Airlines and the Internet Revolution

8/15/2019 Airlines and the Internet Revolution

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Airlines and the Internet revolution

The emergence of the Internet in the mid "$$#s as well as the development ofIntranets and

/ tranets forced airlines to refocus their strategy on technological innovations inorder to enhance

their competitiveness. Airlines identi0ed the Internet as a ma1or opportunity totac'le distribution

costs and to reengineer the structure of the industry. In a recent interview, 2ritishAirways )/!, 3od

/ddington admitted that 2A spent 4"." billion on distribution in 5##" and that wastheir third most

signi0cant e pense after labour and fuel 6%78. In the Internet era, 9:Ss asindependent business

from airlines developed their o erings to provide the bac'bone for the entireindustry to establish

the infostructure for the transactions underta'en by a number of Internet travelportals. In

addition, they gradually reinvented themselves to main technology suppliers for awide range of

tourism organisations including airlines, travel agencies and Internet travel portals.

At the same time, a number of no;frills airlines emerged in both /urope and the


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Airlines, and newcomers such as 2ratthens, 3ynair and /asy1et that adopted theInternet from the

early stages. Several carriers even painted their aircraft with their Internet addresswhilst they

arranged special promotions with newspapers to drive tra*c to their web sites. They provided

incentives for consumers to boo' online and ensured that they were not distributedthrough the

9:Ss, in a way forcing their clients online 6">8. /asy?et and 3yannair, for e amplewere ta'ing the

vast ma1ority of their boo'ings through the Internet by 5##5 and passed on theircost savings to

consumers by giving a 4% discount on a return fare. @o frills airlines, empowered bythe Internet

and other I)T tools, made the industry reengineer itself as it introduced a number of I)T;enabled

innovations including

/lectronic paperless tic'ets

Transparent and clear pricing led by proactive and reactive yield management

Single fare tic'ets with no restrictions on staying or Saturday nights rules

)ommission capping and publication of net fares

Binancial incentives for self;boo'ing online

Auctions and online promotions

(owerful )ustomer 3elationship Management Systems

!nline and conte t;relevant advertising

As consumers en1oyed interacting directly with airlines and bene0ted from lowerrates, tra*c for

traditional scheduled airlines and +ag carriers declined. They therefore had to followthe lead of nofrills

carriers and to develop their online presence in order to maintain theircompetitiveness. In the


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5##" Airlines IT Trends survey it was revealed that airlines moved fast to Internet(rotocol CI(D based

systems, having either to modernise legacy systems or to invest in newtechnological solutions.

9etting closer to customer and cutting costs were the main 'ey drivers for I)Tpro1ects and 5#&

of carriers have already moved to I( based systems and are en1oying the businessand cost

bene0ts. Another third is e pected to 1oin them in the ne t two years and over $#&of the carriers

are reported to have started the migration to I(. ?ust 7& of tic'ets are currently soldonline, using

web based services and airlines gradually see their own web sites as the mostimportant

distribution channel. It is estimated that by 5##E, online sales and e;tic'eting willbecome the

ma1or distribution mechanisms worldwide.

Methodology

)onsistent with the emerging nature of the I)Ts and the constantly moving

structures of the

airline industry, this paper aims to answer the FhowG and the FwhyG questions,rather than to

quantify and verify particular variables. As there is insu*cient literature on the topicand the use

of I)Ts in airlines is very dynamic, it was decided that e ploratory research wouldbetter serve our

purposes. The qualitative approach enables the appreciation of all aspects of thesub1ect and to

develop variables that can possibly be used later 67E,5",>%8. This e ort thereforeconcentrated on

the reasons why technology was deployed and how it can assist the strategic andoperational


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management of airlines. The wor' was underta'en in early 5##5 and allowed us todevelop a

holistic approach in assessing the strategic and tactical impacts of I)Ts for airlines.

