2010 I ssue No. 2
A Maga zine for Airline Executives
2010 Issue No. 2
Ta k i n g
yo u r
a i rl i n e
n e w
h e i g h t s
A Top Contender www .sabreai rl inesol ut ions.com
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A Conversation With â€Ś Enrique Cueto, Chief Executive Officer, LAN Page 12.
18 Cambodia has a new, proud national flag carrier
41 A new era in airline technology is upon us
76 Introducing new check-in technology using a single, robust platform
2010 Issue No. 2 Editor in Chief
Stephani Hawkins Art Direction/Design
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Shaquiq Ahmed, Wendy Albright, Kolbeinn Arinbjarnarson, Jón Árni Bragason, Roberto Butendieck, Karen Davis, Greg Gilchrist, Beatriz James, Barbara Jary, Robin Johnson, Laura Kerr, Nadja Killisly, Mike King, Anthony Mills, Stephen Packwood, Javier Pezzino, Nancy St. Pierre, Nico Stoman, Alan Walker, John Winstead. Publisher
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Introducing Award-Winning Merchandising Capabilities 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.
The Communicator Award: 2010, 2008
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with Tom Klein President, Sabre Holdings rom a business perspective, it’s critical that executives have direct influence over their areas of responsibility. They can’t be burdened with barriers. And they must have the freedom, within reason, of course, to run the business the way they know is best for its future growth and success as well as that of customers, shareholders, etc. Every businessperson should be able to make choices for their business strategy and initiatives … working in tandem with partners that help minimize and eliminate obstacles and unnecessary setbacks.
That’s why it’s crucial that we build technology that gives you considerable flexibility and enables you to execute the choices you make and to respond quickly when your customer needs or the market presents you with opportunities. Take, for example, the recent move toward ancillary sales on which many carriers have capitalized. Savvy airlines have spotted an income opportunity and have unbundled their products to reap additional revenue from the services passengers valued most. And that’s just the type of rapid, profitmaking change that our solutions strive to support. Our approach gives airlines the ability to easily change direction, such as evolving their business model, successfully completing a merger, joining a new alliance or even moving from one alliance to another — all while keeping their operation going without interruption or repercussion. Forging technology is the nature of our business, so pushing the boundaries to continually help airlines change and improve is essential. And that’s the essence of our Software-as-a-Service model. Clearly, we work in an industry that evolves through considerable change, and the role technology plays transcends simply developing new capabilities that supports your business’s needs. It goes beyond software
applications. What also must remain a focal point are the platforms on which they run, the way they are delivered and their ability to sustain long term to support new technologies when and how you need them. In another critical area, airlines house massive amounts of data that are spread across their organization. We’re developing ways to give you the ability to easily conduct crossdomain analysis to identify trends and make adjustments accordingly. For instance, if you offer a direct routing that customers aren’t choosing, examining combined data from reservations and ops, you can analyze the data to determine why — price and schedule come to mind — these routes aren’t generating business and make necessary future planning changes. In addition, key data should be immediately available to employees across your organization when a business event occurs so they can respond quickly and effectively (read Checking In on page 76). Something as simple as automatically upgrading a customer to first class during the reservations process when he or she qualifies for the next loyalty tier is an easy way to impress and retain a customer. There are numerous initiatives underway that support out overall technology strategy. One of the more significant evolutions of our technology strategy includes providing an infrastructure to enable airlines to achieve the necessary business goals that ensure success — technology to turn vast stores of data into actionable intelligence, to act quickly in real time and make the most efficient decisions, and to have insight into all business processes. The lead article in the special technology section does a deep dive into the basis of our entire strategy. It discusses why it’s vital
that we take a multi-faceted approach when developing applications and the infrastructure that supports them. On a business front, we’ve recently acquired two companies — Calidris and Flightline Data Services. Iceland-based Calidris is known for its unmatched revenue integrity technology, and carriers such as Finnair, the world’s first airline to adopt real-time revenue integrity, achieved total return on investment after two short weeks of using the solution. Sabre Airline Solutions ® will use the new capabilities to offer unrivalled technology that unifies all of a passenger’s travel data (reservations, ticketing, boarding) into a single data structure. Rules are then applied over this single structure, allowing for creative passenger-benefitting capabilities and real-time, actionable data for better business decision making. Airlines have always been quick to see the value locked up in their data. With the acquisition of Calidris, and the incorporation of the Calidris technology into our business, airlines are now able to realize value from the combined data in real time — powering real-time decision making, real-time actions and real-time application of rules. Flightline specializes in innovative crew scheduling software and services capabilities, which brings all phases of the monthly crew schedule bidding process online. In our company section, we unveil the value these two companies bring to airlines around the world. Beyond technology, in our profile section, three unique carriers — Air Canada, Cambodia Angkor Air and Ethiopian Airlines — share their amazing success stories, each with its own philosophy on becoming a leading carrier in their respective regions and helping better the economy while supporting the communities they serve. And last, but certainly not least, on our cover, LAN Chief Executive Officer Enrique Cueto shares his thoughts about what positions the Latin America-based carrier as a top contender in the markets it serves. I hope you enjoy this issue of Ascend, and I look forward to working with you to ensure every aspect of our business brings value to your airline and your customers alike through our ever-evolving technology strategy and committed role as your preferred partner.
