Airlines pin recovery hopes on technology

Both BA and easyJet are looking to IT-led initiatives to help them break through the dark economic clouds that continue to hang over the airline sector

easyJet has in-sourced its aircraft engineering system and improved its crew rostering applications

As airlines dust themselves down following one of the worst recessions in the industry’s history, IT decision makers are spearheading efforts designed to reverse the sector’s bad fortunes.

An IT reorganisation at British Airways (BA), for example, has contributed towards significant cost reduction at the carrier, which reported its first quarterly profit for over a year earlier this month.

Total technology spend at BA over the past nine months reached £162m, a year-on-year reduction of 17 per cent driven by a complete project review, according to the firm’s chief information officer, Paul Coby.

“We reduced spend by paying a lot of attention to detail and working more closely with our suppliers,” Coby told Computing.

Under the company’s business response scheme, many BA employees volunteered to work for nothing or take unpaid leave. About a third of the airline’s 500-strong IT department contributed to the plan, generating extra savings of about £2m.

IT projects that were prioritised over the period included work on the firm’s online dynamic packaging, allowing up-selling of products and services, as well as increased virtualisation where old servers were replaced by HP kit.

Coby also created what he described as a “star chamber”, where IT spend is scrutinised at a greater level, saving about £1m.

Meanwhile, staff cuts at the airline meant the IT department could reduce spending on end user kit by about £500,000.

Despite the slight improvement of the firm’s financial condition, BA’s chief executive, Willie Walsh, said the latest results reflect “permanent change” to the business.

Large-scale rollouts, such as the enterprise resource planning implementation that was canned last year, continue to rank low on Coby’s priority list, but BA is now working on a subset of the platform to improve payroll processes.

New IT initiatives at BA are likely to centre on the carrier’s prospective tie-up with Spanish airline Iberia. A final deal is yet to be announced, but Coby has been working on the IT integration aspect of the acquisition.

Meanwhile, BA’s smaller rival easyJet has been through a similar, but less dramatic IT review.
The company has in-sourced its aircraft engineering system and improved its crew rostering applications as well as its flight planning application, which enables aeroplanes to use more efficient routes and mitigate the rising price of fuel.

According to easyJet’s IT director, Tim Newing, cost and operational efficiencies could be generated by the use of cloud computing. EasyJet is a Microsoft shop and has asked the supplier to suggest hosted alternatives to its current communications platform. It is also looking at Google Mail.

“Most of the people who use email here are cabin crew, and they are quite light users who don’t utilise all the features of Exchange,” he added.

The firm is also working on im­proving its online set-up and mobile tools to provide passengers with more self-service capability and, as seen at BA, increase revenue.

Newing said he has not been under as much pressure to reduce spend as his peers at larger airlines. “IT is seen as central to our business improvement strategy going forward, so I have not had any significant budget cuts. In fact, I am doing significantly more right now than this time last year,” he said.

Sector seeks more from less

IT spending in the airline sector is predicted to fall during 2010, with resources directed to systems that can provide a quick payback, according to a study by experts.

Technology operational spend dropped by 1.7 per cent in 2009 and the trend is set to continue, according to airline software supplier Sita.

Figures from the International Air Transport Association (Iata) suggest that the sector lost $11bn (£7bn) in 2009 and will lose a further $5.6bn this year.

Reducing enterprise costs and generating revenue are the key focus areas for airlines’ IT, including systems such as advanced revenue management systems, which can improve the yield for each flight and seat sold.

Systems to help bring in ancillary revenue have also been prioritised, as they enable carriers to upsell products and services such as hotels and excess luggage online, as well as keep control of their own sales channels and exclude third parties such as travel agents from the process.

Airline in-house IT teams are shrinking, as is their supplier community, according to Richard Stokes, Sita’s senior vice president of sales and relationship management.

“Most airlines have already begun processes such as rationalisation of IT suppliers, infrastructure consolidation, and headcount reduction. We are also seeing a trend for shorter contracts with some systems to allow for future consolidation,” he said.

According to Iata, some $3bn in yearly savings have already been generated since e-ticketing became compulsory in 2008.

But additional efficiencies and headcount reductions could be obtained by modernising the IT supporting the new standard, says Stokes.