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Airlines and the Internet revolution
The emergence of the Internet in the mid "$$#s as well as the development ofIntranets and
/ tranets forced airlines to refocus their strategy on technological innovations inorder to enhance
their competitiveness. Airlines identi0ed the Internet as a ma1or opportunity totac'le distribution
costs and to reengineer the structure of the industry. In a recent interview, 2ritishAirways )/!, 3od
/ddington admitted that 2A spent 4"." billion on distribution in 5##" and that wastheir third most
signi0cant e pense after labour and fuel 6%78. In the Internet era, 9:Ss asindependent business
from airlines developed their o erings to provide the bac'bone for the entireindustry to establish
the infostructure for the transactions underta'en by a number of Internet travelportals. In
addition, they gradually reinvented themselves to main technology suppliers for awide range of
tourism organisations including airlines, travel agencies and Internet travel portals.
At the same time, a number of no;frills airlines emerged in both /urope and the
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Airlines, and newcomers such as 2ratthens, 3ynair and /asy1et that adopted theInternet from the
early stages. Several carriers even painted their aircraft with their Internet addresswhilst they
arranged special promotions with newspapers to drive tra*c to their web sites. They provided
incentives for consumers to boo' online and ensured that they were not distributedthrough the
9:Ss, in a way forcing their clients online 6">8. /asy?et and 3yannair, for e amplewere ta'ing the
vast ma1ority of their boo'ings through the Internet by 5##5 and passed on theircost savings to
consumers by giving a 4% discount on a return fare. @o frills airlines, empowered bythe Internet
and other I)T tools, made the industry reengineer itself as it introduced a number of I)T;enabled
innovations including
/lectronic paperless tic'ets
Transparent and clear pricing led by proactive and reactive yield management
Single fare tic'ets with no restrictions on staying or Saturday nights rules
)ommission capping and publication of net fares
Binancial incentives for self;boo'ing online
Auctions and online promotions
(owerful )ustomer 3elationship Management Systems
!nline and conte t;relevant advertising
As consumers en1oyed interacting directly with airlines and bene0ted from lowerrates, tra*c for
traditional scheduled airlines and +ag carriers declined. They therefore had to followthe lead of nofrills
carriers and to develop their online presence in order to maintain theircompetitiveness. In the
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5##" Airlines IT Trends survey it was revealed that airlines moved fast to Internet(rotocol CI(D based
systems, having either to modernise legacy systems or to invest in newtechnological solutions.
9etting closer to customer and cutting costs were the main 'ey drivers for I)Tpro1ects and 5#&
of carriers have already moved to I( based systems and are en1oying the businessand cost
bene0ts. Another third is e pected to 1oin them in the ne t two years and over $#&of the carriers
are reported to have started the migration to I(. ?ust 7& of tic'ets are currently soldonline, using
web based services and airlines gradually see their own web sites as the mostimportant
distribution channel. It is estimated that by 5##E, online sales and e;tic'eting willbecome the
ma1or distribution mechanisms worldwide.
Methodology
)onsistent with the emerging nature of the I)Ts and the constantly moving
structures of the
airline industry, this paper aims to answer the FhowG and the FwhyG questions,rather than to
quantify and verify particular variables. As there is insu*cient literature on the topicand the use
of I)Ts in airlines is very dynamic, it was decided that e ploratory research wouldbetter serve our
purposes. The qualitative approach enables the appreciation of all aspects of thesub1ect and to
develop variables that can possibly be used later 67E,5",>%8. This e ort thereforeconcentrated on
the reasons why technology was deployed and how it can assist the strategic andoperational
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management of airlines. The wor' was underta'en in early 5##5 and allowed us todevelop a
holistic approach in assessing the strategic and tactical impacts of I)Ts for airlines.