ASCEND I TABLE OF CONTENTS
The Bear Bearskin Airlines started with very little and evolved into a leading force in its region
Air Canada: Empowering Airport Staff Air Canada leverages new mobile technology to help better serve customers and efficiently manage resources
A Top Contender Enrique Cueto talks about what makes LAN a top contender in the markets it serves
Air CO2 Emissions: 22 Manage And Trade Wisely Beginning in 2012, airlines operating to and from Europe must obtain carbon credits to continue operating in Europe
The Pony While world economic recovery may be lopsided, most regions of the world see measurable signs of an upswing
Simplify The Evolution Low-cost carriers, as they evolve to a hybrid model, add sophistication without adding complexity and costs to the business
Building Standards New technology standards promise to provide a customary platform crucial to the way ancillary services are leveraged, sold and purchased
More Smoke Than Fire Iceland’s volcanic eruption created angst and uncertainty among airlines, travelers and numerous businesses
Cambodia’s Pride and Joy Cambodia Angkor Airlines has become Cambodia’s new, proud national flag carrier
Don’t Delay Under the new tarmac delay laws, airlines face harsh penalties for delayed flights of more than three hours
The New Normal The airline industry can expect a vastly changed landscape with mergers on the rise
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SPECIAL SECTION 50 The Freedom To Execute A new era of execution on profitability, nimbleness and competitive differentiation has emerged Processes At The Heart O f Competition In-depth analysis of business processes provides a balanced strategy that exceeds customer expectations and promotes efficiency across the entire operation
The Dogital Pendulum Organic Server Management, and like solutions, will revolutionize the world of midrange, open-systems operations as much as they are going to rationalize and bring order to it
Back To School Investments to Sabre® Airline University ensure airline employees are armed with the knowledge they need to help run a successful operation
Checking In New check-in technology enables airlines to manage end-to-end check-in and departure control operations with precision and ease
79 Crew Balancing Act
Satisfaction Guaranteed Sabre Airline Solutions® acquired Flightline Data Services for its crew scheduling software and services capabilities
Carriers have access to a complete range of crew recovery technology that enables them to retain control over their schedule and crew recovery processes
Revenue Integrity: Beyond All Boundaries Sabre Holdings® acquired Calidris to bring airlines the world’s most robust, innovative revenue integrity technology
82 Get Off The Tarmac
Airlines have access to innovative technology designed to prepare for, avoid and rapidly recover from potentially costly tarmac delays
At magazine, we want to provide you with valuable information that will be beneficial to your business, but if we were to include an article for every topic, you’d likely be looking at a novel rather than a magazine. But how can we bring you important information and still keep at a reasonable length? It’s simple. We use Quick Response Codes (QR codes), paper-based hyperlinks, whereby you can use your smart phone to download additional information that’s attached to a specific article, ad, news release, etc. When you come across a QR Code, take a picture of it with your smart phone and you’ll get redirected to a website using your smart phone’s browser. There, the information you seek will appear. If your smart phone doesn’t come equipped with a QR code reader, you can download a free version from multiple resources, such as AT&T Scanner, i-nigma or QR Reader, which takes approximately two minutes to download and install. To the right, are several article synopses that include QR codes. If you want to read more about how other airlines are using technology, scan the accompanying QR code for the full story. In future issues, we’ll not only include this section, but we’ll append a QR code to other areas throughout the magazine whereby additional information can be found.