The wor' was underta'en in three stages. Birstly, secondary research was used torevise the

theoretical framewor' and to identify previous research. As technology is movingfast here, only

articles, reports, and boo's specialised in the I)Ts in air transportation published inthe last few

years were used. In addition, a number of articles and boo's that demonstrated thehistoric

development of I)Ts in travel and air;transportation provided the strategicmanagement

framewor' and identi0ed critical applications. The second stage concentrated on ananalysis of the

web presence for =# ma1or carriers, as demonstrated in Bigure ". /ach web site wasvisited and

e plored. The level of e)ommerce opportunities as well as the comprehensivenessand userfriendliness

were e amined. A number of value added services were identi0ed and e plored,whilst

a list of lin's and partners was collected for each airline. / tensive notes were ta'enin order to

identify the level of interactivity with consumers and other sta'eholders. In addition,an analysis of

I)T providers for airlines was underta'en to e plore the 'ind and type of serviceso ered in the

mar'etplace. A list of the ma1or suppliers researched is illustrated in Bigure 5.

The third part included semi;structured telephone interviews with airline e ecutives.About 5#

airline )hief Information !*cers or :istribution Managers were contacted and eightagreed to


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participate. Although the number of airlines could have been improved, it wasdecided that an indepth

analysis was better. The interviews aimed to e plore what technology was used andfor

what purpose, on both strategic and tactical fronts. Interviewees were activelyencouraged to

speculate on the future I)T solutions as well as to predict how I)Ts might in+uencethe structure

of the industry as a whole. A standardised, but open;ended, approach toquestioning was usedH

some areas were e plored in greater depth, through probing questions not originallyincluded in

the interview schedule. Interviews were tape;recorded and tapes were listened toduring the

analysis stage for further input. In addition, notes were 'ept on all questions as'ed. The semistructured

discussion enabled the researcher to interact with participants and to identify andclarify

critical issues. Bollowing the analysis of the unstructured interviews, a further roundof qualitative

wor' was underta'en, mainly to qualify, support, and appreciate the 0ndings. Anumber of

interviewees were as'ed to comment on some 'ey 0nding and to provide theire pert opinion.

eAirlines Strategic and tactical use of I)Ts in the airline industry "#

Bigure " Airlines researched on;line

AI3 I@/S

". Aer ingus www.aerlingus.ie

5. Aero+ot www.aero+ot.org

>. Air )anada www.aircanada.ca

=. Air Brance www.airfrance.com


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%. J M


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>". 3yanair www.ryanair.com

>5. SAS www.scandinavian.net

>>. Saudia Airlines www.saudiairlines.com

>=. Singapore Airlines www.singaporeair.com

>%. South African Airlines www.saa.co. a

>7. Southwest Airlines www.i+yswa.com

>E. Swissair www.swissair.com

>K. Tur'ish Airlines www.tur'ishairlines.com

>$.


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In+ight )atering Association http www.ifcanet.com

Airport Technology http www.airport;technology.com

)ontent analysis was employed to analyse the data and information from the threestages was

incorporated in a framewor' that identi0ed systems

Q dealing with customers and sta'eholders through Internet interfaces,

Q targeting e ternal partners through dedicated lin'ages and e tranets, and

Q addressing operational and strategic needs through internal systems andintranets.

The adopted methodology o ered a depth of 'nowledge on the area and allowedthe researcher

to collect qualitative and e ploratory information that supported the strategicanalysis.

% Strategic and tactical role of I)Ts for airlines

The level of I)T utilisation in airlines is variable. -owever, all carriers depend on I)Tsfor their

strategic and operational management and employ I)Ts for a wide range ofbusiness departments.

Interviewees suggested that they use software to support their business functions,including

accounting, 0nancial management, human resources, procurement etc. -owever,we concentrated

only on airline;speci0c software and systems that enable the operational andstrategic management

of airlines. An emphasis was given on distribution and mar'eting, as this hasemerged as one of

critical aspects of airline strategy.

Brom a strategic point of view, airlines use technology to develop and manage theirbusiness

model as well as to monitor the e ternal environment and competition, underta'erevenue


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analysis, forecasting, maintain historical data, predict demand, and design desirableproducts. I)Ts

are critical for monitoring and forecasting the performance of Strategic 2usiness


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degree of cancellations e perienced, were very e pensive to bear, especially for lowcost seats.

