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IT TRENDS SNAPSHOT

38 | Airline Business | July 2012

FUTURE PROOFNow in its 14th year, the Airline Business/SITA Airline IT Trends Survey reveals IT spend is back on the up in 2012, as airlines show particular interest in developing mobile and business intelligence solutions

2012 AIRLINE IT TREND SURVEY SUMMARYThis year marks the 14th Airline Business/SITA Airline IT Trends

Survey – the benchmarking study

tracking IT developments and

strategic thinking for the industry.

Respondents represent more than

half the global airline passenger

traffic. You can download the

executive summary of this year’s

survey now at the IT zone

(flightglobal.com/ITzone) and the

full report will be available for

purchase later this summer at

flightglobalshop.com

‘VERBATIM COMMENTS

‘SuccessesReducing costs, ancillary

services, mobile services

Baggage reconciliation system; mobile boarding pass; simplified interline settlementCost containment. Adoption of

new technologies e.g. iPads

Major re-hosting of operation control system database. Mobile access to key reporting / briefing dataSMS (text based) on all phone

boarding passes. Virtualisation

of the laptop client (bring your

own technologies)

Stability of internally-developed applications and infrastructureGreat new mobile applications

deployed for both employees

and customers

FailuresAdapting to social media

challenges and opportunities

Lack of integration/coordination across silosTracking of customers at the

hub; location services at the

airport; innovation in the B2C

space

Deploying applications to every front line in timeEstablishing measurements for

IT value proposition (KPIs)

Impossible to build virtual private network for outstationReduced funding for key

initiatives, failure of legacy

systems with loss of data

Future challengesBudget control, pace of

technology change

Consumerisation of corporate ITEnterprise resource planning

and business intelligence

implementation

Bandwidth available within the business to make best use of IT/systems given growth challengesBenefits of cloud solutions,

own personnel identity and

access

Managing growth and complexityIntegration of all applications

and the creation of a

catalogue of standard

IT web services

July 2012 | Airline Business | 39

2.56%2012 spend on operational and capital IT as percentage of revenue

IT SPEND BACK ON THE UP AMID CAUTIOUS OPTIMISMThis year’s total planned spend is an improvement on the 2.27% of revenues airlines actually pumped into IT&T in 2011

This year’s planned operational IT&T spend is 1.65% of revenues, up from 1.57% actually invested in 2011. The capital budget stands at 0.93% of revenue, up from 0.70% actual spend last year

Planned IT&T spend in US dollars increased for 51% of chief information officers this year, albeit rather more – just under two-thirds – achieved a rise in actual US dollar spend in 2011, compared with 2010

83%Airlines to be selling ancillaries via mobile by 2015

MOBILE PLATFORMS MOVE CENTRE STAGEJust over a quarter of airlines sell ancillary services via mobile apps or their own website today, but this is expected to rise to 83% by the end of 2015. In the same time frame, ancillary sales via social media outlets look set to rise from 15% currently to 72%

58% of airlines have earmarked mobile services as major investment programmes, with 35% planning R&D projects in the next three years. The focus for social media initiatives is R&D, with 56% planning pilot programmes and 35% major programmes80%

Airlines with plans to invest in business intelligence solutions

MINING THE DATA52% of airlines are planning major business intelligence programmes over the next three years, while another 28% have R&D projects in the pipeline

By the end of 2015, 64% of airlines plan to improve business intelligence by sharing operational data with ground service providers, 55% with alliance/bilateral partners and 53% with airport operators

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IT TRENDS DATA

40 | Airline Business | July 2012

“Furthermore, efficient and precise invoic-ing/billing procedures are not regarded as ‘must haves’, although the subsequent advantages with regard to budgeting, forecasting and clos-ing procedures are indeed fascinating.”

Improving customer services and increasing revenues are also key areas of the business that can really benefit from BI. “Effective use of a revenue management system has been credited with revenue increases of between 3% and 7% resulting in profit increases of 50% or more,” says Mignon Buckingham, managing director of loyalty marketing specialist ICLP.

“The goal is really to combine the compu-ter brain with human intelligence, where experienced individuals live and breathe the booking patterns and load factors for a spe-cific route or group of routes and are able to predict booking patterns and load factors with extreme accuracy,” Buckingham says.

She adds: “Airlines are also good at applying BI to frequent flyer programme data, which lends itself to analytics as it is generally clean data, and FFPs are very much number-driven entities. They use various off-the-shelf tools and more advanced statistical modelling tech-niques, such as clustering and regression.”

With so much scope for BI to drive improvements, there is a danger projects can lose their way without clear business objec-tives. “Expectations towards BI tools are usu-ally high and sometimes end in a kind of disappointment,” says Wilde.

