Traditional airlines are increasingly putting IT at the centre of plans to meet the growing pressures of terrorism, rising fuel prices and competition from low-cost carriers on busy short-haul routes.
The emphasis is shifting from individual technology projects that address specific requirements to an approach more familiar to newer, smaller carriers, where overall business models incorporate rolling technology investment to cut costs and improve efficiency.
BMI is the latest company to pursue such a strategy with its decision to turn Blue Sky – a three-year programme using IT to cut costs by £100m – into a continuous model of improvement (Computing, 28 September).
Initiatives such as e-ticketing, online check-in and automated passenger data collection have generated significant savings, says BMI’s group IT director Richard Dawson.
‘We have had great success with the programme and decided to continue using technology to help us to remain competitive against low-cost airlines,’ he said.
‘In year one we took the low-hanging fruit – the projects that were easiest to achieve – and in the past two years we have looked at major changes to help reduce our overheads.’
The carrier’s e-ticketing project made savings of £34m in its first year. This scheme was followed by the development of online check-in facilities and increased automation of the company’s engineering and procurement departments.
The pace of change to e-ticketing is limited only by wider industry adoption of the facility, says Dawson.
‘More than 90 per cent of our tickets are e-tickets and we hope to reach 100 per cent by the end of 2007, though that does depend largely on the willingness and ability of smaller airlines to provide the same technology,’ he said.
BMI’s plans follow a similar trail to that blazed by British Airways (BA). Technology investment was crucial to the 25 per cent rise in annual operating profits that the airline announced in May, says BA. And as part of a continuing strategy to use IT to cut costs, improve efficiency and transform the business, the company plans to increase productivity by 35 per cent and reduce costs by £450m in the next two years.
So far, 10 per cent of BA passengers book flights and check in using ba.com, while six per cent use online boarding passes. And when the airline moves to its new headquarters at Heathrow Terminal 5 in 2008, it wants 80 per cent of customers to check in for flights online or use self-service kiosks, and 95 per cent to use e-tickets.
Low-cost airlines, traditional leaders in the innovative use of technology to help them undercut their more well-established rivals, are refusing to be left behind, and will continue to employ IT to exert pressure on the larger carriers.
Ryanair has invested heavily in self-service and online check-in to streamline the process and cut costs, says the airline’s head of IT Brona Kernan.
‘We are pragmatic and do not use technology for the sake of it, but we will use IT to boost productivity where it is simple and cost-effective,’ she said.
Mark Raskino, senior vice president at Gartner, says airlines have used IT strategically for years to cut costs, but many are only now waking up to how it is core to running an airline.
‘IT has become a competitive battleground, not between the major airlines, but between the new carriers and the old ones,’ he said.
‘New carriers had the luxury of starting afresh following the birth of the internet, and either invented themselves online or transferred across quickly to an online business model that is fundamentally more efficient.’
Profit margins for airlines are very thin and many traditional carriers are only just starting to catch up, renewing their focus on IT and preparing for a period of rapid evolution, says Raskino.
Blue Sky ... in 30 seconds
BMI launched the Blue Sky cost reduction programme in 2003, with the aim of stripping £100m of costs out of the business by 2006. The project is now part of a model of continuous improvement.
The airline saved £34m in its first year through initiatives such as e-ticketing, and is already exceeding the target of 70 per cent e-ticketing by the end of the year set by the International Air Transport Association. BMI expects to be 100 per cent compliant next year.
Online check-in was introduced for passengers in January and BMI is processing more than eight per cent of check-ins online.
Future initiatives under consideration include the introduction of electronic flight bags – mobile computers that contain flight, route, take-off and landing information and calculate flight data automatically.
What do you think? Email us at feedback@computing.co.uk
Further reading
Airline takes mobile flight device on board
reader comments