@o;frills airlines therefore adopted the Internet as their main distribution mechanismand

disintermediated the distribution channel, placing scheduled airlines at adisadvantage. Bor

e ample )ontinental is reported to pay 9:S boo'ing fees of up to R"E perpassenger and a total

distribution cost of R"bn per year 6>8. Ma1or scheduled carriers around the globehave therefore

generally introduced commission capping and have invested heavily in drivingInternet tra*c to

their web sites for online boo'ings.

2randing and communication of principles are also critical for airlines at thestrategic level.

Managing communications with all sta'eholders, including investors, press,employees and

customers, is of paramount importance. I)Ts;enabled communications assistedairlines to interact

with all their sta'eholders and to update them with regards to their initiatives anddevelopments.

Many carriers used their web sites as main information points following theSeptember "" attac's,

as well as other disturbances in their services emerging from their e ternalenvironment, such as

wars, earthqua'es, SA3S etc. 9areiss demonstrated how )ontinental managed theSeptember ""th

crisis using cutting edge I)Ts 6>#8. Interestingly, although the Internet provision wasoriginally in

their I)Ts department, most airlines set up digital mar'eting and distributiondepartments to wor'

together designing interfaces and devising successful strategies to attract andretain consumers.


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)onsistency of on;line and o ;line branding was one of the 'ey issues highlighted asa factor for

success. Airline e ecutives also mentioned that I)Ts become a prerequisite fordeveloping

partnerships and alliances with other airlines, as well as for monitoring competitors.

I)Ts are critical for the operational management of airlines, as illustrated in Bigure >. There are

several requirements including chec';in, allocation of seats, generating a number of reports and

orders, such as +ight paths, weather forecasts, load and balance calculations,manifests for airport

immigration and security authorities, in;+ight catering orders and crew rotas. I)Tsalso assist a

number of functions including inventory and reservations management as well astic'eting. Airlines

have bases and distributors around the world, particularly at destinations theyserve. -ence, they

need e*cient co;ordination and communications with stations, branches,distributors, and

customers globally. Interaction with distributors, travel agencies, and otherdistributors can

determine levels of sales whilst e*cient invoicing and revenue collection is criticalfor both cash

+ow and pro0tability. Binally, airlines have been investing in )ustomer 3elationshipManagement

programmes in order to improve their direct communication and to manage theirloyalty clubs.

Increasingly, eTic'eting instigates paperless transactions, while o ering signi0cantsavings.

Tactical pricing, yield management, and special o ers and promotions are allfacilitated by

constantly assessing tra*c and by ta'ing both proactive and reactive measures toad1ust demand


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and supply. I)Ts also facilitate e(rocurement and management of suppliers andpartners on a

regular basis. Most airlines use standardised software to underta'e those functionsand to

generate the reports.

eAirlines Strategic and tactical use of I)Ts in the airline industry ">

Bigure > eAirlines I)T;empowered functions

9eneric Airline Management

Q Strategic and !perational Management

Q Binance and accounting

Q /mployee productivity and crew

management Crota, training etcD

Q 3elationships with partners and alliance

integration

Q 2usiness management and reporting

Q Safety and security procedures

Strategic Airline BunctionsQ Strategic 2usiness


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Q Inventory management and distribution of

tic'ets

Q )ustomer pro0ling, customer service and

communication with consumers

Q Management of inventory and boo'ings

through 9:Ss and the Internet

Q )ustomer 3elationships Management

Q Managing loyalty clubs

Q 3eservations management, tic'eting and

electronic tic'etingQ !perational management

Q Tactical pricing and yield management

Q (romotions, special o ers and targeted

campaigns

Q e(rocurement and management of

suppliers and partners

Q )ommunications and transactions with

stations, branches distributors and

customers globally

Q Invoicing and revenue collection

Q )o;ordinating with partners and alliance

members

Tactical planning and running the

business

Q 3eservations and revenue support

Q )hec';in procedures and seats allocation


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Q 9ate management and reporting to