High-Level View Philippine-based Airphil Express has renewed its partnership with Sabre Airline Solutions® as its main e-Commerce technology partner to support its business transformation and ambitious expansion plans.
Cambodia Angkor Air, one of Southeast Asia’s newest airlines and Cambodia’s national flag carrier, has migrated to SabreSonic® Customer Sales & Service, the industry’s most powerful revenuegenerating and customer-focused reservations system, to underpin its expansion plans and become a leading airline in its region.
Latin America-based Avior Airlines became the first carrier to use the electronic miscellaneous document component of the broader Sabre Airline Solutions merchandising platform to support its emerging fulfillment needs. The solution will also enable the sale of ancillary services for the broader SabreSonic Customer Sales & Service solution and the Sabre® global distribution system.
British Airways has selected the Developer Tool from Sabre Airline Solutions to help the airline improve customer service and increase productivity for its ramp and airport agents.
Aeroflot, Russia’s national carrier, has renewed its agreement for SabreSonic Customer Sales & Service reservations system, including powerful, new website capabilities.
AeroMexico, the global airline of Latin America, has selected SabreSonic Customer Sales & Service to help boost its growth plans, including its activities within the Sky Team alliance. The airline has also selected revenue management solutions from Sabre® AirVision™ Marketing & Planning.
Air India, India’s national flag carrier, has teamed with Sabre Airline Solutions to achieve operational efficiencies in key airline functions in a bid to be more cost efficient.
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The Bear With its strong brand that sports a bearâ€™s paw print on every aircraft and its keen ability to weave both professionalism and compassion into its operations, Bearskin Airlines represents a first-rate example of a carrier that started out with very little and evolved into a leading force in its region.
Photos: Bearskin Airlines
By Stephani Hawkins | Ascend Editor
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very airline has a unique history that tells an interesting story from its very first flight to present day. What makes the story intriguing is the way each carrier evolves through the years, going from a state of infancy to a well-established, seasoned operation. The journey for Sioux Lookout, Ontario, Canada-based Bearskin Airlines, referred to as the “Bear,” is no exception. After all, not many airlines can say they started their journey landing on water for lack of runways. More than 45 years ago, in 1963, the regional carrier, named after Bearskin Lake, a remote First Nations community positioned 270 miles from Sioux Lookout, came to life, providing charter services to secluded First Nation reserves in northern Ontario. During the first 14 years, the carrier provided air-taxi service using Cessna 180s equipped with floats during summer months and skis in the winter. Given the lack of airfields in this remote area, the aircraft worked well to charter passengers on the surface of lakes near Sioux Lookout. However, the landing devices didn’t come without challenges. During early winter freeze-ups and early spring break-ups, the landing gear couldn’t be relied upon. That started to change in 1977 through the early ’80s when the Ontario government began constructing new airfields, making the northern communities accessible year-round. That’s also the year one of the carrier’s pilots, Harvey Friesen, who had purchased 50 percent of the business five years earlier, bought the previous owner’s shares, giving him control of the airline. In addition, Bearskin Airlines, that same year, began its first regular scheduled flights between Big Trout Lake and Sioux Lookout. And the evolution for this young charter carrier was set in motion. From that point, other scheduled flights were progressively added, starting with Thunder Bay and then Kenora and Winnipeg. The move from a solely charter operation to a regional carrier was a major milestone for Bearskin Airlines, but it, too, came with challenges. Part of its fleet had to be converted to wheeled aircraft to support the new markets it served as well as future expansion. To serve these communities only accessible via air, Bearskin Airlines began adding 14-seat Beech 99s to its fleet and then subsequently moved into the 19-seat Fairchild Metro 3 and Metro 23 aircraft when its northern routes were sold in 2003. “We needed the right-size aircraft and, of course, the aircraft had to be fairly fast, pressurized, comfortable and reliable, so all those things had to come together to allow us to provide a good service,” said Harvey Friesen, president of Bearskin Airlines. Today, the carrier operates 14 Fairchild Metroliners, which were created by legendary aircraft designer Ed Swearingen, who developed them as a stretched version of his Merlin
