During the past six years, the airline industry has had to navigate some fiercely turbulent currents: the 9-11 attacks and subsequent financial meltdown, industry deregulation and the cataclysmic impact of the low-cost airlines have all contributed to massive uncertainty. In such straitened times, IT investment can seem like an ill-affordable luxury. In fact, as the low-cost up-starts have demonstrated, it is IT that can help breathe new life into this long-established industry.
The low-cost carriers have been at the vanguard of establishing new, slimline working practices – from dynamic pricing and self-service kiosks, to online check-in and mobile boarding passes. In recent years, the explosion of no-frills airlines, including Ryanair, EasyJet and Southwest Airlines in the US, has reshaped the industry with the web now becoming its primary sales channel.
The traditional carriers have taken up the technology batten: Alongside the enthusiasm for the Internet, they have also been ahead of the curve in introducing next-generation network technologies, delivering personalised video services to customers’ seats, adopting large-scale rollouts of radio frequency identification (RFID) tags and participating in deployments of biometric security.
The breakneck pace of change has helped redefine the industry within just a few short years. For example, IT advisory group Forrester Research suggests that online ticket sales are likely to double over the next four years to €263 billion. This is revolutionising sales strategies, placing unprecedented focus on airlines’ web presence and their online booking systems.
“On the web, you are competing for eyeballs and, if you want to take control of that space, you need to offer a better user experience,” says Denis Lacroix, product development director, sales and e-commerce platforms, at global distribution system (GDS) and airline software specialists Amadeus. “Airlines are now looking [to websites] to reduce costs, increase online revenue and compete effectively against other players.”
Airlines have responded with a headlong rush to differentiate themselves through web-based e-ticketing, dynamic packaging (the bundling of flights, insurance, hotel reservations and car hire) and online check-in services. Such enhancements may rapidly become commonplace across competitors, but they can require significant alterations to back-office processes – no small feat for any airline.
There is no better example of the impact that these changes are having than on airlines’ relationships with their suppliers. “New entrants and no-frills airlines are shaking things up not only in terms of pricing but also in driving a direct distribution route. Airlines no longer want to use a GDS but want to issue their own tickets,” explains Dave Endicott, senior vice president of software development for Sabre Airline Solutions, an airline industry software and consultancy service. “All airlines are looking for an edge, whether they’re a flag carrier or a new entrant, because the market is highly competitive.”
Under the intense pressure of the competition, airline leaders are pouring over balance sheets, hunting for any areas ripe for cost reduction. In particular, paper tickets and the purchasing of air travel through travel agents or call centres have come under fire from airline executives. “If the airlines can get passengers to change to booking online then it will provide a huge cost saving,” says Stephen Colebourne, technical architect e-commerce platform division at SITA, a provider of IT and communication services to the air travel industry. “Airlines can then pass that saving on to consumers in terms of cheaper fares, enabling them to compete with lower cost airlines.”
In response to the debilitating pressure to cut costs, the International Air Travel Association (IATA) launched a campaign in 2004, to help its members cut costs while simultaneously improving customer service. The campaign, Simplifying the Business, aimed to cut $6.5 billion annually.
The programme is split into five distinct areas – e-ticketing, which is expected to be implemented across 100% of the industry by May 2008; bar-coded boarding passes to enable faster and more convenient check-in to be implemented by 2010; self-service check-in kiosks; RFID use within baggage handling; and IATA e-freight, a system designed to eliminate paper documentation for air cargo.
E-commerce rapidly became an accepted part of life online, yet it is easy to forget that it “was not part of the web’s original design,” says Amadeus’s Lacroix. Consequently, users have become accustomed to low-levels of interactivity, long wait times or “bizarre messages, such as ‘page expired’”, when trying to conduct transactions, he adds.
Sabre’s Endicott agrees. “The technology can help provide a richer, stickier site and, in terms of providing an enhanced user experience, that’s something all the airlines are interested in and there is a lot of movement towards making that happen.”
The technology has already been put to good use by UAE-based carrier Etihad Airways. Amadeus helped the airline develop an interactive slider to help frequent flyers cash in their airmiles on flights or shopping rewards (see box Online rewards).
But the move to online booking and issuing of e-tickets has not always been easy and, in some quarters, has been met with some resistance. “As well as being price sensitive, our customers were worried about the security of booking online with the result that only 25% of visitors were interested in booking online,” says Asmaa Fenniri, e-commerce specialist at Royal Air Maroc. Introducing a friendly user interface and addressing security concerns by informing customers of their payment status in real-time has helped the airline enhance the customer experience.