authorities

Q Management of in;+ight catering

Q Airport passenger handling

Q )argo management,

Q 2aggage handling and monitoring

Q (ricing, tic'eting, revenue and yield

management

Q @etwor'ing and schedule development

Q Scheduling, operational management andcontrol

Q )rew management and control

Q Maintenance management and control

Q (rocurement of materials and equipment

Q )oordination of stations and hubs

Q Oeather, fuel and rota reports and

manifests

Q )ritical incidents management and

corrective mechanisms

Airlines had to invest signi0cantly in their I)T systems in the late "$$#s in order todevelop

interfaces with consumers and the travel trade. The level of investment in I)Tsillustrates their

critical role. In the IT Trends Survey 5##" 6%$8, the average planned I)T e penditurefor 5##" was

5.K& of the airline revenues. Bigure = demonstrates that 5=& of the respondentshad planned to


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spend more than =& of their revenue on I)T investments. The importance of I)Ts isalso evident

by the fact that 5$& of the carriers surveyed have started pilot studies usingwireless and mobile

technologies, whilst 7#& now have I)Ts represented at the board level.

eAirlines Strategic and tactical use of I)Ts in the airline industry "=

Bigure = (lanned I)T investment as percentage of airline s revenue in 5##"

5&

%& K& $&

5#& 55& "%&

">&

7&

#&

%&

"#&

"%&

5#&5%&

More than "#& 7;"#& %& =& >& 5& "& ess than "& :o not 'now no answer

Source ! Toole, 67#8

Interviewees suggested that in the last few years, I)Ts emerged from a pureinfrastructure

department to a critical enabler of the entire range of the airline business

processes. I)Tse ectively determine the competitiveness of airlines, as they are embedded inevery simple

element of the airline value chain, as illustrated in Bigure %.

%." Internal Systems and Intranets


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In order to perform the tas's, airlines use a wide range of internal systems andintranets to

coordinate their activities. Interviewees were requested to e plain the types ofsystems they use and

the main purpose that they ful0l. Internal airline systems were then classi0ed intosales and

mar'eting support systems, operational, and resource management systems. Anumber of

information management and decision support systems underpin the airline s corebusiness

processes and operational management. Interviewees suggested that airlines aimat ma imising

their pro0tability, by optimising their total yield and by minimising costs. Thisprocess is facilitated

by a number of integrated systems that operate in parallel to coordinate a numberof critical airline

functions, such as accounting, 0nancial management, human resources, etc. Inaddition,

specialised software facilitates scheduling in order to optimise crew, aircraft, andother resources

and to ma imise the operational e*ciency whilst 'eeping costs under control. These systems are

similar for all types of airlines and there were no ma1or di erences betweenscheduled, charter,

and no;frills airlines. -owever, no;frills carriers and charter tended to schedule their+ight

programmes more tightly and therefore they tended to have a greater number of

indicators andcontrols.

eAirlines Strategic and tactical use of I)Ts in the airline industry "%

Bigure % I)T enabled Airline Industry Nalue )hain

I@2!


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!9ISTI)S

!(/3ATI!@S !


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)areer planning

Service Training

)3M and :atamining

2aggage Trac'ing System

QSegmentation

Q:istribution

mechanisms

Q(romotion

QSpecial o ers U

targetedcampaigns

Q!nline sales

QAdvertising

QBrequent Blyer

QTravel Agent

(rograms

Q9roup Sales

QInvoicing and

revenue collection

Q3escheduling

Q)oordination of

stations and hubs

QTic'eting and

3eservations

Q)hec' in and 9ate

!perations


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communication

Q)omplaint Bollow;up

Q ost 2aggage Service

Q)oordinating with

partners and alliance

members

Q3ental )ar and

Q -otel reservation

System

Q)ommunicationwith airport

authorities

Q2aggage Systems

QBlight connection

Q )ommission

payments

Q)ritical incidents

management

Q2usiness

management and

reporting

QSafety and security

procedures

(rocurement, In;+ight System, )omputer 3eservation System

Blight Scheduling System ield Management System

)ooperation Training


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(rocedure and

!perational Training

3elationships with

trainers and colleges

(3I

MA

3

A)