The wor' was underta'en in three stages. Birstly, secondary research was used torevise the
theoretical framewor' and to identify previous research. As technology is movingfast here, only
articles, reports, and boo's specialised in the I)Ts in air transportation published inthe last few
years were used. In addition, a number of articles and boo's that demonstrated thehistoric
development of I)Ts in travel and air;transportation provided the strategicmanagement
framewor' and identi0ed critical applications. The second stage concentrated on ananalysis of the
web presence for =# ma1or carriers, as demonstrated in Bigure ". /ach web site wasvisited and
e plored. The level of e)ommerce opportunities as well as the comprehensivenessand userfriendliness
were e amined. A number of value added services were identi0ed and e plored,whilst
a list of lin's and partners was collected for each airline. / tensive notes were ta'enin order to
identify the level of interactivity with consumers and other sta'eholders. In addition,an analysis of
I)T providers for airlines was underta'en to e plore the 'ind and type of serviceso ered in the
mar'etplace. A list of the ma1or suppliers researched is illustrated in Bigure 5.
The third part included semi;structured telephone interviews with airline e ecutives.About 5#
airline )hief Information !*cers or :istribution Managers were contacted and eightagreed to
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participate. Although the number of airlines could have been improved, it wasdecided that an indepth
analysis was better. The interviews aimed to e plore what technology was used andfor
what purpose, on both strategic and tactical fronts. Interviewees were activelyencouraged to
speculate on the future I)T solutions as well as to predict how I)Ts might in+uencethe structure
of the industry as a whole. A standardised, but open;ended, approach toquestioning was usedH
some areas were e plored in greater depth, through probing questions not originallyincluded in
the interview schedule. Interviews were tape;recorded and tapes were listened toduring the
analysis stage for further input. In addition, notes were 'ept on all questions as'ed. The semistructured
discussion enabled the researcher to interact with participants and to identify andclarify
critical issues. Bollowing the analysis of the unstructured interviews, a further roundof qualitative
wor' was underta'en, mainly to qualify, support, and appreciate the 0ndings. Anumber of
interviewees were as'ed to comment on some 'ey 0nding and to provide theire pert opinion.
eAirlines Strategic and tactical use of I)Ts in the airline industry "#
Bigure " Airlines researched on;line
AI3 I@/S
". Aer ingus www.aerlingus.ie
5. Aero+ot www.aero+ot.org
>. Air )anada www.aircanada.ca
=. Air Brance www.airfrance.com
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%. J M
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>". 3yanair www.ryanair.com
>5. SAS www.scandinavian.net
>>. Saudia Airlines www.saudiairlines.com
>=. Singapore Airlines www.singaporeair.com
>%. South African Airlines www.saa.co. a
>7. Southwest Airlines www.i+yswa.com
>E. Swissair www.swissair.com
>K. Tur'ish Airlines www.tur'ishairlines.com
>$.
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In+ight )atering Association http www.ifcanet.com
Airport Technology http www.airport;technology.com
)ontent analysis was employed to analyse the data and information from the threestages was
incorporated in a framewor' that identi0ed systems
Q dealing with customers and sta'eholders through Internet interfaces,
Q targeting e ternal partners through dedicated lin'ages and e tranets, and
Q addressing operational and strategic needs through internal systems andintranets.
The adopted methodology o ered a depth of 'nowledge on the area and allowedthe researcher
to collect qualitative and e ploratory information that supported the strategicanalysis.
% Strategic and tactical role of I)Ts for airlines
The level of I)T utilisation in airlines is variable. -owever, all carriers depend on I)Tsfor their
strategic and operational management and employ I)Ts for a wide range ofbusiness departments.
Interviewees suggested that they use software to support their business functions,including
accounting, 0nancial management, human resources, procurement etc. -owever,we concentrated
only on airline;speci0c software and systems that enable the operational andstrategic management
of airlines. An emphasis was given on distribution and mar'eting, as this hasemerged as one of
critical aspects of airline strategy.
Brom a strategic point of view, airlines use technology to develop and manage theirbusiness
model as well as to monitor the e ternal environment and competition, underta'erevenue
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analysis, forecasting, maintain historical data, predict demand, and design desirableproducts. I)Ts
are critical for monitoring and forecasting the performance of Strategic 2usiness
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degree of cancellations e perienced, were very e pensive to bear, especially for lowcost seats.
