"The list of things to be done in the information technology arena just gets longer and longer," according to Graham Howarth, vice-president of Gemini Consulting. Whether an airline is seeking to optimise its behind-the-scenes operations or the front-end business of customer relations "the agenda's getting larger" he says.
Much of what is bloating this agenda, according to Howarth and other industry watchers, is the increasingly mobile Internet and the e-business opportunities - and threats - that it is creating. If you add internal skill shortages to the list then airlines are under a lot of strain. Technology companies are lining up to rescue them.
IBM is one of the heavyweights in the IT industry offering to help airlines navigate their way around the constantly changing digital-age maze. To position itself, the US computer manufacturer has, over the past year, built agreements with many of the wireless industry's leaders, including Nokia, Motorola, Psion, Palm and the Symbian alliance.
Internet equipment maker Cisco Systems, which bought IBM's routing and switching intellectual technology property last year, and microchip manufacturer Intel, are also on board, as are customers relationship management (CRM) specialist Siebel and e-business-to-business software companies I2 and Ariba, the latter being behind the online aerospace parts exchange PartsBase.com.
Many of these technology partners were in Paris for the European leg of IBM's mobile Internet press summit in March. Flanked by its allies, the US computing giant promoted the potential of the wired world and the opportunities it offered to businesses - airlines included.
IBM is, of course, no newcomer to the travel industry. With more than 30 years' experience, it claims already to be the leading global IT supplier. From core traditional IT functions of desktop and database management, through to e-ticketing and customer relationship management, it plays a central role in seven multi-year, multi-million dollar airline IT outsourcing contracts around the world. But e-business is making up an increasingly important part of IBM's product and services portfolio - and it is increasingly mobile.
Reinvented IBM
In 1998 IBM reinvented itself for the Internet age with its "pervasive computing" concept. Its vision is of a "networked world" containing linked devices with imbedded computing and networking capabilities, from cell telephones to washing machines. Pervasive computing is "an explosion of channels", says Claude Guay, IBM head of marketing and business development.
Key to IBM's pervasive computing strategy is open standards, such as Wireless Application Protocol (WAP). Customers will want airlines to deliver through new distribution channels as and when they are released and "if they are stuck in a proprietary environment, it will be more difficult to accomplish that," says Guay.
"Middleware" is the software tool which IBM is selling as a solution to the incompatibility between the different operating systems used on web-based devices. It converts existing data and applications on a website into the format appropriate for wireless appliances.
IBM has plenty of reasons for embracing pervasive computing, from sales of integrated circuits used in mobile devices, servers used by websites and the software which accompanies that hardware, through to systems integration and consulting work.
But it is also developing ways to allow airlines to offer improved and customised services for their clients. E-business is about building integrated e-commerce platforms with CRM. "The number one issue [for airlines] is customer service. The number two issue is customer loyalty," says Guay.
Among the most recent converts to IBM's pervasive computing world are Swissair and Delta. The US airline commenced a "beta trial" in December with a number of customers transmitting data from its website to a variety of smart devices, including mobile telephones and the Pal VIITM hand-held organiser. Passengers can check personal travel itineraries, flight arrival, departure and gate information.
The US airline, whose technology subsidiary and Internet marketing company Modem Media are also working on the project, intends to offer this service system-wide later this year.
Swissair began a more ambitious interactive "beta trial" in the same month. Its trial sample of passengers can check in using their WAP phones, which display flight number, exact time of departure, gate and seat assignment. Plans include seat availability information on a given flight and the facility to book, confirm or re-book a flight. In case of delay, Swissair will send messages offering alternative flights services which can be confirmed at the touch of a button. IBM, from its Zurich laboratory, is now developing additional services, such as e-banking or e-retail, that airlines, with their captive market, may choose to add later.
British Airways could also be going mobile with IBM, as its rolls out the £20 million ($32 million) e-commerce project it officially launched early this year. The US computing company has already establishing back-end e-ticketing systems and user front-end kiosks for the UK airline. For the past 18 months, IBM has been carrying out the design, programming and implementation of BA's website. "Its a logical flow," says Guay about BA choosing IBM for the website. "As you create new channels, you don't want a new code for each one."
Telcoms joins fray
In this increasingly networked world, all types of technology companies - many newcomers - are angling for a piece of the action. Telecommunications companies are among them.
