Anybody who has not realised that strategic alliances between airlines are the future of the industry must have been asleep for the last few years. But as the major alliance groups seek to implement the close ties their strategists have planned, they are becoming acutely aware of a painful reality: every airline is inextricably linked to and dependent on its IT platforms, and no alliance can work unless its members' computers talk to each other.
IT systems exist at every level of an airline, handling or supporting every function. Systems include catering, flight information display, inventory control, reservations and distribution, cargo scheduling, financial revenue accounting, departure control, loyalty management, yield management, call centre-customer services, route management and scheduling, maintenance and engineering, payroll, baggage reconciliation, and general office automation. Whatever the function - including the flying of the aircraft - there is an IT system supporting it.
Indeed, given the increasing complexity of the industry as it embraces electronic commerce and strives to offer a seamless travel experience, an airline's IT systems will play an even more crucial role in supporting its competitive advantage.
This industry has been at the forefront of many IT innovations, such as real-time transaction processing for reservations systems. Unfortunately, the early pioneering use of technology led to a wide spectrum of different and incompatible systems as each airline developed its technology to match its unique circumstances. Paradoxically, past IT investment has left many airlines in a disadvantaged position today. These carriers are sitting on discrete islands of legacy technology, characterised by 'difficult-to-link' and 'difficult-to-modify' IT platforms. Airlines thus face a considerable challenge in upgrading their IT systems just to remain operational.
However, this task is dwarfed in the face of the challenge faced by a group of airlines when embarking on an alliance which requires harmonisation, rationalisation and integration of IT. Invariably, each partner will have pursued diverse strategies, resulting in a plethora of miscellaneous platforms, each at a different stage of development. Making an alliance work ultimately depends on the IT department supporting the alliance's integrated processes. Managing this process across companies requires an unprecedented level of coordination and poses the ultimate change-management test.
But while airline senior managers recognise that IT is a vital consideration in forming an alliance, the IT department is often not kept fully informed during the sensitive commercial negotiation process. Alliance negotiation demands the involvement of a restricted number of people, so the commercial departments have to second- guess their IT departments.
Once an alliance has been formalised, the IT departments are given the task of realising the potential of the commercial agreement. This invariably involves identifying critical success factors and developing a supporting IT vision and implementation strategy. The most common critical success factors are codesharing and ticketing; seamless passenger handling such as through check-in; and transparency of frequent flyer programmes.
David Holmes, alliance integration manager for Customer Services at British Airways, reflects on the issue of codesharing. 'Codesharing, the basis of most alliances, is inherently difficult,' he points out. 'Current codesharing arrangements are generally "one-off" IT solutions, with few standards specifying how they should be implemented. Consequently, where new alliances are formed implementation is from scratch.'
Implementing ticketless travel across the alliance is just as problematic. Given its proven potential for cost savings and customer service improvements, ticketless travel is a hot topic among airlines. But a 'ticketless' passenger from one alliance partner is going to expect to be treated in exactly the same manner by all the other partners. Of course, once the technology has been implemented the IT department needs to address the internal issue of providing user-friendly interfaces and self-training facilities to enable staff to handle this new breed of traveller.
Seamless passenger handling at check-in between alliance partners is a high priority and poses a large number of challenges to the IT department. Tight levels of integration are essential. Particular problems arise where individual partner systems are interconnected via an interface instead of having a single departure control for all alliance airlines. This relies on timely information being transferred among airlines. However, when a traveller changes a flight from one alliance partner to another within 24 hours of departure, the alliance partner's departure control system will often not have the updated details.
Invariably, it is high-yield business travellers who are affected most by such problems. Unfortunately, the first point of physical contact with the passenger is normally at the airport, where the airline only has the first 30 seconds to impress or fail.
Loyalty programmes will encounter the challenge of providing the best of each system's capabilities - as well as programme benefits - to each of the alliance partner's FFP members. For instance, if a traveller from one alliance partner's programme is currently able to check benefits via the Internet, check-in over the phone and receive automatic upgrades, access to this information needs to be available to both airline employees and passengers across the alliance.
If the airlines had no IT systems and were starting from scratch, it is likely that they would specify a single integrated system. Since this is never the case, an appropriate strategy and process needs to be defined instead. A vision promoted by Hans Eisele, president of SAirGroup's IT arm Atraxis, is that the long-term future for any alliance is a single IT department managing the alliance partners' complete IT needs with evolution to a single database and a single system. 'The first alliance to achieve this position will attain a significant, perhaps permanent competitive advantage over its competitors,' confirms Philip Roberts of Roberts, Roach & Associates.
But those who are implementing such a strategy need to take into account that each airline in the alliance has its own peculiarities and, while a generic solution may be desirable, it may not be possible in the final analysis. Those implementing a 'unified and integrated' systems strategy will need to address a number of fundamental issues. These includethe natural fit of common processes, the age of current systems, timescales, and exit strategy considerations.