II corporate turboprop and designed the aircraft specifically to serve the regional airline market. According to Friesen, the expansion of the airline, in some cases, had more to do with judicious timing to meet the needs of market demand as opposed to a formal business plan or strategy. “I think we helped the company grow one careful step at a time,” he said. In the early 1980s, the Bear’s biggest competitor was bought out and ceased operations to the smaller communities in northwest Ontario. The opportunity to expand simply knocked on the carrier’s door, and the owners promptly took action. “We did have to make fairly aggressive moves at times,” Friesen said. “Back in the early ’80s, one of the airlines that had been serving the area, and our biggest competitor, was being bought out by Air Ontario. It elected to move out of the smaller communities in northwestern Ontario. We then very quickly bought aircraft and expanded to meet all of those needs.” Through the years, the carrier kept a close eye on the needs of travelers and expanded where it made sense. Putting customers first has been a leading contributor to the carrier’s success. It’s
been vital that Bearskin Airlines flies at the precise times of day travelers want or need to travel and that it provides direct routes that are convenient, resulting in time savings for its valued customers. By 2003, Bearskin Airlines had expanded to include scheduled service to nearly 40 destinations and, today, more than 45 years after it first took to the skies as a two-aircraft charter carrier, the airline offers more than 100 daily flights to 17 destinations in Ontario and Manitoba, surpassing any other carrier serving these key northern Ontario markets. For the Bear, however, it’s much more than linking Northern Ontario’s five largest cities to Winnipeg, Ottawa and numerous smaller communities for the traveling public. The carrier’s executives and more than 250 employees also place great emphasis on assisting the communities they serve. For nearly three decades, via Hope Air, a national registered charity founded in the mid 1980s, Bearskin Airlines has provided free air transportation to Canadians who are in financial need and require non-emergency medical care outside of their native communities. In 1997, Bearskin Airlines Hope Classic, a curling bonspiel for women, was formed to raise funds to help fight breast cancer. To date, the
Prior to taking ownership of Bearskin Airlines in 1977, President Harvey Friesen (left) was a pilot for the carrier. A year later, his brother, Cliff, purchased shares and is currently the company’s executive vice president.
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annual charity event has raised nearly US$2 million that is used to hire research scientists, purchase state-of-the-art medical equipment and fund medical facilities and support groups as well as numerous other projects aimed to help cure breast cancer. Through its Charity Golf Classics event, the carrier, along with numerous other sponsors, such as Avis, Bell, Best Western NorWester Resort Hotel, ESSO Imperial Oil and PepsiCo, has raised more than US$1,005,500 since launching the program in 1999. Proceeds go to a variety of charities and non-profit organizations including The United Way of Thunder Bay, Thunder Bay Regional Health Sciences Foundation and Northern Cancer Research Foundation/Tamarack House. Three years ago, the Bear became a regional sponsor for Relay For Life, supporting the Canadian Cancer Society. During the annual event, participants gather for a 12-hour, non-competitive, overnight relay held at a local track. The occasion brings together cancer survivors, those who have lost a loved one to cancer, those going through cancer treatment and those who simply want to help with fund-raising efforts. “We take pride in our role as a community supporter,” Friesen said. “We remain committed to investing in the communities we serve and the people who live there. We continually attempt to develop new and improved ways to create opportunity. For the past 44 years, we have become a solid partner in supporting community events and development projects, building the economy, creating jobs and establishing important transportation links with communities in the north. Why? Because we are here for the long haul.” In its quest to continually provide high-quality air transportation throughout northern Canada, support the communities it serves and expand to meet demand, technology remains a key enabler for the airline. Its executives don’t sit back and wait for technological advancements to come to them. To the contrary, they seek opportunities to improve their systems to ensure their valued customers have easy access to their products and services as well as an exceptional start-tofinish travel experience. In addition, they rely on modern technology to run an optimal, efficient operation. For example, earlier this year, Bearskin Airlines became a launch customer for new check-in technology via SabreSonic® Check-in, using a powerful platform that enables the carrier to manage end-to-end check-in and departure control operations with precision and ease (see related article on page 76). The upgraded technology, which previously supported two check-in systems that were regionally designated, has been combined using the best of both to create a single, robust solution capable of supporting every airline business model across all corners of the world. “By combining the features of [the North America and international systems] on one new platform, SabreSonic Check-in permits all 8 ascend
Bearskin Airlines executives and employees alike take pride in working together to assist the communities they serve. Transporting patients with non-emergency medical needs who struggle financially, raising money for breast cancer research and the Canadian Cancer Society, and sponsoring events that support a variety of charities and non-profit organizations are among the many ways the carrier’s more than 250 employees contribute to those with less-fortunate circumstances.