“Stepwise integration of revenue data in a first step and cost data in a second step (or

costs through optimisation of business proc-ess and better business support – cost saving is a pretty predominant aspect of these projects. And you are looking for a return on the investment within your timeframe.”

Stephan Wilde, director sales and business development at route profitability and cost management specialist Airpas, says: “More effi-cient back-office procedures like digitalisation of invoices or even (standardised) interfaces would allow for lowering administrative cost and gaining a competitive advantage.

NUMBER CRUNCHBusiness intelligence is moving up the airline priority list, not just to ensure efficient data management but also to drive customer service and personalisation

“The goal is really to combine the computer

brain with human intelligence”MIGNON BUCKINGHAM

Managing director, ICLP

REPORTGILLIAN JENNER LONDON

Business intelligence (BI) sounds so simple and self-evident. Yet you’d be hard pressed to find two words that encapsulate a concept that has so many implications for

all areas of business. Around 80% of airlines intend to invest in

BI solutions over the next three years accord-ing to the Airline Business/SITA Airline IT Trends Survey. At the broadest level, we are talking about the applications and technologies for gathering, storing and providing access to data to help businesses optimise their resources and create value-added opportunities.

However, this does not really get to the heart of its role.

Fuelling the BI machine is data and to be truly powerful, data must have achieved a reasonable level of quality and validity when it enters the BI system. Therefore, much of the discussion and activity around BI gets snagged on the whole issue of accessing data, finding ways to clean it up and sharing it.

These problems with data integrity stem from fragmented and legacy technologies, compounded by a propensity for bespoke end-to-end application systems and thinking, which have dogged the airline industry.

Never theless, the BI revolution is under way, with innovative projects now on track at both an individual airline and at a more global level in the industry.

SITA’s chief technology officer Jim Peters says the greatest impact from BI is to be had around process optimisation. “Reducing

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vice versa) could be one approach to reduce complexity and to guarantee the buy-in of the different stakeholders involved,” Wilde adds.

However, good BI implementation not only provides a holistic view, but actually also requires it. “Many airlines also forget the heli copter view, leading to a fragmented anal-ysis and subsequent departmental key per-formance indicators leading to department optimisation, but not overall business opti-misation,” says Ursula Silling, chief execu-tive of consultancy XXL Solutions.

“If used properly, performance indicators will cover the enterprise and not only [the] department view, and targets for team members will be set on a cross-departmental basis; in that way BI can help to improve the cross-functional working together for various projects, whether revenue or cost improvement or customer serv-ice or operation/punctuality related.”

The same focus and systematic approach is needed when it comes to the thorny issue of data integrity. Headaches typically include try-ing to access data locked in departmental silos and inconsistent data across systems. Getting to grips with data – ensuring it is accurate and sanitised – is a key focus of Westjet’s BI strategy.

It has benefited from some early wins

increasingly important for the industry to have a common set of terminology and reporting,” says Mercator vice-president Duncan Alexan-der, explaining that Mercator is rebuilding a corporate-wide safety platform and sharing the IPR with IATA to create a better way for the industry to report and analyse data with the authorities and each other. “It is a big area of collegiate, cooperative approach by the industry, where we will get greater traction faster, because it is in everyone’s interest.”

Faced with a reliance on business partners for many applications and the need to decen-tralise its data, JetBlue set up a data govern-ance group plus a team of data stewards. There is also an education programme to tackle some of the data issues. JetBlue is now the central hub for data when working with business partners, developing standard mechanisms for data exchange.

Director of application services Andrea Azzolina says this is part of a four-point strat-egy, which also includes partnering with the business to define the most critical metrics driving the business; building enterprise BI and integration initiatives into a centralised architecture; plus centralising and extending the internal BI capabilities.

around centralising data quality checks, opti-mising refreshing of the information and rec-ognition that data needs to be federated.

Rather more challenging, says Torry Fischer, data warehouse manager, is recognis-ing the need to identify and manage the data more holistically, plus supporting day-to-day information needs in parallel with develop-ing a corporate view of the data for more stra-tegic and tactical business actions.

TRYING TERMINOLOGYTrying to make sense of your data starts at the most fundamental level – making sure every-one across the airline organisation is using the same terminology. Neetan Chopra, vice-president strategy and architecture for Merca-tor, explains: “Origin and destination – differ-ent departments have different definitions of this terminology. The vocabulary and seman-tics that you use for describing information make it difficult to collate data.”

Chopra recommends establishing a BI-com-petency centre, with a team of people working to clean up the vocabulary before taking the data into a more federated set-up.

An example of this in action is in the safety arena. “This is another data set area where it is

July 2012 | Airline Business | 41

Rex

Featu

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“We are currently working on building out a robust crew and recovery capability that will rely heavily on data and analytics. Key focus areas will be within our systems operations center to deliver operational data to front-line crew members. We will focus on providing web-based and mobile reporting technologies on airline operations,” she says.