The ease of combining systems or adopting a single system depends primarily on the alignment of the processes the systems support; this is mostly irrelevant of the underlying technical architecture. For instance, from the distribution perspective, common processes driven by intercommunication requirements have existed for years, enabling one alliance partner to move its inventory control and distribution functions to another with relative ease.
Airport operations, on the other hand, are peculiar to each airline. Airport systems are insular, never having needed to communicate outside the airline's own environment. Each system was developed on the basis of an individual airline customer services standard, process and priorities. Consequently IT systems optimised for one mode of operation cannot be combined or easily modified to fit another airline's requirements. Serious consideration is then needed as to how to migrate these systems or processes.
The discussion of timescales for implementation normally causes great tension between the commercial and technology departments. The passenger-facing environment is very hostile to IT systems. Passengers are unforgiving. IT systems are expected to be integrated and allow smooth operations from day 1. One time event which will not slip is the millennium; one airline recently involved in a wholesale outsourcing scrapped its entire IT systems due to the timescales required to address the Year 2000 problem.
Deciding which system to maintain or abandon also depends on the system's viability. To some extent, this is the easiest and clearest cut decision to make. Clearly, if one airline's system is old and has lacked investment to keep it current, the decision process is relatively straightforward. This is often the case for the smaller, 5 million passengers a year carriers, which need to adopt the 'best-of-class' systems of their larger partners.
In the case of two larger carriers, weighing the merits of their respective systems is less obvious and requires the development of comprehensive evaluation criteria and methodologies, and sometimes non-biased external arbitration. But for these larger carriers, other overriding exit-strategy factors may determine that interconnection between independent systems is the only appropriate strategy.
Alliances are relationships, and in the real world relationships do not always work out. Consideration needs to be given to disengagement which, if systems are completely intertwined, becomes impossible. Few major airlines will be willing to merge IT systems without examining alternatives, such as systems which can be purchased 'off-the-shelf'.
Paradoxically, for the smaller airline partners disengagement is less likely to be an issue. Were a smaller airline to leave the partnership, it would doubtless be for another alliance. There would be a payment to the smaller carrier, and the new alliance could reasonably be expected to have 'best-of-breed' systems.
For larger airlines, the issue of disengagement may doom the alliance to supporting ad infinitum multiple systems which will merely be interfaced, in order to allow a quick separation. Decisions need to be made at the beginning of the alliance as to what is unique and as a source of competitive advantage best kept in-house, and what is a commodity and thus possible to merge.
Airline alliance partners need to take clear and positive action to address these challenges and sustain competitiveness. None of the alliances will have the luxury of a clean IT slate, so it is crucial that alliances adapt their existing technology base effectively.
Senior managers must articulate the IT vision of an alliance in order to achieve their goals in the areas with the greatest potential. This should be process and business oriented rather than technology oriented; IT should be seen as an enabler of superior processes, not a driver of them.
Once this vision has been developed, it needs to be communicated clearly to all levels in the organisation. However, this articulation should not be a surprise to people, as successful IT strategies are best developed in a collaborative manner with all relevant departments throughout the alliance.
If the strategy fails to recognise a particular business unit's needs, it will be doomed to failure. Even though the alliance may be consumed with the inward looking activity of consolidating its position, it cannot take its sight off current business challenges.
The technical issues surrounding the inability to operate correctly on 1 January 2000 make the need to address the problem of legacy systems all the more urgent. Here the benefits of alliances are clear. The decision to adopt one of the alliance partner systems over another means that the workload required to fix the Year 2000 problem on the remaining systems disappears. Airlines and alliances need to complete this work and obtain a clean 'bill of health'.
Similarly, no airline is immune from dealing with issues of the introduction of the single European currency, the euro. While the airline industry has dealt with multiple currencies for many years, the euro is more than just another 'business-as-usual' currency. It poses fundamental business and marketing challenges, requiring decision making as to how an airline will operate and position itself. Once decisions are made, these processes will need to be supported by the IT systems.
Meanwhile, the rationalisation of customer-facing systems must make seamless travel possible. The reservation systems of each alliance partner must work seamlessly, passing passenger information to each other's marketing and departure control systems. Given the difficulty of operating in an international interline environment and the lack of compatible technology among carriers for implementing ticketless travel, alliance airlines will need to invest significant resources in this area and to cooperate fully with one another.
No alliance stands out through the superiority of its IT systems. All face similar challenges and their own unique features. But clearly the winning alliance will be the one that delivers superior customer service at every stage of client contact. This can be achieved only by the appropriate investment in alliance-wide IT systems. In this global airline business, IT provides a crucial differentiation between those who are able to fulfil their ambitions and those who fall victim to outdated and incompatible systems.
Source: Airline Business