According to Gemini Consulting's Howarth, telcoms companies stand to gain from a "vast increase in volume of data and voice transmission". This is generated by the digital-driven growth in direct sales, online marketplaces and sophisticated messaging and interactive services for WAP-enabled mobile telephones. "This is where telcoms companies see the opportunity: capture volume of transmission and play a part in the creation of infrastructure around it."
Telcoms providers, he adds, have two advantages: technical knowledge to help build digital marketplaces and deep pockets. "They can forge alliances with other players - equipment manufacturers, database companies, application suppliers and computer reservation systems. They can put themselves at the centre of the web."
Telcoms companies are no longer content to remain behind the scenes. Shedding their traditional role as arms-length access providers to their networks, they are positioning themselves as value-added service providers to airlines. The USA's AT&T and the UK's BT are among the most aggressive.
Following years of deregulation, consolidation and heavy investment, these two giants are together building a global Internet protocol (IP)network which they believe will allow them to compete with airline-owned network provider, SITA. Since January, Concert, their international joint venture, has joined them.
Like IBM, they are multiplying partnerships, particularly among equipment and content providers to the mobile communications networks. But if they appear to have gained the technical expertise and reach to provide networking-related services to a global industry such as aviation, there is clearly some doubt as to whether they can leverage this to suit the industry's needs.
BT's efforts to gain a foothold in the sector started seven years ago when it internally reorganised by sector and began attending education and training classes with Cranfield University's Air Transport Group. By February, the UK telcoms industry evidently felt it was time to declare its arrival on the block.
BT's message, delivered to the aviation press in London by airline business manager John Irvine, was familiar. The airline industry must learn from other industries and abandon a "one size fits all" approach. In other words, airlines should ditch local deals with incumbent national telecommunications companies and cut loose from airline-owned SITA.
When BT describes SITA as its "main competitor" it is somewhat understating the situation. "There is a huge [telecoms] market in the airline business and most of it is held by Sita," says Olivier Houri, aviation sector director at Paris-based Cap Gemini. "It is understandable what BT is doing. A lot of people would like to take a bigger piece of pie."
BT presents some aggressive arguments to press home its case. It hints that SITA is behind the technological curve and more expensive since it has to pay the telecoms providers to use their lines and lacks the economies of scale of the major telecoms providers. In mobile telephone networks, BT points to its Cellnet operation.
One BT executive claims that "SITA is two years" behind technologically, and airlines are "carrying" it in terms of the price they pay for their messaging service. "SITA has to pay retail rates," says Irvine. "If something goes wrong for British Airways in the UK, the first thing SITA has to do is call BT." Furthermore, BT now has its own network in mainland Europe, so BA could choose BT instead of "national" telcoms providers or SITA in Italy, Spain, France and Germany. "BT already has 120,000km [74,700 miles] of cable," says Irvine, adding: "SITA hasn't got a centimetre and never will have."
For its part, SITA dismisses much of this argument as "marketing hype", pointing out that it still retains a global network with the largest reach in the world, and has been competing for years alongside the national telecoms companies. SITA adds that it was among the first to offer IP network services some five years ago.
Growing advantage
BT says its own technological and size advantage will grow. Concert is investing $3 billion in an IP network over the next five years which will gradually replace the old voice-based infrastructure. When completed it will be the "biggest in Europe" and a leader in the USA. "The bottom line is that we have a big network," says Irvine.
Some airlines are convinced by BT. SAS contracted the UK telcoms industry to provide its voice and data network within the Nordic region two years ago and the two companies are "talking" about establishing a similar service elsewhere, says Irvine. Swissair now relies on BT for its data network in Switzerland. Lufthansa, meanwhile, is now using BT, its German subsidiary Viag Interkom and AT&T for all its domestic, international and trans-border voice services.
But while this is evidently progress, BT has some way to go to establish itself in air transport. Executives privately admit that they have "a lot to learn" and that they suffer from a "credibility problem" with airlines. "Airlines have a very close relationship with SITA," says one executive.
One problem an outsider such as BT will have to face is that networks are the veins which pump blood through an airline's business. "They want to be certain that telcoms companies can deliver the same standards as SITA - they will not take any risks on that," says Howarth.
Source: Airline Business
