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2010 I ssue N o. 1

A Mag azine for Airline Executives

2010 Issue No. 1

Ta k i n g

y o u r

a i r l i n e

n e w

h e i g h t s

World’s Happiest Airline

www . sabre airl ine solutions.com

Join us on Facebook at sabreairlinesolutions.com/fb Follow us on twitter at twitter.com/SabreAS

t o

A Conversation With ‌ Enrique Beltranena, Volaris Chief Executive Officer and Managing Director Page 10.

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Afriqiyah Airways knows when and where to expand

32 Significant improvements to air traffic control systems

80 Effectively diagnosing MRO issues and prescribing solutions


Ta king

your

airline

to

new

heights

2010 Issue No. 1 Editor in Chief

Stephani Hawkins Art Direction/Design

Charles Urich

Managing Editor

making contact To suggest a topic for a possible future article, change your address or add someone to the mailing list, please send an e-mail message to the Ascend staff at wearelistening@sabre.com.

For more information about products and services featured in this issue of Ascend, please visit our Website at www.sabreairlinesolutions.com or contact one of the following Sabre Airline Solutions regional ­representatives:

Asia/Pacific

North America

B. Scott Hunt

Associate Editor

Carla Jensen

Design Manager

Yvette Hunt

Contributors

Chris Bird, Patt Bourland, Stephanie Bundick, Dominic Clarke, Greg Gilchrist, Brett Jacobson, Gordon Locke, Horacio Mena, Anne-Marie Monahan, Mark Neill, Brent O’Brien, Kamal Qatato, Gary Stone, Ben Vinod, Chris Wilding. Publisher

George Lynch E-mail: george.lynch@sabre.com www.sabreairlinesolutions.com Awards

2010 Hermes Creative Award 2009 Awards for Publication Excellence, International Association of Business Communicators Bronze Quill, Hermes Creative Award, ECO Awards For Excellence In Environmental Communications

David Chambers Vice President Phone: +65 6215 9518 E-mail: david.chambers@sabre.com Europe

Alessandro Ciancimino Vice President Phone: +39 348 3708240 E-mail: alessandro.ciancimino@sabre.com Latin America

Kamal Qatato Vice President Phone: +1 682 605 5399 E-mail: kamal.qatato@sabre.com Middle East and Africa

Maher Koubaa Vice President Phone: +973 38350001 E-mail: maher.koubaa@sabre.com

2008 Awards for Publication Excellence, International Association of Business Communicators Bronze Quill and Silver Quill, Hermes Creative Award, The Communicator Award

Address Corrections & Reader Inquiries

If you have questions about this publication, suggested topics for future articles or would like to change your address, please send an e-mail to wearelistening@sabre.com.

Maximize the value of every seat. Sabre® AirCommerceTM Distribution & Merchandising provides you award-winning* capabilities. Differentiate your airline and grow revenue by merchandising branded fares, seats, bags and other ancillary services to corporations and travelers worldwide. Discover how Sabre AirCommerce can take a front seat in your airline’s success. Visit www.sabretravelnetwork.com/sabreaircommerce today.

2006 Awards for Publication Excellence, International Association of Business Communicators Bronze Quill, Silver Quill and Gold Quill

2004 Awards for Publication Excellence, International Association of Business Communicators Bronze Quill and Silver Quill

Sabre Airline Solutions, the Sabre Airline Solutions logo and products noted in italics in this publication are trademarks and/or service marks of an affiliate of Sabre Holdings Corp. All other trademarks, service marks and trade names are the property of their respective owners. ©2010 Sabre Inc. All rights reserved. Printed in the USA.

Introducing Award-Winning Merchandising Capabilities

2007 Awards for Publication Excellence, International Association of Business Communicators Bronze Quill

2005 Awards for Publication Excellence, International Association of Business Communicators Bronze Quill, Silver Quill and Gold Quill

Mike Douglass Vice President Phone: +1 682 605 5349 E-mail: mike.douglass@sabre.com

Cert no. SW-COC-002360

powering progress


perspective

with Tom Klein President, Sabre Holdings

I

find the speed at which technology evolves fascinating, yet it can be somewhat frustrating when you buy the latest in, say, electronics, such as televisions, mobile phones and computers, just to find that you have to make additional purchases to get the full benefit of your upgrade. If you don’t make the right selection, you can find that you’ve been boxed in by what was once considered the newest and greatest technology but has, in a short period of time, become practically obsolete. Technology clearly impacts every aspect of our lives. Mobile phones that were once used only to make simple phone calls now function as e-mail and Internet devices that allow access to everything a person needs to conduct everyday business. Televisions that decades ago relied on antennas to get reception to a couple of local channels now use satellite to gain reception to world news and entertainment. And airlines that once conducted most tasks manually are freed by technological advancements that enable them to operate at top efficiency. No doubt technology is a necessity. But implementing up-to-the-minute, best-of-breed systems represents only half of an airline’s technology strategy. And, while extremely vital, open systems represent only a portion of what’s needed to support 100 percent of an airline’s future needs. For several years, we’ve heard the hype about open systems being the “way to go” when implementing modern technology. Yes, it’s true that open systems should be a key part of your strategy, but relying only on open systems will likely box you

in because it doesn’t offer the flexibility to expand with your airline’s changing needs. So, for instance, five or 10 years down the road when you want to make significant changes to your business model, you’ll likely be forced to move to yet another technology platform to support your needs. But why spend the time and money if it’s not absolutely necessary? As technology partners for the travel industry, we continuously look at present as well as future needs of airlines. And while we produce solutions that are built on open systems, we don’t stop there. We build solutions that are flexible and adaptable so they can be taken apart and reconfigured to fit various airline requirements, setting you free to do business exactly the way you want to do business without restrictions or limitations. We don’t want our airline partners to go down a path that works today only to find that it’s outdated in five years and doesn’t support more modern technology. They should also have the freedom to adapt if business needs change and they want to, say, change business models. We want to implement solutions, and the platforms to support them, that are the best today and remain the best five, 10, 15, 20 years into the future. Our airline services exchange platform ® — Sabre ASx Airline Services Exchange — gives airlines freedom to implement new technology as it comes available … without constraints of rebuilding the current platform to conform to new systems. We’ve developed our solutions to integrate with other systems, support changes within an airline’s business SM

model and adapt to the constantly evolving industry. So while open systems are essential to our business, there’s much more that must be added to the equation for our technology, or that of any IT provider, to thoroughly support the needs of our airline partners. In our Company section, Barry Vandevier, our chief information officer, discusses several aspects of our technology strategy, including how we use cloud concepts to take SOA to the next level, our Software-as-a-Service offering that supports 119 airlines across 23 open-system solutions and our move to an Agile development methodology. These are just a few examples that support our commitment to develop flexible, adaptable solutions that meet your business needs today and grow with you for decades to come. On our cover, Latin America-based Volaris explains what makes its Mexico’s premier low-cost carrier and how technology is one of its top three priorities, along with people and aircraft. Your airline runs only as smoothly and efficiently as the technology that supports it. And that technology must be extremely flexible so as not to restrict your business but rather enable your airline to grow without boundaries. I hope you enjoy this issue of Ascend, and I look forward to working with you to ensure your technology strategy doesn’t box you in but rather sets you free to do business the way you want to do business.


ASCEND I TABLE OF CONTENTS

32

PROFILE

INDUSTRY

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16

Enjoying The Tailwind Afriqiyah Airways looks beyond regional expansion to more lucrative international routes

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World’s Happiest Airline Enrique Beltranena explains what makes Volaris Mexico’s premier low-cost carrier

Highways In The Sky Airlines can expect to see significant improvements to air traffic control systems in the near and long term

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38

The Glass Cockpit Electronic flight bag technology provides substantial benefits for airlines and their crewmembers

Gloves Off The struggle over Japan Airlines set the stage for a new order in global airline alliance negotiations

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Play By The Rules New revenue management and pricing processes and IT systems are needed to effectively compete

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10

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In Unison Airlines achieve sizeable benefits by syncing up scheduling processes and using integrated decision-support systems

Chatter Box Carriers can benefit from the right social media strategy

Cargo Infusion Carriers that implement a sound cargo revenue management strategy will achieve significant financial gains

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Year Of The Tiger Chinese airlines cope with highspeed rail, changing consumer behavior and technology’s pace of change

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United They Stand The three main global alliances have achieved significant results during the last decade

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ASCEND I TABLE OF CONTENTS

SPECIAL SECTION Unleashing The Power 56 Of Choice Boosting ancillary revenues requires a concrete shopping strategy that appeals to every consumer type Travel Agent 59 Of The Future Travel agents rely on technological advances to succeed and survive

COMPANY 68

SOLUTIONS 74

On “Cloud” Nine Sabre Holdings ® applies cloud concepts to take SOA to the next level

Lighten The Load Electronic flight bags are already on many commercial carriers’ flights today

71

No Blind Spots Airline executives provide valuable feedback to help evolve the products and services provided by Sabre Airline Solutions®

77 Gate Manager

AirTran Airways leverages Sabre ® AirCentre™ Gate Manager to efficiently gate a flight schedule and respond to irregular operations

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Channeling China Online travel is expected to represent 20 percent of China’s total travel revenues

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Maintaining Control Industry consultants from Sabre Airline Solutions ® can effectively diagnose MRO issues and prescribe solutions

65 Value Articulation

It’s vital that the value of an airline’s products is clear and can be easily identified to achieve maximum sales potential

85 Calling All Channels

Airlines have recently developed distribution strategies that have led the way to a set of revenuegeneration trends in the greater market

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ASCEND I BY THE NUMBERS

Industry Fares And Traffic Source: Sabre® AirVision® Market Intelligence By Kartik Yellepeddi | Ascend Contributor

Average Global Year-Over-Year Traffic and Fares

2010

320

2009

2008

2007

760 740

315

Millions

Based on data from Sabre® AirVision™ Market Intelligence, including all global distribution systems and an estimate of low-cost carrier traffic, year-over-year traffic continues to improve from January and February 2009 to the same period this year. However, the average global airfare continued to decline during the first two months of 2010. The average fare of US$676.43 represents a 10.1 percent decrease from the 2008 average fare of US$752.52 for the same period.

310

720

305

700

300

680

295 660 290 640

285

620

280

Network-wide traffic

Average ticket value

Average Airfare Trend On International Flights Departing Region

Domestic Oceania

Domestic ME

Domestic Europe

Domestic Asia

Domestic America

20%

Domestic Africa

Airfare on flights from each region have decreased since 2007, with the exception of Asia, which after falling 12 percent from 2008 to 2009 has rebounded with a 4 percent increase from 2009 to 2010.

15% 10% 5% 0% -5% -10% -15% -20%

2007 – 2008

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2008 – 2009

2009 – 2010


ASCEND I BY THE NUMBERS

Domestic Fare Trends By Region Domestic Oceania

Domestic ME

Domestic Europe

Domestic Asia

Domestic America

Domestic Africa

Most regions experienced an average fare decrease from 2008 to 2009, led by domestic Africa with an almost 30 percent decrease. The lone exception was the Middle East, which saw average fares increase nearly 10 percent. The Middle East, however, is the only region to see average fares decrease from 2009 to 2010, indicating the beginning of a global recovery for the airline industry.

15% 10% 5% 0% -5% -10% -15% -20% -25% -30%

2007 – 2008

2008 – 2009

2009 – 2010

Year-Over-Year Regional International Traffic

Domestic Oceania

Domestic ME

Domestic Europe

Domestic Asia

Domestic America

Domestic Africa

20%

From an international perspective, traffic has clearly increased substantially from January/February 2009 to the same period this year. Oceania has led the way with a 17 percent increase in the January/February timeframe.

15% 10% 5% 0% -5% -10%

2007 – 2008

2008 – 2009

2009 – 2010

Year-Over-Year Regional Domestic Traffic

Domestic Oceania

Domestic ME

Domestic Europe

Domestic Asia

Domestic America

20%

Domestic Africa

While airlines in Europe and North America have not added new capacity, the number of domestic passengers per region has grown significantly from the first two months in 2009 to the same period this year, showing substantial discipline on the part of these carriers. Middle East has realized the greatest improvement in traffic at 16.08 percent year over year, followed by the Oceania 11.6 with a percent increase.

15% 10% 5% 0% -5% -10% -15%

2007 – 2008

2008 – 2009

2009 – 2010

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ASCEND I PROFILE

Enjoying The Tailwind While other carriers in Africa have struggled during difficult times, Afriqiyah Airways has been able to ride the storm out time and time again. It stays true to its objective of linking Africa’s cities together without making its passengers suffer through lengthy layovers, it takes advantage of modern technology, and it knows just when and where to expand in support of future growth and ongoing success. By Lynne Clark | Ascend Staff

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ASCEND I PROFILE

Photos: Afriqiyah Airways

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oman philosopher Seneca said, “Luck is when preparation meets opportunity.” According to that definition, Afriqiyah Airways has been “lucky.” While airlines worldwide have been slashing flights to match dropping demand during the ongoing global recession, Afriqiyah is among the handful of African airlines that have bucked the trend. Instead of slashing flights, the carrier is looking beyond regional expansion and is eyeing more lucrative international destinations. The nine-year-old, state-owned carrier flies once a day between Libya’s capital city, Tripoli, and Benghazi and has no plans to add more domestic routes. Currently, it has direct flights between Tripoli and 17 destinations in north, west and central Africa and the Middle East as well as to European destinations such as Paris, Brussels, London, Rome and Amsterdam. When it was formed, Afriqiyah had hopes to become Africa’s favorite airline, as spelled out in its corporate mission “to link the African countries directly with one another, without the need to suffer through the long connecting flights from Africa and Europe and then back to Africa again.” Afriqiyah Chief Executive Officer Rammah Ettir told reporters last year the airline has largely accomplished that goal. “We have made Tripoli a gateway to and from Africa, shortening routes from Europe and then developing the network to cover a considerable number of African destinations, which will be further extended to Asia and North America,” he said. The most immediate new route extension planned by the airline is to Beijing and Guangzhou, China. In the future, Afriqiyah Airways also plans to introduce new services to Leon and Milan and hopes to expand to the United States — particularly New York’s John F. Kennedy International Airport and Houston, Texas, which has headquarters for many U.S. oil companies. Afriqiyah Airways began positioning itself for international expansion in 2006.

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ASCEND I PROFILE

Afriqiyah Airways planes are painted in red, green, yellow and black (Africa’s traditional colors), with the numbers 9.9.99, referring to the birth date (Sept. 9, 1999) of the African Union.

The carrier signed a memorandum of understanding for the acquisition of six Airbus A320s and three A319s, plus an option for three A330-200s. It has already taken delivery of three A319s, and has deployed them on the new Dubai route. Two of the three A330s were also delivered last year and used to inaugurate new routes to Dhaka, Johannesburg and Kinshasa. At the time Afriqiyah was expanding its route service, executives realized the

old reservations system was outdated and began searching for a new technology partner. In 2005, the airline partnered with Sabre Airline Solutions ® and chose components within SabreSonic ® Customer Sales & Service to effectively manage its travelers and distribution channels. “Afriqiyah was aiming to implement a state-of-the-art solution for its commercial functions, and the technology from Sabre Airline Solutions was the right choice,”

According to Afriqiyah Airways director of commercial operations, Khaled Sawese, the collaboration with Sabre Airline Solutions was critical in helping the carrier gain efficiencies and grow revenues.

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ASCEND I PROFILE

said Khaled Sawese, director of commercial operations for Afriqiyah Airways. “The system we had at the time was unreliable and was unable to connect with other global distribution systems.” Sawese said the partnership with Sabre Airline Solutions was a key element in helping the airline become more efficient and grow revenue to increase its value in a short period of time. The technology company believed in Afriqiyah Airways and was willing to engage in a “risk-reward” initiative. “In addition to the SabreSonic CSS implementation, Sabre Airline Solutions was prepared to share the risk with Afriqiyah and embarked with us in a riskreward type of engagement, where both companies needed to work hand-in-hand to be where we are today,” he said. “This project was successful, and we are pleased that Sabre Airline Solutions has helped us improve our processes and procedures, which has also helped improve our financial performance.”

Early Headwinds

In the late 1980s, the country’s air transport sector was feeling the affects of the isolation imposed by United Nations sanctions banning all flights to and from Libya and prohibiting the supply of all aviation equipment. Flag carrier Libyan Arab Airlines was on life support having borne the brunt of sanctions. The year before the imposition of United Nations sanctions, the carrier had 35 passenger aircraft, but it shrank to just one operational Fokker F28 and one Boeing 727 by 1999. “There were many days when we did not have a single aircraft in the air,” Captain Sabri Shadi, former Afriqiyah Airways chief executive officer and now chairman of the Libyan African Aviation Holding Company told Airline Business in a 2008 interview. “We had 450 pilots in the airline at that time; they were not doing anything. “The damage done was so great. It was really difficult to recover. Although the United Nations sanctions had been lifted, the U.S. embargo carried on for another four years. I tried so hard to find solutions for the fleet, and although we signed a letter of intent with Airbus in late 1999, we were unable to buy new aircraft until early 2006.” With questions about the viability of Libyan Arab Airlines, it seems paradoxical that the Libyan government would establish another state-owned airline. “At that time, the Libyan government was asked to bail out struggling West African multinational Air Afrique,” Shadi said. Also, Libyan Arab Airlines was not in good shape and was suffering badly from the consequences of the sanctions, but it

Afriqiyah Airways’ Airbus A319 aircraft cabins are configured with 16 business-class and 96 economy-class seats with the latest in in-flight entertainment. Both cabins are designed with comfortable seats and warm interior lighting.

was then politically unacceptable to shut it down. “So, many elements came together,” Shadi said. “The government, therefore, decided to establish a new airline specifically to link Libya with Africa and ultimately connect Africa with the rest of the world. This was the thinking behind Afriqiyah Airways. It was possible that Libyan Arab Airlines would not recover and, in such a situation, Afriqiyah was in place to serve as the state airline.” As it turned out Libyan Arab Airlines (now Libyan Airlines) survived and now flies to 10 destinations in Europe, five in North Africa and three in the Middle East. To resolve the anomaly of two national airlines, the Libyan government has placed both Libyan Airlines and Afriqiyah Airways under a single state-owned holding company, Libyan African Aviation Holding Company, with the two carriers expected to merge by 2011.

multi-billion-dollar infrastructure development plan focused on the renovation and construction of airports, roads, railways, housing, schools, hospitals, and water and sanitation projects. Afriqiyah CEO Ettir estimated that 70 percent of the airline’s business consists of passengers transiting Tripoli on their way between Europe and various African capitals. The most heavily traveled routes for business are between Tripoli and Paris, Accra, London and Dubai. Only 15 percent of Afriqiyah’s passengers are tourists, but Ettir expects that to change as the country begins to see results from infrastructure improvements. In Tripoli alone, 10 five-star hotels are being built and a number of four- and three-star hotels are already complete. In fact, whole tourist villages are now operational and many more are being erected throughout the country. Libya is undoubtedly ready for takeoff, and Afriqiyah Airways is clearly prepared to enjoy the tailwind. a

Taking Advantage Of Tailwinds

Today, Afriqiyah Airways has carried more than 1 million passengers and is focused more on its arrival than departure. After a long period of sanctions and isolation, Libya appears to have turned a corner and is now occupying the international limelight thanks to the country’s booming oil- and gas-driven economy. A growing number of foreign investors are traveling to the country to take advantage of lucrative business opportunities sprouting up around oil and gas industries, and an ambitious

Lynne Clark can be contacted at wearelistening@sabre.com.

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In response to the many new challenges it’s faced during the past few years, Mexicana Airlines has made highly strategic changes to its commercial side of the business as well as experienced great success from its low-cost subsidiary.

The World’s Happiest Airline

Photos: Volaris

A Conversation With … Enrique Beltranena, Chief Executive Officer and Managing Director, Volaris


F

rom the time of its inaugural flight in March 2006, Volaris, known as the “World’s Happiest Airline,” has been anything but a typical, ordinary airline. The high-efficiency carrier shakes it up year after year, bringing surprise and excitement to its customers and employees, who are known as “Ambassadors.” For example, to celebrate its first anniversary, Volaris offered 45,000 tickets to all of its destinations for a total fare — taxes included — of US$20 per ticket. And that was just the first of many surprises the Mexico-based carrier would offer the market during its first four years. Volaris uniquely engages with the traveling public through a series of contests and promotions that undoubtedly pique the interest of current and prospective customers. For the past two years, the “Your Name On A Plane” contest has driven customer participation, generating great results for the airline. Last year, 21 Volaris customers won the contest, earning a year of free travel for the winner and a guest on any Volaris flight to any

of the carrier’s 38 domestic and two international destinations. In addition, 21 of the airline’s Airbus aircraft now sport the individual winners’ names on the fuselage. “We received over 20,000 story entries from our customers describing what they would do if they had one of our airplanes at their disposal for a year; the selection is a well-represented group from all over the country,” said Enrique Beltranena, Volaris chief executive officer and managing director. “We selected the 21 most outstanding stories and are certainly pleased with the tremendous response we got from our clients.” In 2008, Volaris and Coca-Cola Zero teamed up to give 60 contest winners a concert that was held 30,000 feet above the ground, aboard a Volaris flight. The in-flight concert, Vuelo Zero, featured two of the most popular Mexican rock bands, Zoé and Molotov. To enter the contest, participants simply had to register and accumulate “Zero Codes” from 400 milliliter and 600 milliliter Coca-Cola Zero bottles.

In addition to providing enjoyable and memorable experiences for its customers, Volaris enriches the lives of those who are less fortunate in the communities it serves. Last year, the carrier became the official airline of Fundación Televisa “Nuestro Destino es AYUDAR,” providing educational and motivational opportunities for children in two orphanages and foster homes in Mexico. As a reward for outstanding performance or activities at their respective institutions, 65 kids between the ages of 3 years old and 15 years old flew to Monterrey and participated in fun activities held at the MARCO Museum and Kidzania Monterrey. In addition, children saw a performance by pop singer Tatiana during the event. “For us, it is a true honor to be part of such significant events that will truly mark the lives of each and every one of these children, serving as a reminder that a promising future does lie ahead for them,” Beltranena said. Volaris customers, employees and communities aren’t the only beneficiaries of the airline’s


ASCEND I PROFILE

thoughtful, giving, responsible ways. The environment is also an issue constantly appearing on the carrier’s radar screen. In 2008, the International Air Transport Association presented Volaris with Latin America’s first Green Airline Award and also granted it the Green Aviation Partner certification. Last year, the airline documented, implemented and achieved certification on an “Environmental Management System” under the ISO 14001 norm awarded by NORMEX, an entity certifying the airline’s environmental program. With this announcement, Volaris became one of the first airlines in Mexico and Latin America to operate in accordance with these regulations. Beltranena follows his conviction that “what makes an executive great is a deep vocation to be and remain human, motivating his team and making sure they move forward, overcoming all hurdles.” As a result of his ability to put his beliefs and work ethics into everyday practice, last October, during the sixth Annual ALTA Airline Leaders Forum in Cartagena, Colombia, Beltranena received the prestigious “Federico Bloch Award.” In a recent interview with Ascend, Beltranena shared his thoughts about what makes Volaris Mexico’s premier low-cost carrier. Question: In just three short years after Volaris’ inaugural flight, the carrier, in April 2009, was ranked by the Great Place to Work Organization as one of the best 100 companies to work for in Mexico. The airline ranked high in employee pride and comradeship as well as respect and credibility. How would you describe Volaris’ corporate culture? Answer: Fun and happy travelers and employees! When we founded the company, we knew that one of the most important challenges we faced going forward was managing our talent. We started day 1 with an entire philosophy that not only applies to our Ambassadors (our employees representing the brand and a lifestyle) but also our customers. As I always said, we shared the notion that aviation had lost sight of the ability to treat passengers as real customers. The only way to shift this behavior is by starting in house. I remember how I dreamed, a year before while certifying, what the culture was supposed to be. Our conclusions were laid out in a document called “Working Together.” This document refers to our personnel as “Human Talent,” since we needed a fresh culture that we could develop, with passion to execute, focused on common goals, generating synergies among the team and committing to becoming an exceptional culture and working environment. We never lost sight of the fact that we are all humans that must be treated fairly: 42 percent of our company’s Ambassadors do not hold the same position they had when we started, and they have grown up with the company; 82 percent of our people submitted their point of view to the Great Place to Work Organization, assuring the world we are a great company to work for — number 34 among the top 100 in Mexico — because of our pride, 12 ascend

Volaris ranks No. 34 among the top 100 companies to work for in Mexico because of its pride, teamwork to achieving high-efficiency goals, and executing under moral principles and behavior.

teamwork to achieving high-efficiency goals, and executing under moral principles and behavior. Q: How has the airline built such a strong culture? What keeps employees satisfied and motivated? And what impact does this type of culture have on the airline? A: We all dreamed of having tons of fun and being happy doing our work. Our promotional campaigns developed by our chief commercial officer, Holger Blankenstein, supported by our marketing director, Jose Calderoni, have to be very fun and very close to our targeted client as well as be born and incubated in our company environment. When we launch them, we guarantee ourselves that our Ambassadors are living them. Among one of the most fabulous achievements we’ve had has been the brand penetration in the market. If it worked for the public, which is a reflection of our Ambassadors’ behavior, imagine what it did internally for the company! I stand up every morning with the dream of showing Mexico that it is viable to make aviation in this country a fabulous, enjoyable, effective work environment. I start the week planning our Ambassadors communication and how we can become one of the top 10 companies for which to work, an excellent place to develop a professional career in the aviation business. You watch, we will make it … it is another set of guarantees! We found 83.4 percent of our Ambassadors feel they are completely informed of what is happening in the company. We realize 50,000 information impacts in our internal network of screens,

mailing, electronic chats and events each month. Q: Part of Volaris’ mission is to enable more people to travel “WELL” … placing great emphasis on the term “WELL.” What does this mean for the carrier and its customers? A: With safety, treating them with fair human respect and not just as a reservation number, guaranteeing on-time performance or their money back, at a fair price, well informed, entertained, with reliability, receiving more than what we promised, with credibility (which means integrity in service), with lots of warmth and reasonable comfort. We aim to carry out these actions, with a lot of creativity before, during and after the flight. For the carrier, this means more and more training, and for the customers, it means they can fly more … now they can fly rather than spend hours on a bus. It’s about being a company that understands and speaks directly and clearly to them. I remember a discussion we had when an Ambassador suggested to write the legend “Proudly Mexican” below the Mexican flag on the tail of the aircraft. It was during the time we were opening our U.S. routes. Someone told us to be careful because immigration was a sensitive issue. We are proud to show the world that we are a Mexican carrier, with a Mexican labor force, with a huge emphasis on our community travelers. My next step was to walk to the legal council office at our company and ask them to prepare the paperwork to become a naturalized Mexican carrier. We all show our customers that they are nothing but a great market that increasingly needs to be treated fairly and with


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respect. The slogan of the launch campaign was “The U.S., more Mexican every day,” which, by the way is totally true, and we used a simple way of writing typical Mexican words and cultural elements, spelled out as they would be read in English. The campaign has ranked among the best campaigns of the year in Mexico, and customers reacted very positively to it. We became the highest market-share carrier in San Francisco and Oakland, California, after four months. Q: Social media, such as Facebook and Twitter, is becoming widely used in the airline industry as a method to communicate and engage with customers. In what innovative ways does Volaris leverage social media? What impact does it have on the airline? And in what way does it serve as part of the airline’s vision? A: We need to speak in the same language, form and in the same way those communities are communicating. Clearly, this is not the only way we communicate with them, but it certainly has become one of the most important ones. When we classified our niches, we found that the least-loyal group of travelers are young, between 16 years old and 32 years old. They are very much driven by price, but deep down inside, they are sensitive to what is aspirational, or what is cool. They react much more to feelings and increasingly communicate via mobiles and the Web, at their convenience. In terms of media, it is the niche with highest growth in Mexico. So, we speak to them, promote to them, create games, solve their requests and, in general, identify with them through mobiles and social media like Facebook and Twitter. At the airline, this means thinking the way the customer does, in their most comfortable environment, which led us to create a department that communicates with them and prepares campaigns for them using their most appropriate communication tools. The result for the airline vision was again helping them fly WELL, but it has developed twice the loyalty in that niche than before we started. A key result is retention, in a niche where the prevailing mode of transportation is flying as opposed to previous generations who used to consider bus transportation primarily. Q: Volaris has reached exceptional on-time performance levels, as high as 98.1 percent some months, supporting its on-time guarantee on all flights. From the time a customer arrives at the airport for a flight to the time the flight has landed at its destination, what steps does Volaris take to ensure an on-time departure and arrival? On those rare occasions that Volaris doesn’t deliver on its on-time promise, how are customers compensated? A: When measuring those attributes passengers value most, after pricing and safety, we learned that on-time service was a priority. At the start, we were very price competitive and drew in lots of customers. But when asked if they realized how successful we were in terms of

on-time performance, there was no awareness. Our variable compensation is very much oriented to it, with a difference to the drivers of compensation based on punctuality. Why? Because we are significantly oriented to it. When we launched the airline, not only did we have to communicate well that we were delivering as promised, but we also needed a product differentiator without representing a higher cost to the airline. On-time performance is something you can achieve by delivering systems, managing airports, etc., but the only real element that makes it happen in real life are those people working at the airline, an incurred cost, not an additional one. When we launched Volaris, the legacy carriers matched our pricing levels, so we sent a market message that pricing with service was not all; you have to have a differentiator, and one of ours is delivering on-time performance. Q: Volaris’ vision is to transcend by creating and living the best travel experiences. What does the airline bring to the traveling public that surpasses that of its competition? A: It is all precisely part of our flying WELL notion, as I explained. Our competitors’ mentality did not take us seriously in our goal to transform the aviation industry by evolving, innovating and satisfying. I think the key is not only to improve day after day, but also to remain as the best. So, when we speak about transcending, we mean staying forever in the market in the long run, and this was clearly not

what happened to the other five airlines that appeared and already disappeared in the market during the past two-and-a-half years. If company people enjoy what they do, and if they enjoy their work, the natural result is better experiences providing better service. We do this because working for Volaris is unique in the aviation industry in Mexico and because we all have great fun doing so. Have you ever heard a passenger telling his flight experiences after a trip? When you are able to create memorable and positive experiences, they will be that much more lasting. In fact, we made an ad about it: it was about a little boy who went to see the whales in Los Cabos. The kid returned from his trip and told a story about hundreds of dolphins swimming around the whales and, even without having had the experience of touching the whales, he spoke to his peers at school about the size of the whale describing it as “hu-hu-hu-hu-hu-hu-huuuuuuuuuuuuuuuumongous! Humongous!” We set out to create unique, unforgettable travel experiences, making dreams come true and then aiming for passengers to retain them as such. We do it with creative people who develop new ideas in an environment where we empower people to do things differently, with less money but without losing sight of safety, customer experience and growing with sustainable profitability. Flying is just part of the travel process, it is not the goal. Traveling is about living and dreaming, it invites us to live with joy! So

Nearly half of Volaris’ employees, called Ambassadors, do not hold the same positions they had when they started; they have literally grown and expanded with the company. And 82 percent of the carrier’s people submitted their point of view to the Great Place to Work Organization, confirming to the world it’s an excellent company for which to work.

