While Jazeera Airways (part of Boodai Group) had held accounts with HSBC for several years, it first started active cash management discussions with the bank in H2 2018. The CFO and treasury team were keen to explore ways in which they could streamline processes to facilitate the higher and more diverse transaction volumes the airline was generating. This interest was maintained when a new treasury team subsequently joined the airline, together with the new CFO, Krishnan Balakrishnan, who had extensive experience working for major airlines in India.
At the time, Jazeera Airways was using multiple local banks across the various countries in which it had operations. By no means all these banks could provide electronic banking connectivity and such as there was only provided viewing rather than transactional capabilities. As a result, Jazeera’s cash management activities were overwhelmingly manual and paper-based, so treasury had minimal visibility of company cash and transaction information was only available to it several days in arrears. In the exceptional cases where historic electronic reporting was available, the file formats varied from bank to bank, which made gaining any form of overall perspective on corporate cash extremely challenging.
After a series of meetings between Jazeera and HSBC, which explored the airline’s current and future cash management needs in detail, the bank was awarded the company’s cash management mandate in mid 2019. The first stage in the implementation process was the rationalisation of the company’s bank accounts in the UK, Egypt, UAE, Bahrain and Kuwait, and their consolidation with HSBC. HSBC will also be opening bank accounts for Jazeera in India, once the airline has registered its entity there in compliance with Reserve Bank of India rules.
Once the accounts were transitioned to HSBC, the company’s treasury team could take advantage of the HSBCnet online banking platform to gain complete visibility of all Jazeera’s bank accounts globally. In order to process point of sale and cash transactions, one account with a local bank had been retained. However, HSBC implemented its inward reporting solution for this which uses SWIFT MT940 bank statement messages to deliver third party bank reporting, so Jazeera’s treasury personnel now have complete balance visibility.
Cash management implementation
Jazeera’s CFO made it clear that the current level of manual activity, with treasury personnel having to phone banks for items such as transaction status updates, reports and rates, was unacceptable. Therefore, a major priority after the rationalisation of the bank account structure was to maximise automation and STP. The company already had an SAP ERP system, but under the previous manual processing regime treasury had been unable to take full advantage of its potential. Working in collaboration with Jazeera’s ERP integration consultants, the HSBC implementation team resolved this by attaching the SAP system to the bank’s HSBC Connect host to host solution.
The company now uses this channel to send batch payment files to HSBC via secure file transfer. After the bank has executed the payments, it sends status information on them back via the same route to Jazeera’s treasury team, who can then automatically reconcile these payments in the SAP general ledger.
Throughout the implementation, HSBC held regular meetings and conference calls with the company’s treasury team and CFO in order to monitor progress and check on project milestones. This helped ensure smooth progress so that the project is already in production verification testing, which together with the opening of the bank account in India will probably only take a further month until completion and full go live.
Liquidity, trade and markets
As the relationship between Jazeera and HSBC developed during the cash management implementation, other areas emerged where the company treasury realised that HSBC could assist it in enhancing its processes and performance. Building on the improvements it had achieved in rationalising and accessing bank accounts, Jazeera decided to take advantage of HSBC’s Liquidity Management Portal (LMP). This provides an intuitive graphical representation of all corporate cash, but which also enables users to slice and dice their views in multiple ways, such as by currency, country, business unit etc. The data displayed in LMP can also be downloaded to use in further modelling or cash forecasting. Ultimately, LMP can also be used to automate investment/divestment of the most appropriate money market funds. While Jazeera is not using this last piece of functionality as yet, it offers the advantage of dispensing with the need for treasury staff to undertake this manually.
Jazeera has also now taken advantage of HSBC’s expertise in trade transactions and the ability to execute and monitor these in an integrated manner via HSBCnet. The company has benefited from finer pricing and better visibility/efficiency as a result. A recent example of this has been HSBC’s support for Jazeera’s new route to Gatwick Airport in the UK, by issuing standby letters of credit relating to five new leased aircraft. Related support activity has included HSBC providing working capital facilities to both Jazeera Airways and its parent Boodai Group.
The company had been experiencing sub-optimal rates and visibility on its FX and interest rate hedging activity and this was another area where it chose to engage with HSBC. Jazeera is now using HSBC’s EVOLVE FX platform in its Kuwaiti office and is also deploying it in its operations in the UK, India and UAE. The platform gives it complete market transparency for picking the best rates, plus the ability to confirm deals immediately. This element of the relationship has also extended into FX and interest rate research and advisory, including strategies for hedging future aircraft and fuel purchases.
Conclusion: relationship begets opportunity
One of the key aspects of the Jazeera Airways and HSBC relationship has been the realisation that a mutual relationship derives mutual benefits. As both parties have worked increasingly closely together, further understanding of needs and capabilities has led to further opportunities. Jazeera’s treasury has achieved exceptional efficiencies and cost savings by reducing manual activity. However, this is only part of the picture, for it now also has the visibility and toolset to make strategic decisions far more effectively - to the ultimate benefit of the business as a whole.