TIN

ITI/S

S


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!nline services

Monitoring Suppliers

/stablishing partnerships

eAirlines Strategic and tactical use of I)Ts in the airline industry "7

%."." Sales and mar'eting support

Airlines have long used internal )omputer 3eservation Systems. They are ofteninterfaced with 9:Ss

and with the airline Internet site in order to distribute inventory globally and toensure that it is

current. These systems are used to issue electronic tic'ets and to e change e;tic'ets with multiple

carriers worldwide. Interviewees suggested that they desperately need to promotetheir web site as

their primary reservation path and as an alternative to the 9:S travel agency route.Such systems

lin' all partners in the handling process, automate procedures, and support smoothcommunication

+ow. Airlines endeavour to use technology to enhance their e*ciency and therefore

they attemptto integrate new technologies such as electronic scales, stac'er systems, handheldterminals, and

bar coding to increase their handling e*ciency and to reduce operational costs. Therefore, these

systems support the administration, accounting, and passenger or cargo handlingprocesses by

coordinating inventory management, sales and mar'eting, yield and revenue

management,

tic'eting, and departure control systems.

Airlines use decision support systems to monitor tra*c and boo'ings on computerreservation


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systems in order to identify customer behaviour, tra*c +ows or trends, as well asthe performance

of partners and sales agencies. They also follow the pricing of their competitors fornumerous city

pairs. These systems also enable airlines to assess their situation against theperformance of their

competitors and to adopt proactive and reactive measures. A broad informationbase leads to

more suitable decisions for core airline strategy and operational activities, such asmar'eting and

sales, schedule planning, yield management, or pricing.

%.".5 !perational SystemsAirlines need to use e ective planning processes to optimise the performance oftheir networ'.

This involves ma imisation of the equipment and human resources utilisationagainst demand

pressures, government regulations, and operational constraints, such as air tra*ccontrol rules.

Interviewees suggested that planning decisions range from long;term strategic

issues, such as

routes selection and competition monitoring, to operational considerations, such asschedules for

equipment and sta rotas. Scheduling implies deciding the number of connectionsbetween

airports as well as timing and choice of aircraft equipment. (lanning and operationsdepartments

use Integrated Blight Schedule Management Systems to support airlines in planningtheir

schedules. Such systems need to provide seamless integration with other systems,including

!perations )ontrol, 3eservations and 3evenue Management, Maintenance )ontrol,and )rew


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Management. They e amine historic tra*c data and previous load factors as well asforecast

demand 0gures. The proliferation of hub and spo'e systems has forced planningdepartments to

manage their networ' as a whole by scheduling departure waves and coordinating+ights. Aiming

to ma imise load factors and yield management for the entire networ', airlines useBlight Schedule

Management Systems to predict tra*c and to simulate operational discrepanciescaused by delays,

weather conditions, and other unpredictable circumstances that disrupt schedules.

)omplementary to Schedule management systems are !perations )ontrol systemsthat support the

automatic calculation and distribution of +ight plans, as well as other features, suchas automatic

consideration of all valid aeronautical restrictions in the process of the +ight plancalculation. Blight

Oatch in particular collects and displays vital information, such as boo'ing 0gures,passenger

transfer information, critical weather conditions, crew rotations, airport limitations,etc. (ossible

problems and critical situations can be identi0ed whilst early alert messages andupdates are

generated for all other operational systems, such as +ight scheduling, reservation,maintenance,

and crew control systems.

eAirlines Strategic and tactical use of I)Ts in the airline industry "E

In addition, as airlines usually have a wide networ' of hubs to support, Station)ontrol Systems

monitor all 'inds of connections on a hub and report on operational details, such asaircraft turns,


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crew connections, passenger, baggage, and cargo connections. Airports and airlinesneed to wor'

together to reduce aircraft turn;around times and to shorten passenger connectiontimes. These

systems also help station managers plan their operations and ensure that allresources are in place

to service each +ight. 2aggage handling and monitoring systems allow airlines toincrease their

e*ciency and to trac' every bag as it moves through the system. This also ensuresthat no baggage

is transported without its owner, as per International )ivil Aviation !rganisationregulations. The

systems support reconciliation procedures of chec'ed passenger baggage enableairlines to ensure

security, reduce operating costs, and improve passenger satisfaction withoutcompromising

punctuality 65#8.