A critical issue for airlines using BI is to plug the gaps in their real-time knowledge of what’s happening in the market, critically in relation to ticket sales. IATA has been working with 43 airlines to pool disparate transaction data.

Launched in June, the Direct Data Service (DDS) is expected to contain 85% of total data for global indirect sales by the end of the year and 90% early in 2013.

A number of airlines are also contributing direct sales into the pool and Aleks Popov-ich, IATA senior vice-president, industry dis-tribution and financial services, sees oppor-tunities to include other data such as industry ancillary revenues from electronic miscella-neous documents.

IATA is also working on another BI initiative to help airlines to differentiate and personalise product across all channels, including global distribution systems. The challenge will be data and Popovitch envisages the DDS project evolving over time to provide that data.

“One of the things we are learning from other industries like retail is shopping. When you buy products through Amazon, [you see] how tailored the product is to you and me. This organisation has learned about yours and my buying preferences to offer solutions tailored to our needs,” he says.

In a not dissimilar move, Amadeus IT Group, with an eye to the achievements of Google and Amazon, is also looking at how to make better use of search and shopping data in travel to drive personalisation. With more than a billion transactions a day going through its system, the GDS is keen to further exploit this information.

“What are people searching [for]?” says Cyril Tetaz, head of marketing, airline distribution marketing at Amadeus. “If we manage to link back from shopping to booking we think we will have a very valuable proposition.”

On the not so distant horizon are opportu-nities for airlines to incorporate new data streams into the mix, which will deliver rich insight about their customers and potential customers. “Traditional customer data sources such as FFP, CRM and reservations data are being supplemented by social media, web and

an airline in a consistent and clear manner. If this is well done, forecasting of future develop-ments is possible using BI.”

He adds: “It is not sufficient anymore to ask what happened or why it happened; the most important question now is, what might happen? This approach is more and more important to get ahead of the competition in the global airline industry.”

PEOPLE POWER AND BIBI implementations are as much about strong, visionary leadership and people skills as they are about technology. When Air Baltic built its passenger data warehouse based on bookings, ticketing and departure control system data some of its key business challenges were peo-ple-related, says chief executive Martin Gauss.

The issues included a lack of internal coordi-nation, the involvement of many parties and internal acceptance of the new reports over the existing isolated data sources. These problems were addressed by top management commit-ment, user training, involving the relevant department heads and channelling communi-cation through project managers/analysts.

The result is that communication has been strengthened by the new role BI plays in the company. By also addressing hurdles such as data quality at the source, testing and documen-tation, the airline has eliminated duplicate reporting processes in various departments.

Development of the passenger data ware-house is ongoing with the focus on ticketing data. Other BI innovations include a financial data warehouse, with the focus on daily updated route results.

Careful consideration of personnel issues – getting unions involved from the outset, think-ing about how to address resistance from peo-ple fearing loss of power as data becomes more easily available – is key, says XXL’s Ursula Sill-ing. But, you can create big wins on the staffing front. “BI used in a proper way can also lead to more staff empowerment and staff engage-ment, as well as better customer service.”

It’s clear the success of BI is wrapped around the issue of making data holistically available. What everyone is wrestling with is how to inte-grate the data sources and deliver them in a meaningful, timely way. Getting this right will decide which airlines will be the winners.

mobile ‘footprint’ data,” says Buckingham. “Therefore any airline that integrates these rel-atively new data streams with the traditional ones within a single BI platform will take cus-tomer insight to an entirely new level.”

Spanish carrier Vueling is already looking at incorporating this social data feed into its BI marketing solutions, which are focused on driving loyalty and personalisation for custom-ers. “Social networks are increasingly becom-ing a part of the relationship between the com-pany and the customer and must be incorporated into information systems,” says marketing director Lluís Pons. “Specific BI tools are being tested to analyse available infor-mation on social networks, to identify opportu-nities and analyse detailed customer profiles. It is, however, too early to assess results.”

With airlines collecting vast amounts of data from many sources, whether it is structured – in a formal database – or unstructured – Tweets or customer feedback emails – they are approaching the realm of “big data” inhabited by the likes of Google, Amazon and eBay, where specialist algorithms are developed to run through the data and extract information.

Mercator and SITA are among those experi-menting with “big data”, with projects likely to come to fruition over the next 18 months. The challenge, says Dr Gunter Küchler, member of the executive board at Lufthansa Systems “is to combine all this information into one holistic view which describes the current situation of

IT TRENDS DATA

42 | Airline Business | July 2012

Read how airlines are targeting mobile phone technology for future growth: flightglobal.com/mobilegrowth

“The most important question now is, what

might happen?”DR GUNTER KÜCHLER

Executive board member, Lufthansa