IT revolution leaves uninitiated behind
Most airlines are investing in information technology to streamline their businesses as part of the relentless struggle for profitability. But a surprising number appear willing to ignore initiatives such as e-ticketing and self-service kiosks, and those that do risk being left behind.
That message came from Peter Buecking, president of airline telecommunications and IT specialist SITA, when he announced the findings of the group’s seventh annual Airline IT Trends survey in London recently. “There is the specter of a two-speed industry,” he warned, “with weaker airlines losing competitive advantage because of a lack of technology investment.”
The International Air Transport Association (IATA) includes e-tickets and common-use self-service kiosks among the core projects in its “simplifying the business” initiative, which it designed to improve customer service while eliminating the costs associated with many traditional processes. Whereas paper tickets cost up to $10 to process, e-tickets cost just $1. So the industry would save at least $3 billion annually by meeting the IATA goal of 100 percent e-ticketing by 2007.
More than 70 percent of the world’s airlines now sell tickets through the Internet, and e-tickets account for 30 percent of all tickets issued by airlines, up from 19 percent in 2004. Yet 25 percent of the airlines responding to SITA’s survey, which between them comprise some two-thirds of the industry’s revenues, do not expect to sell a majority of tickets over the Internet for five or more years. Moreover, only 68 percent expect e-ticket transactions to account for more than half their sales by the end of 2007.
Another of the IATA initiatives centers on common-use self-service kiosks (CUSS). The IATA CUSS standard allows airlines to share kiosks, reducing the demand for space in airport terminals and enabling the placement of kiosks at other locations such as car hire return points and hotel lobbies. Even so, at least 18 percent of airlines have no plan to deploy self-service kiosks, either common-use or dedicated.
The third element of IATA’s program involves bar-coded boarding passes. Able to be printed on passengers’ own home or office computers, bar-coded passes allow passengers to bypass even the check-in kiosk. Then, there is the imminent prospect of cellphone check-in: the passenger’s phone will receive a bar code transmission, and a reader at the gate will read it directly from the handset display.
Some airlines already provide their customers with the option to check in by Internet and print their own boarding passes. But nearly 40 percent of their rivals don’t expect to see commercial use of bar-coded boarding passes for more than three years.
“Much of the disparity is regional,” Buecking commented. “Outside Europe and North America, Internet and wireless technology is less pervasive and what is available is less robust. Inevitably this is slowing take-up rates at some airlines.” That is not the whole answer, though. Even some European and North American airlines are falling behind the technology leaders, the survey’s results reveal. More than 20 percent of airlines from those regions will not have IP-enabled the majority of their systems by the end of 2007, more than 10 years after its introduction to the airline industry.
North America Takes Lead
Buecking attributed some of the imbalance to variations in regional economic conditions. So North American airlines have cut their spending, from 1.9 percent of revenues last year to just 1.4 percent, the lowest of any region. On the other hand, they already sell the majority of their tickets through Internet channels, their 63 percent of online sales far outpacing the 24 percent figure in Europe and 10 percent in Asia/Pacific.
European carriers face fierce price competition, and many have begun investing in the automation of passenger touch points. On the other hand, 29 percent still rely exclusively on paper tickets, and only 17 percent now use bar-coded boarding passes compared with the North American proportion of 67 percent.
The Asia/Pacific region shows the most dynamism. Its airlines have always emphasized customer service, particularly in the air. Already, 23 percent offer an SMS (short message service) link to the ground and 31 percent provide on-board Internet and e-mail access. Those figures appear likely to grow to 66 percent for SMS and 73 percent for e-mail and Internet by 2007, far ahead of their North American and European counterparts. And where only 20 percent of European and 11 percent of North American airlines plan to offer on-board access to mobile telephony services by the end of 2007, 45 percent of the Asia/Pacific carriers expect to make them available.
On the ground, too, the Asia/Pacific airlines have set ambitious targets. Only 9 percent currently deploy CUSS kiosks. But their late start may work to their advantage. Having leapfrogged several generations of kiosk technology, 77 percent of them expect to migrate to CUSS within the next five years. And while their average spending on telecommunications and IT remains static at 2 percent of revenues for the second year running, growth in passenger numbers nearing the double-digit level means they will actually spend more.