Bearskin Airlines, which started out with ski- and float-equipped aircraft, offers more than 100 flights to 17 destinations using 19-seat Fairchild Metro 3 and Metro 23twin turboprop planes.
hosted airlines to access the best DCS features and allows Sabre Airline Solutions ® to better focus its efforts and resources,” Friesen said. “We are pleased to be the first to make this move, putting us in a great position to take advantage of revenue-generating and customer-service features, which will soon be available to all airlines hosted by Sabre Airline Solutions. It’s a competitive landscape, and the faster we are able to enhance our systems, the better able we are to compete.”
The new system went live at Bearskin Airlines in July, marking another important milestone for the thriving carrier. To date, Bearskin Airlines has covered a lot of ground, made great headway and has left quite an impressionable impact in its corner of the world. “True, we’ve been around for several decades, but we’re just getting started, and we’re definitely here to stay,” Friesen said. a Stephani Hawkins can be contacted at firstname.lastname@example.org.
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Air Canada: Empowering Airport Staff Air Canada’s airport operations team at the Toronto International Airport is leveraging new mobile technology to notify airport staff of task changes, flight delays, wheelchair requirements and other key real-time information to help them better serve the airline’s customers and efficiently manage resources on the day of operations.
Photos: Air Canada
By Mike King, Brent O’Brien and Bradley Terrill | Ascend Contributors
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ir Canada’s Ground Task mobile devices, powered by Sabre Airline Solutions® and IBM, provide bi-directional communication capabilities for staff members at the ramp or in the cabin to notify their scheduling teams when their assignments are received and when they begin or complete servicing an aircraft. “Prior to the launch of our Ground Task mobile devices, our airport staff had limited capabilities for being notified of new assignments and tracking schedule changes, particularly for irregular operations,” said Jason Stein, manager of resource planning for Air Canada. “Communications were handled via radio. We have seen a big improvement in our ability to respond to operational changes and reductions in the amount of admin time needed to manage our staff.” In 2007, Air Canada’s airport resource management team had a vision of empowering its airport staff with more real-time information at their fingertips, but they did not have the supporting systems to make their vision a reality. “Our goal was to provide better service to our customers, improve the quality of work life for our airport staff and create efficiencies in our airport operations,” said Enzo Molino, Air Canada’s director of resource planning. Working together, Air Canada and Sabre Airline Solutions saw an opportunity to leverage the open-system capabilities in the Sabre® AirCentre™ Airport solution to interface with the new mobile application that Air Canada envisioned. “We selected Sabre Airline Solutions as a partner because it offered an end-to-end airport resource management solution with proven integration to other mobile applications,” Molino said. “We had a vision to take mobile technology to new levels at our hub airports, and Sabre Airline Solutions provided the core system for generating and receiving messages to and from our mobile application.” In early 2008, Air Canada and Sabre Airline Solutions set aggressive goals for launching the carrier’s Ground Task mobile application and the Sabre® AirCentre™ Staff Manager real-time resource management solution at Air Canada’s largest hub operation located at the Toronto International Airport. The launch was scheduled to be completed in nine months and required several project tracks and multiple vendors to achieve a successful release. Air Canada worked with its partner, IBM, to develop the Ground Task application. The other critical tracks included building and testing all of the carrier’s business rules in Staff Manager and integrating Staff Manager with its real-time flight feed plus the Ground Task application. 10 ascend
Air Canada resource planning analysts, leads and frontline employees in Toronto can effectively communicate in real time with the use of the carrier’s Ground Task and Staff Manager solutions. The new technology supports above-the-wing and cabin workgroups and offers a robust, modern method of communicating vital flight and task updates such as gate, equipment and load changes.
Using new mobile technology, Air Canada agents can alert airport staff of duty changes, flight delays, wheelchair requirements and other key real-time information to enable them to better serve the airline’s customers and effectively handle resources on the day of operations.
