Does the air transport "community" still matter? Paul Coby, chief information officer of British Airways and chairman of SITA, thinks it does and that the aviation industry and passengers stand to benefit.
We are all too familiar with the challenges that we have faced in the air transport sector over the last three years. The industry has survived by cutting costs, and then cutting costs some more. But are we thinking as creatively as we should about how to return to healthy profitability? Are we using the air transport community assets we have as effectively as we can?
As chief information officer of British Airways and as chairman of a renowned community asset - IT provider SITA (now in its 56th year) - this is a question I have been thinking very hard about. The air transport industry over half a century ago saw the advantages of community co-operation. Does this have any relevance now? After all, sharing costs and on-tap services are very much the latest "big idea" in the IT industry.
Now, don't get me wrong. Liberalisation has invigorated the air transport industry and competition has provided airline customers with a previously undreamt choice of carriers and destinations at very attractive prices. BA is a firm believer in the benefits of healthy competition. However, in focusing on the benefits of competition, have we in the industry neglected the advantages that legitimate community co-operation can give our passengers?
It makes no economic sense for airlines, and it makes no sense for the customers of every airline in the world, to have their own bespoke solutions that do not "talk" to each other. It makes no sense to buy network capacity individually when there may be a better deal by aggregating the needs of several airlines, or indeed the whole air transport community.
Old lessons
I claim no originality for this insight - our predecessors had it in the late 1940s when they founded SITA, and again in the 1980s when they founded the global distribution systems (GDS). But perhaps we are forgetting this now.
So while airlines compete on price, product and network, they should use common solutions to ensure that overall costs are lower and airline systems "talk" the same language. Airline reservations are provided by common systems shared by competitors. Look how interline e-ticketing between the fiercest of competitors has developed to the enormous benefit of passengers. Baggage tracing has been available to any airline on a pay-per-use basis for many years now. The alternative does not bear thinking about; developing a "House of Babel" of baggage tracking systems would have been immensely expensive for airlines and would have produced a much poorer service for passengers.
Looking at the airport environment, common user check-in terminals (CUTE) serve airlines and airport authorities well. They enable smart use of airport facilities across the world. Now common user self-service check-in kiosks (CUSS) are taking the strain, providing modern, automated, cost-effective check-in.
Scarce resources and the need for immediate returns on investment have put many IT projects on hold, as the SITA/Airline Business IT Trends surveys for 2002 and 2003 have shown. We may be losing the plot here. Smart application of technology is an effective way to improve airline and airport front-line processes like selling and check-in, and to reduce costs by removing antiquated back-office processes. Ignore this at your peril. The bad news is that if you fail to automate you could find your airline marooned on an uncompetitive cost base.
The good news is that airlines and airports can now automate using community technology services. Using application service providers (ASPs) on a pay-per-usage basis is a very effective way to turn IT services into a variable rather than a fixed cost - thus avoiding up-front investment and providing the ability to weather business shocks in today's volatile environment.
Let's face it, there is little or no competitive differentiation in how you process reservations, trace baggage or depart passengers. It is, of course, vital to differentiate yourself in how these services are presented online or by your staff to your customer. You could spend a lot of money on the background non-essentials and undermine your ability to compete on the real battleground of online customer-enabled and employee-enabled services. Fortunately, community solutions are available for the background basics. We should invest and develop them as an industry.
Industry standards
CUTE, CUSS and baggage tracing are excellent examples of successful industry standards. However, they only work if they are agreed quickly and then implemented consistently across the industry. The trick is of course for the whole community to agree the industry standards.
SITA provides IT and network services to the air transport community. It is, of course alone. The airline alliances and Global Distribution Systems, as well as IT and telecommunications companies also compete very effectively.
SITA is reinventing itself as a cost-effective community provider of technology and telecommunications for the air transport industry. It is moving out of its "comfort zone" of legacy networks, focusing on ASP-based applications and network services. We have a new management team at the helm and SITA's finances have turned round in the last six months, helped by a much leaner organisation, better-focused product set and focus on customer needs. But SITA still has some way to go if it is to deliver on the community promise.
SITA needs to stress its uniqueness and the industry needs to understand and want to use the community asset it has. SITA is owned by the industry, its customers, and is a neutral community provider. The margin earned in providing network services will be returned to the customers in reduced prices, and the margin earned in providing application services is returned to the customer/owners in future value creation. We therefore have the potential here for a genuine win-win for our industry.
So it turns out that the old model of over half a century ago can reinvent itself as that most leading edge of 21st Century solutions - a community provider of on-tap solutions.
Source: Airline Business