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then, why not aspire to convert the process of flying into that? Sounds reasonable! Q: Airbus has recognized Volaris as the airline with the most efficient use of its Airbus A319 aircraft. How does the airline operate this particular aircraft more efficiently than other carriers that utilize the same equipment? A: After our Ambassadors, our fleet is our most important asset. It is costly and, naturally because of this, it is essential we use it optimally. My great, great grandparents came from Spain during the colonization period with one single purpose: to offer efficient transportation in the colonies. I remember my grandfather saying that a still mule never charges for its service. Aircraft are just the same. Why would you have an aircraft sitting on a ramp rather than charging for service? We put them to good use, so we can dilute costs throughout the network. We are flying each aircraft more than 12 hours of actual flight time a day per aircraft, which translates to more than 14 hours a day referred to block times. The second element is on-time performance, which we already covered, but as examples it encompasses maintenance and reliability, the capacity to turn around in less than 22 minutes, the network configuration, airports providing efficient service, where and how to maintain the fleet, etc. The third element is where and how you utilize the fleet. You do not run the most famous horse race Grand Prix with mules or camels. You search for the best-fitted horse to win, handling top distances, altitude, weather conditions, horse track conditions, etc., all are key. Aircraft are the same. They are fitted to a certain mission, and the more you adapt to these, the better they perform. Selecting the right aircraft was important; designing its features is paying back. Q: Volaris is the only airline in Mexico certified for very low visibility (Cat III) operations at Toluca Airport. How has it achieved this certification? What does this mean for Volaris? And what impact does it have on the carrier’s local competition? A: When I came to Mexico, Pedro Aspe, chairman of our board, gave me four alternatives to fly to and set a base for the airline. From our market perspective, Toluca was the most appropriate one. But as in the past, and as is still the case, at times, the location sometimes has lots of fog. Since on-time performance, high utilization and fast turnarounds were of the essence — fixing this piece of the puzzle became a basic need. The federal government contracted International Civil Aviation Organization specialists and confirmed that this certification was important. Providing the airport with first-world technology was then a forced step. They did it, and we bought the fleet with the capabilities and training as needed. Aviation is an extremely complex business that simply does not tolerate improvisation, given that it can be so costly. 14 ascend

In the beginning, and for about the first year, we were the only airline certified and, slowly, another carrier obtained the certification. It has a huge impact in on-time performance and further, the process was worthwhile for some U.S. airports, where we are already Cat III-certified. Q: Volaris has achieved many successes during its short tenure. What are the main contributors to the airline’s overall success? A: An extremely disciplined board of directors drives the company to follow the original plan. The management team with most of them coming from outside of the industry, and most of them being the best in their respective fields, learned to be great aviation people, in addition to the operating shareholder TACA and, clearly, the Volaris team, of whom I have referenced throughout. Q: Looking back, what are some of the greatest challenges the airline has faced? How has it overcome these challenges? What were some lessons learned? A: Every day of the past three-and-a-half years were a challenge, especially last year. We have a saying in Spanish that states more or less, “Fleas stick to the skinniest dog.” Well, we were that dog! I think back on those years and really thank God for guiding our team! The most important lesson besides being committed was remaining humble despite our achievements.

Q: Volaris has clearly moved up the ranks quickly in Mexico — rated as the nation’s second air passenger transportation company. In its goal toward total leadership nationwide, what types of innovative products does the carrier offer its clients that will help make it the airline of choice? What role do employees play in growing Volaris’ customer base and gaining customer loyalty? A: Our goal of leadership nationwide is limited to the capacity of what we can do with our fleet. We already have a decent share and, unless we modify the model, I don’t see Volaris being the total leader. This is the case with most low-cost carriers around the world. As a result, and based on the Mexican peso risk, the company also had planned to create a natural income hedge in U.S. dollars to leverage versus its U.S. dollar cost proportion. The opening of the U.S. market was on the plan since the company’s conception and is stated in the original “Concession” (the equivalent of the U.S. Department of Transportation authorization). We now intend to continue providing the same product quality to our targeted markets in the United States, and most of the growth will come from there. I would say the expansion of the current product beyond the Mexican border is the most important step now. But this comes with a major alliance with Southwest Airlines to accomplish our market objectives. Everything that is necessary to pair the two airline systems and products is happening as we speak.

Volaris, the official airline for Fundación Televisa, further supports the communities it serves through several initiatives such as Teleton (the largest fund-raising campaign in the country favoring disability patients and this year included children with cancer), transportation of organs for transplants, and transportation for injured and burned individuals.


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two-and-a-half years. This advantage allows us to produce fewer CO2 emissions and reduce noise. Flying techniques are very helpful in saving fuel and polluting less, and we have tackled most of them. Finally, recently we certified the company under ISO 14001 standards and started offsetting our corporate office emissions purchasing carbon bonuses. But this is not enough. Our social responsibility campaign carries out a variety of ecological activities to support the community in this goal. We were the first airline in Latin America recognized by IATA in our progress and provided ALTA with a questionnaire that basically helps airlines fulfill many actions, as much as they can, to support the environment. I repeat that the major accomplishment was to filter, convince and make our labor force understand the purpose of the campaign to inherit a better world for our children. Francisco was among one of 21 Volaris passengers to win last year’s “Name On A Plane” contest. In addition, he earned one year of free travel for himself and a guest on any Volaris flight.

Q: The contest to win in-flight seats to the Vuelo Zero rock concert for the Latin American MTV awards proved extremely successful for Volaris. What did this promotion involve? What impact has it had on the airline? What other prizes were awarded to contest participants? A: Vuelo Zero was the first one. We’ve also done the Tigres del Norte, the most popular norteño band in the country. The purposes of these activities were explained before, and our results were amazing. With minimal prizes/cost, we generated a ton of publicity in both cases. The first one associated with Coca-Cola and the second with the producers, Bandamax. It involves lots of coordination, especially when it comes to guaranteeing in-flight safety and security. Authorities were fully participating in the planning phases and that is the huge challenge from the operational perspective. From the market perspective, it involves coordination of advertising, especially in terms of how to position the event and related campaign. Doing this well guarantees a great return on the brand. Most of the impact is measured by the return in multiples of the publicity campaign. The prizes were very simple! Fly and participate in the event. Q: While other carriers strive to generate additional revenue through ancillary sales, Volaris offers customers an onboard array of snacks and drinks from well-known brands such as Coca-Cola, Krispy Kreme, Canel’s, Dove, Cervecería Cuauhtémoc Moctezuma, Sanborns and Casa Cuervo at no additional cost. How does the airline afford to offer top brands on a complimentary basis? A: It is basically a barter agreement with the sponsors. They get commercial exposure, we get their products, which have to represent an

aspiration for the consumer. We afford it based on our capacity to position their products and the onboard sponsorship opportunity. Q: Volaris has a codeshare agreement with Southwest Airlines. What does this agreement involve, and how does each partner airline benefit? What requirements must a carrier meet to partner with Volaris? A: The agreement is essentially that … a codeshare agreement. The agreement will be expanded upon implementation, and we will announce further reach at that time. Q: How has the success of Volaris contributed to Mexico’s economy? A: We firmly believe that without transportation, there is no economical development — a simple premise! In the first years, the market domestically grew from 22 million domestic passengers to almost 28 million. In addition, a true alternative to Mexico City’s International Airport was developed in Toluca, and the State of Mexico, where Toluca is located, has benefited greatly from the creation of this development. I could add so many more other non-subjective issues, but I prefer to stick to these two. I could also add that a new category of airline was added to the market, one based on value, service and style. Plus, the expansion of electronic commerce. Q: Volaris tackles environmental issues straight on. What are some of the sustainability initiatives the airline has in place? What are your greatest environmental accomplishments? A: We firmly support our campaign promoting our capacities as having the most modern fleet in the Americas, averaging just over

Q: In addition to being the official airline for Fundación Televisa, what unique ways does Volaris support the communities it serves in terms of volunteer and fund-raising efforts? A: We do have educational campaigns, house building, supplemental hearing aid products, nutritional efforts, Teleton (the largest fund-raising campaign in the country favoring disability patients and this year included children with cancer), transportation of organs for transplants, etc. We also provide transportation for injured and burned individuals. Q: What role does technology play in the success of Volaris? A: Wow! Everything! I mentioned our people and our aircraft previously as our priorities. The third is technology, which is why we are moving toward SabreSonic® Customer Sales & Service and some other components. Sabre Airline Solutions ® technology is by all means the foundation for growth and has the systems with which will clearly support the next growing phase. We launched three-anda-half years ahead with an e-ticket platform. Distribution for us is direct to the customer on about 82 percent of our sales. It is clearly a driver to grow in the United States, and we will keep on using it to enhance the customer experience and customer research. Q: Where do you see Volaris in the long term — five to 10 years down the road? A: We are positioned to become a preeminent value airline for Mexico and in flows to/ from the United States. The business model proved itself this year when we achieved our first profitable year. The network and the point-to-point model keeps being the edge for profitability, and we will expand in twice our actual size during the coming four to five years. We will continue enabling more people to travel WELL … always placing great emphasis on the term WELL. a

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Airlines can realize sizeable benefits by syncing up their scheduling processes and leveraging integrated decision-support systems. By Sergey Shebalov | Ascend Contributor

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Decision-support systems have been widely used in the airline industry for nearly 50 years. Currently, many of them work as integral parts of the planning and operations control processes. Airline scheduling represents one area that has probably benefited the most from employing these systems. These benefits are due to the ability of decision-support systems to automatically consider multiple constraints and objectives and obtain optimal solutions within operationally accepted time limits. However, the full potential of decision-support systems utilization is far from being realized. The airline scheduling process usually begins at least a year in advance and continues all the way to the day of operations. The goal is to optimally allocate all available resources — aircraft, crew, airport slots, ground equipment, maintenance facilities — according to the airline business model. Until recently, complexity of airline operations never allowed creating a complete and computationally tractable model describing creation of a schedule. To overcome this difficulty, the scheduling process is divided into several stages such as network development, fleet assignment, crew scheduling, revenue management and maintenance planning. Following this approach, decisions are made sequentially, so an output of one stage is used as an input for the next one. Consequently, most of the currently used decision-support systems are specialized in solving one or several closely related problems occurring within a particular scheduling stage. A major disadvantage of this approach is sub optimality of the overall solution. By fixing some of the decisions on the earlier scheduling stages, flexibility of the later ones is reduced and, therefore, they may yield poor results. On the other hand, ignoring some of the restrictions early often cause infeasibility later, and the process has to go through several manual feedback loops before an acceptable solution is obtained. Recent developments in operations research algorithms and improvements in quality of accessible hardware resources provided an opportunity to combine some

of the scheduling problems and attain solutions unreachable via consecutive method. In addition, integration leads to standardization of information streams, simplification of communication processes and better administration of business practices. Integration is a complex concept that can be realized on several levels, such as integration of automated decision-support systems. To take advantage of all benefits provided by these systems, integration on other levels — such as data storage and manipulations, business objectives and performance measurements, organizational structures, and processes — must be implemented.

Integration Opportunities

Airlines can benefit from integrated decision making as it pertains to scheduling processes. Four examples — demanddriven dispatch, network development, integrated routing and integrated recovery

— are not meant to provide a complete picture of the airline scheduling process, but rather illustrate several key areas where clear opportunities for integration exist.

Demand-Driven Dispatch

A classic example of integration in decision making is close-in re-fleeting or demand-driven dispatch. This process combines fleet assignment and revenue management practices. During the fleet assignment phase, each flight is assigned a specific aircraft type so the schedule is operational and produces maximum profit. This process is usually completed two to four months before operations and is done on an aggregated level for a typical day or week. Revenue estimation is based on strategic passenger demand forecasts that account for influence of competition and network effect but does not use fine adjustments practiced in revenue management. Consequently, close to the date of

Impact Of OSS On Revenue 20 18

Revenue contribution (%)

A

irline planning is traditionally performed in several stages. This separation happened due to high complexity of the involved challenges as well as airlines’ business structure where different units are responsible for completion of various tasks. Following this practice, most decision-support systems provide solutions for a specific task. However, scheduling processes affect each other, and significant benefits can be achieved if decisions are made simultaneously.

(4)

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Load factor (%) No YM YM YM+Pricing ODFAM ODFAM+Pricing

Simulation results demonstrate potential revenue improvement from application of integrated DSS to airline fleet assignment process. Each curve represents a potential revenue improvement as a function of load factor. The lowest curve (0) describes the solution obtained by a standalone leg-based fleet assignment model. Other curves show the effect of consecutive integration of revenue management, network connectivity and pricing considerations into this model. As a result, revenue grows by 8 percent to 12 percent.

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Airline Scheduling Process

Airline planning is a complicated, multistage process with numerous interdependencies and feedback loops. Different stages of this process employ specific decision-support systems that are often inconsistent in objectives and constraint. Multiple opportunities exist for integration of these systems that would lead to significant improvements in airline profitability and operational robustness.

departure, it might become obvious that the aircraft type originally assigned to a particular flight is not optimal. In this case, the flight is either under capacitated and some of the valuable demand is spilled or over capacitated and some of the seats on an aircraft are spoiled. On the other hand, revenue management operates on a much more detailed level. Compared to a strategic forecast that includes only average total number of passengers expected to travel on a flight across the entire period of operations, a forecast produced by revenue management systems has information for each flight on a particular departure date for each booking period, fare class and point of sale. In addition, 10 to 20 days before departure, a significant portion of bookings for the flight is already observed and, therefore, information about expected load is much more accurate. Using this information, some fleeting decisions can be changed so assigned capacity better matches expected demand. These decisions have to be made carefully since most scheduling stages following the original fleet assignment are already completed at this point, and there is no time to adjust their results for the new assignment. For this reason, adjustments made to a schedule are usually limited. For example, if two aircraft belong to the same crew family, their swap would not disturb crew assignment. Aircraft rotations can also be preserved if only out-and-back cycles in a hub-oriented network are swapped. 18 ascend

This idea was first introduced in 1993. Since then, several different implementations have been realized and successfully practiced. Reported results vary depending on sophistication level of involved scheduling and revenue management practices. The most advanced systems provide up to 3 percent revenue increase.

Network Development

Network development is completed far in advance and includes several important decisions. First, network structure is identified by selecting new markets that should be served by an airline and current markets where service should be discontinued. This decision should be consistent with an airline’s business model that specifies either point-to-point or hub-and-spoke network type. In addition, market performance evaluation is affected by multiple macro-economic and service-related factors. Market selection is tightly connected to codeshare agreement optimization. An airline can serve a market either by using its own equipment or by marketing flights operated by a partner airline. Optimal choice of partner flights to be marketed by an airline as its own and revenue proration schema can significantly improve airline network potential. Second, service frequencies should be determined for each local market. It is well known that dependency between frequency and demand shares is described by an S-shape curve. This means that an airline with higher frequency share obtains unproportionally high demand share.

Thus, serving a particular market might be profitable only if frequency is high enough to make an airline competitive. Finally, departure and arrival times of each flight should be chosen so total network connectivity is maximized. These decisions affect not only originating and terminating passengers by providing them service at the most convenient time but also passengers making connections. Instead of evaluating each market individually, a decision-support system should assess performance of the entire network as a whole. Often times local demand is not significant enough to make a market profitable and only contribution from high-yield connecting traffic justifies operations. In addition, block times for each flight can also be optimized by taking into account revenue potential, reliability and cost of the schedule. Clearly, all these decisions affect each other and to achieve maximum results, they should be made simultaneously. There are two main objectives that should be kept in mind while the network is constructed. First, total revenue potential should be maximized. Generally, revenue calculations are based on a forecasting system that is able to estimate traffic for each available itinerary. Most forecasting systems utilize customer choice models and follow a well-structured process: Total market demand is estimated for each market an airline plans to serve. All possible itineraries available to a customer are constructed. Each itinerary is evaluated according to multiple quality criteria such as total travel time, number of connections and departure time. Total market demand is split among all itineraries according to their utilities and spill, and a recapture model is used to account for capacity restrictions and obtain traffic values. Second, the resulting network should be operational with available resources. It is impossible to make sure the schedule satisfies detailed resource constraints at this stage of the planning process. However, incorporating major restrictions on an aggregate level ensures a smooth transition to future stages of the planning process. The network should be balanced, connected and consistent with operational characteristics of an airline’s fleet. Required utilization of aircraft, crews, airport gates and other key recourses have to be within realistic limits. In addition, international service agreements as well as slots availability, airport curfews and other constraints must be satisfied. Network development is one of the most difficult areas of the planning process to formalize, and truly integrated decision-support systems are still under development. However, preliminary studies show that overall revenue impact from optimization of an airline’s network structure can be as high as 8 percent.


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Integrated Routing

Once the network structure is determined and fleet assignment decisions are made, flights served by aircraft of the same type should be linked together. Aircraft routing is a process of sequencing flights into lines of flying that later can be assigned to a particular tail. Crew routing or crew pairing is a process of sequencing flights into pairings that later can be assigned to a particular pilot or cabin crewmember. Traditionally, these two processes are completed sequentially starting with aircraft routing that is later used as input for crew routing. The idea is to have an assignment with crew following an aircraft, so the number of times pilots or flight attendants have to switch aircraft is minimized. Many airlines use this approach to reduce the impact of schedule disruptions caused by weather or aircraft maintenance issues. However, fixing flight connections at the aircraft routing stage significantly reduces opportunities for crew cost minimization. To overcome this limitation, aircraft and crew routings can be built simultaneously. During this process, flight connections that minimize crew costs, satisfy aircraft operational constraints and maximize revenue are prioritized in a series of iterations. Thus, the system is incentivized to use the maximum number of such connections in a solution, and crews are guaranteed to stay with the same aircraft as much as possible. This approach helps reduce crew costs by about 1 percent without sacrificing schedule robustness. Aircraft routing decisions can also be integrated with gate assignment and maintenance scheduling processes. Gates at each airport are assigned to a pair of arriving and departing flights; therefore, aircraft routing is an input for this problem. However, gating decisions are usually subject to many restrictions such as time-related constraints, adjacent gates availability and custom requirements. In addition, gate planners usually have their own metrics, measuring quality of an assignment. Aircraft routing that is built without any knowledge about these constraints and objectives could result in a poor gate assignment or no feasible solution at all. In this case, rotations are adjusted manually with several feedback loops between ground operations and schedule planners. Instead, all gating constraints can be enforced at an aircraft routing step; therefore, resulting lines of flying would produce a gating solution for each station as a byproduct. Similarly, if maintenance requirements are taken into account after aircraft rotations are constructed, then multiple schedule adjustments might be necessary to satisfy existing regulations. These modifications might cause aircraft and crew underutilization as well as maintenance work load imbalance. Therefore, simultaneous development of aircraft rotation and maintenance schedules can significantly reduce operational and maintenance costs.

Integrated Recovery

Although it is not optimal, the planning process still can be done in stages as schedulers have enough time to coordinate their solutions and reiterate the processes if necessary. The situation is

drastically different on a day of operation when a disrupted schedule has to be recovered in a matter of minutes. Delays caused by aircraft mechanical failure, crew unavailability and especially weather conditions can easily affect all areas of airline operations and propagate through a large part of its network. Flights might need to be canceled, diverted or delayed; aircraft and crew rerouted; and passengers reaccommodated. If these decisions are made independently, the quality of the resulting recovery solution might be low. For example, if a flight is delayed, the crew might not be able to operate it any more due to legal restrictions on the length of a duty. In this case, a reserve crew has to be used, resulting in significant extra expense. In addition, transferring passengers from the flight are likely to miss their connections, and they will expect some type of compensation such as tickets on another airline or meal and hotel vouchers. Multiple recovery options often exist, and they have to be evaluated with respect to all involved factors in a short amount of time. If an airport’s capacity is reduced, an airline receives limited number of slots and should choose the most critical flights to be operated with all others delayed or cancelled. The efficiency of a recovery plan is usually measured by the time required to bring operations back on plan and a combination of factors such as number of cancelled flights, delayed flights, deadheaded crews and unaccommodated passengers. An integrated approach recently tested in a disruption simulation environment showed a double-digit percentage improvement — including a 12 percent decrease in passenger delays and 69 percent improvement in crew deadheads — in multiple categories compared to a sequential recovery method.

Others

There are many other areas where integrated decision-support systems would provide significant benefits. Systems used in revenue management can incorporate decision making in pricing and marketing as well as account for auxiliary revenue opportunities. Airport scheduling systems should simultaneously consider gates, ground equipment, luggage systems and ground crew. Integrated crew scheduling needs to combine pairing and roster optimizations for both cockpit crew and cabin crew and, in addition to costs, take into consideration such factors as crew preferences and fatigue measures.

Challenges And Opportunities

Despite the fact that benefits of integrated solutions are obvious, there are several obstacles that prevent quick adaptation of those principals in practice. Probably the most prominent is the existing organizational structure of airlines’ planning departments, where different business units are responsible for the completion of various tasks. Performance of these units is evaluated within their silos, and they don’t include their effect on others. Consequently, these units tend to optimize their own metrics, and since these metrics often are not consistent

with each other, the overall performance is far from optimal. Another issue is consistency in data flows. For different systems to be capable of sharing information, their data interfaces should be standardized. Airlines typically use some internally built systems and others provided by various external vendors. These systems are developed in different periods of time and use different data manipulation technologies and data organization principles. Achieving consistency in this area is a costly and labor-intensive task, but it is absolutely necessary for the success of the integration effort. Finally, computational complexities of integrated models require application of advanced mathematical algorithms, usage of powerful computers and, therefore, high qualification of decision-support system users and maintenance personal. Decision-support systems currently focus on solving problems in specific areas of the planning process. Integration of these systems can significantly improve quality of resulting schedules and strategies. However, due to the significant length of the scheduling horizon and complexity of involved processes, it is impossible to collect all decision making into one model. Instead, individual decision-support systems can be linked together so a flexible scheduling environment is created. In this environment, individual systems should be connected to each other through shared objectives and consistent restrictions. Each system should be able to react automatically to internal schedule modifications and external factors. Several key conditions have to be satisfied for the successful integration of decision-support systems: Standard data interfaces must be established between different systems. A clear depiction of how the processes flow should be established, and operational constraints and objectives should be made consistent across all integrated areas. Administrative resources involved in the integration effort should receive proper training, and their performance metrics must be based on overall system characteristics. Despite considerable challenges, benefits of integrated decision-support systems clearly outweigh implementation costs. In a highly competitive airline industry, staying on the leading edge of technology is essential for successful operations, and decision-support systems integration is one of the most promising directions in this area. a

Sergey Shebalov is a senior research analyst for Sabre Holdings ®. He can be contacted at sergey.shebalov@sabre.com.

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The Glass Cockpit From cutting costs and improving revenues to boosting productivity and improving the quality of life for airline employees, electronic flight bag technology provides substantial benefits for airlines and their crewmembers. EFB, part of but not exclusive to the next-generation “glass cockpit,� has eliminated the need for weighty, paper-filled flight bags once carried onboard by pilots and cabin crewmembers. By Dave Roberts | Ascend Contributor

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echnology has overtaken the cockpit and the manner in which pilots operate and monitor their aircraft and flight. In today’s new aircraft, every component of the plane’s operation is now tracked through technological advances and displayed on monitors on the instrument panel to make the flight safer and more efficient. What about the paper in today’s aircraft? Fortunately, technology is helping with that as well. Airlines are beginning to use electronic versions of the paperwork required for a flight, some of which goes back to when the Wright brothers noted the weather on paper before the launch at Kitty Hawk. Paper in the cockpit was a part of virtually every cockpit function. Pre-taxi and takeoff — paper checklists. En route weather — paper charts. Flight plan and load manifest — paper forms. Engine performance numbers — hardcopy aircraft manual. Warning light in cockpit — hardcopy printed aircraft minimum equipment list (MEL) chart. Airport approach procedures — printed airport charts. It requires a tremendous amount of data, such as manuals, charts and checklists — printed on many different pieces of paper — to operate a single flight. All of this paper must be carried on each flight for safety and operational efficiency. Each flight crewmember must have a copy of all of this paper, and the data must be current. Pilots traditionally carried all of this paper in a personal bag much like that utilized by doctors. This personal bag, or flight bag, became a mainstay for pilots everywhere — private, commercial and military. As air travel and aircraft increased in complexity with larger and faster aircraft designed to fly farther, higher and quicker, the amount of paper necessary for operations increased. The flight bag has presented many obstacles over time. To maintain the current data requires separate staff in each airline to print and distribute new charts and manuals. Each pilot then must remove old data pages and insert new ones. Obviously, this can lead to human error and potentially effect flight safety or operational efficiency. Then there is the weight of each of these bags that is carried on each flight. Flight bags can weigh up to 40 pounds when filled. This is for each crewmember and can mean an additional 80 pounds to 120 pounds on the aircraft — weight that increases fuel burn and expense. Evolving technology provides an alternative, called “electronic flight bag” (see related article on page 74), to the physical bag that eliminates the additional weight and the printing and distribution of new data via paper. It also affords a more efficient means of retrieving dynamic as well as static data. Electronic flight bag is an electronic management information storage

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unit much like a laptop computer that can be affixed to the aircraft or built into the avionics system onboard the aircraft. This new computing capability in the cockpit replaces paper reference material as well as opens the door for more automated calculations normally accomplished manually. In addition, new software applications can be made available to flight crews to improve the efficiency of flight operations en route and on the ground. In many other ways, airlines and crewmembers have adapted to the electronic age through the use of personal computers for other aspects of their jobs that go beyond actual flying. For example, crew scheduling to include crew bidding and crew swaps are just two of the items that can be introduced into the cockpit rather than having to wait until the crew is on the ground.