“We knew our timelines were aggressive,” said Sophie Georgakakos, senior director of airports resource planning for Air Canada. “But we had confidence in our joint project teams, and we were eager to begin realizing the benefits of the new automation.” Today, the Ground Task and Staff Manager solutions are in full swing at Air Canada’s Toronto above-the-wing and
cabin workgroups, providing a powerful new means of communication between resource planning, leads and frontline employees. Important flight and task updates — such as gate, equipment and load changes — are instantly and automatically communicated without the use of phones or radio. A free-flow text component enables planners to use Staff Manager as an
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instant messaging tool, sending personalized notes to an individual employee or team or to all employees working a particular flight. Meanwhile, the mobile device users can acknowledge tasks, react to new task detail in real time and gain instant visibility on key task details such as other team members who are assigned to the same flight and/or task. As one would expect with a complex real-time solution, implementation at a major hub airport operation was no easy task and only came together through careful orchestration among all parties. “We couldn’t have asked for a better business partner than Air Canada,” said Bradley Terrill, project manager for Sabre AirCentre Airport. “The Air Canada project team and airport staff alike made this successful implementation possible by establishing a clear and collective vision, driving the necessary change management and maintaining focus to completion.” What started out as a cool idea a short time ago is now the driving force behind real-time operations management at Air Canada’s largest hub. The successful implementation of Ground Task and Staff Manager at Toronto International Airport generated interest from the other large Air Canada airport operations. This interest and the experience of the Air Canada Toronto project team will enable a fast roll out and adoption of Staff Manager at Montreal International Airport, Calgary International Airport and Vancouver International Airport. “We have been able to leverage our Staff Manager implementation experience in Toronto to put together a skilled team that has been successful in launching Staff Manager at our other hub airports in less than 30 days per airport,” said Stein. “One of the benefits of launching Staff Manager has been the implementation of more consistent standards across our hub airports.” Air Canada recently added Ground Task mobile devices for its Montreal cabins group and plans to roll out Ground Task to its other hub airports by year’s end. Air Canada is not resting on its laurels after the successful launch of Ground Task and Staff Manager. “We see additional opportunities for optimizing our resource planning and rostering as we implement Sabre ® AirCentre ™ Staff Planner and Sabre ® AirCentre ™ Roster Maker this summer,” said Georgakakos. “The Sabre ® AirCentre™ Staff Admin Employee Self Service module will also enable our airport staff to go online for self-service shift bidding and trading.” Air Canada expects to realize several major benefits from the combined Ground
Air Canada employed advanced technology to empower its airport staff with greater real-time information through better communications via mobile devices. Its objective was to enhance customer service, improve the quality of work life for airport staff and develop efficiencies in airport operations.
Task and Sabre AirCentre Airport solution, including: Reduced fuel burn (gate holds, appropriate water levels), Reduced number of passengers arriving without bags, Reduced overtime, Improved historic information to better plan operations using Staff Planner, Improved customer service (especially for passengers requiring assistance), Improved irregular operations handling. “Optimizing our planning and rostering, self-service bidding and trading, and realtime resource management were key drivers to our decision to implement the Sabre AirCentre Airport solution, but we also
wanted access to the metrics and reporting available from having an end-to-end solution,” said Nick Careen, vice president of airports for Air Canada. “Increased visibility into operational and resource metrics will enable Air Canada to improve customer service and better manage our costs.” a
Mike King is a senior account director, Brent O’Brien is a solutions manager of Sabre ® AirCentre™ Enterprise Operations and Bradley Terrill is a senior IT project manager for Sabre Airline Solutions. They can be contacted at mike.king@ sabre.com, brent.o’brien@sabre. com and email@example.com.