%.".> 3esource Management Systems

Airlines need to ma imise the utilisation of their most e pensive resources human

resources and

+eet. Therefore, they need to ensure that their equipment and aircraft is functionaland its

capacity fully used. Maintenance )ontrol systems co;ordinate aircraft maintenance,commercial,

and operational requirements. They ensure that aircraft and other equipment isregularly

maintained and also that technical problems and unscheduled services are dealtwith as e*ciently

as possible to minimise out;of;service periods whilst minimising service disruptions.!ften these

systems are integrated with e(rocurement systems for allowing airlines to orderparts and other


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consumables online, whilst engineering systems may be integrated for providingonline manuals

and technical support. Technical documentation management systems often create,distribute, and

manage comple technical data and documents. -ence, airlines aim to ma imise+eet utilisation by

improving maintenance, repair and overhaul performance. This is achieved byoptimising the supply

chain networ', aircraft downtime, and materials management.

Airlines also control their crew rotas through crew management systems. (lanningduty rosters is a

comple process as there are numerous 'ey constraints, including s'ills and theability to operate

equipment, ran', immigration issues, rest periods, and cost of rest periods. )rewmanagement

systems use comprehensive crew databases to underta'e pairing construction,roster generation,

and crew control in order to optimise the human resources performance. They needto be coordinated

with all associated activities, such as +ight scheduling, operations control, crewcontact,

+ight brie0ng, etc. These systems can also underta'e a number of routine tas's,such as chec'ing

legalities, publishing rosters and noti0cations, and administrating hotelaccommodation, deadheads

and pic';up services. )ommunicating scheduling information with crewsCnoti0cationsD and

ne t duty period Cbrie0ngsD as well as information regarding +ight load, crewcomposition, aircraft

and airport details is also critical. A number of intranet solutions facilitate thisprocess 6=%8. It is

the coordination of all these systems that ensures that airlines en1oy operationale*ciency and are


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empowered to achieve their long;term strategy.

%.5 Interconnecting partner systems and / tranets

Interviewees also e plained that airlines rely heavily on e ternal partners for theiroperations.

Therefore it is critical to develop e*cient systems for wor'ing together with them.Bor e ample, all

airlines need airport infrastructure as well as a variety of partners to support theiroperations.

%.5." e(rocurement transactions and information +ows with suppliers

eAirlines Strategic and tactical use of I)Ts in the airline industry "K

Suitable e tranets and inter;organisational systems are required to facilitate airlineinteraction with

their regular suppliers. Airlines are customers of airports, air control systems, andother authorities

such as immigration and customs. Airlines, therefore, regularly e changeinformation with airport

authorities and air tra*c control systems. These +ows include requests for landingslots and doc'ing

gates, informing about arrivals and departures, altering slots, declaring +ight paths,and coordinating

operations. Although many airlines and airports still rely on printed forms andtelephone

communications, a good percentage of the interviewees suggested that I)T;enabledsystems are

currently constructed to support these processes. A number of airlines graduallydeveloped or

adopted electronic environments for data e change with the )ustoms and AirportAuthorities in

their main stations. / tranets assisted them to develop reliable and directconnections and

enhance their e*ciency. Interviewees e pected that the global security concernswill generate


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further regulation that will ma'e interactive e tranets a prerequisite for +ying toseveral

technologically advanced destinations, particularly the


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out to tender. Binally the VAeroWchangeV mar'etplace is being set up by ufthansa,in cooperation

with most of the Star Alliance partners, as an airline industry online tradinge change that o ers

industry;speci0c goods and services ranging from special screws to aero;engines.(rocurement

mar'etplaces have become highly economical for airlines by ma'ing mar'ets moretransparent and

by allowing companies to bundle their procurement volumes.