EFB Benefits

The benefits of adding EFB capability to an aircraft for the flight crew varies depending on the size of the operation, the type of applications deployed and the method selected to manage the EFB data and the distribution of this data. Cost-saving benefits include fuel savings associated with the reduction in weight of the onboard flight bags, printing and manual distribution costs of required operational manuals and charts and, in some cases, reduced medical costs associated with handling the physical flight bags. Efficiency benefits are realized through provision of increased amount and accuracy of data available to the flight crew in preparing and conducting operations. Reducing delays and the impact down line is another major EFB benefit. Naturally, an aircraft on the ground does not produce revenue whereas aircraft time in the air is key to an airline’s productivity and bottom-line success. One of the primary ways EFBs help reduce delays is the enhanced communication of data between the flight crew and the airline’s maintenance group. An electronic communication of mechanical issues detected while in flight from the aircraft to maintenance provides mechanics advanced time to determine what is required to correct a problem and locate necessary parts to be changed if warranted. In essence, EFBs now provide an electronic version of the paper-based maintenance techlog. The electronic version accommodates any aircraft type, providing capability to identify and find the mechanical problem and enabling a better picture of the situation to include MEL expiration dates for faster clearance. The results are faster flight turn times by utilizing an electronic techlog to identify problems as well as quicker log corrective actions. There is a significant reduction in time when comparing the EFB approach to the normal manual maintenance procedures used today. Dispatch reliability, aircraft turn time and reduced expense 22 ascend

are direct benefits of communication via EFB between flight crew and maintenance. Several airlines have confirmed that this difference alone in time and procedures has justified the deployment of EFB.

Off The Paper Trail

The technology evolution leading to EFB onboard aircraft included the introduction of GPS, weather displays, and electronic approach plates and airfield diagrams. The evolution continued with new ruggedized computers and docking or mounting stations affixed to aircraft. Along with these new computers was the development of viewers for crewmembers to see and read digitized manuals and charts. Eventually, all flight bag documents found an electronic home and can be viewed via EFB. “There is currently great interest and activity toward developing small electronic information management devices for use by flight crew in performing flight-related tasks,” according to a report prepared by the Operator Performance and Safety Analysis Division of the Office of Research and Analysis at the Volpe Center. “These devices aid pilots and aircraft operators in conducting flights more efficiently and safely. “EFBs were originally seen as a repository for electronic documents such as checklists, operating manuals and navigation publications, but now they are seen as multi-function devices that can support an array of applications beyond those of a traditional flight bag, including cabin surveillance, surface moving map, electronic

messaging and display of live weather. Some EFBs will even be fully installed systems with multiple functions.” According to the U.S. Federal Aviation Administration, the scope of EFB functionality is broad. “EFBs may be portable electronic devices or installed systems. The physical EFB display may use various technologies, formats and forms of communication.” The FAA’s entire definition of EFB not only included installed devices that could be sophisticated and complex, but it also introduced data link connectivity, a feature of EFBs that has significantly broadened the capability of what can be included in information available to the flight crew. Complex functions require communication with external sources that can provide real-time weather displays, updated NOTAMS, ground mapping and specific aircraft operational systems.

The Human Factor

While the technology is rapidly changing the scope and boundaries of the EFB, there is still the human factor that must be considered. Ease of use for pilots using the EFB will enable airlines to recognize operational benefits and enhanced situational awareness and safety. The FAA and other government agencies around the world have addressed the human factors issues and issued guidelines for the safe use of EFB applications and functions. (The EFB presentation must not conflict with the crew’s ability to concentrate on other instruments in the cockpit or on flying the aircraft. The ability to read the

A key way EFBs help reduce delays is the improved communication of information between the flight crew and the maintenance organization. Electronically informing mechanics of issues detected during flight gives them an opportunity to determine the problem and locate necessary parts prior to the aircraft arriving.


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EFB Of The Future

Cost-saving benefits of an electronic flight bag include fuel savings associated with the reduction of weight of the onboard flight bags as well as printing and manual distribution costs.

screen and easily use the touch screen, colors and night-time operation all must be considered when designing and installing an EFB device.) There is sufficient data indicating that the EFB will become an invaluable tool for all aviation and will provide a more-effective management tool and improved safety of flight.

EFB — Hardware Or Software?

Regulatory authorities have tried to define EFB in terms that include the hardware components as they apply to aircraft equipment lists and as software applications that support EFB systems. EFB systems are divided into three hardware classes and three software types.

EFB Hardware Classes

Class 1 — Primarily commercial-off-the-shelf equipment that includes laptops and handheld electronic devices. These devices are not attached to the aircraft and may be stowed during segments of a flight. A Class 1 EFB may connect to aircraft power and interface with other systems through a certified interface. Class 2 — This hardware may also be off the shelf or specially developed computer systems designed for cockpit and in-flight usage. They are normally affixed to the aircraft via a mounting device or docking station, and the EFB display can be seen by flight crewmembers throughout the flight. These systems connect to aircraft power and data sources using interfaces such as ARINC 429. A major advantage of Class 2 is that it may have multidirectional communication capability to send and receive data between the air and ground.

Class 3 — This is an onboard hardware system that is developed as part of the avionics system with components in the avionics bay. It is subject to airworthiness directives just like other onboard systems. It is part of the “glass cockpit” concept and can provide more approved software components.

EFB Software Types

Type A • May be hosted on any of the hardware classes; • Supports static applications such as document viewer (PDF, HTML, XML formats); • Offers electronic checklists; • Eliminates the need for flight crew operating manuals and other printed documents such as airport NOTAM. Type B • May be hosted on any of the hardware classes; • Provides takeoff, en route, approach and landing as well as missed-approach performance calculations; • Equipped with power settings for reduced thrust (major source of reduced wear of the engines); • Provides weight and balance calculations; • Produces weather and aeronautical data. Type C • Subject to airworthiness requirements, such as software certification; • Must run on Class 3 EFB hardware.

Electronic flight bags are no longer a thought of the future … they are on the flight deck today, and their scope and capabilities are expanding daily. The provision of regulatory guidelines for EFB is a clear indication of the acceptance by the aviation community and those governing it. Aircraft manufacturers are closely involved with new aircraft equipped with hardware and connectivity capabilities. Government-subsidized organizations continue to analyze the impact of the EFB on human factors and are searching for guidelines to improve safety and efficiency of crewmembers. The original goal of EFB was to replace the large quantity of paper with electronic versions of the same information. However, today, it is apparent that the complexity and features employed by EFB are limited only by imagination and budget. Improved efficiency of flight operations can be demonstrated now with the advent of EFB in the cockpit. However, efficiency alone will not generate the return on investment airlines require for the initial capital outlay for EFB systems. The reduction in delays that contribute to decreased expense and a potential increase in revenue will help. The creation of new systems that turn the cockpit into the crew’s office can also help decrease costs while improving the efficiency and quality of life for crewmembers. For example, the time to complete a pre-flight check can be reduced by 50 percent in some cases with the proper use of EFB. EFB solutions designed to drive improved customer service and increase revenue are now being developed and implemented. Providing links to the ground data for passenger information that is readily accessible by the cabin crew leads to more personalized service and return customers. The various reports required by airlines for cabin crews to complete after the flight can be submitted via EFB with improved accuracy and submission timing. The cabin crew can also have access to their personal scheduling information while on the aircraft and complete bids, swaps or any activities within their crew management system. Like the evolution of the passenger ticket system from paper to card to e-ticket, the EFB will continue to evolve and move airline flight operations forward and continue to gain greater capabilities, improve safety, increase revenue and decrease expenses. Sounds too good to be true, but the results during the past decade are beginning to pay significant rewards. a

Dave Roberts is senior principal in airline and flight operations strategic planning for Sabre Airline Solutions ®. He can be contacted at dave.roberts@sabre.com.

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Play By The Rules Traditional revenue management and pricing processes and technology solutions cannot fully cope with the current competitive landscape. Today, demand, capacity and pricing volatility coupled with the ever-more relevant ancillary revenue opportunities are changing the rules of the “revenue game.� New processes and IT systems are needed to effectively compete and pave the way for a successful future. By Alessandro Ciancimino | Ascend Contributor

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Traffic Change (Industry) Europe to Europe

Europe to North America

January-March ‘09 versus ‘08

September-November ‘09 versus ‘08

CHART TO FOLLOW -1.3%

-1.6%

-5.1% -6.7% Industry showed a considerable decrease in short-haul traffic first (first quarter 2009 versus the same period the previous year) and then in long-haul traffic (September through November 2009 versus the same period in 2008). The “evaporation” was due to the recession itself and the threat of an unprecedented impact of such recession. This traffic decline was compensated by an industry capacity cut that has been able to keep industry load factor almost at the same level year over year, but at a considerable lower price.

ne thing all airline industry executives share is the unprecedented impact of the global recession on their industry. In fact, some actions being taken are also without precedent: sudden speedup of consolidation and cross-border investments, development of joint ventures in markets where it was not an option just a few months ago, employees being asked to temporarily work for free, bailout offering to peers close to bankruptcy. Even though the industry has previously shown several instances of demand bouncing back after a crisis, what is alarming this time is that the depth and breadth of the current recession may leave, once the recession has ended, some structural changes in the marketplace. For example, those traveling in business class or with fully flexible economy fares — what was previously considered business traffic — have now learned, or have been forced to learn, that it is feasible and acceptable to travel with restricted economy fares even for business purposes. Hence, one of the questions currently alarming the industry is to what extent will traditional business traffic bounce back when the worst part of the recession is over? The current downturn could represent a crucial cornerstone for air transportation, and airlines need to quickly adapt

themselves to different paradigms governing the industry. And this time, more than ever, the way out is represented by a substantially improved revenue-generation capability that airlines need to establish rather than further draconian cost-cutting initiatives. Controllable costs have been, in fact, heavily addressed during the last few years as soon as either pressure on yield started or uncontrollable costs, such as fuel, increased dramatically. So now the game has to be more on the revenue side and, to put it in Darwinian terms, airlines need to evolve to survive and have a successful future in the new decade. As a byproduct of the recession and the consequent decline in traffic and yield, demand has become extremely volatile; this translated into two key outcomes: Market sizes and yields have been changing considerably year over year, Within most markets, worldwide air transport capacity has also changed either because airlines have trimmed their capacity to try to cope with changing market conditions or because airlines have been going in and out of markets with a frequency that rarely was observed in the industry’s history. Revenue management and pricing practices, in addition to network planning and scheduling, are the core drivers of the commercial effectiveness of airlines. So how

should they change and adapt to the changed market conditions? Traditionally, revenue management practices have based inventory control actions on historical data: deciding what to do tomorrow based on what happened yesterday. This used to work during a stable economy where no big changes happen from one year to another. And it still works fairly well in the few mature markets where unconstrained demand could be predicted on the basis of historical data. Additionally, traditional pricing practices are based on standard bucketed fares, with limited pricing strategy for ancillaries or branded-fares offerings. Much of this is no longer sufficient and/ or adequate. Therefore, it’s clear that revenue management and pricing practices must cope with rapidly changing market conditions where new competitors enter and leave markets virtually every week, competitors attack the same markets with different business models and demand dramatically varies every month. But there is also another important dimension on the revenue side that needs to be addressed by revenue management and pricing in an effort to design and offer to airline guests what they individually want as opposed to the traditional one-size-fits-all model. During the last couple of years, airlines have successfully expanded ancillary offerings, unbundling traditional products with the objective of giving their guests the ability to create their own product without losing loyal customers or leaving new ones to the competition. The overall objective is to shift the business model from being airline-centric to customer-centric, allowing each customer to pay for what he cares about and not what other customers deem valuable. Thus, unbundling the product offering and avoiding revenue dilution has become one new rule of the game. Ancillary revenues have seen a phenomenal growth in recent years. In 2006, ancillary revenues for the airline industry totaled US$2.3 billion. In 2008, the total reached US$10.3 billion — a 500 percent growth. For those leading the way in terms of ancillary services, such as hybrid and low-cost carriers, ancillary revenues currently represent up to 20 percent of their total revenue. As ancillary services further expand and are distributed through additional channels other than the traditional airline.com — either through specific GDS functionality (such as branded fares and pay-for-seat functionality through the Sabre ® global distribution system) or through the ATPCO Optional Services — ancillary revenues will definitely continue steady growth, gaining a higher percentage share of total revenue.

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Average Fare Change (Industry) Europe to Europe

Europe to North America

January-March ‘09 versus ‘08

September-November ‘09 versus ‘08

0.6%

CHART TO FOLLOW

-5.2%

-21.2% -22.0% Keeping industry load factor at a level similar to the previous year has been reached at the expense of the average fare that dropped significantly during the last months of 2009. In a figurative way, the industry observed a traffic shift from the business cabin of traditional carriers to the economy cabin of the traditional carriers and from the economy cabin of the traditional carriers to the LCC. In the end, the average fares were considerably impacted.

Ancillary revenue, therefore, represents a large portion of airline income that so far has not been included in the revenue management equation. For example, inventory control actions are typically taken without considering the total revenue associated with a booking but rather only the pure fare-related revenue. In essence, the “next-gen” revenue management and pricing processes and solutions need to address three main aspects: Demand is extremely volatile and historical PNR data and booking-class revenue value may not be as relevant in certain markets to predict future demand by fare. What is critical in such markets is the real-time offering in terms of capacity and fares that competitors are deploying, such as the real-time competitive landscape that has a substantial impact on customer behavior when it comes to making a booking. Within the same markets there are competing airlines that implement different business models (network carriers, hybrid carriers and LCCs), implying that within the same markets, some airlines might be offering tradi26 ascend

tional fenced-pricing structures and other airlines are instead deploying restriction-free, one-way pricing. The revenue value of each potential booking is not represented only by the associated fare-bucket historical value. It needs to include any ancillary service associated with the booking. The impact of the above aspects is that next-gen revenue management solutions need to be able to: Provide continuous monitoring of competitors’ available entry-level fare at a flight level in real time and define the inventory control actions accordingly, Perform real-time revenue management through integrated revenue management, inventory and reservations processes to ensure timely reaction to unexpected/unforecasted events (traditional nightly revenue management systems batches are no longer sufficient), Perform customer choice-model-based forecasting of unconstrained demand in addition to traditional PNR-based forecasting to be

able to capture customer behavior based on the real-time competitive offering, Perform inventory control actions with both restricted and unrestricted fares, even in a single market with restricted fares for peak flights and unrestricted fares for off-peak flights (which requires the ability to manage parallel mixed-nesting structures from an inventory viewpoint with corresponding parallel pricing structures), Define revenue management decisions on the basis of selling fares as opposed to historical average booking-class revenue, since due to the volatility of the market, the average historical booking-class revenue is inaccurate, Define revenue management decisions based not just on revenue driven by fares but also by ancillaries, Ultimately, perform revenue management by each individual customer and adjust availability based on each individual customer value score, where the value score is uniquely defined by the airline based on its customer relationship management strategy. At the same time, pricing solutions need to be adjusted as well to address: Mix of one-way, restriction-free and restricted return fares for peak/off-peak flights, Branded fares to simplify the pricing structure from a customer viewpoint but at the same time avoiding any diluting effect as much as possible, Pricing decision-support processes for ancillaries and branded fares definition. Such a revolution in terms of solutions requires both business process review/re-engineering and a corresponding redesign of technology systems as well so new processes will be enabled by new technology. This represents a double challenge. Such business and technology transformation seems to be inevitable for any airline that wants to set the foundation for a sustainable and successful future. The new “revenue game” has laid out new rules, and players now need to quickly learn them, interpret them and equip themselves with new game-winning strategy, tactics and tools. Otherwise, it’s like a traditional poker player pulling up a chair at a Texas Hold‘em table without a knowing the new rules: it’s not going to pay off. a

Alessandro Ciancimino is vice president in Europe for Sabre Airline Solutions ®. He can be contacted at alessandro.ciancimino@sabre.com.


Social media vehicles such as Facebook and Twitter have given airline customers a voice, and carriers with the right social media strategy can benefit from these conversations.

Photos: Jupiter

By Lauren Lovelady | Ascend Staff


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N

ot so long ago, an airline customer encountering less-than-satisfactory service on the ground or in-flight had little recourse except to relay the experience to family and friends and file a complaint with the carrier’s customer service department — after the fact. And “acts of nature” — flight delays, cancellations and reroutes due to bad weather and other natural disasters — often left flyers feeling stranded and alone hundreds of miles from home and waiting for information from equally frustrated airline and airport personnel. On the other hand, little was heard from passengers receiving top-notch service, especially after the trip had occurred. All of that has changed with meteoric rise of Web 2.0, or social media, including Facebook, Twitter, YouTube, Flickr and millions of personal, professional and special-interest blogs. These social media vehicles are producing an enormous amount of consumer “chatter,” which businesses such as airlines can either choose to ignore, react to randomly or engage in wisely.

The Changing Face Of Marketing

Traditional marketing techniques (advertising, public relations campaigns, sponsorships, branding, tradeshows, websites) have always been and still are an integral part of most airlines’ strategic plans. These techniques generally focus on a one-way, top-down approach, with companies carefully defining their brands and then pushing those products and services to their customers in ways that attempt to control their brand image. The primary goal is to generate sales and increase revenues for the business. There’s little room for customer response. With the rise of social media, consumer-oriented businesses in particular are finding they are being increasingly defined by conversations — what consumers and potential consumers are saying and hearing about them — in real time. Why should an airline take note? Because after years of declining face-to-face communications and the move to automation, consumers are now clamoring for the human interaction and community building promoted by vehicles such as Facebook and Twitter. The once faceless consumer now has an instantaneous platform and a voice. Social media marketing is an extension of traditional marketing. It encourages multi-way dialog, enabling companies to talk to customers, customers to talk to companies and, perhaps most importantly, customers to talk to each other. Most of the content and connections found in Web 2.0 are user-generated rather than company-created. 28 ascend

Social media vehicles were not initially created as sales tools, but as a means for building trust, creating relationships, enhancing reputations and generating introductions. They function as a magnet, drawing customers to a business, but when used improperly or ignored completely, these same tools can repel current and potential customers. “A presence on social media cannot be created with a view to quickly turn it into a revenue stream,” according to a new report by the Innovation Analysis Group titled, ‘The Airline Industry and Social Media — A Must Have Strategic Guide for Airline Marketing and Sales.’ Social media is about relationships first. These systems work on referrals.”

Highlight

Social media vehicles were not initially created as sales tools, but as a means for building trust, creating relationships, enhancing reputations and generating introductions.

Follow Their Lead

Several airlines have already proven that in the right hands, social media can be a powerful tool. While brand awareness is often the initial goal, there are certainly additional uses and benefits as well: Virgin America’s Facebook page is designed similar to a website, allowing visitors to click links to search flight schedules; check flight status; and check-in for, change or cancel flights. The page also connects to fan photos and videos, customer reviews, surveys and a discussion board, enabling the airline’s customers to easily interact with one another. Travel is undoubtedly a very visual experience, and JetBlue’s sizable Flickr group has more than 21,000 photos and videos posted by customers, fans and employees of the airline. Members of

the group can comment on each other’s photos and add each other as friends. There are also discussion boards. While taped safety demonstrations generally don’t attract much attention, Delta Air Lines caused quite a buzz by posting a recent in-flight safety video on YouTube. According to FoxNews, admirers dubbed the 33-year-old woman hosting the video “Deltalina,” a combination of the carrier’s name and Hollywood actress Angelina Jolie, whom they say she resembles. Delta also uses the site to showcase its new in-flight services and aircraft features and host video travel guides created by the carrier’s employees to popular destinations. Southwest Airlines utilizes Twitter extensively, especially for issuing travel advisories and addressing customer service issues. The carrier estimates its Twitter page is growing by 7,000 followers each day. The airline’s blog, “Nuts about Southwest,” is timely, interactive and features podcasts, internal news, surveys, videos and photos. Approximately 30 Southwest employees contribute to the blog, which receives more than 60,000 unique visitors monthly. MySkyStatus is a service provided by Lufthansa that posts by request the current location of a passenger’s flight on any number of airlines to Twitter or Facebook so friends and family can track his or her whereabouts at any time. What’s more exciting and engaging than a contest, for both the participants and spectators? After creating a video called “Bare Essentials of Safety from Air New Zealand” and posting it on YouTube, the carrier’s flight attendants and crew members, who wore only painted-on uniforms for the video, challenged Southwest Airlines to join them in producing the world’s first airline safety musical. While Southwest employees weren’t quite ready to sport only painted-on attire, they did create a “greatest hits” video in response featuring rappers, an Elvis impersonator providing safety instructions and a flight attendant doing backwards flips down an aircraft aisle. The contest even caught the attention of local television stations in Southwest’s hub in Dallas, Texas. A number of airlines, including JetBlue and American Airlines, use social media tools to offer special discounts. Fans of American’s New York Facebook page received 10-percent-off coupons when the page reached 10,000 fans last May. JetBlue rewards its followers while boosting revenues by posting last-minute flight deals, known as


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JetBlueCheeps, on Twitter. The carrier’s Twitter page has well over a million followers, and it tracks about 120,000 of them. United Airlines also offers Twitter-only fares called “twares.” Carriers have also begun using network sites to target and develop key market segments. After conducting focus groups with African-American customers, American Airlines launched a social network called BlackAtlas.com. Users can search for fares and vacation packages on the site and find destination information tailored for their interests. AirTran Airways utilizes airtranu.com to offer 18- to 22-year-old students standby fares while Lufthansa has launched GenFlyLounge.com, a social networking site where students who love to travel internationally can meet and connect. KLM’s Club China and Club Africa are virtual business communities for passengers conducting business within those regions. Mergers have become increasingly commonplace within the airline industry in recent years, as mounting financial losses force some carriers to join operations. Merging two different corporate cultures is tricky at best. When Northwest Airlines merged with Delta Air Lines, Delta utilized its blog, “Under the Wing,” to welcome Northwest

employees and help customers with the transition. The blog replaced the traditional list of frequently asked questions. With few exceptions, most of these carriers, as well as others, have quietly entered into the world of social media, actively participating in only two or three of the most popular vehicles on a limited scale. The reason: much of the technology behind the tools as well as airlines’ use of them is largely experimental and may be short-lived. “We’re seeing a lot of testing by airlines,” said Forrester Research analyst Henry Harteveldt. “They are trying to figure out, given limited staff and limited budget, what’s going to get them the best return from social media.”

Proceed (With Caution)

Social media offers airlines an almost unlimited number of opportunities at minimal costs. “It can be essentially cost-free to get started, since all one needs to do is open a Facebook, Twitter or YouTube account and get creative,” said Adam Ostrow, editor-inchief of the social media guide Mashable. com. “In a down economy, the low cost of entry certainly makes social media even more attractive than it might have already been otherwise.”

With the growth of social media, many airlines find they are being increasingly defined by conversations — what current and potential customers say and hear about them — in real time. As a result, airlines can take advantage of this method of interacting with customers through vehicles such as Facebook and Twitter.

To take full advantage of social media, a carrier should develop a plan for success, taking into account the fluid nature of these tools and the associated challenges: Study the landscape — It’s best not to dive in without first understanding the various social media tools and how other companies, not just airlines, are utilizing them. Take advantage of what is already established and easily accessible, such as Facebook and Twitter, and realize the “next big thing” is yet to come. Develop a plan — For a social media plan to be truly effective, it must clearly align with a carrier’s business strategy. Review current issues and future marketing campaigns to create an approach that supports the objectives already in place. Don’t view social media simply as a trend or gimmick. “A smart, strategic approach,” said Ted Kohnen, vice president of interactive marketing for Stein, Rogan & Partners, “can protect and accelerate your brand, position your company and people as thought leaders, improve natural search engine rankings and serve as a quality lead-generation channel.” Keep the pace — By nature, the airline industry is conservative. Decisions are often made after much deliberation and review by various departments such as legal. Social media moves quickly — very quickly. A consumer issue can literally travel several times around the world via cyberspace before an approved response is given by an airline. By that time, an issue may be long forgotten or may have become an enormous problem. Learn to take risks. Determine where the relevant conversations are taking place. Empower employees — It takes manpower to monitor and participate in social media, and in today’s still-struggling economy, most airlines are unwilling to invest in resources that are not directly related to operational needs. It’s critical that existing employees clearly understand the carrier’s business strategy and that the carrier divvies up responsibilities, giving employees ownership over specific social media tools and enabling coordinated responses. Engage and continue engaging — While many airlines are willing to begin a social media conversation, customers often complain that few respond in a timely and effective manner once the talk turns to consumer-service issues. Often the issues “fall between the cracks” when carriers fail to assign specific employees or departments to investigate and respond to them. As a result, customers are less likely to engage in

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conversations again and more likely to express their displeasure. Essentially, this approach backfires on airlines. Learn from successes and mistakes — As the saying goes, “Not all Tweets are created equal.” Given limited resources, there’s no feasible way airlines can effectively listen and respond to every conversation. Learn to recognize, often through trial and error, which “chatter” is significant and which is not. Sudden or gradual shifts in customers’ perceptions — either positive or negative — merit further investigation. Realize from the beginning some consumers will never be happy — no matter how many times an airline converses with them or tries to improve a situation. Determine metrics — One of an airline’s primary objectives should be to accurately hear what customers are saying. How will an airline know if its social media strategy is reaching its target audience? What is the overall perception of the airline and its services? How will this impact its business? Are the discounted fares the carrier offered on Twitter boosting revenues? Is the safety

video the airline posted on YouTube attracting more viewers than a typical in-flight safety video? While gathering and accurately interpreting this information appears to be a daunting task, there are individual consultants and companies now offering social media monitoring and analysis services and training. In addition, tools that automate, filter and centralize customer feedback from the Web are now being developed and marketed. Review strategies often — Social media vehicles are developing rapidly and companies must be agile enough to advance with them. It’s easy for businesses such as airlines to become overwhelmed by the rapid growth of social technologies and the sheer volume of accompanying conversations occurring every minute of every day. These businesses are finding they are no longer in control of their brands — their customers are. But thanks to the unique opportunities offered via social media, an airline can engage its customers and guide its brand. It can have a voice in the conversation. And that’s important because the

latest Nielsen Global Online Consumer Survey of more than 25,000 Internet users from 50 countries found that 90 percent of people trust the reviews and recommendations of people they know and a full 70 percent trust consumer opinions posted online. People are talking, and people are listening. Is your airline? a

Lauren Lovelady can be contacted at wearelistening@sabre.com.

+count it up 217 million

2009

3.5 trillion

The number of additional travelers

The year in which intra-Asia/Pacific travel

The estimated economic impact, in

expected to travel via air within

eclipsed North America as the world’s

U.S. dollars, created by the aviation

the Asia/Pacific region by 2013.

largest aviation market, reaching 647

industry, equivalent to 7.5 percent of

According to IATA, the Asia/Pacific’s

million compared to 638 million within

world gross domestic product.

prospects are “improving faster than

North America (including domestic mar-

other regions, but it urged regional

kets), according to IATA.

leaders to ensure that liberalization and air traffic management unification allow growth to continue.”

2.2+ billion

440

One in seven

The number of passengers each year

The number of passengers KLM, the

The number of passengers worldwide

that are transported via the airline

world’s oldest airline, carried during

who use SabreSonic ® Check-in, more

industry, about one-third the popula-

its first full year of operation. KLM car-

than any other check-in solution in the

tion of the entire planet.

ried 22 tons of freight during the same

world.

period. Today, it carries 23 million passengers and 657 tons of freight a year.

