The challenge

For the small, eight-person treasury operations team at American Airlines, reliance on time-consuming manual spreadsheet-dependent processes was a strain on resources, creating tremendous inefficiencies for the organisation. Adding to the challenge, a cumbersome banking infrastructure involving hundreds of accounts spread across numerous banking partners all over the world was an administrative nightmare, not to mention involving costly fees.

“We recognised the need to transform the treasury operation, implementing a state-of-the-art treasury management system, while rationalising bank accounts and consolidating banking relationships to achieve greater efficiency and reduce costs,” recalls Ryan Millard, Sr. Manager, Treasury.

For American Airlines, the shifting industry business model over the past two decades has left the organisation with too many bank accounts. The reason so many accounts were needed was that cash was collected at each airport for tickets, upgrades, oversized baggage fees, etc. This meant local banks and accounts were required to deposit this cash conveniently and safely. As a result, treasury was responsible for managing bank accounts and relationships at a very large number of small local banks around the globe. However, as the business has evolved away from cash, primarily accepting payments by credit card or through digital channels, the need for local bank accounts has greatly diminished. This left treasury with the task of managing many accounts with very little activity on them.

The solution

To achieve this transformation, treasury assembled stakeholders from across the organisation. Accounts payable, accounting, international finance, IT and general managers from all the airports that American Airlines fly into and out of were included in the process of conducting a Request for Proposal (RFP) for global cash management banking. Citi was awarded American Airlines’ international business due to the bank’s global footprint, which matched the airline’s international footprint.

The initiative set out the objective of ensuring all bank accounts would connect to the newly implemented treasury management system. To reduce the administrative burden on treasury and lower bank fees, the team looked to consolidate 300 bank accounts down to around 200, and 100 banking partners down to approximately 40. By replacing time-consuming, manual spreadsheets with a digital treasury management solution, greater treasury efficiency would be achieved. The RFP process afforded American Airlines the opportunity to revaluate its current practices and examine industry best practices to determine how to effectively transform treasury operations. The team split the RFP into two; one focusing on the US and Canada, and the second on the business internationally. The ambitious nature of this transformation project was even more impressive given the small size of the treasury team, which had to manage all aspects of the initiative, while maintaining business-as-usual operations around the globe.

Best practice and innovation

American Airlines’ treasury team has completely transformed its operations, implementing a best-in-class treasury management system, while at the same time consolidating bank accounts and bank relationships to drive tremendous efficiency and cost savings.

By bringing together stakeholders from across the organisation, treasury has delivered significant improvements for the business. By rationalising bank accounts, treasury has reduced overall direct spend on bank fees and mitigated risk creating 33% savings which translates to over US$1m per year.

By reducing bank accounts, treasury has achieved indirect cost savings through a reduced administrative burden on the team. A side benefit of the bank consolidation is that it has simplified the task of implementing connectivity with the company’s new treasury management system – saving time, cost and IT resources. Consolidation of banking partners has also enabled American Airlines to maximise the use of wallet share to improve access to favourable credit facilities. The final advantage of this transformative effort has been the opportunity to evaluate cutting-edge solutions, such as cash concentration and pooling structures, API reporting and further treasury automation, which opens the door to greater treasury efficiency going forward.

“We are very grateful for the recognition and this is a wonderful reflection of a lot of hard work by the American Airlines team. We’re motivated to continue to add value as a treasury team and we’ll see you next year!”

Ryan Millard, Sr. Manager, Treasury

Key benefits

• Cost savings.

• Headcount savings.

• Improved visibility.

• Errors reduced.

• Number of banking partners/bank accounts reduced.

• Manual intervention reduced.

• Increased system connectivity.

• Future-proof solution.

• Process efficiencies.

• Increased automation.

• Risk mitigated.

• Exceptional implementation (budget/time).