:eveloping 252 applications and interconnecting / tranet systems will support bothairlines and their

partners to streamline them and reduce their turn;around time at the airport. )larityof

communication and e*ciency chain is critical for both controlling costs anddelivering service.

%.5.5 :istribution, mar'eting and sales support with partners

The vast ma1ority of airlines rely heavily on travel agencies for distributing theirproducts.

Interviewees suggested that the lin' with travel agencies is normally facilitated by

9lobal :istribution

Systems that provide the infostructure for itinerary building and facilitate the entiretransaction.

-owever, airline e ecutives e plained that they would li'e to transact with travelagencies on an

/ tranet, over the Internet, in order to avoid that 9:S s boo'ing fees for lowerfares. Bor e ample,

2ritish Airways has developed a dedicated web site for the travel trade

Chttp www.batraveltrade.com D that can be developed to an e tranet in order tofacilitate this

process. -owever, travel agencies may gradually 0nd some useful 0nancialfeatures. Bor e ample


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they will be able to process credit card payments in a way that charges the airlinethe cost of the

eAirlines Strategic and tactical use of I)Ts in the airline industry "$

credit card fee Ccurrently about 5&D. Similarly J M provides its web fares only on itse tranet, whilst

9:S fares are more e pensive to cover the e tra costs. Although connecting istechnically possible,

interviewees suggested that travel agencies are reluctant to follow this route, partlybecause they

prefer comparing all schedules and prices on a 9:S and partly because 9:Ssprovide incentives and

they have long term contractual agreements with them. Interviewees suggestedthat there is a great

potential in these types of e tranets and that the business logic will be drivingtechnological

deployment.

Airlines also appoint 9eneral Sales Agencies in all regions that do not operate theirown o*ces. They

are appointed by international airlines to secure business from IATA and non;IATA

agents in

mar'ets where agency networ's are yet to be fully automated and where airlinesneed 0nancial

security to cover business ris's. They handle their reservations and distributionlocally and are in

close lin' with the Station manager to co;ordinate the activity in their particularmar'et. In addition,

consolidators pre;purchase seats in bul' and then distribute them to their localmar'ets at discounted

rates. :eveloping / tranets for these players and ensuring that they support theironward distribution

chain, providing adequate tools to interact with all departments of the airline andmanaging their


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revenue collection on time are also critical for airline pro0tability.

-ow Ma1or Airlines are Structured

ine (ersonnel

These include everyone directly involved in producing or selling an airlineXs services; the mechanics, who maintain the planesH the pilots, who +y themH the +ightattendants, who serve passengers and perform various in+ight safety functionsH thereservation cler's, airport chec';in and gate personnel, who boo' and process thepassengersH ramp;service agents, security guards, etc. ine personnel generally fallinto three broad categories engineering and maintenance, +ight operations, andsales and mar'eting. These three divisions form the heart of an airline and generally

account for K% percent of an airlineXs employees.

!perations

This department is responsible for operating an airlineXs +eet of aircraft safely ande*ciently. It schedules the aircraft and +ight crews and it develops and administersall policies and procedures necessary to maintain safety and meet all BAA operatingrequirements. It is in charge of all +ight;crew training, both initial and recurrenttraining for pilots and +ight attendants, and it establishes the procedures crews areto follow before, during and after each +ight to ensure safety.

:ispatchers also are part of +ight operations. Their 1ob is to release +ights forta'eo , following a review of all factors a ecting a +ight. These include the weather,routes the +ight may follow, fuel requirements and both the amount and distributionof weight onboard the aircraft. Oeight must be distributed evenly aboard an aircraftfor it to +y safely.

Maintenance

Maintenance accounts for appro imately "" percent of an airlineXs employees and"#;"% percent of its operating e penses. Maintenance programs 'eep aircraft insafe, wor'ing orderH ensure passenger comfortH preserve the airlineXs valuable


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physical assets Cits aircraftDH and ensure ma imum utili ation of those assets, by'eeping planes in e cellent condition. An airplane costs its owner money everyminute of every day, but ma'es money only when it is +ying with freight and orpassengers aboard. Therefore, it is vital to an airlineXs 0nancial success that aircraftare properly maintained

Airlines typically have one facility for ma1or maintenance wor' and aircraftmodi0cations, called the maintenance baseH larger airlines sometimes have morethan one maintenance base. Smaller maintenance facilities are maintained at anairlineXs hubs or primary airports, where aircraft are li'ely to be par'ed overnight.)alled ma1or maintenance stations, these facilities perform routine maintenanceand stoc' a large supply of spare parts.