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By Lauren Lovelady | Ascend Staff

he statistics speak for themselves — social media is today’s fastestgrowing marketing and communications tool, both personally and professionally. More than 80 percent of Americans alone participate monthly in some form of social media through blogs, forums and networking sites, with the greatest growth occurring in the 39-year to 54-year age category. The percentage is slightly less globally, but recent studies report that worldwide one in every 11 minutes spent online is now accounted for by social networking and blog sites. While most social media vehicles were not initially established for business purposes and are still largely experimental, they have quickly become a means for individuals worldwide to relay their experiences and opinions about every conceivable subject from toothpaste to travel in real time, 24/7. And businesses, including airlines, are increasingly turning a listening ear to this online chatter. A rundown of today’s five most popular social media vehicles includes:

1. Social networking websites — The largest site is Facebook with more than 350 million active users worldwide — approximately 70 percent are outside the United States. At the end of 2009, the site reached a milestone, logging more than 100 million active American users. If Facebook were a country, it would now have the third-largest population in the world, encompassing more than 70 languages. Among other wellknown general social networking sites are MySpace, Bebo, Friendster and hi5. These sites are proliferating at an astounding rate and are becoming increasingly segmented by interests. 2. Professional networking websites — With more than 50 million users globally, LinkedIn is growing at approximately one new member per second. When this business-oriented site was initially launched in 2003, it took 477 days to sign up its first million members. This last million took only 12 days to reach, due in large part to the recent economic downturn and staggering job losses worldwide. Approximately half of LinkedIn’s membership is outside the United States. Europe has 11 million members alone, and India, with 3 million members, currently has the fastest-growing membership rate. LinkedIn and competitors such as IXING and Spoke allow registered users to

maintain contact lists of business people they know and trust. In addition, employers can post available jobs and search for potential candidates, and job seekers can review jobs and hiring managers searching for possible links on their contact lists. 3. Image and video hosting and sharing websites — Perhaps many people remember the old saying, “A picture is worth a thousand words.” Apparently, this holds true when it comes to social media as well. Flickr is one of the most popular sites available for users to share personal photographs and host images embedded in blogs and other social media. As of last October, the site hosted more than 4 billion images in eight languages. YouTube is the dominant provider of online video in the United States, although three-fourths of the material on the site is uploaded from other countries. It’s estimated that 20 hours of new video are placed on the site every minute. While individuals have uploaded most of the content on YouTube, media corporations and other businesses are now offering their materials via the site as well. YouTube has made it possible for anyone with an Internet connection to post a video that can be viewed worldwide in a matter of minutes. 4. Web logs — Blogs, in short, are sites that provide commentary or news on particular subjects through the use of text and images and give readers an interactive format to post comments in response. Initially, blogs were primarily maintained by individuals and were often personal online diaries, but many interests groups and businesses are now actively “blogging.” A February 2009 survey estimated there were more than 215 million blogs in existence. 5. Combination services — The most popular service in this category is Twitter, a mobile social networking and micro-blogging site. Users send and receive text-based messages of up to 140 characters, known as tweets, via the Twitter website, short message service or external applications. In February 2009, Twitter had a monthly growth rate of 1,382 percent. However, the service only has a 40 percent user-retention rate. Perhaps the fragility of Twitter’s user base is indicative of one of the major pitfalls of social media vehicles. In addition, the technology empowering them is advancing rapidly, guaranteeing that today’s popular mediums will either continue to evolve or slip into cyber-afterlife. “But there will always be something coming up behind it,” said Steven Frischling, founder of TheTravelStratestic.com and author of the blog, ‘Flying With Fish.’ “Airlines need to be there when that something shows up.” a

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HIGH

In The


WAYS

SKY During the next decade, the air transport industry, based on initiatives outlined by several countries around the world, can expect to see significant improvements to current air traffic control systems that will result in numerous benefits.

Photos: Jupiter

By Dana Knight | Ascend Contributor


ASCEND I INDUSTRY

hree initiatives — NextGen and NowGen in the United States and SESAR in Europe — are in various states of development as the world searches for a better way to move people by air to where they want to go, when they want to go, in the least amount of time. To a large extent, aircraft continue to follow the same “highways in the sky” that have been in existence for decades. The GPS navigation system in an automobile today is far superior to the technology that many aircraft currently use to navigate airspace in North America. Some of the emerging technologies being explored and developed to enhance future air traffic systems include system-wide information manager (SWIM), automatic dependent surveillance-broadcast (ADS-B), multilateration and trajectory-based planning. These terms will increasingly become familiar as this technology moves from concept to reality.

NextGen

The realization that the air traffic control system needed an overhaul started during the first years of the century. Then in 2007, the term NextGen began to be widely used as the U.S.

Federal Aviation Administration started discussing the major overhaul planned for the U.S. air traffic control system. The primary focus of NextGen is to shift from ground-based navigation and surveillance systems to a satellite-based system. Today, air traffic controllers use traffic management initiatives to reroute or delay aircraft to manage demand with limited capacity resources. In the ultimate end state of NextGen, operators, such as a scheduled airline, corporate flight department or aircraft charter company, that use the ATC system will be more responsible for de-conflicted trajectory-based planning as there will be massive sharing of data between ATC and operators via SWIM. Schedules will be built far in advance that will consider all imposed limitations. As the actual day of operation approaches, additional adjustments will be made based on prevailing conditions to ensure as few disruptions to the schedule as possible. These were the grandiose ideas that were initially presented when NextGen was first discussed. Airplanes would fly where the operators wanted them to fly, there would be no flight delays and air traffic controllers would know where all aircraft were at all times because they would be in constant communications via satellite. The

unanswered question was how and when could air traffic nirvana be achieved? The date that was floated was 2025 with no phased-in approach conceptualized or at least communicated. The general perception was that there would be a technological miracle, and everyone would wake up at some point in 2025 with airplanes navigating via space-based navigation aids, there would be no more ATC delays and the world would be a happier place. Initially, the U.S. Joint Planning and Development Office was tasked with bringing NextGen to fruition. There were initial meetings held with all concerned parties, but the process was not moving quickly, if at all. Although the JPDO is still ultimately tasked with making NextGen a reality, the FAA formed a task force to put the process in motion. The task force enlisted the expertise of a broad segment of operators from airline, charter, corporate and general aviation as well as government and industry personnel to come up with a plan on how some benefits could be realized before this magical day in 2025. In mid 2009, this diverse group committed a lot of time and energy to produce a plan that would result in some tangible benefits. There were guiding principles, and the task force was committed to:

For decades, aircraft have followed the same “highways in the sky,” but promising new technologies that will include SWIM, ADS-B, multilateration and trajectory-based planning are expected to result in numerous operational benefits for industry operators.

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Initiatives, such as Europe’s SESAR and the United States’ NextGen and NowGen, will bring much-needed change to an air traffic control system that needs a complete overhaul to catch up and keep pace with the future direction of the industry.

Foster collaboration and consensus on critical NextGen issues between now and 2018; Focus on maximizing NextGen benefits and facilitating a business case for industry investment; Provide recommendations on strategies and means to maximize benefits, strategies to encourage equipage, and policies and other means to implement governing principles.

NowGen

Last September — stemming from the question, “How can we get to NextGen now?” — in a report the task force delivered to the FAA, the term NowGen was introduced. The report highlighted some relatively dramatic objectives that, prior to being released to the FAA, went through an assessment (acid test) to ensure the feasibility of implementing a particular item and its potential value. Possibly more groundbreaking were the “sponsors” who agreed to take on the implementation of particular tasks if the opportunity were available to them. For instance, Alaska Airlines, American Airlines, Continental Airlines, Delta Air Lines and others have agreed to test new procedures at Port Columbus International Airport, Dallas Love Field, Fort Lauderdale-Hollywood International

Airport, John F. Kennedy International Airport and other select airports to enable more simultaneous approaches to parallel runways. If this carefully controlled test proves as expected, there will be a ripple effect of decreasing delays throughout the National Airspace System once the concept is put into operation. The task force brought forth some interesting points that potentially make one pause and wonder why some things are as they are. For instance, parallel runway approach procedures that enable simultaneous approaches to multiple runways are based on the capabilities of man and aircraft 20 years ago. The term “blunder assumption” — an incorrect assumption that leads to a sizeable mistake — is accepted as part of this particular current procedure. There is enough leeway in the specified procedure to account for possible errors on behalf of interested parties executing or controlling the procedures. Regardless of other issues that are wrong with the system, aircraft operating in the system are technically more advanced than they were 20 years ago, and the people operating them and the air traffic controllers guiding them are better trained so the blunder assumption can probably tighten up without compromising safety.

There are several other current processes and procedures operators currently endure that could be tightened up to realize some operational benefits without making major infrastructure or equipage changes. This naturally led to a discussion about the fact that at some point operators using the U.S. National Airspace System must invest in aircraft equipment to fully take advantage of the benefits that NextGen technology will afford. There will be a push, in the not too distant future, for economic incentives for operators to invest in necessary equipment. This will undoubtedly be in the form of low-interest loans or other incentives such as income tax credits, reductions in fuel taxes or user fees. The concept of “best-equipped, best-served” (BEBS) is also part of the overall plan to encourage operators to participate. Under this concept, operators that have equipped their aircraft with the technology will be afforded as yet undefined, higher levels of service. With the current state of the airlines still in a mode of scaling back, it begs the question, “Why pursue this now?” Delays are not gone by any stretch of the imagination, but with the reduced traffic and investments in airport infrastructures, the delays are far less than they were mid-year 2008. The best analogy is that if the FAA waits to start fixing the ATC system at the time of maximum delays it will be like trying to change the wheels on a moving vehicle … it is as next to impossible as one can imagine. This current period of reduced operations is the exact time for this undertaking. Other countries, such as Australia, are already ahead in this area, and the United States needs to do everything possible to keep pace. NextGen is estimated to cost US$20 billion, and hundreds of millions of dollars have already been allocated to fund various research initiatives and key infrastructure developments such as the ADS-B network.

SESAR

As with the U.S. ATC system, Europe has acknowledged that the air traffic control system is in dire need of revitalization. In 2004, the Single European Sky initiative was launched with the hopes of harmonizing Europe’s air traffic system. This was further refined in 2007 with the establishment of the Single European Sky ATM Research (SESAR) initiative that is the technological dimension of the Single European Sky. It will help create a paradigm shift, supported by state-of-the-art and innovative technology. The SESAR Joint Undertaking is a body of members that was created in February 2007 under European Community law. EUROCONTROL and the European Community are the founding members and will manage the SESAR development phase. In many respects, the SESAR project is ahead of NextGen from a planning standpoint. Whereas NextGen is really focused on the technology to improve the system in the form of ADS-B, Multilateration, SWIM and other technology solutions, SESAR is more focused on the fact

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that information sharing and planning are just as important as the systems. The key to the SESAR concept is the “business/ mission trajectory” principle in which airspace users, air navigation service providers and airport operators define together, through a collaborative process, the optimal flight path from gate to gate. What does that mean? Operators will submit their planned schedules at the time they are conceptualized and provide continual updates to the day of operation. SESAR has been broken into three phases: definition, development and deployment.

Definition Phase

The definition phase ran from 2005 through 2008 and produced the SESAR ATM (air traffic management) master plan. Stakeholders of ATM identified the future needs of aviation and conceptualized the actions from research to implementation that will be required to implement SESAR.

Development Phase

The development phase will run through 2013. This is, by definition, a feasibility study. Some longterm results of this phase will produce criteria and requirements that will be further validated and consolidated during the next SESAR phase. During the early stages of this phase, the SJU has broken up the development phase into a series of work packages, numbering more than 15, that “slice and dice” the core areas of the SEASAR master plan that will need to be addressed. Four main threads of WPs have been identified: transversal, operational, SWIM and system threads with work packages ranging from WP1 that is program management and support to WP8 and WP14 that cover the information management that will be part of SWIM requirements. There are individual companies as well as consortiums that are hard at work to produce: Required operational procedures and preparation of an implementation process,

Operational/technological research and validation, Large-scale validation activities for mature concepts and solutions such as real-time simulations and flight trials, Prototypes required for pre-operational validations, The provision of material to support standardization and implementing rules, The development, upgrade and integration required for the validation infrastructure, methods and tools, The performance assessment (operational and system) including the cost benefit analysis.

Deployment Phase

The third and final phase of SESAR is the deployment phase that will run from 2014 through 2020. This phase includes the large-scale production and implementation of the new air traffic management infrastructure that will approach the same nirvana state expected in the United States in 2025. This infrastructure is expected to comprise fully harmonized and interoperable components guaranteeing high-performance air transport activities in Europe. Key performance indicators include: Enable a threefold increase in capacity of the ATM, Improve safety by a factor of 10, Reduce the environmental impact per flight by 10 percent, Cut ATM costs by 50 percent.

Around The World

China has announced plans to overhaul its air traffic control system that will most likely take the region down a similar path as Europe and the United States. Australia, with its privatized air traffic control system in Air Services Australia, has unceremoniously been deploying ADS-B so aircraft can be tracked while over the vast stretches of

uninhabited territory of the continent. ASA is also rolling out a ground-based augmentation system that is a satellite-based precision approach and landing system. It augments GPS signals to provide aircraft with very precise positioning guidance, both horizontal and vertical, which is especially critical during the approach and landing phase of flight. This allows a safer, more efficient descent and landing. Regardless of the different approaches being taken by those governing the world’s air traffic control systems, at some point all these initiatives will need to converge as aircraft operators cannot be expected to have vastly different equipment to navigate from country to country. SESAR and NextGen have formalized agreements to assure this and ICAO is, of course, keeping a watchful eye on all developments. The main question at this point is whether or not these initiatives will come to fruition. History shows that some programs and initiatives start up and never take hold by the larger industry but rather are only adopted by a small sector of the community. ADS-B is definitely a reality and areas such as the Gulf of Mexico in the United States and open areas in Australia are now tracking aircraft that previously couldn’t be tracked via radar. Going forward, will ATC systems be able to accommodate double or triple the number of operations that now cause gridlock? There are skeptics, of course, but some benefit can be expected by migrating from ground-based technologies the industry has been relying on since the 1960s. a

Dana Knight is a solution director for Sabre Airline Solutions®. He participated in the RTCA Task Force 5, and he can be contacted at dana.knight@sabre.com.

+count it up 210 million

1927

841

The number of passengers served

The year in which the first concrete

The record, held by Edward

through Sabre AirVision™ In-flight

runway was built in the United States,

Shackleton, for piloting the most

last year, equal to serving the fifth-

by Henry Ford.

aircraft types.

®

largest country in the world behind China, India, Indonesia and the United States.

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Sabre Airline Solutions and the Sabre Airline Solutions logo are trademarks and/or service marks of an affiliate of Sabre Holdings Corp. Š2010 Sabre Inc. All rights reserved. AS-10-11986 0410

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The tug of war over embattled Japan Airlines set the stage for a new order in global airline alliance negotiations and became a lightning rod for criticism by opponents of antitrust immunity, who are concerned that the three major alliances will act as mega-carriers, crushing competition in trans-Atlantic and trans-Pacific markets. By Lynne Clark | Ascend Staff

Photos: Airbus, Air Canada, Boeing, Continental, Delta Air Lines, Jupiter

F F O S E GLOV


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arlier this year, as JAL flirted with moving from oneworld to SkyTeam, the future of airline alliances stood at a cross roads. If Delta Air Lines had successfully convinced JAL to join its SkyTeam alliance, it would have served to “redraw the alliance map and reshape the airline industry,” David Grossman, a former airline industry executive, wrote in a December 2009 column for USA Today. And although the effort was ultimately unsuccessful, Grossman wrote the “bold move signals a change in alliance recruitment etiquette where poaching from another alliance is no longer taboo. “Until now, alliance recruitment, though competitive at times, has been quite civil and orderly,” Grossman wrote. “In large countries, like the United States or China, there are enough major airlines to satiate all three alliances. And in a region like Europe, with three dominant airline families (Air France/KLM, British Airways and Lufthansa), each has joined a different alliance. But in most countries with a single major carrier, like Australia, Canada, Thailand or Turkey, only one alliance can win that prize.”

includes Cathay Pacific Airways, Iberia and Qantas Airways. At their inception, alliances were a means to circumvent outdated global aviation regulations that limit cross-border deals by requiring airlines to be owned and controlled by nationals of the country in which they are based. Carriers were able to add a few more destinations to their route maps and sell tickets on the flights of another airline as though the flights were their own. The idea was to provide better and more

convenient service for consumers, and carriers were able to enjoy some cost savings. In recent years, airline alliances have worked to take the process to the next level, asking governments to grant members antitrust immunity to jointly plan services and fares over international markets served by the alliance. Antitrust immunity opened a panacea of revenue opportunities, helping steer profitable business travelers through enlarged networks that shared the spoils.

Key To Survival

Alliances are a way to give carriers backdoor merger benefits (revenue sharing on trans-Atlantic routes) alongside the efficiencies that come with aligned schedules. So it’s no wonder the white gloves have come off in recruitment. As the carriers see them, global alliances are key to survival, in an industry fraught with increasing financial pressures due to high fuel costs, environmental drives to reduce CO2 emissions, limited landing slots and other challenges. In 2003, the three main alliances combined had 29 member airlines. Their significance wasn’t realized until the 2008 open skies treaty that deregulated flying between the United States and 27 European Union countries. That opened the door for strategic alliances based on geographical locations. Today, 80 percent of the world’s commercial airline capacity is affiliated with one of the three existing alliances, and all but two of the world’s 20 largest carriers are members of Star, SkyTeam or oneworld. The largest, Star, includes 25 airlines that range from names such as United Airlines, Lufthansa and Singapore Airlines to regional carriers such as Finland’s Blue1 and Shanghai Airlines of China. After the loss of Continental, SkyTeam is anchored by Delta and the Air France/KLM conglomerate, but also includes carriers such as Korean Air, Alitalia, Aeroflot and Kenya Airways. Besides American Airlines, British Airways and Japan Airlines, oneworld

While Delta Air Lines’ bold move to recruit JAL away from oneworld to join forces with SkyTeam was unsuccessful, the message was clear … poaching from another alliance is no longer forbidden.

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The pervasive scope of alliance reach makes it difficult for non-aligned carriers to access growth opportunities. This reality is forcing even the strongest established national flag carriers to consider trading independence in favor of alliances. Geoff Dixon, former Quantas CEO and oneworld chairman, predicted the current volatile consolidation era. In his 2008 farewell profitbriefing message, he warned shareholders and regulators that the carrier must be freed of legislated ownership and operational restrictions or it would lose its financial leverage to negotiate the creation of a super-regional airline alliance. “It is inevitable,” Dixon said. “I will have moved on, but a new level of maturity and understanding will be needed when this debate takes place, as it inevitably will, because airlines cannot continue on the way they are at the moment. It is the way the industry has been going, and it is the way of the future. The ones that consolidate will be the big survivors in the future.”

Under The Microscope

After becoming the newest member of the Star Alliance last October, Continental coordinates passenger perks, plans schedules and prices, and shares revenues on flights with alliance partners United Airlines, Air Canada and Lufthansa, regardless of which carrier operates the flight.

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As Asian and European governments recently opened their air travel markets to greater competition, Delta, American and United — along with their alliance partners — began battling over lucrative routes that could reshape international aviation. The competition is fiercest for control of routes between the United States and Japan. Last December, as Delta and American campaigned to partner with JAL, United and Continental moved ahead with a partnership arrangement with Japan’s other large national carrier, All Nippon. The U.S.-based carriers requested antitrust immunity in a Dec. 23 filing with the U.S. Department of Transportation. United also set in motion a bid for landing rights at Tokyo’s Haneda Airport once it opens to U.S. carriers as part of a trade treaty. Alliances are coming together on transAtlantic routes as well. In January, United, Continental, Air Canada and Lufthansa began to coordinate passenger perks, plan schedules and prices, and share revenues on flights regardless of which carrier operates the flight. The arrangement is similar to a Delta and Air France/KLM partnership formed last year. In the meantime, American is waiting to hear if its twice-vetoed bid for a tie-up with British Airways will be approved by U.S. regulators. In the past, regulators in Europe and the United States have supported partnerships. Heated competition among alliances has generally resulted in lower ticket prices and enabled carriers to cut costs and generate new revenue. However, the recent gloves-off competition for new alliance partners has forced the debate over whether the benefits of


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Rivalry is most fierce for control of routes between Japan and the United States as a result of the Asian government recently opening air travel markets to greater competition. Delta Air Lines, American Airlines and United Airlines, with their partner alliance carriers, began battling over lucrative routes that could reshape international aviation.

alliances outweigh the costs. Regulators are worried lax industry oversight could pave the way for the three alliances to act as mega-carriers, crushing competition in trans-Atlantic and trans-Pacific markets. Most notable among immunized alliance detractors is U.S. Congressman James L. Oberstar, chairman of the Committee Highlight

Today, 80 percent of the world’s commercial airline capacity is affiliated with one of the three existing alliances, and all but two of the world’s 20 largest carriers are members of Star, SkyTeam or oneworld.

on Transportation and Infrastructure for the U.S. House of Representatives. Oberstar introduced HR 831 last March, which calls for the comptroller general to study legal requirements and policies used by the secretary of transportation to decide whether to approve proposed international airline alliances and grant them antitrust immunity. The bill, which was incorporated into the Federal Aviation Administration’s Reauthorization Act of 2009, also automatically invalidates any prior grant of immunity three years after the bill’s effective date and prohibits renewal unless the secretary determines whether to adopt any recommendations by the comptroller general regarding new standards for authorizing international airline alliances and granting antitrust immunity. “I have become increasingly concerned with the decline of competition in international markets, particularly between the United States and Europe,” Oberstar told an audience at a March 2009 meeting of the International Aviation Club. “These markets used to be served by a substantial number of carriers from European countries and the United States. Increasingly, the market has come under control of three alliances. “If you believe that deregulation was and is sound public policy, then you cannot afford to be complacent about the threat to competition posed by immunized airline alliances. As the evidence indicates, these immunized alliances hold great market power and have the potential for

exercising that power to the exclusion of non-immunized carriers, thereby reducing competition in the international marketplace as well as disrupting domestic competition. This legislation is an important step forward in determining whether the U.S. Department of Transportation’s antitrust policies are sound and whether DOT gives appropriate consideration to the impact that granting antitrust immunity might have on competition here and abroad. If these immunized mega-alliances are allowed to proceed unchecked, the end result may be trading government control in the public interest for private monopoly control in the interests of the industry.” The bill passed in the House by a roll call vote of 277 for and 136 against on May 21, 2009. The U.S. Senate took up the bill in June and referred it to the Committee on Commerce, Science and Transportation where it remains. In the meantime, talks began in February on the second phase of the U.S.-E.U. open skies agreement. The second phase, which concluded in March, further liberalized the trans-Atlantic air transport market. The agreement settled, in principle, the dispute on reciprocal liberalization of airline ownership and control. It also, pending some changes in the E.U. legal framework, granted seventh freedom rights to E.U. carriers. “Today’s agreement strengthens our already close aviation relationship with our European partners,” U.S. Secretary of Transportation Ray LaHood said at the time of the agreement. “President Obama promised European leaders that we would reach an agreement this year, and today we fulfill that promise.” European officials agreed. “This draft deal represents a significant breakthrough in the process of normalizing the global airline industry,” said Siim Kallas, E.U. vice president of transport. The draft agreement will be submitted in June by the European Commission for approval. If ratified, looser foreign ownership laws could likely pave the way to cross-border mergers along alliance lines and could lead to significantly altered domestic U.S. competition. a

Lynne Clark can be contacted at wearelistening@sabre.com.

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Cargo Infusion By Mukundh Parthasarathy | Ascend Contributor

Photos: Jupiter

Airlines that implement a sound cargo revenue management strategy coupled with the use of advanced technology and industry best practices will achieve significant financial gains based on the anticipated rapid growth in the air cargo sector.


ASCEND I INDUSTRY

D

uring the next decade, air freight growth — particularly driven by the demand for time-sensitive services — will outstrip passenger growth at an average annual rate of 6 percent, according to forecasting research conducted by aircraft manufacturers Airbus and Boeing. Airlines will face enormous opportunities and challenges presented by an increasingly integrated and fiercely competitive cargo environment. Intense competition means air cargo operators will need to be more efficient to maintain and grow their current market position while focusing on optimized capacity management to grow revenues. Since most passenger aircraft offer belly capacities for air freight, airlines can provide cargo services at low marginal costs. Therefore, competition on a pricing level can easily occur, so effective revenue management principles and systems will become essential for managing capacity and pricing. Air cargo is an important revenue source for airlines and air freight forwarders. On average, the revenue from cargo is 13 percent of the total air traffic revenue — up to 40 percent for some airlines. The global air cargo market is growing in tonnage and sophistication. Alliances among air carriers, multi-user booking portals, international online booking platforms, new freighter and combination aircraft, time-definite express services and advanced information technology represent significant pieces of the air cargo puzzle. World air freight is expected to grow more rapidly than mail, averaging annual growth of 6.5 percent through 2021, and world air cargo traffic is expected to exceed 464 billion revenue ton kilometers in 2021. Boeing predicts the global freighter fleet will increase from 1,775 in 2001 to 3,078 in 2021. Medium and large wide-body fleet share will grow from 39 percent to 60 percent during the same period. Unfortunately, the increase in air freight cargo traffic as measured in RTKs does not necessarily mean increase in profit. According to Mercer on Travel and Transport specialty journal (2004), in the historical period from 1974 to 2001, the average annual increase of 5 percent to 7 percent in air cargo traffic translated to an annual cargo yields decline of 2 percent to 3 percent. According to Boeing analysis, the trend for scheduled freight yields declined 3.4 percent a year from 1985 to 1999, after adjusting for inflation. After 1999, freight yields stabilized and slightly increased by the end of 2001. Why is it difficult to make a profit in the air cargo business? There are several internal and external factors affecting profits such as overcapacity, demand imbalances, unfavorable cost structure and poor revenue management. There are also other challenges or threats such as globalization, security, rising energy costs and tough competition

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A significant revenue source for airlines, average revenue generated from cargo represents 13 percent of the total air traffic revenue, up to 40 percent for some carriers.

from integrators. These challenges limit the ability of certain carriers to effectively compete in the marketplace and survive through tough financial periods. The industry also has significant opportunities to reduce costs, improve service levels and increase profits. Initiatives such as Cargo 2000 and eFreight as well as the introduction of cargo portals and eBooking focus on improving customer service levels; increasing productivity and efficiency of information processing, transmission, display and storage; and reducing booking response times. The greatest weakness of the cargo industry is not being proactive in terms of managing challenges and capitalizing on opportunities. Even worse is the high inertia and slow pace in reacting to challenges, adapting to changes and adopting new initiatives and technologies. Even large cargo carriers and their thought leaders have not fully deployed or adopted the International Air Transport Association’s Cargo 2000 initiative to implement processes that are backed by measureable quality standards to improve efficiency of air cargo. A number of mid-size carriers still do not have systems or technology to accurately sell space, monitor movement and manage customers. The key strength of the air cargo industry comes from two key partners — airlines and freight forwarders. These players either work together for success or work separately and fail. This applies to working together on all initiatives that are put forth

by IATA to introduce efficiency, achieve cost reduction and improve customer service. It also applies to turning around the downward spiraling effect of forwarders demanding lower prices and airlines providing poor services due to diminshed yields. The next key strength for cargo carriers comes from being visionary and taking the first step in improving tools and technologies. These carriers should empower their employees by providing the best operational and decision-support capabilities and tools. Leveraging these two key strengths could potentially transform a business that is struggling into a win-win situation for freight forwarders and carriers, creating substantial growth potential and outstanding customer service. Airlines around the world should adopt, automate and streamline business processes to raise productivity levels and improve revenue. Principles of revenue management can help in achieving such goals. With uncertain economic conditions, cargo profitability is increasingly important to air carriers, who have found that if cargo capacity is not managed successfully, revenue opportunities are lost. Revenue management increases airline cargo profits through effective cargo space management. Extensive computer models can help estimate capacity for each departing flight and determine the most profitable space allocation for various cargo products. Working with real-time


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GF-X

Rating system

Sales force

Other

Call center

Operations system

Booking engine

Operational feasibility

Commercial viability Route generator

Queue management

Bid pricing

Revenue management system

Customer value Reports

The integrated booking process depicts the workings of a completely automated cargo booking engine and the interaction between the various cargo IT systems and modules.

information, analysts can efficiently manage future flight capacity. In the early 1980s, revenue management disciplines were first applied in the airline industry as a method to increase revenues resulting from passenger sales. With the success of revenue management to improve passenger revenues, these techniques were applied to other business areas such as cargo, hotel and car rental industries. During the past five years, air cargo thought leaders, such as Lufthansa Cargo, Air Canada, United Airlines and Virgin Atlantic, have successfully implemented cargo revenue management tools to realize revenue improvement and productivity gains. Airlines benefit from revenue management by selling space at a price that maximizes revenue from various customers based on their willingness to pay, which varies depending on the product they buy from the airline. The reasons and the characteristics of the air cargo business make it a prime candidate for revenue management: Cargo carried on passenger aircraft, making it difficult to know available cargo space, Different products are offered at different prices based on different customer requirements — same-day express shipping versus second-day shipping, for example, Booking behavior of customer in terms of under/ over tendering, no shows and cancellations. An effective cargo revenue management system determines the available capacity on each flight, identifies the amount of each type of product that requires space on each flight and allocates capacities to the appropriate products to maximize profit. Lessons learned from airlines’ implementations also emphasize the need for business process analysis

along with automation. If revenue management technology is implemented without proper business process analysis (the solution adoption) trust in system numbers can take a long time reiterating the fact of “junk in, junk out” as with any information technology system. A standard business process analysis study: Identifies business where airlines still maintain some pricing leverage, Ensures airlines provide satisfactory service levels, Eliminates unprofitable businesses and/or routes, Provides products that meet the needs of the supply chain. There should also be a comprehensive review of cargo practices and performance that should contain multifaceted diagnostic analysis, quick hits and longer-term recommendations, assessing current key performance reporting indicators, reports and decision-support capabilities. The study should also help design an organization structure to support efficient business processes related to good revenue management practices. The final recommendations should include information systems; human resources, roles and responsibilities; policies and procedures; and communications policies related to cargo operations and revenue management practices. While some carriers grapple with the decision to jump on the cargo revenue management bandwagon, thought leaders are in the process of moving toward the next-generation revenue management solution that includes an intelligent reservations system, or booking engine. The current process of booking shipments in the air cargo industry requires a high degree of manual intervention. Agents will call

or fax airlines (and often different offices at the same airline) to find the best price on a specific route. Once the airline’s cargo call center agents receive shipment information, they have to refer to various systems to obtain information on rates, capacity and loadability checks; IATA regulations; and customs and embargo requirements as well as comply with their own internal regulations. Additional calls to the revenue management or marketing departments may be required before obtaining the final acceptance for the shipment request. A booking engine is one of several components required to support intelligent booking and inventory control. A booking request can originate from several channels such as a GF-X or CPS portal; the airline’s call center or website; or messages from forwarders or other airlines. The primary role of the booking engine is to act as the intermediary between the various booking channels and the revenue management system. It also interfaces with the rating and operations systems and facilitates the evaluation of every booking request. Several key inputs are needed to make a booking decision (to reject or accept). A booking request has to meet both operational feasibility and commercial viability. Operational feasibility is ensured by selecting routes that are feasible in terms of door size, shipment characteristics, terminal characteristics, loadability, service time, etc. Commercial viability is guaranteed by ensuring the rates offered are higher than the hurdle price (bid prices). Hence, the four most important inputs are routes, capacities, rates and hurdle prices. Capacities are stored in the booking engine or the operations system. Routes are typically generated using a route selector that is either part of the booking engine or revenue management system. In some cases, a stand-alone router is also used. Rates are obtained in real time from the rating/revenue accounting system. Hurdle/ bid prices are generated by the revenue management system. A booking engine essentially acts as a broker to combine this information to decide on booking acceptance. The benefits of revenue management solutions are well documented, and the custom is rapidly becoming an industry best practice. The data challenges are still complex in cargo; therefore, the comparison between passenger revenue management techniques with that of cargo is not completely accurate. The current generation of cargo reservations systems is a mirror image of legacy systems and still does not help streamline the air cargo process, making it essential for carriers to incorporate more automation into their revenue management practices. a

Mukundh Parthasarathy is solutions manager of Sabre® AirVision™ Cargo for Sabre Airline Solutions®. He can be contacted at mukundh.parthasarathy@sabre.com.