@o;frills airlines therefore adopted the Internet as their main distribution mechanismand
disintermediated the distribution channel, placing scheduled airlines at adisadvantage. Bor
e ample )ontinental is reported to pay 9:S boo'ing fees of up to R"E perpassenger and a total
distribution cost of R"bn per year 6>8. Ma1or scheduled carriers around the globehave therefore
generally introduced commission capping and have invested heavily in drivingInternet tra*c to
their web sites for online boo'ings.
2randing and communication of principles are also critical for airlines at thestrategic level.
Managing communications with all sta'eholders, including investors, press,employees and
customers, is of paramount importance. I)Ts;enabled communications assistedairlines to interact
with all their sta'eholders and to update them with regards to their initiatives anddevelopments.
Many carriers used their web sites as main information points following theSeptember "" attac's,
as well as other disturbances in their services emerging from their e ternalenvironment, such as
wars, earthqua'es, SA3S etc. 9areiss demonstrated how )ontinental managed theSeptember ""th
crisis using cutting edge I)Ts 6>#8. Interestingly, although the Internet provision wasoriginally in
their I)Ts department, most airlines set up digital mar'eting and distributiondepartments to wor'
together designing interfaces and devising successful strategies to attract andretain consumers.
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)onsistency of on;line and o ;line branding was one of the 'ey issues highlighted asa factor for
success. Airline e ecutives also mentioned that I)Ts become a prerequisite fordeveloping
partnerships and alliances with other airlines, as well as for monitoring competitors.
I)Ts are critical for the operational management of airlines, as illustrated in Bigure >. There are
several requirements including chec';in, allocation of seats, generating a number of reports and
orders, such as +ight paths, weather forecasts, load and balance calculations,manifests for airport
immigration and security authorities, in;+ight catering orders and crew rotas. I)Tsalso assist a
number of functions including inventory and reservations management as well astic'eting. Airlines
have bases and distributors around the world, particularly at destinations theyserve. -ence, they
need e*cient co;ordination and communications with stations, branches,distributors, and
customers globally. Interaction with distributors, travel agencies, and otherdistributors can
determine levels of sales whilst e*cient invoicing and revenue collection is criticalfor both cash
+ow and pro0tability. Binally, airlines have been investing in )ustomer 3elationshipManagement
programmes in order to improve their direct communication and to manage theirloyalty clubs.
Increasingly, eTic'eting instigates paperless transactions, while o ering signi0cantsavings.
Tactical pricing, yield management, and special o ers and promotions are allfacilitated by
constantly assessing tra*c and by ta'ing both proactive and reactive measures toad1ust demand
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and supply. I)Ts also facilitate e(rocurement and management of suppliers andpartners on a
regular basis. Most airlines use standardised software to underta'e those functionsand to
generate the reports.
eAirlines Strategic and tactical use of I)Ts in the airline industry ">
Bigure > eAirlines I)T;empowered functions
9eneric Airline Management
Q Strategic and !perational Management
Q Binance and accounting
Q /mployee productivity and crew
management Crota, training etcD
Q 3elationships with partners and alliance
integration
Q 2usiness management and reporting
Q Safety and security procedures
Strategic Airline BunctionsQ Strategic 2usiness
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Q Inventory management and distribution of
tic'ets
Q )ustomer pro0ling, customer service and
communication with consumers
Q Management of inventory and boo'ings
through 9:Ss and the Internet
Q )ustomer 3elationships Management
Q Managing loyalty clubs
Q 3eservations management, tic'eting and
electronic tic'etingQ !perational management
Q Tactical pricing and yield management
Q (romotions, special o ers and targeted
campaigns
Q e(rocurement and management of
suppliers and partners
Q )ommunications and transactions with
stations, branches distributors and
customers globally
Q Invoicing and revenue collection
Q )o;ordinating with partners and alliance
members
Tactical planning and running the
business
Q 3eservations and revenue support
Q )hec';in procedures and seats allocation
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Q 9ate management and reporting to
authorities
Q Management of in;+ight catering
Q Airport passenger handling
Q )argo management,
Q 2aggage handling and monitoring
Q (ricing, tic'eting, revenue and yield
management
Q @etwor'ing and schedule development
Q Scheduling, operational management andcontrol
Q )rew management and control
Q Maintenance management and control
Q (rocurement of materials and equipment
Q )oordination of stations and hubs
Q Oeather, fuel and rota reports and
manifests
Q )ritical incidents management and
corrective mechanisms
Airlines had to invest signi0cantly in their I)T systems in the late "$$#s in order todevelop
interfaces with consumers and the travel trade. The level of investment in I)Tsillustrates their
critical role. In the IT Trends Survey 5##" 6%$8, the average planned I)T e penditurefor 5##" was
5.K& of the airline revenues. Bigure = demonstrates that 5=& of the respondentshad planned to
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spend more than =& of their revenue on I)T investments. The importance of I)Ts isalso evident
by the fact that 5$& of the carriers surveyed have started pilot studies usingwireless and mobile
technologies, whilst 7#& now have I)Ts represented at the board level.