A third level of inspection and repair capability is maintained at airports, where acarrier has e tensive operations, although less than at its hubs. These maintenancefacilities generally are called maintenance stations.

Sales and Mar'eting

This division encompasses such activities as pricing, scheduling, advertising, tic'et

and cargo sales, reservations and customer service, including food service. Ohile allof them are important, pricing and scheduling in particular can ma'e or brea' anairline, and both have become more complicated since deregulation. As e plained inthe ne t chapter, airline prices change frequently in response to supply and demandand to changes in the prices of competitorsY fares. Schedules change less often, butfar more often than when the government regulated the industry. Airlines usesophisticated computer reservation systems to advertise their own fares andschedules to travel agents and to 'eep trac' of the fares and schedules ofcompetitors. Travel agents, who sell appro imately K# percent of all airline tic'ets,use the same systems to boo' reservations and print tic'ets for travelers. Moreinformation about airline pricing and scheduling can be found in )hapter =.

3eservations and Tic'eting

There are ma1or changes in air transportation, which simplify the process for airlinepassengers to ma'e a reservation and to purchase a tic'et. /lectronic commerce is


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playing a signi0cant part in the airline industry. In addition to the paper tic'etsissued in the past, all of the ma1or airlines are now o ering electronic tic'eting fordomestic and international air travel. /lectronic tic'eting allows an airline todocument the sale and trac' the usage of transportation. (assengers no longerworry about carrying +ight coupons or losing their tic'ets. (assengers have the

ability to shop for the lowest priced transportation, ma'e or change a reservation,request refunds etc., not only from their travel agent but from their own personalhome computer or from a telephone, on the way to the airport. A boarding pass isissued at the airport in e change for proof of a reservation Can airline con0rmationnumberD and payment Ccash or a ma1or credit cardD. The number of air travelersshopping, ma'ing reservations and purchasing electronic tic'ets using the Internetis increasing daily. Self;service automated tic'eting machines are also widelyavailable at ma1or airports around the country.

The ne t step for airlines will be to automate the chec';in procedure. /lectronic self;service chec';in computer 'ios's at ma1or airports will soon be available for mostpassengers using electronic tic'ets. Self;service machines will enable passengers toverify their itinerary, obtain class of service upgrades, select speci0c seatassignments, chec' baggage with bar;coded baggage tags and obtain their ownboarding passes.

Sta (ersonnel

These include specialists in such 0elds as law, accounting, 0nance, employeerelations and public relations. Their function is to support the wor' of the linepersonnel, so that the airline runs e*ciently and earns a pro0t. Bor the most part,sta personnel wor' out of corporate headquarters and fall into seven broad 1obcategories typical of ma1or corporations 0nance U property, information services,personnel, medical, legal, public relations and planning.

Binance U property handles company revenues and 0nances. In addition, it overseesall company property and the purchase of food, fuel, aircraft parts and othersupplies needed to run an airline. Information services designs and maintains thecompanyXs internal computer systems, used to store and analy e data needed foroperations and planning. At an airline, this includes the important function of +eetplanning, e plained in greater detail in the ne t chapter.


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Subcontractors

Ohile ma1or airlines typically do most of their own wor', it is common for them tofarm out certain tas's to other companies. These tas's could include aircraftcleaning, fueling, airport security, food service and in some instances, maintenancewor'. Airlines might contract out for all of this wor' or 1ust a portion of it, 'eepingthe 1obs in house at their hubs and other 'ey stations. -owever, whether an airlinedoes the wor' itself or relies on outside vendors, the carrier remains responsible formeeting all applicable federal safety standards.

Airlines and the Internet Revolution

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