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ASCEND I INDUSTRY

YEAR OF THE TIGER High-speed rail, changing consumer behavior, technology’s pace of change — will Chinese airlines be like reeds in the winds of change or will they resemble mighty oaks? By Siew Hoon | Ascend Contributor

n old Chinese proverb goes, “An inch of time is an inch of gold, but you can’t buy that inch of time with an inch of gold.” Any international company that has ever had business dealings with China understands that to be true. To get ahead in any business in China, you have to put in the time, and you know that no amount of gold can be a substitute for that time. Just ask those managing the biggest names on the Internet — eBay, Yahoo and Google — and they will tell you of the trials and tribulations they’ve had in growing their business in China. So, it’s the Chinese airline sector that continues to confound, yet fascinate, the 46 ascend

international community — confound because it’s a wonder how it operates within the legacy structures and processes and yet it does seem to work, and fascinate because those who work in China know if they put in the time and manage to get their foot in the door, they will “be in readiness for favorable winds” and eventually make their pot of gold. So will the winds be favorable this year for the Chinese airline sector? Hope springs eternal. The image last November of China President Hu Jintao and U.S. President Barack Obama standing at the Great Wall, a structure once built to keep out foreigners and now draws them in by the millions,

fanned new hopes of further liberalization of certain sectors of its economy, aviation included. There is no doubt the world wants — and needs — a more open China to boost trade in a year that will continue to be slow for most major economies around the world. Last year, as the world reeled collectively from the global financial crisis, the Chinese economy held its own, ending the year with a more than 9 percent growth. This year, economists are predicting close to 10 percent growth. Its gross domestic product is now more than US$5 trillion, making it the second-largest economy in the world, displacing Japan.


Photos: Jupiter

ASCEND I INDUSTRY

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ASCEND I INDUSTRY

High-speed rail in China poses a threat to the country’s top carriers. During the next decade, the county will build more than 18,000 kilometers of high-speed track, giving China more than half of the world’s total high-speed railways and significantly impacting domestic air service.

Economists are also predicting that the major drivers of growth this year will come not only from China and India, but also the rest of the Asian region. Global companies thus know that to develop their business in the new year, they will have to put in more inches of time in the region.

Gloom Amid The Boom

Air travel is one sector that has seen massive growth in China in the past few years. According to PhoCusWright, in 1985, only 7.5 million people traveled by air in China. By the end of 2008, this figure had risen 25 times to about 200 million. That’s not to say things have been all rosy for Chinese airlines. Their problems began even before the collapse of Lehman Brothers in September 2008 and the subsequent implosion of the global banking sector. The greatest sporting event of the century for China — Beijing Olympics 2008 — was supposed to generate great business, but it didn’t materialize. Security concerns and visa hurdles kept foreigners away, including business travelers who 48 ascend

feared the inconveniences of a trip around that period. A spate of natural disasters thereafter — from snowstorms to the devastating earthquake in Sichuan — also dampened travel demand, both domestic and international. The result: A combined loss of more than US$4 billion by the country’s three state-owned carriers — Air China, China Eastern and China Southern. Last year, as the global financial crisis took its toll, Chinese airlines were not spared. According to PhoCusWright, China’s airline market was projected to decline by 9 percent to US$22.6 billion in 2009. While passenger volumes suggest a steady year-over-year growth of 8 percent to 10 percent, the decline in premium international traffic adversely affected the bottom lines of all three airlines.

Domestic Travelers To The Rescue

But what helped was the strength of the domestic market, a major contributor to Chinese airlines’ revenues. Domestic travel accounts for 60 percent of Air China’s

revenues, 70 percent of China Eastern’s and 80 percent of China Southern’s. The government stimulus package to promote domestic travel as well as its declaration to make domestic tourism a key pillar of its economy definitely helped boost numbers. According to Xinhua Economic News, China Southern, China’s largest airline company by fleet size, transported 66.4 million passengers, accounting for 28.7 percent of the civil aviation industry’s total passenger volume and outperforming Air China and China Eastern Airlines. In so doing, China Southern increased its passenger transportation volume by 6.59 million over 2008. An airline source in China told Ascend that domestic air travel in the country grew by 20 percent. “The environment in 2009 was definitely better than in 2008. Oil prices were reasonable and domestic demand rose.” Brett Henry, vice president of marketing for Abacus International, said that in the dark year for airlines in Asia in 2009, “the bright spot really is China. “Chinese carriers’ revenues are up from 2008 by 6 percent in comparison even as yield and average fares are down, capacity and departures are up by 15 percent and the load factor is up by 5 percent,” Henry said. “Most Chinese airlines are reporting a return to profitability. It will only get better for Chinese carriers in 2010.”

Rail Threat Looms

But growth notwithstanding, a new threat looms in the “Year of the Tiger” — the introduction of high-speed rail. Last December, the 1,000-kilometer link between Guangzhou and Wuhan opened, causing sleepless nights at airlines such as China Southern, which has the biggest exposure to the domestic market. “It will be a tough year,” said a Chinese airline source. “This is bad news for domestic-focused airlines like China Eastern and China Southern. It will be difficult for airlines to compete with high-speed rail.” The new rail cuts journey time between Guangzhou and Wuhan from 10.5 hours to 3 hours. Flying time is 90 minutes. Train tickets cost about 40 percent less than airfare, and train stations are more centrally located than airports and come with fewer security procedures. The Wuhan-Guangzhou link is only the beginning of a grand plan to build more than 18,000 kilometers of highspeed track by 2020. When completed, China will have more than half of the world’s total high-speed railways, which will expand the national rail network to 120,000 kilometers.


ASCEND I INDUSTRY

Together, China President Hu Jintao and U.S. President Barack Obama visited the Great Wall Of China late last year, giving hope to some of further liberalization of certain sectors of the Chinese economy, including air transportation.

“Wait until the link between Beijing and Shanghai opens by the second half of 2010; that’s when we will see the full impact on airlines,” said the airline source. “The only thing we can do is cut fares and keep our airfares at RMB300 to RMB400 (US$44 to US$59). But we have no room to control our costs such as airport service charges. In fact, this will add to our costs because we have to improve our service to compete for passengers.” This lack of ability to control costs within a regulated environment — not to mention the official intolerance of low-cost independent airlines — is one of the hurdles that stops low-cost carriers from truly taking flight in China. Other than Spring Air, based in Shanghai, which has seen reasonable success, all others including Lucky Air (Kunming), China West Air (Chongqing), United Eagle (Sichuan) and Viva Macau (Macau) have remained small and have localized operations. Even AirAsia, which has seen phenomenal success elsewhere, has found it challenging in China. In December, it suspended its Kuala Lumpur to Tianjin

route, citing low demand during the low season. The idea behind the route was to entice people who would normally fly from Beijing to use Tianjin, but schedule changes midway through the route operation made it inconvenient for Beijingers to catch a morning departure from Tianjin. “Another reason is landing charges — that’s a very significant part of overall costs — and landing charges are high in China, even in small airports like Tianjin,” said the source. “This is one factor that makes it hard for low-cost airlines to really operate in China.”

The lack of focus on yield management and revenue optimization is one key factor that affects profitability of Chinese airlines. According to PhoCusWright, airfares remain virtually the same regardless of the booking horizon. Fixed airfares have also affected consumers’ buying behavior. According to the market research company’s “The Emerging Online Travel Marketplace in China” report, Chinese consumers typically plan their travel early (up to four weeks in advance), but they don’t make a buying decision until the week preceding their date of travel. “The Chinese airline industry has yet to adopt principles of dynamic pricing and selling distressed inventory, accoring to the report.” The Centre for Asia Pacific Aviation, in one of its reports, stated that “for China Southern, an increasing focus on international routes is likely, with the carrier already flagging the possibility of launching more ‘Air Express’ services to Southeast Asia. More long-haul flying from its hubs in Beijing and Guangzhou is a natural evolutionary step for China Southern, although this will pit it against the established players in Beijing, led by Air China.” With its ranking as the second-largest economy in the world, China presents hope for a bright future for many of its businesses, including airlines. But China’s airline industry is no different than in any other region … it’s a constantly evolving environment. “The thing with the Chinese aviation sector is, you can’t use normal common sense to figure things out,” said a source who worked within the Chinese airline system for years. “You have to be flexible because things can change at a moment’s notice.” Or to quote another Chinese proverb, “A reed before the wind lives on, while mighty oaks do fall.” a

New International Focus: E-commerce

Given the competition from high-speed rail and other threats and challenges, what are Chinese airlines to do this year to stay afloat? Analysts expect stronger focus on the international market and increased investments in technology and e-commerce to drive more direct bookings and international business as well as maximize efficiencies and drive higher yields.

Siew Hoon is editor at large for SHY Ventures and Producer of WIT-Web In Travel. She can be contacted at siewhoon@webintravel.com.

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United They Stand In a little more than 10 years since the birth of the three main global network alliances, each, with its own set of objectives, has achieved significant results during the last decade.

By Janet Kimoff | Ascend Contributor


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I

n the mid to late ’90s, the concept of the global airline alliance was conceived as a way to generate competitive advantages and provide much greater geographical presence and reach for carriers of all shapes and sizes around the world. With Lufthansa German Airlines providing much of the impetus and leadership, the Star Alliance in 1997 was the first truly global aggregation of airlines to approach coordinated marketing and service delivery through broadly accepted techniques including codeshares and honoring one another’s loyalty programs on a worldwide allied scale. But it didn’t take long before the Star Alliance encountered hefty alliance competition with the 1998 formation of oneworld, led primarily by global mega-carriers American Airlines and British Airways. And SkyTeam, originally consisting of only four carriers and nominally headed by Delta Air Lines, then joined the simmering global-alliance competition in 2000. Now, a full decade into the 21st century, how are the global alliances performing?

Different Strokes

The three main global alliances each possess a basic difference in their management approach. Star put together a centralized management group based in Frankfurt, Germany, that today is some 75 strong. SkyTeam and oneworld pointedly avoided creating such a sizable separate alliance hierarchy. “We don’t think of the alliance structure as ‘loose,’ but rather as ‘self governing’ as opposed to having a central corporate infrastructure,” Paul Matsen, then senior vice president of marketing at Delta Air Lines, told Airline Business in September 2004. And in the same article, Mike Lenz, then a managing director at American Airlines, said, “With us, oneworld is an ‘overlay’ as opposed to a structure like that at Star.” Management structure is definitely a point of divergence among the global alliances. Whether structural differences are the reasons for varying results, however, must remain subject to conjecture — particularly since even the results themselves must be carefully analyzed prior to drawing highly subjective conclusions.

Star Out Front

While the extent to which management style has shaped and otherwise influenced the various alliances’ relative levels of success can be debated at length, Star’s position as the perennial frontrunner generally cannot. By the final quarter of 2009, Star stood as the largest of the three alliances in terms

of the vital statistics of revenue, traffic and capacity (over 50 percent more seats than SkyTeam and over 90 percent more than oneworld). Since the beginning of the decade, Star membership increased twofold to 26 members, capacity and revenue grew by just over two-thirds, and traffic more than doubled. Star began its history as the most geographically diverse of the global alliances. Nearly 10 years ago, 40 percent of Star Alliance capacity was situated within North America (largely the capacity of United Airlines), 23 percent within Asia and 22 percent within Europe. Of the remaining 15 percent of seats, just over one-quarter were on the lucrative North Atlantic markets. But Star had little to no presence in Africa or the Middle East. During the past decade, Star has focused on filling these gaps. And entering fiscal year 2010, the 26 members of the Star alliance consisted of two African, seven Asian, 12 European, one Middle Eastern and four North American carriers. Of Star’s total capacity, 10 percent now touches either Africa or the Middle East. Star’s capacity within North America, Asia and Europe still represents more than 80 percent of the alliance’s total seats. Asia’s weighting, however, has increased to 26 percent, while North America’s share has dropped to 35 percent and Europe’s share to approximately 20 percent of overall Star seats.

oneworld’s North Atlantic Foundation

From the start, oneworld wagered heavily on the combined strength of its two main carriers, American Airlines and British Airways, and their significant presence on the crown-jewel North Atlantic routes — where, as of July 2000, just over 6 percent of the alliance’s capacity was situated. At the outset, oneworld’s geographical composition was somewhat similar to Star’s, with 39 percent of oneworld’s combined capacity within North America, a lesser 13 percent within Asia and 28 percent within Europe. The oneworld alliance also lacked presence in Africa and the Middle East. By the end of last year, oneworld consisted of 11 members — up from eight members in 2000. Despite this fairly small increase in membership, oneworld managed to grow capacity by almost 30 percent, traffic by 80 percent and revenue by 42 percent. As of January, oneworld membership consisted of three Asian, four European, one Middle Eastern and three carriers from the Americas. The alliance’s capacity composition had changed significantly. While North America

remained oneworld’s largest component at 31 percent (despite an 8 percent drop during the previous decade), Asia became its second-largest region, representing 28 percent of combined seats, while Europe’s weighting dropped to 19 percent. And oneworld’s presence in Africa and the Middle East had improved with the addition of a Middle Eastern partner, but overall only 4 percent of the alliance’s capacity touched these regions. Throughout the 10-year period starting in 2000, much of oneworld’s focus was devoted to fighting still-unresolved antitrust battles. Did this overt focus distract attention in any way from growing the alliance? Or perhaps it was the group’s collective philosophy of how best to expand that effectively limited its membership growth. “We’re not about getting to a certain number of member airlines,” oneworld managing partner John McCulloch told Airline Business in 2004. “Each airline in oneworld has to have a strong enough brand identity in its home country and around the world. So we don’t have to be too concerned about filling regional gaps with new members.” Five years later, the alliance remains true to its primary objectives. “As we enter our second decade, the alliance’s strategy remains the same: focusing on quality rather than quantity and on adding value for our member airlines and their customers,” McCulloch said in a February 2009 oneworld press release.

SkyTeam Joins The Fray

At the end of 2000, the newly formed SkyTeam alliance consisted of only four members. It was the least geographically diverse international alliance of the three, with 67 percent of its seats situated within North America, 13 percent within Europe and 9 percent within Asia. The alliance had no presence in South America, Africa or the Middle East. But during the next several years, SkyTeam as a group apparently determined to roll up its figurative sleeves and work diligently to make up for its late start. By 2009, the alliance had more than doubled its full membership — to nine carriers: two Asian, five European and two North American. The alliance’s traffic and revenue had both more than doubled. Also, SkyTeam managed to surpass oneworld in size based on capacity (by 28 percent), passengers (by 13 percent) and revenue (by 4 percent). While still the least geographically diverse, SkyTeam reduced its North American concentration from an original two-thirds down to less than half of overall seats. And it increased Asia and Europe capacity weightings to just over 20 percent each.

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Seat Allocation By Region ONEWORLD

STAR Region-Pairs

2000 2009 0%

2%

2009 + Proposed new members

2%

2000 2009 0%

SKYTEAM

2009 + Proposed new members

1%

1%

2000 2009 0%

1%

2009 + Proposed new members

1%

Within Africa Africa-Asia

0%

0%

0%

0%

0%

0%

0%

0%

0%

Africa-South America

0%

0%

0%

0%

0%

0%

0%

0%

0%

Africa-Europe

0%

1%

1%

1%

1%

1%

1%

2%

2%

Africa-Middle East

0%

1%

1%

0%

0%

0%

0%

0%

0%

Africa-North America

0%

0%

0%

0%

0%

0%

0%

0%

0%

Within Asia

23%

26%

26%

13%

28%

29%

9%

22%

24%

Asia-South America

0%

0%

0%

0%

0%

0%

0%

0%

0%

Asia-Europe

2%

2%

2%

2%

2%

2%

1%

2%

2%

Asia-Middle East

0%

0%

1%

0%

0%

0%

0%

0%

0%

Asia-North America

2%

2%

2%

1%

2%

2%

2%

1%

2%

Within South America

3%

0%

5%

2%

3%

3%

0%

0%

0%

South America-Europe

0%

0%

0%

1%

1%

1%

1%

1%

1%

South America-North America

1%

1%

1%

5%

5%

5%

1%

1%

1%

Within Europe

22%

19%

18%

28%

19%

18%

13%

21%

21%

Europe-Middle East

1%

3%

2%

1%

1%

1%

0%

1%

1%

Europe-North America

4%

4%

4%

6%

4%

4%

5%

5%

4%

Within Cutline toMiddle go here.East

0%

2%

2%

0%

1%

1%

0%

0%

0%

Within North America

0% 40%

0% 35%

0% 31%

0% 39%

0% 31%

0% 31%

0% 67%

0% 41%

0% 40%

Grand Total

100% 100%

100%

100% 100%

100%

100% 100%

100%

Middle East-North America

Source: OAG July 2000 and July 2009 seats Seat allocation by geographic region for the three global airline alliances, Star, oneworld and SkyTeam, has changed exponentially between July 2000 and July 2009.

The Verdict

Based on expanding alliance composition and seat/mile statistics, it’s undoubtedly fair to conclude that the international alliances have succeeded in improving their global reach and achieving substantial growth for their members. But what does each alliance’s geographical composition represent in terms of future growth potential? And which alliance commands the greatest share of the largest and most promising regions? With Asia anticipated by many to eventually lead the way out of the recession — and the Middle East the only region to have shown recent statistical year-overyear growth in double-digit percentages — these areas may be reasonably judged to offer the most immediate promise of further significant short-term growth. And if that’s the case, Star appears best-positioned among the three major international alliances to reap the largest share of benefits. 52 ascend

Based on traffic, the top regions out of 21 defined and reviewed were Asia, Europe, North America and South America. Combined, these regions represented more than 80 percent of worldwide 2009 traffic. Star controlled a greater share of capacity compared to SkyTeam and oneworld in four of the five top region-pairs (the one exception was South America). Of the top 10 regions (representing 93 percent of worldwide traffic), Star commanded a larger share in seven, including the Middle East. SkyTeam had the second-largest share in five of the top 10 markets and led in one region (Africa-Europe). And oneworld dominated the South America region and the South AmericaNorth America region pair, and it came in second for Asia and the Middle East. It held the smallest share in the remaining six region pairs. Something to watch closely is the continually shifting makeup of the various global airline alliances. Among recent

salient issues, of course, was the membership affiliation of Japan Airlines (JAL announced in February that it would remain a member of oneworld, rather than switching its membership to SkyTeam). Additionally, numerous carriers are either strongly considering or are already committed to join the various alliances, either as full-fledged voting members or as associate (non-voting) members. And a significant shift in outlook for the different alliances occurs when the proposed carriers are included. Under best-guess (as to near-future alliance makeup) scenarios, Star dominates eight of the 10 top regions. And it’s second in the other two regions. SkyTeam controls the next-largest share of capacity in six regions, including Asia, where SkyTeam edges out oneworld for the No. 2 ranking. Oneworld’s overall position could deteriorate further as, in addition to the Asia shift, it might lose its dominant position in Latin America to Star.


ASCEND I INDUSTRY

Alliance Share Of Total Capacity

2009 Region-Pairs Within Africa

STAR 25%

ONEWORLD 3%

SKYTEAM 6%

COMBINED 3 34%

9%

46%

Africa-Asia

27%

10%

Africa-South America

57%

0%

0%

57%

Africa-Europe

14%

7%

19%

40%

Africa-Middle East

27%

2%

1%

31%

Africa-North America

29%

0%

33%

63%

Within Asia

21%

13%

12%

46%

Asia-South America

13%

39%

0%

52%

Asia-Europe

30%

18%

19%

66%

Asia-Middle East

7%

2%

1%

10%

Asia-North America

38%

19%

22%

79%

Within South America

0%

7%

0%

7%

South America-Europe

12%

21%

27%

60%

South America-Middle East

0%

0%

0%

0%

South America-North America

19%

34%

14%

67%

Within Europe

19%

9%

14%

43%

Europe-Middle East

28%

6%

7%

42%

Europe-North America Cutline to go here. Cutline to go here.

32%

18%

25%

75%

Within Middle East

19%

3%

Middle East-North America

4% 13%

22% 37%

Within North America

26% 29%

0% 7% 22%

64%

Grand Total Average

22%

11%

15%

48%

On average, Star Alliance makes up 22 percent of total seat allocation by geographic region, while SkyTeams follows at 15 percent and oneworld with 11 percent. Combined, the three global airline alliances, as of July 2009, comprise nearly half of the industry’s total capacity share.

While membership within each alliance is far from stable (for example, with Continental Airlines recently moving to Star from SkyTeam and Japan Airlines finally deciding to stay with oneworld, after months considering a potential switch to SkyTeam), the three alliances combined represent a formidable force. The members of the three major global alliances (including proposed new members) control more than half of the world’s capacity and close to half of the passengers. This significant influence includes managing 64 percent of capacity within North America, 55 percent within Asia, 44 percent within Europe, 31 percent within Central/South America, 22 percent within the Middle East and a whopping 75 percent of seats on the North Atlantic. Given the alliances’ pervasive scope, it becomes more and more difficult to construct a business hypothesis under which nonaligned carriers will be able to access significant global growth opportunities.

As carriers continue to clash against government authority over regulatory issues (including route and/or airport slot rights, foreign-investment limits and outright mergers), international routes and flow traffic represent an alternative to trying to compete effectively against lowcost carriers in domestic market share. Also, as carriers reduce capacity in response to the economic downturn, alliances offer an option to supplement the carriers’ diminishing schedules. “In a world where you’re not allowed to do full mergers, this [forming airline alliances] is the next-best thing,” British Airways Executive Vice President Simon Talling-Smith told Reuters last July. And oneworld’s February 2009 statement that it had generated more than US$3 billion in incremental revenue from alliance fares and sales activities alone during the last decade further demonstrates the significant potential of alliance membership despite regulatory constraints.

At least through the current period of continuing economic distress, global-alliance membership should be considered an even more critical element of any individual carrier’s survival tactics. And in the broaderrange picture, alliance membership could also prove critical to many carriers’ medium- and long-term growth strategies. a

Janet Kimoff is senior management consultant in Consulting & Solutions Delivery for Sabre Airline Solutions ®. She can be contacted at janet.kimoff@sabre.com.

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Unleashing The Power Of Choice

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Boosting ancillary revenues isn’t just about offering a few add-on products or services to an airline’s website. It’s about implementing a concrete shopping strategy that appeals to every consumer type, ensures a satisfying customer experience and promotes loyalty.

As technology continues to advance inexorably on all fronts, travel agents and agencies continue to evolve, with their business success anchored upon and closely tied to technological advances. As the highest-yielding sales channel, it’s essential that these capabilities are developed to support agencies.

Channeling China 62

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China has experienced significant growth in the online travel arena and is expected, by the end of next year, to represent 20 percent of the country’s total travel revenues.

Travel Agent Of The Future

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Value Articulation Not only is it critical for airlines to take advantage of every possible distribution channel to sell their offerings, it’s also vital that the value of these products is clear and can be easily identified to achieve maximum sales potential.


SPECIAL SECTION

Crossing All Channels ascend 55


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Airlines must often evaluate their route network — determining when to add a new route, when to discontinue a route or when to change the frequency Boosting some ancillary basic revenues isn’t just about offering a on a route. Following guidelines is key few add-on products or services to an airline’s website. to making sure the rightimplementing markets aare served at the It’s about concrete shopping strategy that appeals to every consumer type, ensures a satisfying right times. customer experience and promotes loyalty.

By Brian Borg | Ascend Contributor

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Photos: Jupiter

Unleashing The Power Of Choice


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F

rom buying a car or choosing where to sit in a movie theatre to deciding on a vacation destination, decision making is everywhere. And, in no other place is there more choice and breadth of opportunities than in air travel. For airlines to win in their points of sale, they need to have a robust solution for their guests as well as a sound strategy. Having an air shopping strategy is often an overlooked but exceptionally important part of e-commerce business. And, there appears to be growing frustration with airlines that use inflexible and uninspiring shopping processes that do little to help consumers uncover the choices they seek. Previous issues of Ascend have included in-depth features about air merchandising and what it takes to implement a successful air merchandising strategy. Another vital aspect of the strategy is effectively taking opportunities and making them available to consumers. Airlines must determine which options to offer their guests and how best to display them on their websites so they can be easily identified. It should be considered much more than heuristics; it’s a complete air shopping strategy. An airline should think of its website as a virtual store. The shopping paths it offers and the creative ways it displays those fares is how customers view the product. Creative displays and easy-to-find merchandise almost always result in sales. They must be attractive to draw the customer into the buying experience. After all, if a shopper is uninspired by a particular website or shopping experience, chances are he won’t buy anything and may not return to that “store” to shop in the future. Finding the balance between offering too much or too little is a delicate process. More content and decision-making paths can result in longer look-to-book times. Too little choice in shopping opportunities can result in consumers feeling they are missing something and lead to shopping multiple sites, particularly if they are successful in finding alternatives in other sites. A carrier needs to determine whether or not its product line is too complicated to allow less air-shopping-savvy consumers to quickly find what they need. The consumer shouldn’t have to be an expert on the airline’s product and fare structure to get through the purchase experience.

the strategies and solutions are agreed upon by all stakeholders, only then can a successful solution be rolled out into the marketplace. There are several possible shopping strategies that have associated benefits and risks.

