Leveraging Technology to Create the Treasury of the Future

by Friedrich Floto, Senior Vice President, Finance & Administration, airberlin PLC & Co. Luftverkehrs KG

As a leading airline that has a recent history of rapid growth and an ambitious future strategy, treasury plays a vital role in supporting the financing (including aircraft financing) risk management, cash and liquidity management needs of the business. To fulfil this role, treasury needed a sophisticated treasury management system (TMS) that would support greater efficiency, automation and control, and enable the treasury team to focus on tasks that added value to the business and contributed to the group’s strategic objectives. In this article, Friedrich Floto, SVP, Finance & Administration discusses the project so far to select and implement a TMS.

Treasury organisation

airberlin has a centralised treasury organisation in Berlin. Like other airlines, overseas entities are typically small ticketing operations rather than large business functions with their own P&L so cash and treasury management requirements are largely concentrated in the centre. Within this centralised environment, we have a unique treasury organisation at airberlin. Instead of having a group treasurer, we have two SVPs responsible for different aspects of the treasury function. My colleague looks after long-term financing (including aircraft financing and leasing), trading (including foreign exchange, interest rate, jet fuel and CO2 emissions certificates) and jet fuel procurement. On my side, I take care of middle-office and back-office functions, including cash management, liquidity management, working capital, and debtor and creditor risk management. Across the two teams, we have a treasury department of around 30 professionals.

Previous and planned infrastructure

airberlin has enjoyed rapid growth since it was founded in 1991, including frequent acquisitions in recent years. Although we had a legacy treasury management system (TMS) in place, it became increasingly difficult to manage our requirements in the system as the group’s treasury demands expanded and became more complex, resulting in a variety of ancillary tools, spreadsheets and manual processes.[[[PAGE]]]

At airberlin, we are committed to constant improvement across all of our business functions, with a focus on efficiency, productivity and quality of service. Consequently, we made the decision to review our treasury technology infrastructure with a view to replacing our TMS and ancillary tools and processes with a state-of-the-art solution that would meet our current and future needs as our business expands in the future. We had a variety of aims:

• The solution would need to support the full spectrum of our treasury activities, replacing not only our existing TMS but also the ancillary tools, spreadsheets and manual processes that had developed around it. This would in turn increase efficiency, automation and control within treasury and improve the quality of reporting and decision-making;
• The solution would need to support straight-through processing (STP) by integrating closely with specialist tools such as on-line dealing, accounting and cash flow forecasting. Although TMS typically support cash flow forecasting, we recently implemented a specialist forecasting solution that offers particular advantage for airlines that have a high degree of cash flow volatility.
• Furthermore, the solution would be integrated with our electronic banking system for transmitting payments and retrieving bank statement information. Initially, we will be using Multicash for electronic banking, but in the future we may look to implement a cloud-based SWIFT solution.

Selecting a solution

We launched a request for proposal (RFP) amongst leading TMS vendors. Although there were a number of strong functional propositions, an essential criterion was the vendor’s ability and commitment to supporting the system in the future. Consequently, in addition to its ability to meet our functional requirements, in particular in risk management, we ultimately made the decision to implement SunGard’s AvantGard Quantum solution.

Initially, we will host the solution internally as this has been a strong IT preference historically; however, as awareness and confidence in cloud-based, SaaS (software-as-a-service) solutions increases, we may consider outsourcing the hosting and management of the solution in the future. One of the benefits of working with SunGard is the flexibility to deploy the solution on a hosted or SaaS basis as our IT strategy evolves over time.

Ensuring implementation success

We started the implementation in February 2014, with a project team that comprises a project manager, business support from front, middle, back office and accounting functions, our SunGard consultant and KPMG. The project is divided into two phases: by end August 2014, we intend to replace our existing TMS with AvantGard Quantum. The second phase will be to connect the solution to our specialist ancillary systems (e.g., online dealing, confirmation matching and hedge accounting) and implement more sophisticated reporting and analysis capabilities. We recognise that a disciplined approach to implementation is essential to achieve the objectives we have defined. Consequently, we have a detailed project plan that details clearly the tasks that each business area needs to complete, and our SunGard consultant spends about two or three days on-site every two weeks. We also have regular steering committee meetings including executive representation from both airberlin and SunGard to ensure that the project remains on track. Consequently, the project is progressing well and we are happy with the achievements we have made so far.

Anticipated benefits

Once the project is complete, we will have a simplified, streamlined and more automated treasury organisation. This will in turn allow our team to spend less time on repetitive tasks and focus more on activities that are more varied and engaging, ultimately improving job satisfaction as well as leveraging skills within the team more effectively. We can already see how visibility over cash, accounting and risk positions will be improved, which enhances accuracy and timeliness of decision-making, increases confidence in treasury reporting and ensures that transactions are reported and accounted for more consistently. Cash visibility is particularly important at airberlin given the cash flow volatility experienced by airlines: for example, we are typically cash-rich at the start of the year when customers book their vacations, while bookings and cash flows later in the year are less predictable.

As we are a business that prizes efficiency, quality and transparency, the implementation of AvantGard Quantum has a significant role to play in equipping treasury to manage our current business needs and support the future aspirations of the airberlin group. At the same time, the project allows us to create a positive working environment for our treasury team by enabling them to focus not on repetitive, routine tasks but on more interesting, engaging responsibilities that offer greater value to the business.