It has been a long time coming, but the Star Alliance common IT platform is finally close to launch, representing a major step up in alliance co-operation
After years of anticipation, it looks as if the Star Alliance common IT platform may finally be coming to fruition. The alliance is confident that it will get the go-ahead for the project this summer, possibly as early as July.
Although it has been a long wait – the request for information went out in early 2003 – the venture is a significant milestone in alliance co-operation. The project will see carriers share common software, databases and technical platforms. This is a huge undertaking, especially given the background of ageing in-house legacy systems and the business processes that go with them.
Global distribution provider Amadeus has been in talks with Star and the alliance’s members for over a year after being selected for exclusive negotiation in early 2004 from an initial batch of 13 bidders, including the likes of Lufthansa Systems/Unisys.
The original idea was that Star partners Air Canada, Lufthansa and United Airlines would spearhead the project, setting a template that other Star carriers could then join at a later date. Air Canada will not now be in this first group, leaving Lufthansa and United, Star’s two largest carriers and respective leaders in Europe and North America, to take the lead.
Lufthansa is expected to start the migration process either later this year or early next year with some functions transferred over to the new platform in what is likely to be a phased approach. United will take a little longer, with migration taking place in either late 2006 or early 2007. The US carrier has more work to do than Lufthansa as it will have to migrate over from its creaking Apollo reservation system.
The motivation behind the development of the platform is a combination of a desire to offer passengers a more seamless service and the wish to cut costs – the two holy grails of alliance strategy.
Seamless service – effectively treating passengers of partner carriers as if they were your own – has proved tricky to achieve as carriers have often been reluctant to deepen co-operation levels to the point where this was possible. Star believes that the common platform can allow this happen: “It is our strategic objective to offer a seamless travel experience to Star Alliance across the network.”
To this end, one objective of the project is to ensure that customers arriving at an airport will be served as Star customers, and will not have to go to the desk of a particular airline just because that airline happened to issue the ticket, for instance.
The new platform will also allow services and products to be implemented much more quickly. Rather than a product having to be programmed in by each of the 16 alliance carriers, it will have to be entered just once, making new offerings much quicker and cheaper for IT departments to adopt.
IT costs will also be reduced by the move away from legacy systems, where carriers still pay licence fees for systems developed decades ago which are now far from being state-of-the-art.
There will also be cost savings on the distribution side – something that is pretty near the top of the agenda for most carriers. The sheer volume of traffic that Star will be offering, even just with Lufthansa and United, will increase bargaining power with distribution providers. To this extent, the fact that Air Canada has dropped out of the initial phase has some impact on the business case for the project, although the Canadian carrier was by some margin the smallest of the three airlines.
At the same time, carriers will be paying just one fee per boarded passenger, rather than paying for each segment of a journey as they do at the moment. Neither will they pay for passengers who do not board.
The common platform will also provide increased ability to bypass global distribution systems (GDS). In this context, it may seem odd at first glance that Amadeus will be the partner for the project, but the GDS provider has been repositioning itself to cater for both traditional and online distribution channels, and is now both a GDS provider and an IT service company. Inventory will be accessible through the carrier’s own websites, online travel websites and corporate and multinational agencies, while traditional travel agencies will connect through GDSs.
Star also believes that the improved origin and destination control for both interline and codeshare flights will allow carriers to increase revenue through better yield control.
By sharing common software, databases and a technical platform, the airlines will be able to share availability and schedules, reservations and inventory, fare quoting and ticketing, and airport customer services including check-in. Airlines will therefore be able to share customer preferences and travel history, for instance, regardless of the servicing carrier. All data, such as that for passport numbers, will be shared by inventory, reservation and airport applications.
Airlines will be able to access complete booking information across all carriers and there will be real-time availability for last-seat inventory.
Keeping control
Areas that will remain under individual airline control include yield management, origin and destination passenger management, sales accounts, back office functions, data warehouses, customer databases and frequent flyer programmes.
The emphasis has clearly been on co-operating within areas that are customer-orientated front-end activities, while leaving those aspects of the business that matter more to the airline than the passenger, such as yield management, with the individual airlines.
The Star Alliance already has StarNet, a centralised communication exchange that translates messages from one carrier into EDIFACT and then into the language of the recipient carrier before sending it on.
This allows carriers to speak to each other and communicate on areas such as frequent flyer programme redemption availability and mileage upgrade awards, but has always had limitations, with each carrier still speaking its own language. “StarNet doesn’t alter the fundamental economics,” says IT consultant Richard Clarke, director of Travel Technology Research.
The new platform will see airline speaking the same language. “Airlines will have the ability to talk to each other intelligently,” says Clarke. “If you are all basically doing the same thing, then why not use the same platform?” he says, pointing to the economics of using a common vendor.
StarNet will still have a major role to play for a long time to come, although this will change over time. For one thing, it will still be used for communications involving those elements that carriers want to keep back from the shared platform, such as frequent flyer programmes and yield management. And it will still be the main alliance communication tool for the majority of Star carriers that have yet to move to the common platform.
Of course, the cost of migrating from legacy systems and setting up new IT systems is quite significant – one of the reasons it has taken so long to reach a decision on the platform. This is especially so given the perilous financial state of some of the key carriers involved in the negotiations – even if this made the cost savings all the more attractive.
Christoph Ganswindt, chief information officer at Lufthansa, said last year that the project had taken over 200 man years of vendor-funded development to create a “state-of-the-art solution”. The project is also a good example of the recent philosophy within Star to carry out alliance projects in small subgroups that are willing to move at the same speed, rather than trying to win consensus across the whole membership. This is particularly important for Star given that it can count 16 members across five continents.
Ganswindt says one of the key experiences of the Star Alliance is to “run joint projects with subgroups and never let more than three partners participate at the same time”, but adds that it is important to keep the non-participating partners informed at all times. “Let a few partners, never more than three, achieve what is to be done for the whole group so the others can join in later,” he insists.
Challenges
As the negotiations have dragged on, there have been times when sceptics predicted the project would be a bridge too far for the alliance, or that the eventual outcome would be a watered-down common platform. Certainly the negotiating process has been challenging, as demonstrated by Air Canada’s last-minute decision to opt out of the first wave.
Even so, Star says the fact that the process has taken so long has had its advantages. For instance, the alliance can take advantage of the rapid development in GDS bypass options. What is certain is that this is a major step up in alliance co-operation and, if successful, will set a clear challenge to the other two alliances.
COLIN BAKER LONDON
Source: Airline Business
