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Airlines Investment in IT Falls

Airlines’ investment in IT and telecommunications has fallen to 2.1 per cent of revenues from 2.4 per cent last year and is at a lower level than previously recorded, according to the results of the ‘Airline IT Trends Survey 2004’ - undertaken by SITA and Airline Business magazine.At a time when the demands on IT to improve customer services and reduce costs across the aviation business are increasing, Paul Coby, Chairman, SITA Group commented: “The fall in investment reflects the enormous pressures to reduce costs across the airline industry. But it’s not how much you spend it’s what you do with IT that matters. Aligning IT spending tightly to strategic business objectives is the only way to ensure that IT delivers the returns the airline industry demands.”

Peter Buecking, SITA President added: “Profit recovery rests on cost reductions and efficiency gains, which means that IT is firmly placed at the frontier of developments in the aviation industry. IT must play its central role in helping to further reduce costs and simplify the business, while also always improving the passenger experience.”

Regionally, investment is highest in Africa (2.5 per cent of revenues) followed by Middle East (2.4 per cent), Central and South America (2.2 per cent) and then Europe and Asia (both at 2 per cent) and then North America (1.9 per cent). The results also show low cost carriers invest on average around 1.2 per cent, while a few major carriers continue to invest at levels above the industry average.

Based on responses from 109 airline CIOs, the Airline IT Trends Survey reveals a clear picture of the prominent position of IT in the airline business:

IT is considered strategic and priorities are cost savings and customer service

? Almost 90 per cent said that their IT strategy is aligned to their airline business strategy.
? Nearly 60 per cent expect increased budgets next year, 26 per cent expect the same and 16 per cent expect a decrease.

? By the end of this year over two thirds of airlines said the majority of their systems and sites will be Internet Protocol (IP) enabled. By the end of 2006 this should be true across the airline industry as a whole.

? Over 50 per cent rated short-term projects with proven costs savings as the top priority for future IT projects, followed by over 40 per cent saying customer service / market advantage.


Lack of investment and IT skills shortages are the biggest issues:

? A lack of investment was rated the major obstacle to progress (61 per cent). This was followed by a lack of skilled IT people (55 per cent) and lack of IT people with airline experience (51 per cent). These three issues have been consistently reported for several years, and a lack of Board support is also rated one of the main obstacles.

? 80 per cent said demand was increasing for Web systems applications development, 65 per cent saw increasing need for Customer Relationship Management (CRM) / Customer Services skills and 65 per cent for IT strategy skills. Whereas nearly half predicted a fall in demand for legacy systems support.

Airlines are increasingly turning to outsourcing and ASP:

? The number of airlines outsourcing the majority of their IT systems will double by 2006 to over 20 per cent, while half think that the majority of IT systems are core and should remain in-house.

? The most popular areas outsourced are: 45 per cent web hosting. 44 per cent airline applications and 43 per cent network management.

? Outsourcing of general business applications is a growth area with 27 per cent already outsourced growing by 23 per cent in the next two years.

? Application Service Provision (ASP) continues to grow: nearly 60 per cent already use ASP for reservations and departure control / check-in, 31 per cent for cargo (growing by 23 per cent by 2006) and 27 per cent for frequent flyer (growing by 17 per cent by 2006).

b2b e-commerce is now mainstream

? Over 60 per cent of airlines are now undertaking b2b e-commerce transactions online, growing from 40 per cent in 1999. The main areas for transactions are for spare parts purchases and then with engine/ airframe and maintenance services companies. Most airlines expect to save around 10 per cent through e-business.

The ‘Airline IT Trends Survey’ is commissioned annually by SITA and Airline Business magazine. It is now established as the benchmark survey and 109 responses were received from senior IT personnel representing the top 220 airlines, together with key players in cargo, charter and regional markets. NSM Research Limited undertook the study in the first quarter of 2004. All individual results remain strictly confidential. Summary presentations and a detailed report will be provided for free to all respondents and will be available to purchase at US$450. SITA, Airline Business and ACI also undertake the ‘Airport IT Trends Survey’ (launched 6 May 2004) and together the two IT Trends Surveys present a detailed insight into the aviation IT landscape.