The next step for the industry is to move these bookings and check-in tools into the mobile environment. The first bookings were able to be carried out on the mobile platform back in 2002 but the client devices lacked the processing power to deliver a compelling product. Unsurprisingly, it didn’t take off. Today, however, research from SITA indicates that over three-quarters of airlines (76%) expect to be able to offer check-in via mobile phone within the next two years.
This rediscovered enthusiasm for mobile technology comes at a time when airlines are also looking to expand into new markets. “Mobile technology is a big growth area because the realisation is hitting that there’s two-thirds of the world that have skipped copper and gone straight to wireless technology,” says Sabre’s Endicott.
Sabre itself is looking at developing systems to enable the use of the mobile phone during the check-in process. “We’re exploring new ways of using that device for notification, reallocation and for pushing information to make the travel process far easier than it is today,” explains Endicott.
The technology is already being used to some extent by European airlines. Finnair, for example, has started sending text messages to its customers about delayed departures or baggage, and also about cancelled flights. Messages can be sent to all customers who have their mobile phone number included in the reservation information. The carrier also plans to send messages about schedule changes to passengers from later this year.
But it is not only the airlines themselves that are increasing their level of investment in technology to enhance the customer experience. Airports are also starting to become more aggressive in the adoption of new technologies to manage passenger growth and improve services for their tenants – IT spend has increased by 40% over the past three years, according to the recent Airport IT Trends survey carried out by SITA. Airports are also increasingly using self-service check-in kiosks and are trialling RFID technology for baggage management, a system that is expected to become RFID’s main use in the airport sector by the end of the decade.
Looking to the future
As for future trends, airlines are currently exploring the possibilities that so-called Web 2.0 technologies offer. Some are already exploring developing interactive destination maps, blogs and RSS feeds to improve customer interactions.
The Henley Centre HeadlineVision consultancy has identified four sectors of the population that will make up the majority of those travelling in the future, and in conjunction with Amadeus has examined the key technologies necessary to improve passenger experiences, making them more efficient and engaging.
It discovered that investment in enhanced communication technologies, distribution systems, sensing and identification technologies are of the utmost importance – from the introduction of biometric identification systems, flexible journey management options and more secure baggage tracking technology.
“The humanisation of technology is a key driver,” says Jerome Destors, commercial director of Amadeus e-Travel. “There is a role for technology to underpin delivery of expectations and provide more control, security, comfort and personalisation.” This humanisation of technology, combined with the increased desire to enhance the user experience throughout the sector, is likely to propel the air travel industry to the forefront of technology development and implementation.
When United Arab Emirates-based Etihad Airways decided to launch its web-based frequent-flyer programme, Etihad Guest Miles, in 2006 the IT team was given just five months to come up with an innovative, interactive system for the redemption of frequent flyer miles.
Common complaints from flyers, such as the inability to use their frequent flyer miles at the times they needed to fly and the need to reach a certain target of miles to be able to book a flight, were examined by the team. As a result Etihad introduced a number of initiatives to combat these issues. This included anytime availability so customers can book any seat on any flight with their miles and a system so passengers that had earned just one frequent flyer mile could redeem that mile and pay the rest of the fare in cash. “It provides immediate rewards for our guests and makes the redemption process completely transparent,” explains Tehmton Cooper, Etihad Airways’ e-commerce manager.
Etihad intends to use similarly developed technologies with its soon-to-be launched online check-in system and within its internal booking engine. “The key advantage of these [AJAX-based] tools is that it makes the website and the user experience much faster,” says Cooper. “In addition, it provides enriched, web-based information to help each customer make [purchasing] decisions.”
Finland-based carrier Finnair has also embraced the online advantage. It has repositioned its website to become its primary channel for its loyalty programme. The company has seen significant expansion over the past year, with passenger numbers up more than 20% compared with 2005, and a similar increase in the number signing up to its frequent flyer programme, Finnair Plus.
This rise in frequent flyer numbers, exacerbated by an inefficient and unfriendly online service, was putting increasing pressure on the airline’s call centre – a more costly form of customer interaction. “Customers were unable to find flights for award bookings and were even offered destinations that their frequent flyer points balance didn’t allow them to book,” says Timir Bhose, Finnair’s director e-commerce and CRM development.
The company worked with Amadeus to improve its portal user interface by making it easier to find on the homepage and integrating the loyalty programme with its booking engine so available flights were easier to find. “If we are going to allow customers to earn points then we need to provide a simple way for them to use them,” says Bhose.
The impact of these seemingly minor changes has been significant. The online share of redemption bookings is now 50% and response times at the call centre have been improved, allowing agents more time to deal with complex bookings and priority customers. However, it has introduced a number of new business problems that Bhose is now looking to combat.
“We can’t currently offer upgrades, junior or family redemptions, which is making it difficult to increase our online share further,” he says. “We are also looking to introduce a points and cash system via the web within the next year.”