Airlines rethink IT priorities as recession bites

As the airline industry undergoes perhaps its most intense period of rationalisation, the sector’s technology agenda has had to change to respond to the new financial realities.

High fuel prices, the sharp decline in passenger numbers and competition from low-cost carriers has created a unique set of challenges for IT leaders, who will have to stretch limited budgets to increase internal efficiency without compromising service levels.

British Airways (BA) has been among the hardest hit by the recession, last month posting operating losses of £401m for its most recent financial year, compared with a profit of £922m last year. This in turn led to IT budgets being slashed by nearly a third.

Computing spoke to IT decision-makers at five of the UK’s leading airlines about the changes and priorities for the IT department as the sector struggles to ride out the storm.

British Airways
After re-budgeting its technology spend, BA will focus on projects to ensure business continuity, reducing operational cost and improving customer service.

BA’s IT agenda over the next year will look to improve the firm’s call-centre operations, with the aim of delivering a multi-channel offering.

“While I am very proud of BA.com and what we have achieved, that is only part of the story. What we need to do is provide a seamless operation to our customers between all our sales channels,” said Paul Coby, chief information officer at BA.

A team using agile development techniques is also working on enhancing BA’s web site in areas such as the Executive Club and Airmiles schemes.

Despite having cancelled a group-wide enterprise resource planning (ERP) software rollout, BA hopes to complete an SAP implementation covering maintenance planning, quality control and engineering by year end.

A new food planning system is also scheduled to be delivered this year. The project is considered a high priority as it affects both customer service and internal efficiency.

Coby believes the recession will stimulate creativity and maintain the drive to innovate. “Innovation doesn’t need to cost billions of pounds. The app we distributed at the time of the iPhone launch was a perfect example of innovation that costs almost nothing,” he said.

“The challenges ahead are all about being more productive with what you have and ensuring continuity of the business; doing a lot more with a lot less.”

Virgin Atlantic
Last month, Virgin Atlantic reported a doubling of profit to £68m, but the firm warned that “no network airline will make a profit this year”. With tough times ahead, the company has restructured its IT function, making the department head redundant earlier this year.

“Virgin Atlantic is integrating the activities of its IT and finance departments, as well as other business services, so they are closely aligned under the finance director,” the firm said in a statement.

“As a result of this new strategy, our director of IT, Mike Cope, is pursuing other opportunities.”

Ryanair
Customer-focused projects are at the top of the IT priority list at budget airline Ryanair, as the slump has sharpened its already low-cost approach.

“We are driving more projects around cost reduction and looking at how to use technology to generate more demand,” said Eric Neville, Ryanair’s IT director.

Ryanair will drive further automation by rolling out self-service kiosks in more airports. An entirely online check-in is the way forward for airlines looking to cut cost, but it is not for everyone, said Neville.

“More carriers will move towards online check-in, simply because it is cheaper. But it also depends on the mindset of those companies ­ – some are more dependent on intermediaries such as travel agents, for example,” he said.

In the back-office, Ryanair will look at improving its ERP platform in the next year. The enhancements will enable full use of handheld electronic point-of-sale devices by cabin crew selling on-board merchandise, as the firm hopes to achieve better visibility of product demand and improve cash reconciliation.

Deferred projects at Ryanair include mobile ticketing. “We have started sending booking reference codes via text, but projects in that area are a ‘nice to have’, more than anything else,” said Neville.

But regulatory requirements – such as the government’s e-Borders immigration system ­ – could be a distraction from delivering what is commercially important.

“Airlines should be lobbying for unified European passenger information standards, so we could provide the necessary infrastructure in a more efficient way,” he said.

Monarch Airlines
Charter carrier Monarch Airlines has finished a major platform upgrade including its reservation system, ahead of integration work with the companies now forming travel arm Monarch Holidays.

Ongoing work includes web site improvements as well as crew planning systems, but projects such as automation of document management have been postponed.

“We still have a lot of paper-based documents and it would be good to have more automation, but such projects demand a significant investment and it would cause an impact in several areas of the business that we cannot afford,” said the firm’s former chief information officer Richard Mintern, who is now director of Monarch Aircraft Engineering and retains overall responsibility for the firm’s IT agenda.

Over the next 12 months, the airline’s IT team will work on integration projects around Monarch Holidays, the joint venture with tour operator Cosmos, and on better use of customer data to up-sell products.

EasyJet
Low-cost airline EasyJet reviewed technology spend last summer, when the signs of a prolonged downturn became obvious.

“We did some re-budgeting then because we could see the recession coming, but luckily we have always adopted a strategy that keeps the IT cost base quite simple ­ – we are mainly a Microsoft shop and have outsourced a lot of our development function,” said Tim Newing, IT director at EasyJet.

“The recession made us busier than before and we have introduced a lot of projects that were not part of our original budget and more geared at cost reduction and business efficiency,” he said.

The firm has increased use of business analytics and reporting tools to understand its costs, and is this month rolling out a crew rostering system that uses sophisticated mathematical modelling to better match staff with particular expertise and location to flights.

Despite making improvements on its web site, EasyJet does not intend to move to a fully online check-in model or use kiosks, deemed too slow and expensive as staff are often needed to assist any passengers who have difficulty using the equipment.

“We always had the principle that passenger self-service is a good thing, but we won’t introduce things at the expense of a reduction in customer service,” said Newing.

Conservatism and unwillingness to try new things are the main problems of the airline industry, according to Newing. “That is why the sector is behind many other industries in terms of how it uses technology and is also one of the reasons for the current struggle,” he said.

Technology key to lifting airline efficiency

Enterprise resource planning (ERP) systems – almost mandatory at any airline, such applications can help cut costs and streamline processes as well as replace legacy systems that are expensive to maintain.

Customer self-service – online check-in and kiosks speed up boarding and bag-drop processes.

Revenue management systems – maximise profit by controlling pricing and availability and ensuring flights are booked to maximum capacity.

Dynamic packaging – enables consumers to build their own set of flights, accommodation, and a hire car instead of a pre-defined package, during the flight booking process.