“The impact of e-services in a state-owned airline”

Kostas Malagas, Nikitas Nikitakos

University of the Aegean

Electronic Services in AirlinesElectronic Services in Airlines

Reservation & e-ticketing

Airrport Control Systems

Web Services

Frequent Flyer Systems

Revenue Management

Other Systems

Increase customer base

Improve customer services

Minimisation of operational costs

Establish the appropriate organisation

culture

Requires organisational

changes & replacement of processes and

practices

Increase efficiency,

productivity, and improve

compettiveness

Optimise their operations

Competitive advantage

Profit Maximisation

e-ticketing

e-ticketing

stress free ticketing

no risk to lose your ticket

no queues at departure airport

facilitates the use of self service check in

Leverages technology

Reduce complexirty and

costs (annual savings USD

6.5bn)

Assist travel agents (sell by

phone)

Increase convenient for passengers &

freight

change passenger tickets by phone

airline save 9 USD when issue an e-ticket

Airlines eAirlines e--services evolutionservices evolution

1950s First investments from airlines1962 Introduction of SABRE Computer Reservation Systems by American Airlines1970s

Airlines available solutions for e-servives

Airlines have 2 alternatives

evaluate their stregthness if not In house Outsource

no sufficient knowledge or expertise in-house

less time less cost

manage the possible conflict

Provider CustomersAirline

ee--services to airport operationsservices to airport operations

Web check inCUSS (Common Use Self Service kiosks)

- Strong passenger adoption- Shorten queue time, less congestion at ticket and gate counter- Optimise airport staffing

Frequent Flyer Programms

FFP members data & behaviour

Enhance customer experience & loyalty

Revenue Management

Revenue Management

Improved seat Utilisation rates

Optimisation of segemented

pricing

Generated increased profit

(6-10%)

Increased ROI

Mobile technologies

Mobile technologies

Better service to customers

Increased productivity

From Olympic Airways to Olympic AirlinesFrom Olympic Airways to Olympic Airlines

1957 Olympic Airways was established by Onassis.1971 Olympic Aviation, a new subsidiary was established to offerdomestic services.1972 Olympic Airways extended its flights to Far East and Australia1974 Onassis withdrew1975 Olympic Airways were bought by the State1991 Olympic Airways established its subsidiary “Galileo Hellas” to offer Computer Reservation Services1992 Olympic Aviation operated autonomously and a charter subsidiary was establishedAegean Aviation was initially set up

continued

From Olympic Airways to Olympic AirlinesFrom Olympic Airways to Olympic Airlines1994 The implementation of the 1st Restructuring Plan (R. 2271/1994)1996 The establishment of Thessaloniki secondary hub1998 The implementation of the 2nd Restructuring Plan (R. 2602/1998)1999 European Commission penalised Olympic Airways for not achieving the objectives of the 2nd Restructuring PlanAegean Airlines having capital injection entered the scheduled domestic marketBritish Airways subsidiary took over Olympic Airways Management2000 Pricewaterhouse Cooper had appointed to audit Olympic Airways finances in order the carrier to privatise2001 and 2002 Two privatisation efforts without success2003 Olympic Airlines was created to become more attractive to private investorsToday The carrier remains in the state hands facing financial problems

The main characteristics of state owned The main characteristics of state owned airlinesairlines

The occurrence of substantial lossesThe existence of an overpoliticised structureThe existence of strong labour unionsOverstaffed and low labour productivityNo clear development strategyBureaucratic managementPoor service qualityContinuous government intervention

Further to above Olympic has:Many different aircraft typesBureaucratic and overcentralised managementHigh seasonality and low yields

How the new PSS (eHow the new PSS (e--services) have services) have affected Olympic operation/performance?affected Olympic operation/performance?

Increased passenger traffic (by 5-6%), partly explained by the introduction of these services. Average fare slightly decreased (<1%) due to delay of the implementation of the new revenue management system.Significant improvement of ticket counters staff productivity.More agreements with other airlines, which have implemented e-ticketing services, have positive results for Olympic.Further co-operation with the GDSs has positive results also.Significant increase of revenues coming from the carrier’s web site.Less queues at the airports, improving customer service and staff productivity.

continued

Significant telecommunications cost savings.Cut distribution costs and back office accounting work.Immediate receive of passengers payments.On time revenue data information.The delay of the Revenue Management and Frequent Flyer Program implementations has negative results.

How the new PSS (eHow the new PSS (e--services) have services) have affected Olympic operation/performance?affected Olympic operation/performance?

Olympic introduced new electronic PSS Olympic introduced new electronic PSS services:services:

The decision for this was taken later than the other airlines and a year before the IATA’s deadline.The carrier decided to outsource these services.Olympic invited bidders for the tender of PSS services.The biggest providers were responded.The Technical and Financial Committees were scrutinised all offers and select the Provider.The migration Project started on 13th February and completed in 17th June 2007.

Why the new PSS services has positive Why the new PSS services has positive results for Olympic?results for Olympic?

because the “right” Provider selected: i) earlier migration to the new system, ii) did not require significant changes in computers and the cost that this can accrue.because a “good co-operation” of Olympic Project Leaders with the provider staff was established.because the “right Project Leaders” was selected from both organisations.

The main obstacles for the implementation The main obstacles for the implementation of the PSS services were (are):of the PSS services were (are):

the existence of two Management Teams in Olympic (Olympic Airlines and Olympic Airways Services).lack of the promotion of the new services to the public.no organisational restructuring to support the new services.the employees resistance in some cases.low staff morale due to the coming privatisation.

Passenger Service System:Passenger Service System:

to flourish firm should have clear strategic goals.requires the “right” organisational structure.assist airline to offer a differentiated product.offers cost benefits.maximise efficiency.management should monitor competition, government regulation, technology and other environmental forces.Cultural compatibility between client and vendor organisations

The advantage of the study is the actual The advantage of the study is the actual participation of one of the researchers in the:participation of one of the researchers in the:

Construction of the Request for Proposal.Member of the Technical Committee.Management of Project, as a Project Manager

Success of IT Projects:Success of IT Projects:

Commitment of the client to the Project.Consultants skills.“Good collaboration” between the client and vendor.Level of information sharing between the client and vendor.Open and honest communicationAvailability of in-house dedicated staff.Contract Management

ConclusionsConclusions-- what what organisationsorganisations should do should do when introduce advanced ewhen introduce advanced e--servicesservices

Introduction leaner and simpler organisational structure.New roles for staff and departments who lose some of their responsibilities.Scrutinisation of all providers offers in order to find the one that fit better the organisation needs.Find the most well-experienced and educated Project Leaders.The decision to introduce new services should be taken in the “right time”.

Limitation of the present study and future Limitation of the present study and future research:research:

more results when full services are implemented.limited number of interviews.find contacts/respondents from other airlines who use similar services.

Thank you for your attention

nnik@aegean.gr