eAirlines Strategic and tactical use of I)Ts in the airline industry "=
Bigure = (lanned I)T investment as percentage of airline s revenue in 5##"
5&
%& K& $&
5#& 55& "%&
">&
7&
#&
%&
"#&
"%&
5#&5%&
More than "#& 7;"#& %& =& >& 5& "& ess than "& :o not 'now no answer
Source ! Toole, 67#8
Interviewees suggested that in the last few years, I)Ts emerged from a pureinfrastructure
department to a critical enabler of the entire range of the airline business
processes. I)Tse ectively determine the competitiveness of airlines, as they are embedded inevery simple
element of the airline value chain, as illustrated in Bigure %.
%." Internal Systems and Intranets
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In order to perform the tas's, airlines use a wide range of internal systems andintranets to
coordinate their activities. Interviewees were requested to e plain the types ofsystems they use and
the main purpose that they ful0l. Internal airline systems were then classi0ed intosales and
mar'eting support systems, operational, and resource management systems. Anumber of
information management and decision support systems underpin the airline s corebusiness
processes and operational management. Interviewees suggested that airlines aimat ma imising
their pro0tability, by optimising their total yield and by minimising costs. Thisprocess is facilitated
by a number of integrated systems that operate in parallel to coordinate a numberof critical airline
functions, such as accounting, 0nancial management, human resources, etc. Inaddition,
specialised software facilitates scheduling in order to optimise crew, aircraft, andother resources
and to ma imise the operational e*ciency whilst 'eeping costs under control. These systems are
similar for all types of airlines and there were no ma1or di erences betweenscheduled, charter,
and no;frills airlines. -owever, no;frills carriers and charter tended to schedule their+ight
programmes more tightly and therefore they tended to have a greater number of
indicators andcontrols.
eAirlines Strategic and tactical use of I)Ts in the airline industry "%
Bigure % I)T enabled Airline Industry Nalue )hain
I@2!
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!9ISTI)S
!(/3ATI!@S !