Price-Only Strategy

Designed for the low-fare enthusiast or cost-conscious buyer, this strategy provides consumers with the cost of the trip and allows flight choices to be based on the fare alone. This is the most simplistic approach and enables the consumer to select flights and associated fares based on availability. Conversion rates are excellent because there is a single shopping path, and time to book is quick. However, the risk with this strategy is perhaps the consumer is less price driven when it comes to airfare. And, for a full-service airline, the consumer is unable to realize the breadth and depth of product offerings.

Informational Strategy

Specific to the analyzer or informationhungry consumer, using this strategy, if the

item or fare is available, then the consumer will have the option to see it. By providing as much information as possible and as many choices as possible, the consumer makes an educated choice influenced by an abundance (perhaps over-abundance) of information. The benefit is the customer feels as if the choice was made truly based on all the options available. The risk is more information and time to analyze results in longer conversion times as the consumer sorts through various choices and shopping paths. And, even after analyzing, the consumer may find it too difficult a task to decide and move on to another site to purchase.

Time-Is-Everything Strategy

This strategy is aimed at build-your-owntrip or schedule-driven consumers — those who don’t really worry about the cost as much as convenience or schedule. Predictably, this is usually geared toward business travelers who operate on a time schedule that has been predetermined. It is most valued as a shopping strategy in a corporate portal, giving consumers quick booking paths, but

Shopping Strategies

Establishing a true shopping strategy requires a harmonious union between marketing dollars and information technology solutions. To ensure the shopping strategy is effective and addresses specific business needs, an inside-out approach is required. More specifically, an airline’s information technology group must understand marketing direction enough to suggest technical solutions, and its marketing team must understand the opportunities that are technically possible. Once

An airline’s website, when presented as a virtual store with appealing displays and easy-to-find merchandise, often results in ancillary sales. An unattractive, difficult-to-navigate site will likely turn customers away, and they probably won’t return to the site for future shopping.

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Online Leisure And Unmanaged Business Air Bookings By Booking Channel $120

$100

US$ billions

$80 Online intermediaries

$60

$40

Online suppliers

$20

Share of online air bookings

$0 2008

2009

2010

2011

2012

2013

Online intermediaries

31%

30%

28%

26%

25%

23%

Online suppliers

69%

70%

72%

74%

75%

77%

(numbers have been rounded)

According to Forrester, 77 percent of air travel booked online in 2013 is expected to be on supplier sites, up from an anticipated 72 percent this year and 69 percent five years prior. arguably not broad enough for the leisure traveler.

Bundling/Unbundling Strategy

For the pay-as-you-go customer, this strategy — one that a large number of airlines around the world are increasingly pursuing — may begin with a simple lowfare search that draws the customer into the buying process but provides opportunities to add other services as the consumer shops. This could be anything from adding insurance and pay-for-seat options to adding a rental car or hotel. Alternatively, the airline may elect to create a fare-family product with different bundles of products and services that meet the needs of specific customer segments. The primary benefit of these strategies is driving additional revenue through better customer segmentation or up sell and cross sell of other products and services. But, the strategies also offer consumers additional opportunities to complete their trip and create site stickiness. The risk involved is the customer may be confused by the choices or be shocked at the end of the 58 ascend

process to see the once simple low fare is now 200 percent higher than originally thought.

Leisure Strategy

Surprisingly, this strategy, designed for the consumer who wants it all, requires the most thought. Although leisure consumers generally provide the least amount of revenue on a per-passenger basis, this group tends to be a mix of cost-conscious guests who are looking for the best deals but have flexibility in their travel schedule. The benefit of this strategy is that it addresses the majority of leisure consumers who shop the airline’s website. The risk is that these passengers may tend to shop multiple sites before settling on their purchases.

inconsistencies in shopping experiences. If consumers know they will get one deal by calling a reservations office and another by booking directly on the website, they will shop every possible avenue before making a choice. An airline should strive for consistency across all channels to mitigate this risk. A successful shopping strategy will: Boost revenues — The more effective the shopping strategy, the better conversion rates and look-to-book ratios will be. Conversion and look-to-book rates all have an impact on the bottom line, particularly if the e-commerce site is the primary purchase point for the carrier’s consumer base. Increase loyalty — When a consumer feels he consistently finds what he is looking for, at the appropriate price, he will repeatedly return to that particular airline. Empower the customer — Enabling the power of choice means giving consumers the opportunity to choose the fares, services and products they value most. A successful air shopping strategy will enable customers to feel empowered by their purchase. Deliver brand awareness — An airline’s brand begins with its strategy. However customers shop and wherever they shop, the brand should be there to serve them. The answer to having an effective shopping strategy may be a combination of two or more of the specified methods. Careful evaluation needs to take place to discover what works best for an airline’s specific line of business, and it should be consistent with its brand promise and customers’ expectations. For most, an e-commerce site is the primary entry point for customers. It presents an airline’s brand and provides the first opportunity for them to purchase a service. Couple this with delivering the best fares in an easy-to-find but creative format, and consumers will reward their airline of choice with a long-term business relationship. a

The Value

The success of a shopping strategy can be measured in multiple ways. And airlines need to consider the various points of sale where they will distribute shopping strategies. Having a product in multiple points of sale (direct and indirect) is often necessary, but those gains may be offset by

Brian Borg is the product marketing manager of Airline Shopping Solutions for Sabre Travel Network ® and Sabre Airline Solutions ®. He can be contacted at brian.borg@sabre.com.


TRAVEL AGENT OF THE FUTURE By Jenn Petric | Ascend Contributor

Photos: Jupiter

As technology continues to advance inexorably on all fronts, travel agents and agencies continue to evolve, with their business success anchored upon and closely tied to technological advances. As the highest-yielding sales channel, it’s essential that these capabilities are developed to support agencies.


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echnology has always been — and will always be — a mission-critical component of the agency channel within the travel industry. In fact, a strong argument can be made that because of its global demands for quick, timely, accurate and highly accessible yet ever-changing information, the travel industry has long been a key element spurring innovation and expansive development in information technology. It’s also quite evident that the broad range of technologies employed by travel agents over the years has helped make the agency sales channel a vital element in the marketing plan of almost every airline. Burgeoning travel technology has enabled the agent to draw up the best itinerary for the individual traveler and efficiently fulfill and service the end-toend travel-reservations process. And the trend continues. Every day, technology seems to evolve even more rapidly than the day before — changing, among other things, the way significant numbers of people connect and interact. Some of these changes have effectively made the technologies that agencies use more accessible, scalable and easy to use, and the changes have also enabled “virtual” connections and relationships throughout the channel — from airline, to agent, to consumer. Highlight

Technology has always been a mission-critical component of the agency channel within the travel industry.

Nonetheless, for the agency path to remain the highest-yielding sales channel, which it has traditionally been for carriers worldwide, this sometimes mind-boggling progression in technology must be closely associated with and directly applied to fundamental needs within the travel industry. For example, new communication conduits that have recently emerged require instant knowledge and answers, virtual relationships, and constant interaction. So travel agents must be fully equipped with the appropriate technology to enable them to effectively participate in these communications arenas. 60 ascend

Because of the broad range of information technology used by travel agents, this channel has become essential to most airlines’ marketing plans. For agents to continue to quickly produce the best results for travelers and effectively complete the reservations process on behalf of carriers, technology must be available in a scalable form.

New sales models such as the corporate call center and the “remote agent” must have full capability to take advantage of these technologies in the same ways a “traditional” agent can. To accommodate these new sales models, the latest applications and functionalities must be available in a scalable form. The Sabre Travel Network® vision for the future captures the emerging technologies that not only cross through the travel industry but serve to indelibly alter its landscape. These technologies will not only enhance the agent’s service capabilities in dealing with the end consumer but will also continue to elevate the agent’s performance and genuine value as a sales channel to airlines. There are several major categories of technological development that are currently in the process of fundamentally altering the ways in which the agency channel works — with what may often prove to be startlingly positive productivity developments.

Multi Touch

Multi-touch technologies incorporate multiple touch points to enable the travel agent to manage and manipulate applications and data via LCD- or camera-based screen projection. Because multi-touch technologies are designed not only to enable but to prompt and encourage greater efficiencies through multitasking on the parts of travel agents, these technologies provide critical time-saving booking capabilities — fostering collaboration-based environments and applications, and introducing new, more-efficient workflow patterns.

The overall result: greater efficiency and productivity, meaning more bookings per agent/ hour.

Transparent Assistance

Transparent assistance technologies are basically intelligent robotics that will be employed to manage proactive notifications of events and what might be referred to as behind-the-scenes intuitiveness of modern applications. The essential importance of transparent assistance lies in several levels of enhancement of the work experience for the individual agent, greatly increasing the capability to automate tasks that the agent previously performed manually. These technologies essentially streamline the agent workflow while lessening any necessary training time and, once again, increasing agent productivity. Enhanced productivity, of course, means more bookings and completed sales transactions per agent/ hour.

Mobile Commerce

Mobile commerce represents the greater trend in the movement of business and social exchanges from personal computers to mobile devices. It’s a trend no one can possibly miss. In fact, the vast majority are already putting this technological advance into high gear simply by adopting and using more and more advanced communications devices (it’s no longer really even accurate to refer to these devices as cell phones — many


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of them essentially amount to mini-PCs that people carry everywhere). The entire movement toward mobile commerce effectively creates a critical need to think differently about business transactions in general — and there’s a further inherent expectation on the parts of consumers that more-advanced on-the-go applications are inevitably in the offering (which they undoubtedly are, although it’s currently unknown what many of those applications will be). But from a standpoint of the traveling public, one thing’s for sure: It’s where airline customers will be, and that makes it absolutely critical that the agent channel have a strong presence in this space. Many savvy and resourceful travel agents are already there.

Operational Intelligence

Operational intelligence will couple realtime operational insight with the immediate ability to act upon critical elements within the business. With more immediate capability to act, the agent is more likely to achieve positive results. Overall operational efficiency is thereby enhanced through ever-improved decision making. And streamlined operations are created through improved operational intelligence, elevating customer-service levels and helping ensure greater consistency in the quality of the customer experience.

Social Media

Social media actively represents and provides methods of communication combining technology with social interactions. Once again, social media encompasses some of the critical places customers are to be found — both today and in the future. But social media also enhances other vital agency capabilities such as accelerating information deployment and contributing to the growing trend of viral marketing, which serves to quickly build brand awareness. In addition, widespread consumer acceptance of social media has led customers to pick up the ball and run with it. Consumers use social media to discuss products, services and the companies that deliver them — those that have tapped into social media outlets can enable transparent communications and accept direct feedback from customers. And those companies are largely being rewarded for their openness and innovation in communicating with the people who buy their products and services. In a service industry and distribution channel such as that represented by the travel agent, the customer relationships that can be developed through social media are invaluable.

Fully Embracing Technology

All of these technologies support a more productive workflow never previously imagined and, as a result, agents will be faster and more efficient. Efficiency will lead to an

Sabre Travel Network’s vision for the future includes the development of superior technologies that not only support the entire travel industry but also permanently enhance its overall environment. These advancements will continue to boost agents’ performance and true worth as a sales channel to airlines.

increase in bookings per agent, which will mean more bookings overall. Enabling an agent to achieve multiple tasks at once accommodates complex reservations and workflows. Changes can be promptly processed, so the more complicated transactions such as refunds and exchanges can be performed quickly and with consistent quality. Operational efficiency in a corporate call center essentially means that an agency can be nimble and make policy or workflow changes (which come down from carriers and client corporations) on the fly. Enabling greater degrees of consistency and quality control upfront will effectively prevent these types of changes from interfering with the agency’s ability to continue productively creating reservations. Accelerating information deployment enables agencies to receive information from carriers faster than ever before. Giving an agent important information enables the agent to make the best possible decision when booking within the point of sale. With the agency channel being the highest-yielding sales channel — particularly in the corporate segment — it is crucial that these powerful technologies are molded into solutions that support agencies. These capabilities will contribute to reducing carriers’ costs, creating the ideal business scenario for all parties in the channel. Technologies such as mobile check-in have the potential to drive operational costs out of a carrier’s business model. And the global distribution system has and will continue to provide powerful capabilities that encompass the content, services and workflow enabling productivity and efficiency in the agency channel, providing carriers what may prove to be enormous returns on their longer-term investment. a

Jenn Petric is senior product marketing manager of Point Of Sale desktop solutions for Sabre Travel Net work. She can be contacted at jennifer.petric@sabre.com.

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CLIMATE CHANGE

China has experienced significant growth in the online travel arena and is expected, by the end of next year, to represent 20 percent of the country’s total travel revenues. By Siew Hoon and Benjamin Mussler | Ascend Contributors

Beginning in 2012, all airlines operating to Europe will be required to report CO2 emissions and will have emissions limits. Airlines need to prepare now to ensure they comply with the new legislation.


here’s no question that the growth of the travel market has been a real bright spot for China. One highlight last year was the impressive growth of online travel via online travel agents and supplier websites. “It is projected to grow at double digits for 2011 and 2012, and this should result in online representing 20 percent of total travel revenues by the end of 2011,” said Hans Belle, vice president in the Asia/Pacific region for Sabre Travel Network®. “This will influence adoption of online technologies and enablers such as advanced shopping/pricing platforms, Internet booking platforms, online booking tools, customer relationship management, and airline marketing and merchandising tools.” It is a segment that can only grow. China has the largest base of Internet users in the world (300 million people), of which more than 80 million have broadband capabilities. “The robust telecom infrastructure, greater availability of online payment options (online banking, third-party payment sites, credit/debit cards) and availability of high-quality media content have helped fuel the online adoption in travel,” according to a report by PhoCusWright. “Along with other e-commerce players like Taobao, sina.com, etc., travel meta-search players like Qunar and Kuxun have also experienced rapid growth.”

Drive Toward Direct Web Bookings

One supplier that has made great strides in driving direct online bookings has been 7 Days Inn, China’s third-largest budget hotel group. Its Chief Executive Officer Alex Zheng recently outlined expansion plans — from the current 320 hotels to 1,800 during the next five years — and said that more than 60 percent of its sales comes from online reservations. With similar ambitions, Chinese airlines have been investing in their online presence. “Airlines in China have begun to take their online presence more seriously,” said Brett Henry, vice president of marketing for Abacus International. “The growth of the supplier direct is now as fast as the online travel agents. The carriers now appear to be making the right investments in technology, processes and people to leverage and derive benefits from the online environment.” As consumers in China continue to have more travel shopping options, airlines recognize that they have to pay closer attention to the online space to compete with OTAs such as Ctrip. Ctrip caters to the Chinese market — aggregating information on hotels and flights and enabling customers to book online. Like other OTAs, Ctrip also sells packaged tours that include transportation and accommodations. According to PhoCusWright estimates, in 2008, Ctrip sold every tenth air ticket in China, aggregating air bookings of about US$2.5 billion. The value OTAs such as Ctrip provide to consumers can be seen in their immense growth. Ctrip airline ticket sales have skyrocketed in the past three years. In 2008, Ctrip booked more than 14 million air tickets, more than a 350 percent increase from its 2005 air bookings.


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Preferred Mode of Transport

6% 7% 46%

1% 7%

1%

5% 40%

44%

1% 16%

Air Train

54% 13%

18%

55%

Bus Own car

40%

46%

26%

41%

26%

Beijing

Shanghai

Guangzhou

Chengdu

Xian

Source: PhoCusWright’s The Emerging Online Travel Marketplace in China Report, 2009

Record economic growth has stimulated China’s travel industry, which is currently positioned to surpass Japan as Asia’s largest travel market. In terms of passenger volume, China already has the largest aviation market, and the country is experiencing significant investments in travel, tourism and infrastructure across all sectors, including rail, road and airports.

the heart of the Web shopper in some other fashion to sustain long-term site loyalty. In any case, actions such as these represent the growth of “choice” for Chinese consumers. Additional actions have included the expansion of travel offerings by airlines on their websites. Air China, for instance, has signed a partnership with Expedia Affiliate Network, which will see the Expedia hotel product offering available for booking through Air China points of sale across 27 markets globally.

Abacus’ Henry sees this growth as a win for the consumer. “We can expect to see Chinese carriers competing more aggressively with the OTAs in that space,” he said. “Metasearch will also dramatically increase, which will mean better service and options for both consumers and suppliers.” And airlines in China are not waiting to make changes. For example, Air China and China Southern have introduced Web-exclusive fares to drive direct bookings from their websites. Time will tell if exclusive Web fares will work in the Chinese market. In the short term, they represent a great way to drive customers to a site. But building loyalty based solely on price may represent only a short-term advantage — if low prices go away, airlines will have to capture

TravelSky And China

The greatest of intentions can only be realized if supported by the right foundations, and the biggest question that begs asking is, “How does

Top Websites Used For Air Search 41%

baidu.com

35%

ctrip.com

27%

airchina.com.cn

18%

google.cn

14%

elong.com

9%

qunar.com

8%

kuxun.cn

6% 5% 4%

mangocity.com sina.com.cn cs-air.com

Two years ago, Ctrip sold every tenth air ticket in China, collecting about US$2.5 billion in air bookings. Today, the online travel agency possesses a 35 percent share of the top websites used for air travel searches in China.

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the state-owned GDS, TravelSky, fit into this whole scenario?” On its website, it declares its aim to be “a worldclass company with international competitiveness.” For this to happen, many argue that some sort of deregulation must occur in the Chinese travel marketplace. “This will impact both airline distribution and technology in the travel space,” said Henry. “Deregulation will certainly open up the travel industry in China to a high degree of change and push the industry to move at an even faster pace than before.” The decision to deregulate “is not up to TravelSky to decide,” said a TravelSky source. “Our purpose is to compete in all situations, whether the market is open or not. We have to ensure our technology is friendly and easy to use, we help travel agents upgrade from green screen, and we offer e-commerce support to our partners to support their Web business.” One area it is focusing on is the corporate travel market, and it recently signed a partnership with Carlson Wagonlit, in addition to an earlier agreement with American Express. “In China, corporate travel is only beginning,” according to TravelSky. “It’s like Europe or the United States 20 years ago. More and more companies are catching on to the idea of corporate travel management practices, and TMCs are looking for solutions to suit their customers. They want to develop local booking tools with the support of TravelSky as they know they have to adapt to cultural and customer preferences.”

Going Global

But as the players in the Chinese travel space continue to look for ways to expand, entering the international e-commerce segment is where they will face the most challenges. “For Chinese airlines to succeed in the international online space, they have to compete with global carriers, and they have to work on things such as branding, user experience and customer service,” said a Chinese airline source. Likewise, TravelSky remains on the lookout for the right strategic partnership with a global GDS. “We hope to cooperate with other GDSs to forge win-win relationships to help our customers expand their business globally. But we won’t just wait for it to happen — we will also do our best to expand our business globally. We will develop our own plan.” And if the recent history of the growth of the Chinese travel market is any indication — Chinese carriers, OTAs and TravelSky will put their global growth plans into action sooner rather than later. a Siew Hoon is editor at large for SHY Ventures and Producer of WIT-Web In Travel. She can be contacted at siewhoon@webintravel.com. Benjamin Mussler is an airline distribution solutions marketing partner for Sabre Travel Network®. He can be contacted at benjamin.mussler@sabre.com.


Value Articulation

Not only is it critical for airlines to take advantage of every possible distribution channel to sell their offerings, it’s also vital that the value of these products is clear and can be easily identified to achieve maximum sales potential. By Benjamin Mussler | Ascend Contributor


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n an age where various technologies, tools and channels help direct customers to an airline’s products and services, how can an airline ensure its value proposition for these items is effectively marketed through each method of distribution? Decision makers need to ask their marketing and distribution managers about value proposition. Just as new technology continues to offer airlines more ways to differentiate their products and services, the Internet gives travelers more ways to research and determine their travel options on their own. While ancillaries may provide more ways for a carrier to differentiate its services online, many consumers base their decisions on price. Therefore, it’s crucial for an airline to explore ways to ensure that the value of these ancillaries is clearly defined and becomes a key reason consumers choose its offering over the competitions’.

Ancillaries Or Travel “Fees”?

Ancillaries offer a great way to differentiate an airline’s products and generate additional revenue. It is estimated that half of all airline passengers paid a travel fee during the past year and, as Forrester Research suggests, “travel fees such as those to change a ticket or reservation are old hat in the travel industry.” But 2008 saw the emergence of new fees, including those for checked baggage, seat selection, and in-flight food and beverages. The data shows that 50 percent of U.S. online airline shoppers have paid for at least one optional “value-added” service in the past 12 months. Unfortunately, the vast majority of those “value-added” ancillaries purchased are purely labeled and defined as additional “fees.” But it’s not all bad news. The data shows that there are opportunities to capitalize on items that are not considered a fee but rather an option or choice. For example, the study showed that 19 percent of leisure and 21 percent of business travelers chose to pay for an in-flight meal or snack. Thus, there is potential for these ancillaries to bring true value to customers instead of just providing a new way for an airline to collect more money on a service that was once part of the traditional airfare. Carriers that innovate beyond meals and offer new, unique ancillaries consistently through all distribution channels have the potential to generate a wealth of untapped revenue and product differentiation. To succeed in this area, however, airline distribution and marketing management teams need to follow a solid multichannel strategy that includes sale of ancillaries in all places their seats are sold. Forrester suggests that airlines can maximize their 66 ascend

Leisure Versus Business Purchases Leisure air passengers Business air passengers 30% 30%

Fee to check baggage 19% 21% 17%

Meals or snacks on an airplane 11%

Fee or service charge to change a ticket or reservation

9%

6%

8%

Fee for a better coach seat (e.g. exit row, aisle)

5%

4% 4%

Fee to cancel a ticket or reservation

3% 2%

50% 45%

Pillows or blankets on a plane Single visit/day lounge pass None of the above

Base: U.S. online air passengers (multiple response accepted)

Recent data from Forrester Research suggests that there are opportunities to capitalize on items that are not considered a fee. Carriers that innovate beyond “meals” and offer new ancillaries consistently through all channels will clearly generate additional revenue.

ancillary sales prior to a flight by “reevaluating forms of payment and channels and website design and navigation” in their own direct channel as well as the sites of their distribution and travel partners.

Pre-Flight Sales

Many carriers have had great success with the sale of ancillaries and upgrades on the day of departure and/or in-flight (seat upgrades or meals for sale on board). But the opportunity to generate more revenue through the sale of ancillaries during the ticket-purchase and pre-flight phases of the travel cycle mustn’t be discounted. Their importance is two-fold because they: Present more opportunities to sell the customer on any given trip, Provide a more convenient shopping experience for customers because they can buy the services and “extras” they value prior to arriving at the airport or inflight. By offering the extras earlier in the travelpurchasing process, airlines can help boost their revenue by selling more ancillaries and improve the overall customer experience. Once on the trip, travelers are able to enjoy their entire trip because all of their “extras”

have already been bought and accounted for.

Shopping Around

Online consumers are increasingly price sensitive and technology savvy, so it’s imperative the value of ancillary services is clearly stated in all distribution and marketing channels. “Click words” and other search engine-driven marketing tools can be expensive and too repetitive to capture the customer. The typical bid price for key words ranges between 30 U.S. cents to more than US$2. This seems relatively inexpensive but can be misleading because the airline must pay per click (regardless of whether it results in a sale). A Sabre Holdings® analysis, reported in an earlier issue of Ascend, estimated a click-through conversion rate of only 3.37 percent, and showed that it could cost carriers upwards of US$10 to US$50 per booking when the entire cost of a “clickword” Internet search marketing program is allocated to those bookings that are actually purchased. This cost could be justified if this method of acquisition built strong, loyal relationships with customers. However, this would


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Supplier And OTA Air Shoppers Who Also Visit Non-Transactional Categories

45% 40% 35% 30%

CHART TO FOLLOW

25% 20% 15% 10%

Supplier Air Shoppers 2Q07

Destination and Tourism

Planning and Reviews

Metasearch

Lead Generators

Travel Guides

Destination and Tourism

Planning and Reviews

Metasearch

Lead Generators

0

Travel Guides

5%

OTA Air Shoppers 2Q08

2Q09

2009 PhoCusWright Inc. All Rights Reserved.

PhoCusWright data indicates that online consumers are not becoming more loyal but are using even more tools to research travel beyond a carrier’s website. Shoppers often visit supplier websites or online travel agents.

require customers to be price insensitive, carrier loyal and not prone to shopping around for the best deal. This is not the case with many travelers, for example, when one views the growing popularity of online travel agencies as search engines. Recent data from PhoCusWright indicates that shoppers generally start their searches with an OTA and then go to the supplier website to purchase once the cheapest price has been found. The report, which analyzes online travel purchasing habits from January 2007 through June 2009, found that roughly 70 percent of online air, hotel and car rental consumers transact with the respective supplier sites. While this could be considered good news for the airline’s direct channel, additional research indicates online consumers are not becoming more loyal, but instead are using even more tools to research travel beyond a carrier’s website, reaching out to travel agent or OTA to find the best deal. Compete Research reports a significant portion of air shoppers who visit a supplier site or OTA also visit sites

within the non-transactional categories, such as lead generators and destination and tourism sites, during the same month they purchase travel. For shoppers who generally purchase via a supplier site (airline.com), two types of sites in particular have experienced growth during the past two years — travel guides and planning and review sites. During the past year, even more of the shoppers who use OTA sites to book travel visited planning and review sites.

a specific region or country to better articulate the value of their products to agents. These types of campaigns have average click-through rates of up to six times higher than the industry average. GDS and travel management company relationships — Although it is essential for a carrier to maintain its own healthy relationship with the TMCs, it is also beneficial to ensure that the GDSs with which an airline participates understand its needs. An airline should meet with its GDS partners on a regular basis to ensure they have a good working knowledge of the carrier’s value proposition. Questions to ask include: • Does the GDS help TMCs improve automation? • How is the GDS ensuring that the value of the airline’s products is being communicated? • Can unbundled and ancillary offerings be distributed through the GDS? • How can the GDS help target the airline’s offering at specific customer segments? Online travel agent marketing — OTAs can significantly help carriers increase brand awareness and articulate value beyond hub cities. In a recent study, after extending its brand through increased OTA presence, one North America-based carrier increased sales of itineraries outside its hub city by 25 percent. It’s also essential for airlines to utilize the advertising and promotional tools of the OTA in which they participate. As the travel landscape continues to evolve, consumers will have more opportunities to research and determine the value of each carrier’s offerings. Therefore, it will be imperative for airlines to clearly articulate the value of their products. Whether it’s in the form of ancillaries, bundled offerings or a service — carriers must be prepared to capture consumers for the long haul by selling them value, no matter where or when they are shopping. a

Demonstrating Value

Increased use of non-transactional sites, better technology and more self service indicates that savvy consumers search for the best deals … those containing the most value. Airlines should clearly display the value of their products in the channels prospective customers are surfing. There are several ways airlines can ensure product value is prevalent in each channel: Global distribution system advertising — While distributing through the GDS, tools such as Sabre ® GDS Media suite enable airlines to target messages to

Benjamin Mussler is an airline distribution solutions marketing partner for Sabre Travel Network ®. He can be contacted at benjamin.mussler@sabre.com.

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On “Cloud” Nine Talking Technology with ... Barry Vandevier Moving from a mainframe environment to a service-oriented architecture on open systems represented a major technology jump for Sabre Holdings® and its air transportation customers. But it doesn’t stop there. Next steps include the application of cloud concepts to take SOA to the next level.


