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Industry should take lesson from Star Alliance, says Amadeus report

 - December 7, 2006, 6:03 AM

The airline industry should take a shared approach to customer IT systems to meet the twin challenges of increasing financial pressures and rising customer expectations, according to a new report sponsored by global distribution system operator Amadeus. The two main Star Alliance partner airlines have endorsed that view with their selection of a common IT platform to support their customer transactions.

Next-generation customer management solutions can help the industry cope with the complexity and disorder found in the legacy systems that underpin it, argues UK forecasting and innovation expert Professor James Woudhuysen in his report, “It Makes Sense To Share.” And by using an outsourced community platform–a shared system used by rival airlines to manage customer processing–he claims, airlines can benefit from the latest technology while remaining free to innovate and differentiate.

Since the emergence of airline computer reservation systems in the 1970s and their subsequent transformation into the global distribution systems of today, no similar breakthrough in airline industry IT has happened since, argues Woudhuysen. But airlines have placed a growing emphasis on retaining clientele, particularly through the deployment of frequent flier programs, and on the importance of knowing the identity and habits of individual customers.

That knowledge demands an understanding of every stage of the passenger’s journey, from searching for flights through booking, check-in and departure, and of the passenger’s previous history with the airline and consequently his or her future revenue potential.

30-year-old Systems

Legacy passenger service systems include inventory, reservation and departure control systems built up over the last 30 years. In the event of an exception–a missed connection or a canceled flight, for example–data entry requires a lot of manual intervention, since both data and the identification of passengers hinge on the completion of the flight.

Customer management solutions change that focus to make reservation, inventory and departure control customer-centric rather than flight-centric. Given the ability to recognize customers as individuals, airlines can use every touch point to enhance the traveler’s experience and reinforce loyalty.

Of course, legacy systems have other problems. Often based on code written more than 30 years ago, they have become complex and disorganized, making it hard for airlines to innovate. And both the investment and the expertise required to move to modern open systems may have moved beyond the resources of individual airlines.

The new community platform model for IT outsourcing provides the answer, Woudhuysen suggests. Such a system involves using shared applications, freeing airlines from the need to commit massive investments to develop their own.

IT outsourcing has moved through various stages already. One of the earliest approaches involved handing over computers and data processing to an outside supplier. Then application development went to third parties, reducing the number of development staff needed in-house. The community platform approach sees multiple companies sharing applications developed by a third party.

Improved Automation

The benefits for the airlines, Woudhuysen maintains, include significantly better integration and automation of existing functionalities both for sales and in the airport environment. The new systems handle schedule, availability, inventory, reservations, fare quotes, and ticketing, all the way through to passenger check in.

Their ease of use, coupled with the quality of the data to which customer service agents will gain access, supports the airline’s customer service goals. Airlines can apply and amend their own business rules to the transactions, allowing them to deal with passengers in ways that support their business goals while responding quickly to customer and market demands.

Amadeus’ own customer management solution, Altéa CMS, demonstrates how multinational companies that compete fiercely can share the costs both of operational services and of new IT development.

The system’s rules of governance give each airline user between one and five votes, depending on the number of passengers each carries. Each airline can request specific developments that will benefit all the participants. But each also has the right to develop its own applications, which remain its exclusive property for 12 months following implementation on Altéa. After that, they become the common property of all participants.

In August the Star Alliance endorsed the new model with its decision to go to a common IT platform, first for Lufthansa and United Airlines. Amadeus is building the platform, which will replace the two airlines’ legacy IT systems.