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)areer planning
Service Training
)3M and :atamining
2aggage Trac'ing System
QSegmentation
Q:istribution
mechanisms
Q(romotion
QSpecial o ers U
targetedcampaigns
Q!nline sales
QAdvertising
QBrequent Blyer
QTravel Agent
(rograms
Q9roup Sales
QInvoicing and
revenue collection
Q3escheduling
Q)oordination of
stations and hubs
QTic'eting and
3eservations
Q)hec' in and 9ate
!perations
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communication
Q)omplaint Bollow;up
Q ost 2aggage Service
Q)oordinating with
partners and alliance
members
Q3ental )ar and
Q -otel reservation
System
Q)ommunicationwith airport
authorities
Q2aggage Systems
QBlight connection
Q )ommission
payments
Q)ritical incidents
management
Q2usiness
management and
reporting
QSafety and security
procedures
(rocurement, In;+ight System, )omputer 3eservation System
Blight Scheduling System ield Management System
)ooperation Training
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(rocedure and
!perational Training
3elationships with
trainers and colleges
(3I
MA
3
A)
TIN
ITI/S
S
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!nline services
Monitoring Suppliers
/stablishing partnerships
eAirlines Strategic and tactical use of I)Ts in the airline industry "7
%."." Sales and mar'eting support
Airlines have long used internal )omputer 3eservation Systems. They are ofteninterfaced with 9:Ss
and with the airline Internet site in order to distribute inventory globally and toensure that it is
current. These systems are used to issue electronic tic'ets and to e change e;tic'ets with multiple
carriers worldwide. Interviewees suggested that they desperately need to promotetheir web site as
their primary reservation path and as an alternative to the 9:S travel agency route.Such systems
lin' all partners in the handling process, automate procedures, and support smoothcommunication
+ow. Airlines endeavour to use technology to enhance their e*ciency and therefore
they attemptto integrate new technologies such as electronic scales, stac'er systems, handheldterminals, and
bar coding to increase their handling e*ciency and to reduce operational costs. Therefore, these
systems support the administration, accounting, and passenger or cargo handlingprocesses by
coordinating inventory management, sales and mar'eting, yield and revenue
management,
tic'eting, and departure control systems.
Airlines use decision support systems to monitor tra*c and boo'ings on computerreservation
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systems in order to identify customer behaviour, tra*c +ows or trends, as well asthe performance
of partners and sales agencies. They also follow the pricing of their competitors fornumerous city
pairs. These systems also enable airlines to assess their situation against theperformance of their
competitors and to adopt proactive and reactive measures. A broad informationbase leads to
more suitable decisions for core airline strategy and operational activities, such asmar'eting and
sales, schedule planning, yield management, or pricing.
%.".5 !perational SystemsAirlines need to use e ective planning processes to optimise the performance oftheir networ'.
This involves ma imisation of the equipment and human resources utilisationagainst demand
pressures, government regulations, and operational constraints, such as air tra*ccontrol rules.
Interviewees suggested that planning decisions range from long;term strategic
issues, such as
routes selection and competition monitoring, to operational considerations, such asschedules for
equipment and sta rotas. Scheduling implies deciding the number of connectionsbetween
airports as well as timing and choice of aircraft equipment. (lanning and operationsdepartments
use Integrated Blight Schedule Management Systems to support airlines in planningtheir
schedules. Such systems need to provide seamless integration with other systems,including
!perations )ontrol, 3eservations and 3evenue Management, Maintenance )ontrol,and )rew
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Management. They e amine historic tra*c data and previous load factors as well asforecast
demand 0gures. The proliferation of hub and spo'e systems has forced planningdepartments to
manage their networ' as a whole by scheduling departure waves and coordinating+ights. Aiming
to ma imise load factors and yield management for the entire networ', airlines useBlight Schedule
Management Systems to predict tra*c and to simulate operational discrepanciescaused by delays,
weather conditions, and other unpredictable circumstances that disrupt schedules.
)omplementary to Schedule management systems are !perations )ontrol systemsthat support the
automatic calculation and distribution of +ight plans, as well as other features, suchas automatic
consideration of all valid aeronautical restrictions in the process of the +ight plancalculation. Blight
Oatch in particular collects and displays vital information, such as boo'ing 0gures,passenger
transfer information, critical weather conditions, crew rotations, airport limitations,etc. (ossible
problems and critical situations can be identi0ed whilst early alert messages andupdates are
generated for all other operational systems, such as +ight scheduling, reservation,maintenance,
and crew control systems.
eAirlines Strategic and tactical use of I)Ts in the airline industry "E
In addition, as airlines usually have a wide networ' of hubs to support, Station)ontrol Systems
monitor all 'inds of connections on a hub and report on operational details, such asaircraft turns,
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crew connections, passenger, baggage, and cargo connections. Airports and airlinesneed to wor'
together to reduce aircraft turn;around times and to shorten passenger connectiontimes. These
systems also help station managers plan their operations and ensure that allresources are in place
to service each +ight. 2aggage handling and monitoring systems allow airlines toincrease their
e*ciency and to trac' every bag as it moves through the system. This also ensuresthat no baggage
is transported without its owner, as per International )ivil Aviation !rganisationregulations. The
systems support reconciliation procedures of chec'ed passenger baggage enableairlines to ensure
security, reduce operating costs, and improve passenger satisfaction withoutcompromising
punctuality 65#8.