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hrough the early 1990s, life in technical operations at Sabre Holdings was relatively straightforward. In a world dominated by mainframe computing, there were few systems with which to worry. And, when a production issue occurred, one only had to search in a handful of places to identify a root cause. The tools available to manage the mainframe environment were mature and robust, enabling rapid response time for troubleshooting and resolution. In addition, because all of the system resources in a mainframe environment are managed at an extremely granular level, the fix or removal of an offending piece of code could take place within minutes. On top of that, with 100 percent of capacity in a mainframe environment being shared, scale was easy to predict, and planning for additional capacity was a straightforward exercise. Even with all the benefits of a mainframe environment, the reasons for our move to a service-oriented architecture, or SOA, on open systems were obvious. Certainly cost and the commoditization of the midrange hardware space were critical considerations, but it wasn’t just a matter of compute cost. In reality, for simple, high-volume, critical transactions in steady state, a mainframe environment cost when fully loaded with the cost of operations was not outrageously more expensive than those in a midrange environment (which will continue to be challenged by Moore’s Law). But, as more and more of the travel market moved online, look-to-book ratios skyrocketed — consumers demanded much richer content and many more options within seconds of entering their search criteria. Further, the desire for personalized content required the ability to inspect and dynamically alter the information based on the needs of the consumer. For decision-support applications such as revenue management, flight scheduling, crew scheduling and movement control, open systems opened up a new world of options to support the need for flexibility and the importance of usability and the user interface. Combined with the introduction of extensible markup language, or XML, and rich open-systems development tools, building services on commodity hardware provided answers to both consumer demands and rising costs. Today, we process more than 700 million requests per day, peaking at over 32,000 transactions per second. Every one of these transactions is either entirely or partially processed on open systems. More than 20 percent of our requests enter through our Web services environment, and traffic in this environment has more than doubled within a year and includes nearly 300 available services. Our largest opensystems environment, by number of servers, is our air shopping environment, consisting of hundreds of midrange servers, managing more

As chief information officer of Sabre Holdings, Barry Vandevier oversees the corporation’s varied and complex technology functions across three business units (Sabre Airline Solutions ®, Sabre Travel Network ® and Travelocity ®). Since assuming this role in 2006, Sabre Holdings has been recognized for three consecutive years by InformationWeek as one of the “Top 100 Most Innovative Users of Technology.” Highlight

During the last several years, we have moved all our teams to an Agile development methodology, enabling us to build our solutions in smaller iterations and incorporate high-quality practices early in the lifecycle before a line of code is ever written.

than 8,000 messages per second and responding with hundreds of real-time flight options in a few seconds. Our Software as a Service, or SaaS, environment, Sabre® eMergo® Web Access, has been under development for more than nine years and hosts 119 airline customers across 23 open-system applications. On behalf of our air transportation customers, we leverage the latest and greatest in development tools. During the last several years, we have moved all our teams to an Agile development methodology, enabling us to build our solutions in smaller iterations and incorporate high-quality practices early in the lifecycle before a line of code is ever written. This focus has been for the sole purpose of improving the reliability of our delivery and product quality. In addition, by building our products as small, discrete services, we are able to greatly increase service reuse and leverage our global development resources more effectively, building more of our components in parallel while reducing development bottlenecks. This approach has also enabled us to use our solutions for broader purposes by providing better separation of user interfaces and business functionality as well as enabling more flexibility with the use of rules engines, standard middleware components and service orchestration. Having a sizable SOA environment doesn’t come without challenges. All of the system management benefits described in the mainframe environment do not inherently exist in the world of SOA. Proper monitoring, scale, redundancy and resiliency must all be engineered proactively into the environment. Failure to do so before a product is launched will only result in missed expectations. The amount of investment required to incorporate these engineering principles should not be underestimated. In our effort called “Design for Failure,” an initiative intended to identify potential points of failure so they can be avoided, we have invested millions of dollars building engineering capabilities required to operate a resilient SOA environment. In addition to dedicated technical operations, we have engineering, capacity and performance teams focused almost exclusively on our open-systems environments. We have built test environments to support both individual product testing as well as end-to-end integration and performance testing. We have incorporated standard monitoring tools and developed minimum operating standards, or MOS, that include policy, training and audits to ensure products are built to meet operational expectations before they are ever released to our production environment. Any products that do not demonstrate compliance with MOS specifications will not be released. These best practices were built over time through many years of experience with open-systems and SOA architecture.

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How does this relate to some of the latest “buzz words” in the technology industry? One of today’s most popular phrases is “cloud computing.” There are several definitions of this term, including the traditional application service provider, or ASP, and SaaS models where customers make use of product functionality hosted in a vendor’s environment. Cloud computing has also been used to reference the use of Web services from another provider’s products or services. I believe Larry Ellison, chief executive officer of Oracle, probably has the best definition of cloud. In his words, it is simply: “… databases and operating systems and memory and microprocessors and the Internet.” When looking at these more traditional definitions of cloud, it would be fair to say we have been in the cloud business for quite some time, primarily focused in solutions supported as SaaS or through Web services. However, there are new, more leading-edge definitions of cloud that go further, advocating the use of a complete virtual instance of an environment where customers load their own applications on a virtual service without any knowledge of the underlying infrastructure (Infrastructure as a Service or IaaS). While there is no doubt that

IaaS will evolve into a mature capability in the future, it is difficult at this stage to consider an infrastructure service environment for highly scalable, complex solutions that process data updated thousands of times a second requiring huge amounts of interconnectivity with other external services. One benefit of all this hype is that investment in cloud computing has already resulted in innovations by leading technology providers that will assist in dramatically improving the creation and manageability of SOA environments. It will drive increased operational maturity and additional cost advantages through better automation, monitoring and resiliency that are available “out of the box” in an open-systems world. We expect that the ability to interoperate across potentially heterogeneous cloud environments will become much easier and more manageable. And, with better automation, we will have the ability to seamlessly bring capacity online to support new load demands within a matter of seconds, or even shut down hundreds of servers to conserve power during off-peak hours, which we call “organic server management.” The expectation is that in the not-too-distant future, the operational resiliency we have taken for granted in a mainframe world

will also exist out of the box in an open-systems environment. We have made a very thoughtful and deliberate transition over many years from a mainframe environment to an open-systems, service-oriented architecture environment. We are aware of the value the mainframe provides but also recognize the advantages and flexibility we get with open systems that enable us to more quickly deliver products as services that better match your expectations. With our scale and your operational demands, we have learned many lessons along the way and have continuously reapplied those lessons to our standards and new releases of our solutions. Our research team is partnering with major technology providers to apply cloud concepts to our environment in a way that we truly believe will take our SOA capability to the next level. As we continue this journey, we welcome your active participation, as there are many things that we can learn from each other along the way. a

Barry Vandevier can be contacted at barry.vandevier@sabre.com.

+count it up 40 billion

1978

31.9 million

The number in freight ton kilometers

The year in which the United States

The number of jobs worldwide sup-

managed by Sabre AirVision™

removed government control over

ported by the air transport industry,

Cargo every year, two-and-a-half

commercial aviation. Since then, fare

about the population of Dallas, Texas,

times the amount FedEx ships

prices have fallen by half, while

and Tokyo, Japan, combined.

worldwide annually.

passengers traveling have almost tripled.

44+ million

1,762

29

The amount in tons of freight aviation

The number of airlines operating 20,806

The percentage of global aviation

carries annually, about 35 percent of

jets and 6,153 turbo props in 2008.

impacted by the Iceland volcano.

®

world trade by value.

According to IATA, the volcano affected 1.2 million passengers a day.

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ASCEND I COMPANY

For a decade-and-a-half, airline executives from around the world have provided valuable feedback each year in a variety of areas that help evolve the products and services provided by their information technology partner, Sabre Airline Solutions速. By Steve Clampett | Ascend Contributor

Photos: Jupiter

No Blind Spots

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A

little more than 15 years ago, Sabre Airline Solutions sent its first customer satisfaction survey to the 300 or so executives of the airline community. At the time, no one knew quite what the response would be or the changes that would evolve as a result of the customer feedback received. The customer satisfaction survey is a formal, consistent instrument for understanding trends, judging product perceptions, finding or reinforcing areas needing improvement, validating areas doing well and determining where to concentrate efforts. Bottom line: it’s a way of ensuring there are no blind spots. Comprising 16 questions, the survey asks customers their opinions about six key areas: 1. What is your perception of our solutions? 2. What is your perception of Sabre Airline Solutions versus its competition? 3. What do you think of our customer care? 4. What do you think of our account management teams? 5. What do you think of the different pieces of our service offerings? 6. And, of course, the big one: Would you do business with Sabre Airline Solutions again? Generally, much of the survey feedback received has already been gathered from other sources, including account management teams, user groups and airline executive visits. However, the customer satisfaction survey is conducted by an independent international marketing research firm that collects and analyzes the feedback in an objective, unbiased manner. The survey results are then provided to Sabre Airline Solutions for dissemination to the appropriate departments, which, in turn, respond with the necessary actions.

And The Survey Says …

The employees of Sabre Airline Solutions continue to be its greatest asset. This was indicated in the first customer satisfaction survey, and little has changed over the years. Although

Airline executives who took the Sabre Airline Solutions survey indicated that help desk staff needed more technical expertise. As a result, first-line support personnel now receive additional training and the first-call resolution rate has improved considerably.

competitors may attempt to duplicate Sabre Airline Solutions software lines and product code, the breadth and depth of the sales and account management teams’ subject matter expertise is impossible to duplicate. Our roots run deep in the airline industry, and this is our biggest differentiator in the marketplace. Sabre Airline Solutions is also a truly global company. Five years ago, the company was locally based in Texas. Today, its global footprint is far reaching and includes offices in Krakow, Poland; Bangalore, India; Manila, Philippines; Montevideo, Uruguay; as well as others

Airlines around the world have access to Sabre Airline Solutions experts who are located in a variety of offices throughout the Americas, Europe, the Middle East, Africa and Asia, including Krakow, Bangalore, Manila and Montevideo.

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throughout the Americas, Europe, the Middle East, Africa and Asia. The goal is to be as close as possible to our clients worldwide. The survey has also been helpful in pointing out weaknesses and areas needing improvement within Sabre Airline Solutions. In fact, the company has undertaken some significant changes during the past five years. While not all of them have been a direct result of survey findings, many are, at least in part, a response to the feedback received. While Sabre Airline Solutions has made notable progress in the consistency of its solutions, product delivery and customer care, survey results indicate more work is still needed. Because most customers purchase a “basket” of solutions from the company, they expect, as well they should, the entire package to look and perform in a similar manner. We’re pushing hard to establish a unified product development methodology, a single delivery methodology and an account management policy that is consistent across all product lines. The objective is to provide each airline with high-level and high-value service every time. In addition, Sabre Airline Solutions created the role of customer delivery executive within its Customer Service and Delivery organization to adequately meet the needs of its larger airline customers. These CDEs are specifically focused on and responsible for the delivery of all products to each of these larger, strategic customers, and they have been well received by the airlines.


ASCEND I COMPANY

Survey feedback also reveals products from Sabre Airline Solutions have a high degree of brand recognition within the airline industry. If an airline needs a solution, Sabre Airline Solutions is a player in virtually every category, with one or two other competitors on the list as well. We constantly strive to be true to our brand and understand our customers’ expectations. When a solution is developed and delivered, first and foremost, it must work properly in the customer’s business environment. An airline purchasing a product from a “boutique” competitor may be more forgiving if the solution fails to deliver as promised than if the product was purchased from Sabre Airline Solutions. To help meet customer expectations, Customer Service and Delivery is now partnering with clients through an interactive pilot program. It’s a way to engage customers earlier in the process by allowing them to use solutions on a trial basis to refine their requirements and better understand product features and benefits. The pilot program has been particularly successful with Sabre Airline Solutions crew products and will be applied consistently across all product suites. Also in the area of customer support, survey respondents noted that the help desk staff

needed more technical expertise to sufficiently answer product queries and troubleshoot issues. In response, the first-line support people have received a great deal of additional training, and the percentage of first-call resolutions has increased significantly. Product documentation has also been identified as an issue in the survey. Respondents have asked Sabre Airline Solutions to provide additional user, technical, business simulation and training documentation. While it would be virtually impossible to maintain large books of printed product information, much of this is now available on the Sabre® Community Portal. The portal’s online knowledge center includes user manuals, product plans and release notes as well as the latest software downloads. Quick reference instruction guides and product demonstrations are also available. At the other end of the spectrum, Sabre Airline Solutions spent a great deal of time last year fine-tuning its product portfolio and corresponding marketing messages. Feedback from a number of channels, including the satisfaction survey, indicated customers appreciated the wide range of products and services offered, but had difficulty completely understanding the company’s solutions portfolio. In response, the

product portfolio has been repositioned into three key suites — Sabre® AirVision™ Marketing & Planning, SabreSonic® Customer Sales & Service and Sabre® AirCentre™ Enterpise Operations. As well, marketing messages were simplified and clarified, transitioning from an emphasis on the technical aspects of products and services to focusing on the Sabre Airline Solutions Advantage SM — flexibility, accessibility, choice and experience — our customers receive. To help carriers survive and even thrive in today’s airline industry, Sabre Airline Solutions relies heavily on the input of its customers. They shape future solution direction by expressing their needs and actively participating in the product planning, delivery and support processes. a

Steve Clampett is president of Airline Products and Solutions for Sabre Airline Solutions. He can be contacted at steve.clampett@sabre.com.

+count it up 1.9+ billion

6.5

736 million

The amount in U.S. dollars the

The percentage of total revenues, of the

The amount in U.S. dollars collected

airline industry collected in ancillary

32 carriers that reported to BTS,

in baggage fees during October

fees during the fourth quarter of

generated by ancillary fees. In 2009,

through December last year,

2009, according to the Bureau of

the carriers collected US$7.8 billion

according to BTS. US$564 million was

Transportation Statistics. This repre-

in ancillary fee revenue, compared to

collected for reservations change

sents an 18.3 percent increase from

US$5.5 billion the previous year.

fees and US$611 million from other

the same quarter the previous year.

ancillary fees, such as pet transportation fees and frequent flyer award program mileage sales.

79

1,400

The amount in U.S. dollars per barrel

32 million

The number of aircraft expected to be

The amount of jobs the aviation

of oil IATA forecasts this year, an

delivered this year, which, according to

industry supports, according to IATA,

increase of US$17 over last year. This

IATA, puts the industry at risk for over

equating to US$3.5 trillion in economic

means fuel will rise from 24 percent of

capacity.

activity.

operating costs to 26 percent.

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LIGHTEN THE LOAD

By Dave Roberts | Ascend Contributor

Photos: Jupiter

With its continuing rapid development and deployment, the electronic flight bag doesn’t simply represent the future. Electronic flight bags, in fact, are already on many commercial carriers’ flights today.


ASCEND I SOLUTIONS

F

rom the very early days of aviation, pilots have relied on information printed on paper — and with the increased complexity of air travel and the ability to fly longer distances, the large amount of paper necessitated a separate bag for the pilot to carry to and from the aircraft. The “flight bag,” as it became known, is a physical satchel or briefcase in which the pilot carries numerous documents that may be needed during the course of a flight — documents including flight manuals, operation manuals and approach plates. Today, evolving technology in aviation has transformed the physical flight bag into an electronic information storage unit that has come to be commonly referred to as the electronic flight bag. And EFB has continued to grow — from simple solutions such as global-positioningsystem capability and real-time weather display, to electronic approach plates and airfield diagrams. EFB scope and capabilities are expanding daily. Government regulatory guidelines represent a clear indication of EFB acceptance by the airline community and those who oversee flight operations. Aircraft manufacturers are closely involved, building new aircraft equipped with hardware and connectivity capabilities. Software and hardware suppliers are continually announcing new designs and development of new components for various EFB classes. The technology evolution has become an EFB revolution, with more and more carriers expressing eager interest in the capability and potential of new technology onboard their aircraft. New aircraft include EFB capability that is built into the avionics units onboard. Older aircraft are outfitted with ruggedized laptops that may either be mounted in the cockpit or removed from the aircraft after each flight. Three main components comprise a successful EFB solution: hardware, software and communications, each with unique providers. Carriers are faced with a complex task of determining the best solutions for their airline operations as well as making difficult choices regarding hardware and software vendors. These choices include the type of hardware and whether it should be removable, fixed or embedded in the onboard avionics system. A carrier must carefully evaluate the costs versus the hardware capabilities and the procedures used in its flight operations. Software is equally difficult to select since there are many different functions that have been automated and can be

utilized as part of the EFB solution. Again, the carrier must carefully weigh the value of the solutions versus the cost.

Problem Solved

From the outset, Sabre Airline Solutions ® recognized the super complexity of the electronic flight bag as well as the challenges carriers faced in deciding how to evaluate EFB vendors and making the right vendor choices for their specific airline operations. As a result, Sabre Airline Solutions launched new technology called Sabre ® AirCentre™ eFlight Manager, a comprehensive approach designed to work with a carrier’s personnel using the technology company’s expertise in consultative processes, industry affiliations and project management to provide a complete EFB solution. The vision included creation of a digital transformation effort merging several commercial and operational projects into a comprehensive business process. This effort reaches from the flight deck to ground-based systems, producing automated and lean processes across the entire airline system. Automation in EFB development enables each carrier to measure, manage and develop a culture of constant improvement. The foundation upon which eFlight Manager was built encompasses three core aspects: 1. In-depth analysis of a carrier’s flightoperations processes and procedures, 2. Critical evaluation of how these processes and procedures can be leveraged in an EFB solution, 3. Determining which of these may be judged likely to be more effectively and efficiently changed using the EFB technology. Sabre Airline Solutions experts apply their collective knowledge to begin the EFB project by developing a plan to introduce EFB into a carrier’s flight operations — including making recommendations to senior management in setting an EFB vision for the future. Sabre Airline Solutions professionals also review EFB applications and brainstorm on required functionality for the carrier. Select functions of the EFB are based on what can be best described as “common sense” that should be inherent in the initial phase of implementation. As part of this initial phase, a review is undertaken to determine the relative advantages of either continuing with an older, yet effective, procedure or changing to become more efficient. Sabre Airline Solutions also works diligently to build an understanding of the

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An Electronic Flight Bag includes all documentation and forms carried by pilots, such as aeronautical charts, manuals for fault reporting and operations, minimum equipment lists, and logbooks. Its weight-and-balance calculator enables pilots to instantly determine the ideal speeds and engine setting for an aircraft, in any weather, on any runway, with any payload.

data-management aspects as well as data readiness and education of carrier personnel about the difference between current paper processes and future electronic processes.

Advantages Accrue Quickly

Once eFlight Manager has been implemented, it enables a carrier to optimally manage items including digital content — from publishing through delivery — and the carrier can track content throughout its lifecycle. In addition, the carrier has full capability to configure content — by tail and device — and for content archiving to satisfy both historical and regulatory purposes. Overall, the solution consists of people, processes and tools — data-management tools for the administration of EFB content and EFB applications that actually drive value and safety improvements. The Sabre Airline Solutions approach also encompasses a change-management process enabling crews to more easily replace the carrier’s legacy paper culture as well as

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expansion of the carrier’s intranet services and document-management systems. The solution has been designed with capabilities for identifying a carrier’s optimum hardware and software solutions and a workshop approach to aid in determining the best processes through which the carrier can deploy and utilize EFB. Additionally, eFlight Manager includes the “solution-proposal” process — encompassing the vision, solutions components, implementation phases, project timeline, system architecture for respective phases, data services, data management, communication infrastructure, software and cockpit hardware. The solution also includes an EFB readiness check, a high-level businessprocess review and identification of further cost-saving opportunities (based on the individual carrier’s applications).

Cost-Savings Opportunities

Moving from a paper-based to a paperless process, the industry-average cost reduction is substantial: approximately US$150,000 to US$200,000 per year per aircraft.

The value depends on the applications selected in a carrier’s EFB solution and varies by customer, region and type of operation. A representative industry sample (with results calculated from process workshops) showed a 75 percent reduction in process time, a 36 percent reduction in flightoperations working time, a 28 percent improvement in ratio to total labor time and a 48 percent reduction in process costs. Areas that can be readily identified for potential cost savings include a printing cost reduction, a significant paper-saving cost reduction, a weight reduction (a further positive result of which will be fuel savings), a communications cost reduction and a cost reduction related directly to the fact that there will be no more manual processing of trip-file information. Also, savings opportunities materialize due to better payload distribution resulting from greater accuracy in takeoff-point calculations, reduced handling fees, optimized flight-planning results (compare actual versus planned costs to calculate specific savings), general process-cost optimization and cost reduction through selection of best-value vendors. EFB results to date have shown that it is, in general, following the industry pattern previously observed in the evolution of ticketing (starting with paper-based tickets and various automation and paperless phases to even greater savings through wireless check-in and handheld boarding control through use of mobile phones). Over many years of development effort, continually improving wireless capabilities resulted in greater convenience and improvement in ticketing, check-in and boarding processes for passengers. And although EFB at various stages has been available in the industry for many years, it now exhibits the consistent potential for return on investment that is required to justify retrofitting aircraft currently in operation for EFB processes. Making the correct choice about hardware, software, communications and implementation is a major decision for today’s carrier — and the selection process and efficient deployment of EFB are vital to success that can be provided to an individual carrier by eFlight Manager. a

Dave Roberts is senior principal in airline and flight operations strategic planning for Sabre Airline Solutions. He can be contacted at dave.roberts@sabre.com.


ASCEND I SOLUTIONS

GateManager AirTran Airways leverages the new, powerful Sabre Ž AirCentre™ Gate Manager, a real-time flight monitoring and gate management decision-support solution that efficiently gates a flight schedule and helps pro-actively respond to irregular operations. By Lauren Lovelady | Ascend Staff


ASCEND I SOLUTIONS

W

hile many airlines are still trying to recover from the economic downtown of the past couple of years, other carriers, particularly low-cost ones such as AirTran Airways, posted fourth-quarter and even yearly profits for 2009. In fact, AirTran Airways experienced a record full-year profit due in large part to its growing operations at Milwaukee, Wisconsin’s Mitchell International Airport. It’s not surprising then that the airline made a major commitment to the Milwaukee area at the end of last year by announcing the establishment of a secondary hub at the airport, bringing with it additional jobs and pilot and flight attendant bases. AirTran Airways began flights to Milwaukee just seven years ago from its primary hub in Atlanta, Georgia, and is now the second-largest carrier operating there. Currently, it operates 52 departures a day from its new hub to 22 destinations. “For each of the last three years, we have doubled the size of our presence in Milwaukee in terms of our flights, our employees and the numbers of markets served,” said AirTran Airways Vice President Kevin Healy. But growth does not come without growing pains. Like most other carriers, AirTran Airways has focused on cutting costs, generating ancillary service revenues, increasing capacity on profitable routes and trimming unprofitable ones, more efficiently utilizing resources, and improving processes. To assist with these

tasks, the carrier is teaming with Sabre Airline Solutions® to incorporate the latest technology into its operations. Most recently, AirTran Airways served as the launch customer for the new Sabre® AirCentre™ Gate Manager, a real-time flight monitoring and “event-triggered” decision-support solution that helps ensure each aircraft is assigned a suitable airport gate to park at a designated time. Using data from an airline’s flight operations system, Gate Manager evaluates the information, analyzes changing conditions, alerts users to potential problems — sometimes hours in advance — and automatically disseminates updated gate information, making it available to all dependent systems, including flight operations, airport FIDS and boarding pass printers. By proactively addressing potential issues, airlines can minimize operational disruptions and passenger and baggage displacement as well as reduce tarmac waiting times and taxi fuel burn for their aircraft. AirTran Airways implemented the new version of Gate Manager for a handful of key users at its Atlanta hub, which has approximately 280 daily departures. The airline was already utilizing a previous version of the solution at the hub. With the ongoing feedback provided by AirTran Airways, Sabre Airline Solutions continues to fine-tune the gate management technology for the airline’s Atlanta hub. In the meantime, the carrier also recognized the need for an automated, real-time gate management solution at its expanding Milwaukee operation.

The new version of Gate Manager was installed there and is in full production, replacing the airline’s manual processes in place until just a few months ago. “It was a rewarding experience to provide input into the new version of Gate Manager and act as the launch customer,” said Michael Bernardo, Atlanta Command Center manager for AirTran Airways. “The new and improved functionality captured in this version will enhance any carrier’s ability to make time-sensitive decisions with broader knowledge of all the moving parts in a fast-paced hub operation.” The new Gate Manager — rebuilt from the ground up — provides AirTran Airways with advanced features that continue to evolve based on user feedback. A component of Sabre® AirCentre™ Enterprise Operations, Gate Manager is based on flexible, robust technology in an open, service-oriented architecture framework that leverages the Sabre® ASxSM Airline Services Exchange. Utilizing the ASx advanced platform, airlines can easily integrate Sabre Airline Solutions technology with other company systems or in-house or third-party applications and incorporate new components and replace outdated ones without major disruptions to infrastructures or operations. Reliable, scalable and secure, the ASx exchange is designed to evolve as airlines’ needs and operations change in response to the dynamic marketplace as well as lower their IT development costs. Gate Manager integrates with other components within Sabre® AirCentre™ Airport,

Gate Manager includes advanced graphical alert capabilities that immediately display the violation of a specific parameter. The alert offers alternatives so the impact to passengers and the overall operation is minimal.

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ASCEND I SOLUTIONS

including Sabre® AirCentre™ Staff Manager real-time resource management solution as well as other Sabre AirCentre Enterprise Operations components such as the Sabre® AirCentre™ Movement Control flight information system. Therefore, a gate change made in Gate Manager is automatically reflected in Staff Manager without manual input or intervention. Based on customer feedback from users of the previous version, Gate Manager is now more flexible, reliable and user friendly. Flight information and gate assignments and changes that were once saved on each user’s individual computer are now stored in a central database users connect to via a graphical user interface. This common repository enables users to view the same data at the same time. In addition, a variety of reports can be pulled from the database based on user-defined specifications to help identify trends as well as ongoing issues. The gate management solution’s expanded scrollable view of the flight schedule enables users to review operations up to four days in the past, the current day and up to three days in the future. By clicking on a tab, users can easily move among the days and assess past problems, manage current operations in real time and plan the days ahead. In the previous version of Gate Manager, information was updated once every minute, and each user’s computer “refreshed” on a different schedule. These inconsistencies made it difficult for even users seated next to each other to accurately assess information and coordinate changes. Rather than being “refresh-based,” the new Gate Manager employs an XML pushnotification method. Essentially, when a change

occurs — for instance an aircraft blocks in at a gate — the information is sent via message queuing, which signals the solution to automatically update. This enables a seamless flow of information with all users receiving the same data at the same time in a matter of seconds. “Gate Manager allows us to communicate to users and view information once limited to phone or radio transmissions,” Bernardo said. “Out, off, on and in aircraft gate events can be seen within seconds. Comments once only seen by the user can now be viewed by all participants.” Gate Manager now features four standard user access levels, with additional levels possible: Administrator level — Users can make changes to their airline’s gate configuration, including adding and deleting gates, specifying which gates can accommodate various aircraft types, and determining which airlines can park at which gates. This level also oversees the work and access levels of other users. Supervisor level — Users perform the same functions as the administrator level; however, they cannot add or remove users or modify user access levels. Normal level — Operational changes can be made, but system configurations, such as adding or deleting gates, are not possible. Read-only level — Ground handlers, caterers and third-party contractors — those needing a snapshot of the airline’s operation to effectively and efficiently support it — can access Gate Manager via this level, at which no changes are possible.

Fully customizable, Gate Manager can support most airlines’ business models as well as airport authorities responsible for the management of gates. Following user-defined rules, the solution displays a graphical alert as soon as a specified parameter is violated and suggests alternatives for minimizing passenger and operational disruptions. “I encourage all airlines using the old version of Gate Manager or evaluating a real-time gate management system to take the time and review this new version,” said Bernardo. “It’s a must-see application.” Ultimately, users are responsible for making final gate changes, but the Gate Manager solution’s window into the future enables them to make an informed decision before the situation becomes critical. After all, one miscalculation or haphazard gate change can strain an airline both operationally and financially. a

For additional information about Gate Manager, please contact Brent O’Brien, a product manager for Sabre Airline Solutions. He can be contacted at brent.o’brien@sabre.com.

+count it up 10.3

1.7 billion

522 billion

The percentage that passenger

The amount in U.S. dollars airlines lost

The amount in U.S. dollars IATA

demand rose in March 2010

in just six days following the Iceland

expects industry revenues to reach

compared to March 2009, according

volcano, with the greatest impact on

this year. That’s a US$43 billion

to IATA. During the same period,

European carriers, according to IATA.

increase from last year, but still US$42

cargo demand grew 28.1 percent.

billion below the 2008 peak.

Both are improvements from the 9 percent and 26.3 percent growth for passenger and freight demand recorded in February.

