U.S. Airlines Lead World in Technology
SITA have announced the North American results of the seventh annual Airline IT Trends Survey at their Insight Conference in Ft. Worth, TX. The conference, in its fifth year, focuses on effective ways to use technology solutions to cut airline & airport costs, enhance business process efficiencies and simplify the travel and transportation industry.
The survey underscores the fact that while North American airlines are still struggling with pricing and competition, they are much more advanced than other regions regarding the use of technology to meet business objectives. However, the financial difficulties faced over the last three years have forced many airlines to shift their strategic focus from innovation to streamlining, putting in jeopardy their technology leadership position.
For example, U.S. carriers are largely ignoring in-flight service enhancements, such as access to Internet and email, despite the potential for developing new revenue streams and consolidating customer loyalty. Other innovations on the horizon, such as replacing bar-coded baggage tags with the more robust RFID tags to reduce levels of mishandled baggage, also appear to have little appeal for North American carriers. While its high cost means few airlines see RFID as today’s technology, 64% of Asia-Pacific carriers expect to have deployed it within four years, nearly seven times the number of North American carriers.
Highlighting the problem is that average investment by the region’s airlines in telecommunications and IT has dropped to only 1.4% of revenues from the 1.9% recorded last year, and much lower than the 2.0% and 1.9% spent by Asia-Pacific and European airlines, respectively. This has put added pressure on airline CIOs to deliver business results with limited upfront investments. Not surprisingly 89% of survey respondents cited ‘short-term projects with proven payback’ as either their first or second priority for investments, while long-term strategic projects were rated much lower.
“There is strong competition in the North American industry making it difficult for airlines to generate the returns they need to maintain high levels of technology spend,” says Peter Buecking, President, SITA Group.
“But to some extent this is a re-investment in innovation story. North American carriers are pioneers of many of the technologies that are now being embraced by airlines globally and can, to some extent, afford to take a breather while the other regions play catch-up,” he explained.
For example, air travel in North America has already largely migrated online with airlines selling on average around 63% of tickets through web channels, far higher than the 24% and 10% of European and Asia-Pacific airlines, respectively. Other automated passenger systems, such as self-service kiosks, have also become mainstream, while remaining fringe technology in other regional markets.
“Streamlining can only take you so far,” says Buecking. “As each customer touch-point from the reservation stage to boarding the aircraft becomes automated, the only differentiator valued by travellers will be the in-flight service. Those carriers that have ignored this part of the value-chain will then find themselves at a competitive disadvantage,” he continued.
The SITA Airline IT Trends Survey shows that the airline industry as a whole is on the verge of revolutionising the travel experience of many passengers through the widespread introduction of customer-facing technologies both on the ground and in the air. The results indicate passengers will have more convenience and greater control right through from the booking stage to the in-flight service.
Summary of SITA Airline IT Trends Survey Key Findings regarding North American Airline Industry
—North American airlines spend an average of 1.4% of revenues on telecommunications and IT.
—67% of airlines expect their IT budget to increase in 2006.
—Customer service or marketing advantage projects were rated the highest IT priority by the most airlines - 56%. Short-term projects with proven payback were ranked highest by 44%.
—Only 11% of airlines expect to offer some form of in-flight voice or data connectivity by 2007.
—56% of airlines have deployed self-service kiosks for check-in.
—67% of airlines currently use bar coded boarding passes.
—85% of airlines sell some tickets online.
—63%, or more than 3 in every five, of all tickets are sold online. Of these, 55% are sold on the airline’s own website.
—61% of all tickets are fulfilled as e-tickets.