%.".> 3esource Management Systems
Airlines need to ma imise the utilisation of their most e pensive resources human
resources and
+eet. Therefore, they need to ensure that their equipment and aircraft is functionaland its
capacity fully used. Maintenance )ontrol systems co;ordinate aircraft maintenance,commercial,
and operational requirements. They ensure that aircraft and other equipment isregularly
maintained and also that technical problems and unscheduled services are dealtwith as e*ciently
as possible to minimise out;of;service periods whilst minimising service disruptions.!ften these
systems are integrated with e(rocurement systems for allowing airlines to orderparts and other
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consumables online, whilst engineering systems may be integrated for providingonline manuals
and technical support. Technical documentation management systems often create,distribute, and
manage comple technical data and documents. -ence, airlines aim to ma imise+eet utilisation by
improving maintenance, repair and overhaul performance. This is achieved byoptimising the supply
chain networ', aircraft downtime, and materials management.
Airlines also control their crew rotas through crew management systems. (lanningduty rosters is a
comple process as there are numerous 'ey constraints, including s'ills and theability to operate
equipment, ran', immigration issues, rest periods, and cost of rest periods. )rewmanagement
systems use comprehensive crew databases to underta'e pairing construction,roster generation,
and crew control in order to optimise the human resources performance. They needto be coordinated
with all associated activities, such as +ight scheduling, operations control, crewcontact,
+ight brie0ng, etc. These systems can also underta'e a number of routine tas's,such as chec'ing
legalities, publishing rosters and noti0cations, and administrating hotelaccommodation, deadheads
and pic';up services. )ommunicating scheduling information with crewsCnoti0cationsD and
ne t duty period Cbrie0ngsD as well as information regarding +ight load, crewcomposition, aircraft
and airport details is also critical. A number of intranet solutions facilitate thisprocess 6=%8. It is
the coordination of all these systems that ensures that airlines en1oy operationale*ciency and are
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empowered to achieve their long;term strategy.
%.5 Interconnecting partner systems and / tranets
Interviewees also e plained that airlines rely heavily on e ternal partners for theiroperations.
Therefore it is critical to develop e*cient systems for wor'ing together with them.Bor e ample, all
airlines need airport infrastructure as well as a variety of partners to support theiroperations.
%.5." e(rocurement transactions and information +ows with suppliers
eAirlines Strategic and tactical use of I)Ts in the airline industry "K
Suitable e tranets and inter;organisational systems are required to facilitate airlineinteraction with
their regular suppliers. Airlines are customers of airports, air control systems, andother authorities
such as immigration and customs. Airlines, therefore, regularly e changeinformation with airport
authorities and air tra*c control systems. These +ows include requests for landingslots and doc'ing
gates, informing about arrivals and departures, altering slots, declaring +ight paths,and coordinating
operations. Although many airlines and airports still rely on printed forms andtelephone
communications, a good percentage of the interviewees suggested that I)T;enabledsystems are
currently constructed to support these processes. A number of airlines graduallydeveloped or
adopted electronic environments for data e change with the )ustoms and AirportAuthorities in
their main stations. / tranets assisted them to develop reliable and directconnections and
enhance their e*ciency. Interviewees e pected that the global security concernswill generate
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further regulation that will ma'e interactive e tranets a prerequisite for +ying toseveral
technologically advanced destinations, particularly the
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out to tender. Binally the VAeroWchangeV mar'etplace is being set up by ufthansa,in cooperation
with most of the Star Alliance partners, as an airline industry online tradinge change that o ers
industry;speci0c goods and services ranging from special screws to aero;engines.(rocurement
mar'etplaces have become highly economical for airlines by ma'ing mar'ets moretransparent and
by allowing companies to bundle their procurement volumes.
