The benefits of common alliance IT are clearer than ever. But so are the costs of replacing legacy systems.
There has never been a better time to argue the benefits of sharing services within a global airline alliance. Quite apart from the marketing edge to be gained from providing alliance customers with seamless travel, there is mouthwatering potential to save costs: ranging from joint purchasing, through to shared check-ins or sales offices. As ever, the key to grasping these advantages and efficiencies rests heavily on IT and the drive to get systems talking to each other. However, the same cost pressures which are driving the need for efficiencies are also pressurising the IT budgets needed to make the gains. In short, there are some tough choices facing alliances as they take the next step.
"The financial environment is still difficult. The appetite to invest in technology is not high," says Bob McNair, oneworld alliance vice-president IT. However, the gains remain tantalising. "The aim is to serve partner customers as if they were your own customer," says Tom Klein, president airline solutions at Sabre. "This requires much more flexible access to real-time data." And crucial to that task has been communication between the often different global distribution systems (GDS) used by the alliance partners.
Star, the first of the big three global alliances, has also been the pioneer in forging such links between its members. Its own StarNet IT system was launched in 2000 as a way to link up its growing membership, which currently stands at 12 airline groups with three more in the process of joining. StarNet is basically a central hub that translates messages between carriers into a format that is understood by the host systems of each.
Application integration
The system utilises Runway software from Eland Technologies, a travel application integration platform that handles the translation between the different airline IT systems. Allied to this is Tuxedo software, supplied by US provider BEA Systems, designed for high-traffic communications. It was first developed for the telecoms sector and is widely used in call centres. The system is managed by Lufthansa Systems, the independent IT arm of the German airline group.
"Its all about unlocking the potential of the data that's there and working smarter," says Rick Wilton, Star Alliance manager Eland. "After 11 September there was a big shift in priorities," he adds, noting the pressure on alliances to contribute cost savings.
StarNet runs off five hubs. The first is in Frankfurt which serves users of the Amadeus GDS: Lufthansa, the Austrian Airlines Group, bmi british midland, SAS, Thai Airways and Varig. In fact, the Amadeus "system user" concept, through which it effectively acts as a common host, gives these carriers a shared information platform. The GDS, which still has Air France, Lufthansa and Iberia on its board, has not been slow to point out the advantages of its concept as a potential alliance-wide solution.
There is another StarNet hub in Chicago serving United Airlines, Air New Zealand (ANZ) and Mexicana, as well as other hubs at the respective bases of Air Canada, All Nippon Airways (ANA) and Singapore Airlines.
So far, two applications have been developed. The first was flight forecast query response, which allows employees of member airlines to obtain real-time information on flights operated by other Star carriers. For instance, SAS agents in Chicago can obtain real-time information on connections operated by United for flights from Scandinavia. This works on a query-response basis - an airline asks for information, which is sent to the relevant carrier via StarNet, and the response is sent back in the same way. In addition, airlines can send information (such as cancelled flight notification) to carriers on the system.
The second application, arguably of more use to passengers, was redemption availability for frequent flyers. This lets one Star carrier view redemption inventory on other member's flights. For instance, a passenger can phone a Thai reservation agent to check seat availability on an ANA flight for frequent flyer programme redemption and get an immediate response from the agent.
Having tested the ground with these two relatively simple procedures, Star is going for more ambitious applications. The first of these will be passenger name record (PNR) servicing, which will enable members to access and update tickets from partner carriers. Two Star carriers, one Amadeus-linked and one not, will test the system in coming months, with the aim of all member airlines having PNR servicing operational by the year-end. Star is evaluating whether the PNR application will sit within or outside StarNet, although the data itself will almost certainly be passed via StarNet.
There are other possibilities. "One could be joint check-in facilities," says Lars Zanders, alliance manager at Lufthansa Systems. "It depends on how far they want to go in linking thesystem." Michael Stagl, chief information officer at Star, adds that the alliance is also looking into joint purchasing of IT.
In tandem with StarNet's rapid development, a debate is taking place at Star on the fundamentals of its future IT strategy. Driving this is the need for United, Star's largest single carrier, to replace its ageing Apollo reservation system. A decision will have to be made in the next few years if it is to avoid "impacting on the business", says Hans Jorgensen, vice-president airline business at Amadeus, adding that "the questions are when, how and to what?"
Star options
Amadeus already has a strong position within Star, with six existing users, and ANZ has now signed a letter of intent to join them. However, the carrier's financial turmoil after the collapse of its Australian subsidiary Ansett has delayed its final decision.
The big question for Star is whether United will opt for a system that offers some form of alliance commonality? "The issue is whether we can combine forces into one IT platform," says Stagl. There are several potential routes by which this goal could be achieved. It would be achieved immediately if United decides to join Amadeus, and Stagl confirms that this is one of the options. However, Amadeus, born and bred in Europe, is at its weakest in the North American market.
If Amadeus is chosen by United, there would be the potential for the alliance to go even further in outsourcing to a common Amadeus platform. British Airways and Qantas within the rival oneworld alliance, are now in the process of a pioneering partnership deal which sees them hand over whole swathes of their passenger management systems to Amadeus, including inventory and booking.
