accredits agencies and handles settlement. This means one organisation is responsible for vetting the agency, managing reporting, and moving funds.

One practical advantage of ARC is its Ticket Resolution Service. When an airline issues a debit memo, effectively a fine for a booking error, ARC provides a mediation framework. Outside the U.S., agents dealing through BSP are often left to dispute debit memos directly with airlines, which can be time-consuming and commercially one-sided.

ARC also offers the Verified Travel Consultant programme. This is the U.S. equivalent of TIDS. It allows non-ticketing agencies to gain industry recognition without posting a large bond, but it does not permit ticket issuance.

The real strategic decision: accredited or not

The most important decision is not which organisation you deal with, but whether you should be accredited at all.

Many agencies operate successfully without their own IATA or ARC accreditation by working under a host agency or consolidator. In this model, the host holds the accreditation, and the agent uses the host’s credentials. The advantages are obvious. There is no need to post a large bank guarantee, no direct exposure to debit memos, and far less back-office reconciliation complexity. Hosts often provide access to negotiated net fares that an independent agency could not secure alone.

The trade-off is economic and strategic. Commission is shared, typically on a 70/30 or 80/20 basis, and the host is recognised by airlines as the principal account holder. From the airline’s perspective, the client relationship belongs to the host, not the individual agent.

Full accreditation reverses that trade-off. The agency keeps all commission and mark-up, can negotiate direct airline deals, and often carries greater credibility with corporate clients. However, it also carries real financial risk. Booking errors can result in significant debit memos, and financial security requirements can easily run into tens of thousands of dollars tied up in guarantees or insurance.

The Technological Divide: GDS vs. NDC

Possessing a license to sell tickets is useless without a pipeline to view airline inventory. For decades, this was the exclusive domain of Global Distribution Systems (GDS) like Amadeus, Sabre, and Travelport. These systems aggregated all airline data into one screen. However, this model is currently fracturing due to the rise of the New Distribution Capability (NDC).

NDC is an XML-based data transmission standard that allows airlines to push content directly to agents, bypassing the limitations of the traditional GDS. Airlines increasingly withhold their lowest fares or best ancillary products (such as specific seat selection or baggage options) from the traditional GDS to incentivize the use of NDC. Consequently, modern travel agencies must utilize technology aggregators that can blend traditional GDS content with NDC feeds, or they risk being priced out of the market by competitors who have access to this "rich content."

Operational Landmines: Agency Debit Memos (ADMs)

Perhaps the most overlooked risk in the travel industry is the Agency Debit Memo (ADM). An ADM is essentially a fine issued by an airline against an agent for failing to adhere to ticketing rules. These are not minor penalties; they can amount to thousands of dollars and instantly erode profit margins.

Common triggers for ADMs include "churning," where an agent repeatedly books and cancels a segment to hold a seat for an indecisive client, and "married segment abuse," where an agent books a connecting flight (e.g., New York to London to Dubai) because it is cheaper than the direct flight, but only intends for the client to fly the first leg. Airlines use sophisticated algorithms to detect these behaviors and bill the agency for the fare difference plus a penalty. Furthermore, under IATA Resolution 890, agencies are generally prohibited from using their own corporate credit cards to pay for client tickets to earn points or float cash, unless they have explicit consent from the airline.

Strategic Implications for Tour Operators

Finally, it is vital to distinguish the needs of a Tour Operator from those of a standard Travel Agent. While a corporate travel agent requires transparency and standard publication fares, a Tour Operator relies on "IT Fares" (Inclusive Tour Fares) or "Net Fares." These are contractually negotiated rates that do not display the ticket price on the passenger's receipt. This allows the operator to bundle the flight with hotels and transfers into a single package price, protecting their markup and preventing the client from deconstructing the cost of the holiday. Therefore, many tour operators bypass full IATA accreditation in favor of utilizing consolidators who specialize in these high-margin, opaque fare types.

Where this leaves most travel businesses

U.S.-based travel agents who want to issue tickets directly must operate within the ARC system. Agents outside the U.S. who want the same control must work through IATA and BSP. Tour operators, particularly those selling packaged travel, are often better served by consolidators and net fare arrangements rather than full accreditation. Businesses that only book hotels or car rentals usually need nothing more than industry recognition through TIDS or the ARC Verified Travel Consultant programme.

At Antravia, we see agencies get into difficulty not because they choose the wrong option, but because they choose an option without understanding the financial mechanics behind it. Accreditation is not just a badge. It is a balance-sheet decision, a cash-flow decision, and a risk-management decision.

Getting it right means your airline sales work for your business. Getting it wrong means the system works against you.

References

International Air Transport Association, NewGen ISS Overview (PDF)
https://www.iata.org/contentassets/aa1af9700ee94258b18a9b773c01b0e2/ngiss-overview.pdf

International Air Transport Association, NewGen ISS Fact Sheet (PDF)
https://www.iata.org/contentassets/aa1af9700ee94258b18a9b773c01b0e2/newgen_iss_factsheet_final.pdf

International Air Transport Association, What is GoLite Accreditation
https://portal.iata.org/faq/s/article/What-is-GoLite-Accreditation?language=en_US

International Air Transport Association, IATA EasyPay
https://www.iata.org/en/services/finance/iata-easy-pay/

International Air Transport Association, Resolution 890 (PDF)
https://www.iata.org/en/fmc-documents/d2b75c9c-05ec-43d0-8e85-009d49f7e48a/

International Air Transport Association, Resolution 890x (PDF)
https://www.iata.org/en/fmc-documents/9e53ca7e-a6e6-4f20-bbc7-881c52d99391/

International Air Transport Association, NDC overview
https://www.iata.org/en/programs/airline-distribution/retailing/ndc/

ARC, Verified Travel Consultant program
https://www2.arccorp.com/products-participation/travel-agencies/become-an-arc-verified-travel-consultant/

Amadeus Service Hub, fare calculation symbols, M/IT inclusive tour indicator
https://servicehub.amadeus.com/c/portal/view-solution/774026/fare-calculation-symbols-and-explanations

ARC, Delta tips for avoiding booking violations (PDF, churning)
https://www2.arccorp.com/globalassets/support--training/agency-support/reference-guides/deltatipsforavoidingbookingviolations.pdf

Etihad Airways, ADM Policy (PDF, churning penalties example)
https://www.etihadhub.com/content/dam/eag/etihadairways/etihadhub/assets/acm-adm/adm-policy-au-v4.pdf

Navan, NDC shaking up airfare pricing, fare families removed from EDIFACT and NDC exclusive content examples
https://navan.com/uk/blog/how-ndc-is-shaking-up-airfare-pricing

Disclaimer:
Content published by Antravia is provided for informational purposes only and reflects research, industry analysis, and our professional perspective. It does not constitute legal, tax, or accounting advice. Regulations vary by jurisdiction, and individual circumstances differ. Readers should seek advice from a qualified professional before making decisions that could affect their business.
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