Capacity Purchase Agreement — Regional Feeder Revenue
Recording revenue earned by a regional carrier operating flights under a capacity purchase agreement with a mainline carrier.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Accounts Receivable (Mainline Carrier) | Asset (+) | 8,500,000.00 | - |
| CPA Revenue (Capacity Purchase) | Revenue (+) | - | 8,500,000.00 |
💡 Accountant's Note
Under a Capacity Purchase Agreement (CPA), a regional airline operates flights for a mainline carrier and is paid per block hour or departure regardless of passenger loads. The mainline carrier takes the revenue and passenger risk; the regional receives a guaranteed fee. CPA revenue is recognised as flights are operated (service delivered over time).
Practitioner & Systems Framework
💻 ERP Architecture
CPA revenue is tracked by the regional carrier's flight operations system. Monthly invoices are raised to the mainline carrier based on actual block hours and departures operated under the CPA. The mainline carrier books the passenger ticket revenue and pays the regional carrier the contracted CPA rate. Under IFRS 15, the regional carrier's performance obligation is to operate the contracted schedule — revenue is recognised as each flight is completed. For CPAs with fixed payments (regardless of flights operated), the recognition pattern follows the service delivery schedule in the contract.
⚠️ Audit Flags
Auditors reconcile CPA revenue to the flight operations data (block hours and departures operated under the CPA). Test the CPA rate applied against the current contract. For CPAs with minimum guaranteed payments, confirm the payment is received regardless of actual schedule disruptions. Review the IFRS 16 assessment for the CPA — if the mainline carrier has the right to use identified aircraft operated by the regional carrier, the arrangement may contain a lease. Confirm the regional carrier's balance sheet does not include passenger revenue (that belongs to the mainline carrier).
📄 Required Documentation
CPA agreement (rate per block hour/departure, term, minimum guarantees), flight operations data (block hours and departures per month), mainline carrier invoice and payment, IFRS 15 performance obligation analysis, IFRS 16 lease assessment, and schedule compliance metrics.
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