:eveloping 252 applications and interconnecting / tranet systems will support bothairlines and their
partners to streamline them and reduce their turn;around time at the airport. )larityof
communication and e*ciency chain is critical for both controlling costs anddelivering service.
%.5.5 :istribution, mar'eting and sales support with partners
The vast ma1ority of airlines rely heavily on travel agencies for distributing theirproducts.
Interviewees suggested that the lin' with travel agencies is normally facilitated by
9lobal :istribution
Systems that provide the infostructure for itinerary building and facilitate the entiretransaction.
-owever, airline e ecutives e plained that they would li'e to transact with travelagencies on an
/ tranet, over the Internet, in order to avoid that 9:S s boo'ing fees for lowerfares. Bor e ample,
2ritish Airways has developed a dedicated web site for the travel trade
Chttp www.batraveltrade.com D that can be developed to an e tranet in order tofacilitate this
process. -owever, travel agencies may gradually 0nd some useful 0nancialfeatures. Bor e ample
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they will be able to process credit card payments in a way that charges the airlinethe cost of the
eAirlines Strategic and tactical use of I)Ts in the airline industry "$
credit card fee Ccurrently about 5&D. Similarly J M provides its web fares only on itse tranet, whilst
9:S fares are more e pensive to cover the e tra costs. Although connecting istechnically possible,
interviewees suggested that travel agencies are reluctant to follow this route, partlybecause they
prefer comparing all schedules and prices on a 9:S and partly because 9:Ssprovide incentives and
they have long term contractual agreements with them. Interviewees suggestedthat there is a great
potential in these types of e tranets and that the business logic will be drivingtechnological
deployment.
Airlines also appoint 9eneral Sales Agencies in all regions that do not operate theirown o*ces. They
are appointed by international airlines to secure business from IATA and non;IATA
agents in
mar'ets where agency networ's are yet to be fully automated and where airlinesneed 0nancial
security to cover business ris's. They handle their reservations and distributionlocally and are in
close lin' with the Station manager to co;ordinate the activity in their particularmar'et. In addition,
consolidators pre;purchase seats in bul' and then distribute them to their localmar'ets at discounted
rates. :eveloping / tranets for these players and ensuring that they support theironward distribution
chain, providing adequate tools to interact with all departments of the airline andmanaging their
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revenue collection on time are also critical for airline pro0tability.
-ow Ma1or Airlines are Structured
ine (ersonnel
These include everyone directly involved in producing or selling an airlineXs services; the mechanics, who maintain the planesH the pilots, who +y themH the +ightattendants, who serve passengers and perform various in+ight safety functionsH thereservation cler's, airport chec';in and gate personnel, who boo' and process thepassengersH ramp;service agents, security guards, etc. ine personnel generally fallinto three broad categories engineering and maintenance, +ight operations, andsales and mar'eting. These three divisions form the heart of an airline and generally
account for K% percent of an airlineXs employees.
!perations
This department is responsible for operating an airlineXs +eet of aircraft safely ande*ciently. It schedules the aircraft and +ight crews and it develops and administersall policies and procedures necessary to maintain safety and meet all BAA operatingrequirements. It is in charge of all +ight;crew training, both initial and recurrenttraining for pilots and +ight attendants, and it establishes the procedures crews areto follow before, during and after each +ight to ensure safety.
:ispatchers also are part of +ight operations. Their 1ob is to release +ights forta'eo , following a review of all factors a ecting a +ight. These include the weather,routes the +ight may follow, fuel requirements and both the amount and distributionof weight onboard the aircraft. Oeight must be distributed evenly aboard an aircraftfor it to +y safely.
Maintenance
Maintenance accounts for appro imately "" percent of an airlineXs employees and"#;"% percent of its operating e penses. Maintenance programs 'eep aircraft insafe, wor'ing orderH ensure passenger comfortH preserve the airlineXs valuable
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physical assets Cits aircraftDH and ensure ma imum utili ation of those assets, by'eeping planes in e cellent condition. An airplane costs its owner money everyminute of every day, but ma'es money only when it is +ying with freight and orpassengers aboard. Therefore, it is vital to an airlineXs 0nancial success that aircraftare properly maintained
Airlines typically have one facility for ma1or maintenance wor' and aircraftmodi0cations, called the maintenance baseH larger airlines sometimes have morethan one maintenance base. Smaller maintenance facilities are maintained at anairlineXs hubs or primary airports, where aircraft are li'ely to be par'ed overnight.)alled ma1or maintenance stations, these facilities perform routine maintenanceand stoc' a large supply of spare parts.