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MAINTAINING


All airlines face maintenance, repair and overhaul challenges that leave room for improvement. Industry consultants from Sabre Airline Solutions 速 can effectively diagnose MRO issues and prescribe solutions, whether process and procedure related or dealing with information technology software, to significantly and quickly yield optimal results. By Allan Bachan | Ascend Contributor

Photos: Jupiter

CONTROL


ASCEND I SOLUTIONS

A

ircraft maintenance is highly regulated, and statutory compliance must be met by all operators worldwide. Maintenance, repair and overhaul costs of aircraft can range from US$300 to US$1,800 per flight hour. There is also a minimum of US$1.2 million in annual supply chain and capital materials inventory investments to support any twin-engine aircraft in the commercial fleet. Maintaining aircraft and their engines and components is also an extremely labor-intensive process and requires numerous unique skills and competence across all disciplines. Consider airframes that must undergo temperature changes of 100 degrees Fahrenheit in mere minutes. Couple that with complex, failsafe and myriad systems such as avionics, electrical, plumbing, hydraulics, pneumatics, temperature control, communication and pressurization systems all in a single vessel — virtually an aerodynamic tube — and it becomes clear how aircraft maintenance can be a significant challenge. Information technology systems are, therefore, essential tools for the management and control by an airline to meet such a challenge.

Three Main Components

The aircraft repair business can be categorized into many different facets, or modules, as MRO software vendors traditionally like to call them. What it all boils down to can be categorized into three main components — compliance, productivity and materials management — with cost management being a common denominator. A layman’s perspective can also be management of issues that are regulatory (compliance), people and planes (productivity) and assets (materials management). There is slight overlap in these three broad categories where, for example, in disciplines such as human factors, licenses and certifications, people and compliance come together. Regardless, an MRO system can be “boxed” into these areas, having costs as a mandatory dimension with infinite possibilities for subcategories. In a nutshell, the key compliance output of any MRO division at an airline is safe, airworthy, mission-reliable aircraft. Add the business aspect, which requires optimal resource utilization, lowest overall costs and minimal aircraft downtimes. The optimal IT system should be fully capable of achieving all these requirements, and it should provide proven decision support for the airline as it strives to accomplish these objectives.

MRO Technology

Historically, MRO IT systems were designed based on the need for management and control of compliance issues. With the fast-growing sophistication of aircraft and general advances in air travel, the business aspects of maintenance are more in focus without compromise for safety and compliance. Cluttered. There is no better way to describe the current marketplace. It is a daunting experience 82 ascend

for any airline to embark on a selection process for MRO software, with at least 20 pure-play providers, another 25 or so specific point solutions, and five enterprise resource planning types from which to choose. And more are emerging. At last count, there were no less than 120 providers of MRO systems. But which flavor is best — a pure-play, ERP or point system? The answer lies in the specific business model of the airline and what it seeks to achieve. Each system has value in one way or another, but there is yet to be a single system that is a complete solution. Therefore, an airline needs to specifically define its business objectives and have a rigorous selection process to finalize its shortlist of contenders. Bear in mind that more than one shortlist can result — one for each domain area. For example, technical documentation management vendors may or may not be the same as materials and logistics vendors. Some may argue that a sound, corporate ERP system must be in place before an MRO system can function effectively. Others may contend that with an effective ERP system, an aviation MROspecific system is not needed. There are merits and demerits of both, and either can be very effective. It all lies in the implementation services once the functionality exists in the product. And one thing is certain … there is no true aviation MROERP system available. ERP systems that are used for MRO are heavily customized installations that had/have large

capital investments and/or are supported by many add-ons or external systems. ERP systems are extremely execution biased and perform better in independent MRO shops rather than for airline maintenance operations. Software vendors have touted their products as replacements to “legacy” and “homegrown” systems. Observing the implementations of these newer systems during the past six years, however, shows that traditional systems have not been entirely retired and, in some cases, are either still fully running in parallel or only certain functionality has been turned off. Some of the newer systems have even been abandoned during the project initiation stages — literally when a good peek under the hood has taken place. And still others were abandoned or scaled back after going live and operating for more than a year or so. Still, others have just never gone live and are stuck in a lengthy implementation cycle. Some airlines have also gone through multiple product implementations in just a few years. Sabre Airline Solutions® cited the case of two known low-fare/low-cost carriers in the United States that are now into the third MRO system implementation in six short years and have at least five known ancillary systems supporting missioncritical MRO business functions. There is no question that modernization is necessary. Software vendors that have changed their underlying technology with equivalent

Maintenance Health Check: From Planning Through Execution

Report and Feedback • Performance management • Maintenance costing * Reliability management

Plan • Aircraft routing • Maitenance programs and planning • Manpower planning • Materials planning • Work orders and packaging

Record and Audit

Schedule • Production standards • Production planning • Progress monitoring • Pre-kitting • Resource assignments

• Work orders closure • Compliance management • Technical records

Execute • Task execution • Maintenance control • Engineering support • Deferrals and MELS tracking • Parts tracking

The maintenance planning through execution cycle takes an analytical look at the “day in the life of” the maintenance and engineering functions at the airline. Starting with the “Plan” activity, Sabre Airline Solutions examines how the airline conducts aircraft routing and maintenance programs management as well as other planning activities. Performance measures such as maintenance yield are taken. A pre-prepared questionnaire is used by the Sabre Airline Solutuions consultant. This continues through scheduling, execution and reporting. An overall picture of the processes is then presented.


ASCEND I SOLUTIONS

Health Check Status (Fulfillment To Industry Best Practices)

Extremely well

Very well

Pretty well

Not too well

Not well at all

Planning Scheduling Maintenance Execution Recording & Auditing Reporting and Feedback Business Procedures Use of Technology

1 1.8 2.0 2.4 2.5 2.0 2.3 2.0

The health check status view presents a graphical summary report that represents the findings of the study. It points to areas of potential improvement at high level and will be included in the prescriptive recommendations provided to the airline. The prescriptions will detail what corrective actions can be taken to achieve better performance levels.

improvements to the business are seeing maintenance renewals and upgrading their clients, in some cases, with complete sub-product add-ons. These experiences all speak to the relative maturity of the products and vendors as compared to legacy systems that have had time to grow. While there are many vendors in the space with varying technology platforms and product offerings, they all seem to be doing some level of business. But there is no clear market leader. There are new systems sales, and there are legacy systems upgrades as well as point solutions and add-on improvements across all selections. So airlines are still selecting, implementing and improving MRO systems to meet current and emerging challenges.

Vendor Experience

It’s a myth that most MRO systems fulfill the basic and primary functions and that an airline should really look at differentiators within and among these systems. An airline should start by looking at the number of customer years (the cumulative number of years per customer) a particular product or module of a product has been used. Next, it should examine the number of aircraft years the system or part of the system has been used to manage that aircraft and/ or maintenance management processes for the aircraft. This would be the cumulative number of years that each aircraft has been in the system. Third, look at the airline and industry MRO experience that is on the vendor team — domain experience. MRO management systems are not born in IT shops. They are born from the industry and bred with experienced personnel and proven philosophy.

Fourth, review the customer list and see who the vendor is using as a thought leader for the product. Finally, ask the vendor to identify the adoption levels at that thought leader and what actual business cases can be made as value propositions for the software used in that company. This should ideally be an airline that is recognized or perceived as an industry frontrunner.

Business Requirements And Evaluation

Only after the vendor knowledge and experience has been determined should the business requirements list come into consideration. Those requirements have to be spread across technology, modular and business functionality, product plan and direction, customer support, price, and delivery. Typically, airlines submit a request for information followed by a request for proposal to shortlist specific vendors. Then a final evaluation would include product demonstrations and onsite (user) reference visits. What is not frequently done but should be requested is a proof of concept. MRO systems have a large user base, and defining business scenarios that cover the more vital cross sections of the MRO division can be difficult as there will be organizational biases. What works best is taking a single integrated process that involves the most user departments that are executed most frequently. Make it real. Use real aircraft, real parts, real roles, real screens, and real data and reports. Sabre Airline Solutions MRO experts find that an integrated cycle from planning through execution works quite well as the first demonstration. It is, after all, a daily process. Asking

the vendor to map its system into this cycle and also to execute demos to it can be quite effective as a standard. Other business scenarios that should be demonstrated include: Materials demand to procurement/replenishment, Aircraft induction, The rotable cycle, Maintenance planning document and maintenance review board revisions into the approved maintenance program, An airworthiness directive or service bulletin from receipt to execution, Compliance reporting. This is not an all-inclusive list, but with the right audience, the appropriate questions can be asked that will lead into the philosophy and concepts of the vendor’s systems to make a good judgment call and educated decisions. The process of evaluation outlined is one of cross-functional business scenarios rather than a departmental-level or transactional checklist. Analogously, and far too frequently, it’s been determined that just having eggs, butter, flour and sugar does not always yield a well-done cake. A common mistake is that airlines tend to overlook the simple, important functions as they assume that vendors have naturally incorporated these into the system design. For example, what is the use of managing multiple parameters on an aircraft or component when the only visibility afforded on key screens is just those control parameters and not conventional aircraft hours and cycles? True, it’s an industry standard but sadly, it’s not an observed software standard. So beware that nothing is too trivial. Another unused selection criterion is a trial period. In this modern era of cloud computing, Software as a Service and application service providers as delivery methodologies, being able to test drive the system remotely should be allowed. An MRO system lifespan is more than 15 years, and investments are substantial, so a trial in some form of at least a subset of the system should be mandatory.

Vendor Services

Implementing a new MRO system is a costly and lengthy endeavor. The software must first be mapped to the airline’s business processes, and the client must see how the system will act for its defined roles and responsibilities. This is the “solution definition” phase and is typically conducted in an interactive pilot environment. The system would typically be used by 15 percent to 20 percent of the total airline staff or as much as 25 percent to 30 percent for an airline with significant MRO capability. Solution adoption and training must be structured, recurrent and exact. Data conversion and migration activities must ensure that the necessary historical information is available in the new system since the value of an aircraft is in its records. This must be available after the older system is replaced. There will be business process changes introduced by the new system, and change management is

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a necessary program, especially where most, if not all, of these processes must be documented, audited and statutorily approved by regulatory and state agencies. As mentioned before, there is no one complete enterprise system. Integration as well as customization of the system becomes necessary. These are uniquely defined for each airline based on the other systems in place. Typical integrations include bidirectional interfaces to human resources, finance, payroll, flight scheduling and flight operations; time and attendance; courier tracking systems; vendor supply and tracking systems; health monitoring (AHM); engine condition monitoring (ECM); and technical documentation systems. Project and program management is also necessary to ensure success. The introduction of an MRO system is therefore not just a hardware and software project because these additional activities are frequently up to eight times the cost of software and hardware. And this does not include staff costs for those who will be dedicated 100 percent to the project during the implementation cycle. If the project turns out to be one of a developmental nature, then that becomes a whole other topic. Complex software creation, evolution and management processes have to be taken into consideration. The airline’s core business is not IT, and it is not advisable to have large development effort in an MRO IT project.

Benchmarking And Selection

Sabre Airline Solutions can help airlines select a system or subsystem to fit their business needs. While no longer offered by Sabre Airline Solutions due to a change in business strategy, the MaxiMerlin M&E system has been the “gold standard” for many years. There is merit in benchmarking any new system on the market against this business standard. Sabre Airline Solutions is armed with hundreds of cross-functional business processes, matured and augmented for technology changes as an assessment benchmark standard for emerging and current software in the market today. Airlines choosing to select systems can benefit tremendously from this compounded experience. This is backed by industry expertise in the form of personnel having more than a combined 200 years of airline MRO management experience and systems implementations. The IT company’s experts possess a valuable resource library of more than 100 MRO RFIs and RFPs from multiple airlines collated for different industry segments with Sabre Airline Solutions personalized scoring and weighting methodologies. Sabre Airline Solutions has airlines using its operations solutions, integrated with several MRO systems, and it has also partnered with some of today’s top MRO applications vendors. Its experts have witnessed outsourced attempts at migrations from Maxi-Merlin and other legacy transformations to these “newer” solutions. They know these vendors and their applications’ capabilities and 84 ascend

limitations intimately and, therefore, they can work directly with and for airlines on how to circumvent these known product and implementation issues. Sabre Airline Solutions has integrated its staff management, flight following and maintenance control systems to more than 15 different MRO systems at various airlines throughout the world, and its MRO professionals understand full well the business need for such interfaces. They can also serve as an advisor to the airline throughout the selection process and directly pinpoint areas of difficulty in some applications. This will enable an airline to cover those appropriately in the project scope.

Implementation Management

Whether the project is one of MRO systems implementation or improving some business aspect of maintenance operations, Sabre Airline Solutions can manage the complete project. This effectively covers non-product areas that are of prime interest to an airline but are not currently addressed by some MRO software vendors, including: Project and program management, Solution definition, Interactive pilot management, Data conversion and migration, Change management, Solution adoption.

Health Checks

Decomposition of MRO functions at an airline and a detailed study of key performance indicators for each will yield a prepared health check report, resulting in high-level prescriptions for improvements that should be addressed in key business areas.

Get-Well Programs

Based on the status and recommendations made from the health checks, the airline may embark on specific get-well programs for a particular area, whereby Sabre Airline Solutions will employ the full-time use of its industry consultants. This may or may not include the installation of point solutions, integration packages, process improvements, and/or training and guidance. Specific goals, such as improvement of maintenance yield by 10 percent, will be defined in such an engagement.

Integration Packages

The Sabre Airline Solutions flight following, movement control, maintenance control and maintenance planning solutions have been integrated with more than 15 MRO systems at more than 20 different airlines. This integration interface is now a standard middleware interface package that can be installed and configured in a matter of days. The key business benefit is one of much improved maintenance yield and decreased disruptions for unscheduled maintenance.

Technical Records Hub

Sabre® AirCentre™ Technical Records Hub solves a significant challenge and supports goinggreen initiatives at any airline. It is designed to: Automatically capture and collaborate information and data from maintenance documents, records in any format and maintenance forms that are filled out at maintenance stations without manual data entry into other systems; Communicate and securely transmit those documents into pre-defined indexes and repositories while prompting down-line and follow-up actions by advising staff and consumers of the information; Store those records in Web-searchable files for retrieval and use; Share those files internally and externally through secure Web access for auditors, vendors, aircraft owners, etc. The solution also provides the ability to extract all aircraft records and store them on a DVD in a structured format at the time of ownership change. When 50 percent of the commercial value of an aircraft or engine lies in its records, the value of this solution can easily be seen. Additional value is realized when the processing and ongoing use of those records on a real-time basis are fully automated.

Mobility

Technical staff costs can be high, and productivity is the key to profitability in an MRO environment. It is also essential to cost control in an airline’s MRO organization. Keeping mechanics and technicians close to the job at hand, yet empowering them with informational tools to perform effectively, goes a long way toward these productivity goals. Various solutions can be deployed that include but are not limited to: Having technical manuals available on a handheld device as readable and searchable content, Retrieving work assignments and reporting work status, Using interactive and onscreen bi-directional interfaces on kiosks and/or portable devices to back-end MRO systems.

The Right Partner

No matter what an airline’s current MRO situation, there is always room for improvement. A new MRO system is not always the answer. It may, in fact, be the source of other issues and challenges for years to come. Regardless of an airline’s MRO requirements, Sabre Airline Solutions consultants will find areas of quick returns that will deliver tremendous incremental value. a

Allan Bachan is a solutions director for Sabre Airline Solutions. He can be contacted at allan.bachan@sabre.com.


CALLING ALL CHANNELS

Airlines have recently developed distribution strategies that have led the way to a set of revenue-generation trends in the greater market — and Sabre Travel Nework Ž can help airlines take advantage of those strategies.

By Nadja Killisly | Ascend Contributor


ASCEND I SOLUTIONS

D

uring the past several years, air carriers have established trends that have effectively enhanced value and, because of their demonstrable levels of success, have positively affected distribu-

tion markets in any number of industries around the world. And those trends can be readily quantified and analyzed, not just as an academic exercise, but in an orderly process to gain valuable insight and further innovative ideas

Opportunities Through Business Intelligence

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Control swaps of crewcompatible fleet to optimize network profitability

Sales and m ar

Understand changes in demand and traffic

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Analyze demand curves to determine capacity controls Gain insight into market information and analysis through technology

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Optimize route, network structure and fleet mix

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Determine effective partnerships and build others

Identify competitive position and track promotional effectiveness

Improve bookings across all agencies and track sales representative performance

Several opportunities can be determined through business intelligence, giving an airline the ability to identify new revenues and maximize its operations.

Traveler Trip Types Direct

Indirect Cost-conscious leisure High-end leisure Weekend getaway Group/tour/ package Unmanaged business travel Managed corporate Complex intinerary

The concept of trip type helps an airline segment booking types both by their number of occurrences and their value to an airline’s bottom line. Consumers travel at different times for different reasons — for the week, a business trip; for the weekend, a quick getaway. Travelers typically match their trip type to the distribution channel that best matches their specific travel needs.

86 ascend

on where distribution trends are headed in both the near and distant future.

Merchandising

Because of changing economic conditions and increased competition, carriers have basically been forced to reconsider their fundamental revenue-generation models. The new merchandising approach not only helps airlines increase their sales, but also enables them — from a customerservice perspective — to differentiate their offerings and increase the value to their customers by giving them the option to choose among attributes. In fact, the whole idea of “fare families” creates a more logical relationship between services and price — and the choice as to exactly which services to buy and what price is reasonable in relation to those services is left up to the customer. Global distribution systems and reservation-platform providers are now incorporating those advanced capabilities and those customer choices into their solutions. This further enables carriers to sell ancillary services (special excursions, discount tickets to entertainment and local attractions, etc.) through distribution channels. And the relative complexity of merchandising has resulted in increased complexity of the required shopping platform as well as the underlying algorithm supporting the global distribution system.

Multi-Channel Strategy

These developments have also fostered the rise of the multi-channel strategy involving, for example, further development of an airline’s own website (in conjunction with global distribution system offerings) or, say, a low-cost carrier, as it evolves into more of a hybrid model, looking to enter indirect distribution channels. As time goes by and multifaceted marketing approaches are employed, it is more important than ever that carriers look closely at a distribution channel strategy. Thinking and acting clearly and objectively, an airline must determine the appropriate target and overall objectives for the different channels, thereby maximizing each.

New-Media Technology

Mobile technology is emerging as a major new battleground on which traditional suppliers and distributors are being challenged by innovation from new market entries. How to be part of the new social media phenomenon — and how to properly incorporate mobile services into the workflow — is a focus to which the distribution specialist must pay close attention. Developing mobile services requires the


ASCEND I SOLUTIONS

Revenue Optimization Scale Customer–centric revenue management Dynamic availability/dynamic pricing Point–of–origin revenue management Origin–destination revenue management Branded fares Ancillary revenue opportunities Married segments/journey data Automated inventory controls Last–seat availability Advanced group management Manage distressed inventory Interlining and/or codesharing Sell from zero Electronic ticketing Interactive messaging Revenue integrity tools 26 inventory classes Numeric point–of–sale control Revenue management for private and public fares Marketing/advertising services Dynamic connect points Multi–carrier itineraries Leg–segment revenue management controls

To increase revenue and improve yield, more sophisticated revenue management strategies and capabilities must be implemented. With increased GDS participation comes increased revenue management capabilities and support.

Consumer Choice Yield Curve

High cost high margin

F fares

Business travelers high yield

Low cost low margin

Y fares

Q fares

Direct online customers Other

Complex trips

Simple trips

Depending on the complexity of the trips and whether these are leisure or corporate customers, travelers will choose the channel appropriately, which will have significant impact on an airline’s yield.

airline to deliver the same exceptional experience on a hand-held device as the one on its website to gain consistent, positive brand recognition.

Business Intelligence

Today, more than ever, airlines need business intelligence to make time-sensitive decisions based on market changes. The use of business intelligence is gaining importance in the marketing and revenue management areas. And because it is key to understanding the consumer’s behavior, there will be an increasing demand for additional data related to the travel or shopping phase — specific shopping data or, in the future, merchandising data that can be skillfully applied in conjunction with more traditional market data such as revenue data or the critically valuable competitive insights from MIDT.

Global Distribution System Value

Something that hasn’t changed during the past several years is the sharpness of debate regarding the relative value of the global distribution system. And in this regard, it’s important to keep several salient points in mind. First, a global distribution system involves extremely robust technology — technology that, under any circumstances, would not be easy to replace. In fact, during fiscal year 2008 in the United States, global distribution systems processed more than 375 million air transactions, representing nearly two-thirds of all U.S. airline-passenger revenues (in Europe, the number of GDS air transactions processed during the same period was more than 275 million). Indirect distribution fees should therefore be looked upon by carriers as not just a cost, but also as a highly valuable means of increasing revenue. The question, in other words, should not be whether to use GDS merchandising, but rather, how much channel share the carrier is planning for and how GDS involvement can help increase revenue. Any evaluation of distribution channels that considers GDS only as a cost is fundamentally flawed. Relative channel profitability is a much more appropriate approach in more accurately evaluating GDS activity. And there are further examples to illustrate how a global distribution system increases a carrier’s revenue. For instance, travelers typically match their trip type to the distribution channel that best matches their specific travel needs. For a carrier to capture the maximum number of travelers and increase its market share among the total potential customer base, it must

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be able to offer its products via multiple distribution methods — sometimes to the same traveler, who would choose from among multiple channels based on the purpose of the trip. An independent study showed that in only 33 percent of the travel instances analyzed, the traveler would have a strong preference to book a trip on the specific channel chosen. When it comes to an analysis of corporate market segments, global distribution Highlight

As time goes by and multifaceted marketing approaches are employed, it is more important than ever that carriers look closely at a distribution channel strategy. systems traditionally have the greatest penetration with travel management companies or travel agency organizations because a GDS offers a set of products and services that support business-process requirements. And one of the marketing advantages of a GDS in comparison to an airline’s own website is the greatly increased reach and promotion of the airline’s brand through the GDS in markets where brand penetration and recognition are not high. If specifically comparing GDS fees to the costs of other media offerings, the individual transactional cost of the GDS may for some airlines prove higher than that of other Internet methodology (taking all costs into consideration). But the GDS reach goes far beyond what other Internet marketing efforts can yield, due to such obvious factors as language and awareness limitations.

The Solutions

In conjunction with their revenue management practices and strategies, carriers can positively influence their revenues based 88 ascend

on the relative level of sophistication in their control of the distribution offering they apply. Many carriers are looking at sophisticated controls in their inventory and revenue management systems alone to manage availability. These carriers, however, often ignore the fact that not aligning connectivity level (in indirect channels) to their direct business needs effectively serves to limit sales potential. The Sabre Travel Network distribution portfolio contains a set of products and services, enabling carriers to increase reach, improve revenue and gain additional insight. Sabre Travel Network is best positioned not only to help increase carrier reach via its network of online and offline agencies, but it also provides access to leading corporations worldwide, of which Sabre Travel Network possesses a 51 percent share of global travel management companies. To improve revenue for airlines, the Sabre ® global distribution system offers, through the Sabre ® AirCommerce™ Distribution & Merchandising solution, a set of diverse capabilities ranging from interline and electronic ticketing and sophisticated revenue management practices to merchandizing and marketing. These all help improve the airline’s yield. A carrier might consider leveraging Sabre Travel Network marketing and promotional ads — Sabre ® Sign-In Advertising and Sabre ® PromoSpots — which are graphical or textual promotions that are displayed on agents’ desktops and designed to influence their shopping and booking behavior. The results can be substantial and may be used in a number of situations. For example, an airline can announce its availability as a booking carrier in the Sabre GDS, it can increase bookings in underperforming O&D markets or it can launch new direct service to a number of destination markets. Some of the functionalities of a GDS are based on interactive connectivity, which

are part of higher participation levels. In general, the set of functionalities an airline seeks and the type of connectivity (teletype versus interactive) it selects will impact revenue-generating opportunities. As part of the business model, strategy and objectives, the carrier should dictate which functionality — and participation level — is the best fit. The Sabre Travel Network solutions portfolio consists of data sets (BIDT, MIDT, TCN, Fare Tier Report, transactional data), data processing (simple PMRT processing, enhanced MIDT processing), and myriad decision-support tools and consulting services. The need for data and business intelligence is critical for decision-making processes in the areas of sales, network planning, pricing and revenue management. With its extensive portfolio, Sabre Travel Network becomes a true partner for an airline’s distribution strategy in helping identify additional revenue and marketing opportunities. a

Nadja Killisly is a senior principal of air segment strategy and marketing for Sabre Travel Net work. She can be contacted at nadja.killisly@sabre.com.


your

airline

to

new

heights

2010 Issue No. 1 Editor in Chief

Stephani Hawkins Art Direction/Design

Charles Urich

Managing Editor

To suggest a topic for a possible future article, change your address or add someone to the mailing list, please send an e-mail message to the Ascend staff at wearelistening@sabre.com.

For more information about products and services featured in this issue of Ascend, please visit our Website at www.sabreairlinesolutions.com or contact one of the following Sabre Airline Solutions regional ­representatives:

Asia/Pacific

North America

B. Scott Hunt

Associate Editor

Carla Jensen

Design Manager

Yvette Hunt

Contributors

Chris Bird, Patt Bourland, Stephanie Bundick, Dominic Clarke, Greg Gilchrist, Brett Jacobson, Gordon Locke, Horacio Mena, Anne-Marie Monahan, Mark Neill, Brent O’Brien, Kamal Qatato, Gary Stone, Ben Vinod, Chris Wilding. Publisher

George Lynch E-mail: george.lynch@sabre.com www.sabreairlinesolutions.com Awards

2010 Hermes Creative Award 2009 Awards for Publication Excellence, International Association of Business Communicators Bronze Quill, Hermes Creative Award, ECO Awards For Excellence In Environmental Communications

David Chambers Vice President Phone: +65 6215 9518 E-mail: david.chambers@sabre.com Europe

Alessandro Ciancimino Vice President Phone: +39 348 3708240 E-mail: alessandro.ciancimino@sabre.com Latin America

Kamal Qatato Vice President Phone: +1 682 605 5399 E-mail: kamal.qatato@sabre.com Middle East and Africa

Maher Koubaa Vice President Phone: +973 38350001 E-mail: maher.koubaa@sabre.com

2008 Awards for Publication Excellence, International Association of Business Communicators Bronze Quill and Silver Quill, Hermes Creative Award, The Communicator Award

Address Corrections & Reader Inquiries

If you have questions about this publication, suggested topics for future articles or would like to change your address, please send an e-mail to wearelistening@sabre.com.

Maximize the value of every seat. Sabre® AirCommerceTM Distribution & Merchandising provides you award-winning* capabilities. Differentiate your airline and grow revenue by merchandising branded fares, seats, bags and other ancillary services to corporations and travelers worldwide. Discover how Sabre AirCommerce can take a front seat in your airline’s success. Visit www.sabretravelnetwork.com/sabreaircommerce today.

2006 Awards for Publication Excellence, International Association of Business Communicators Bronze Quill, Silver Quill and Gold Quill

2004 Awards for Publication Excellence, International Association of Business Communicators Bronze Quill and Silver Quill

Sabre Airline Solutions, the Sabre Airline Solutions logo and products noted in italics in this publication are trademarks and/or service marks of an affiliate of Sabre Holdings Corp. All other trademarks, service marks and trade names are the property of their respective owners. ©2010 Sabre Inc. All rights reserved. Printed in the USA.

Introducing Award-Winning Merchandising Capabilities

2007 Awards for Publication Excellence, International Association of Business Communicators Bronze Quill

2005 Awards for Publication Excellence, International Association of Business Communicators Bronze Quill, Silver Quill and Gold Quill

Mike Douglass Vice President Phone: +1 682 605 5349 E-mail: mike.douglass@sabre.com

The Sabre Travel Network logo is a trademark and/or service mark of an affiliate of Sabre Holdings Corp. ©2010 Sabre Inc. All rights reserved. AS-10-11515 0210 *2010 Business & Travel Meetings Show Innovation Award.

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powering progress


2010 I ssue N o. 1

A Mag azine for Airline Executives

2010 Issue No. 1

Ta k i n g

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a i r l i n e

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World’s Happiest Airline

www . sabre airl ine solutions.com

Join us on Facebook at sabreairlinesolutions.com/fb Follow us on twitter at twitter.com/SabreAS

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A Conversation With ‌ Enrique Beltranena, Volaris Chief Executive Officer and Managing Director Page 10.

6

Afriqiyah Airways knows when and where to expand

32 Significant improvements to air traffic control systems

80 Effectively diagnosing MRO issues and prescribing solutions


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