Another option would be to develop a standalone Star IT platform, sitting alongside the the existing GDS systems. Hot favourite to develop such a platform would be Lufthansa Systems, alliance politics allowing.
However, it is unclear whether United would accept either the Amadeus or common Star platform approaches. "United is evaluating its options, and this includes all the major computer reservation systems," says Stagl.
Whatever United's decision, StarNet is likely to continue to be required for other members, both current and future. The cost of migrating from a legacy system makes it a daunting exercise and one unlikely to be undertaken simply to be able to talk to alliance partners. Such a requirement would also ask a huge commitment, especially for new members, such as Asiana, LOT Polish Airlines and Spanair now signed up to join Star.
By contrast StarNet provides a quick way to link with partners without forcing the pace. Star changed its constitution to allow majority voting earlier this year in order to avoid the need for all members to move at the same speed. So a smaller group of members is now potentially free to forge ahead while others remain more cautious.
oneworld bilaterals
For its part, the oneworld alliance has decided against developing such an alliance-wide communication tool. "We looked at that in the early days and decided against it," says Bob McNair, oneworld vice-president IT. From the outset the alliance has had a more bilateral approach, allowing a couple of partners to take the lead in developing technology, which can then act as a framework for others.
Of course, oneworld has only eight members to deal with, compared with twice that number shortly to be within Star. Also half of the members are already users of Amadeus, including BA, Iberia, Finnair and Qantas Airways. They could feasibly be joined by Cathay Pacific and Aer Lingus which are soon to decide on replacing legacy systems.
However, American Airlines remains tied to Sabre, which it set up and owned until a couple of years ago. That leaves a key part of oneworld's strategy based on what Jorgensen calls "a twin peaks approach" - communication between the Amadeus carriers on one hand and Sabre on the other. McNair says GDS commonality "is not seen as a priority" at the moment. "If there is a good business case, we would look at it, but this is not the right economic climate," he says. "Our focus is on developing functionality on two hosts."
So, instead of developing its own version of StarNet, the alliance uses bilateral communications carried on the existing network infrastructure using standard IATA Edifact messaging. That is already used for such applications as flight information.
McNair says that oneworld already has "an element" of PNR servicing via a central alliance helpdesk with direct access to the records of member carriers. However, he agrees that "more could be done" on PNR servicing.
"We are looking at the level of access needed," says McNair. "We are taking a two-pronged approach, focusing on empowering frontline staff and ease-of-use for the helpdesk." He adds that getting information to the frontline is of key importance. "We wouldn't want to add to check-in times."
A key consideration is the fact that some oneworld carriers, including American and BA, do not have antitrust immunity. "We must have certain safeguards in the type of information that is made available," says McNair. Indeed, Sabre's Klein says that for all of the alliances, "regulatory issues will be a bigger barrier than technology".
Oneworld's PNR servicing work is connected to the push towards alliance-wide e-ticket interlining. This is being driven by American's decision to drop interline agreements with carriers which do not have this capability by 2004. Oneworld has already embarked on this process with American and Finnair, which has meant developing a system that works across the Sabre and Amadeus systems. Finnair has been at the forefront of the push to make e-business work, but other carriers will soon follow, with the next two likely to be BA and LanChile. The drive towards a paperless ticketing approach has also been boosted by the increased emphasis on cost control.
Meanwhile, SkyTeam, the youngest and tightest knit of the global alliances, has been developing rapidly. Like Star, it is working on a central hub that communicates between the different IT systems, ensuring information appears in the host computer's language. This system has been dubbed SkyTeamNet, and applications along similar lines to Star are being developed for it. "It will offer powerful integration solutions for the implementation of new applications," says Air France.
Again, it is too early to say which way SkyTeam will go as far as booking and reservation system commonality is concerned. "They are considering their options," says one observer. The members say there are no plans at present to introduce a central management team, as oneworld and Star have done. Again, the major challenge is communication between the North American representative and the lead European partner. CSA Czech Airlines has moved to Amadeus, joining Air France. Amadeus also has a 34% stake in Korean Air's GDS system.
Legacy challenge
Jorgensen at Amadeus believes that it is only a matter of time before more of the alliance carriers face tough choices over replacing their legacy systems. "Times have moved on. The legacy system has served its purpose," he say. However, such systems will not disappear overnight and may even have a longer lease of life than some expect. "The legacy system is not necessarily negative. The new generation may be cheaper, but it has limitations," says Star's Stagl.
The old mainframe technology could yet receive a shot in the arm from the development of Linux, a version of the Unix operating system developed for free by an international community of programmers. This could provide a free alternative to Unix, the established open-source operating system, and is already supported by IBM. "It is early days yet, but it is moving quickly," says Bobby Healy, director of technologies at Eland, adding that two airline customers are piloting it on a mainframe. Sabre's Klein says Linux will be "part of the mix" but adds it is "uncharted ground."
The fact that airlines are showing interest in Linux is evidence of the greater emphasis on cost savings. While loathe to commit to the huge expenditure involved in replacing old legacy mainframes, many must now face the fact that their IT systems are nearing the end of their useful lives. The decisions that they take may influence the extent to which the global alliances are able, or indeed willing, to work towards common IT platforms.
Source: Airline Business