A third level of inspection and repair capability is maintained at airports, where acarrier has e tensive operations, although less than at its hubs. These maintenancefacilities generally are called maintenance stations.
Sales and Mar'eting
This division encompasses such activities as pricing, scheduling, advertising, tic'et
and cargo sales, reservations and customer service, including food service. Ohile allof them are important, pricing and scheduling in particular can ma'e or brea' anairline, and both have become more complicated since deregulation. As e plained inthe ne t chapter, airline prices change frequently in response to supply and demandand to changes in the prices of competitorsY fares. Schedules change less often, butfar more often than when the government regulated the industry. Airlines usesophisticated computer reservation systems to advertise their own fares andschedules to travel agents and to 'eep trac' of the fares and schedules ofcompetitors. Travel agents, who sell appro imately K# percent of all airline tic'ets,use the same systems to boo' reservations and print tic'ets for travelers. Moreinformation about airline pricing and scheduling can be found in )hapter =.
3eservations and Tic'eting
There are ma1or changes in air transportation, which simplify the process for airlinepassengers to ma'e a reservation and to purchase a tic'et. /lectronic commerce is
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playing a signi0cant part in the airline industry. In addition to the paper tic'etsissued in the past, all of the ma1or airlines are now o ering electronic tic'eting fordomestic and international air travel. /lectronic tic'eting allows an airline todocument the sale and trac' the usage of transportation. (assengers no longerworry about carrying +ight coupons or losing their tic'ets. (assengers have the
ability to shop for the lowest priced transportation, ma'e or change a reservation,request refunds etc., not only from their travel agent but from their own personalhome computer or from a telephone, on the way to the airport. A boarding pass isissued at the airport in e change for proof of a reservation Can airline con0rmationnumberD and payment Ccash or a ma1or credit cardD. The number of air travelersshopping, ma'ing reservations and purchasing electronic tic'ets using the Internetis increasing daily. Self;service automated tic'eting machines are also widelyavailable at ma1or airports around the country.
The ne t step for airlines will be to automate the chec';in procedure. /lectronic self;service chec';in computer 'ios's at ma1or airports will soon be available for mostpassengers using electronic tic'ets. Self;service machines will enable passengers toverify their itinerary, obtain class of service upgrades, select speci0c seatassignments, chec' baggage with bar;coded baggage tags and obtain their ownboarding passes.
Sta (ersonnel
These include specialists in such 0elds as law, accounting, 0nance, employeerelations and public relations. Their function is to support the wor' of the linepersonnel, so that the airline runs e*ciently and earns a pro0t. Bor the most part,sta personnel wor' out of corporate headquarters and fall into seven broad 1obcategories typical of ma1or corporations 0nance U property, information services,personnel, medical, legal, public relations and planning.
Binance U property handles company revenues and 0nances. In addition, it overseesall company property and the purchase of food, fuel, aircraft parts and othersupplies needed to run an airline. Information services designs and maintains thecompanyXs internal computer systems, used to store and analy e data needed foroperations and planning. At an airline, this includes the important function of +eetplanning, e plained in greater detail in the ne t chapter.
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Subcontractors
Ohile ma1or airlines typically do most of their own wor', it is common for them tofarm out certain tas's to other companies. These tas's could include aircraftcleaning, fueling, airport security, food service and in some instances, maintenancewor'. Airlines might contract out for all of this wor' or 1ust a portion of it, 'eepingthe 1obs in house at their hubs and other 'ey stations. -owever, whether an airlinedoes the wor' itself or relies on outside vendors, the carrier remains responsible formeeting all applicable federal safety standards.