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A Top Contender
arlier this year, Latin Americabased LAN landed the sixth spot among the region’s most globalized companies, according to the Multilantinas ranking, joining Mexico’s Cemex (cement) and Telmex (telecommunications) as well as Brazil’s Gerdau (steel). It is the most international carrier in the region and ranks third in Latin America in foreign investments abroad. “It is a matter of great pride for LAN to be the most globalized airline in Latin America and improve its position in this category,” said Ignacio Cueto, president and chief operating officer of LAN, which, in August, announced a US$3.7 billion acquisition of Brazil-based TAM. “These achievements reflect the company’s mission to grow internationally and contribute to the economic and social development of the countries in the region.” The globalization analysis is based on aspects such as sales volumes, number of countries with company operations, number of employees outside of the home country and financial results, all measured in terms of the firms’ respective industries. That’s one of numerous milestones for the 81-year-old carrier and its sister companies. For example, in April, LAN CARGO unveiled its new cold storage facility at Miami International Airport. It’s the largest airline-operated facility of its kind at a United States airport. The US$4 million investment doubles the cargo carrier’s capacity to process perishable goods (the main export products from Latin America to the United States, Europe and Asia via Miami International Airport). One of LAN’s distinct competitive advantages is its ability to profitably integrate its scheduled passenger and cargo operations. It takes into account potential cargo services when planning passenger routes and also reserves certain dedicated cargo routes using freight aircraft. Adding cargo revenues to its existing passenger service enables LAN to increase the productivity of its assets and maximize revenue, which has historically covered fixed operating expenses per flight, lowered break-even load factors and enhanced perflight profitability. Additionally, this revenue diversification helps offset seasonal revenue fluctuations and reduces the volatility of its business over time. Looking for ward, another sizeable anticipated achievement is the scheduled delivery of the Boeing 787-8 Dreamliner early next year, making LAN among the first carriers to incorporate the next-generation aircraft into its fleet. Initially, the airline expected to begin taking possession of the Dreamliner in 2014; however, it has made adjustments with the aircraft manufacturer
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Named Latin America’s sixth most globalized company earlier this year by the Multilantinas ranking, LAN is the most international carrier in the region and ranks third in Latin America in foreign investments abroad.
so it can begin utilizing the wide-body jet for long-haul routes. The acquisition of the Dreamliner is part of LAN’s re-fleeting plan that will enable it to modernize short- and long-haul fleets as well as reduce the number of aircraft families it operates. In 2004, the company launched a new brand “LAN,” under which all of its international passenger airlines operate. A driving objective of the branding effort was to help customers better identify with the high standards of service and safety that exist among LAN Airlines and its affiliates. The new image has improved the visibility of the LAN brand as well as the cost effectiveness and efficiency of the carrier’s marketing efforts as it continues to expand in existing and new markets. The carrier also strives to present a fun environment to its current and prospective customers. In another creative effort to build brand awareness and bring pleasure to the traveling public, LAN holds contests for its customers to reward them for their business. Last year, more than 145,000 people entered the “LAN invites you to the 2009 Sony Ericsson Open” sweepstakes, which included two tickets to the tournament semifinals matches, plus a night’s hotel stay in Miami Beach, Florida, along with a two-day car rental. 14 ascend
The previous year, LAN held a contest called “Fly There Or Bring Them Here!” The winner received two round-trip tickets, which included the choice of either flying to any destination in South America or bringing any two friends or family members for a visit to the United States. Keeping its customers and prospects aware, engaged and satisfied is certainly a critical part of LAN’s overall strategy, but it also places strong emphasis on the communities it serves and providing aid in times of crises. Earlier this year, LAN CARGO committed resources to assist aid efforts in Haiti. A LAN CARGO Boeing 767-300 freighter carried approximately 48 tons of relief items to Port-au-Prince, including medical supplies, portable toilets and water from local and national organizations such as the Americas Relief Team, The Pan American Development Foundation, the University of Miami’s Project Medishare and The Coca-Cola Company. LAN CARGO team members accompanied the flight to assist with the unloading of cargo on the ground. Additional relief supplies including clothes, water and canned goods collected by LAN Airlines and LAN CARGO in Miami were also onboard. On the ground in Miami, the airline
partnered with Boston, Massachusettsbased Partners In Health, a non-profit organization that works to bring modern medical care to poor communities in nine countries around the world and has a 20-year history in Haiti. Partners In Health also used the LAN CARGO export warehouse at Miami International Airport as a staging point and hub for all relief supplies that were transported to Haiti. Under the leadership of LAN Chief Executive Officer Enrique Cueto, the airline prides itself on keeping its eye on its customers, employees, shareholders and communities, ensuring continued longterm success for all parties involved. In a recent interview with Ascend, Cueto talks about what makes LAN a top contender in the markets it serves. Question: After 60 years as a stateowned enterprise, LAN became privatized in 1989 with the sale of 51 percent of its equity to local investors and Scandinavian Airlines System. In 1994, the process was completed when current controlling shareholders and other major shareholders acquired 98.7 percent of the company’s shares. What are the greatest benefits of operating as a private airline versus being government owned? In what ways
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has becoming private contributed to the growth and financial success of LAN? Answer: LAN’s successful expansion is based on two key factors: LAN’s growth strategy and its competitive advantages, as well as public policies in Chile and in countries where LAN has established its affiliates, which have favored the sustainable and competitive development of the airline industry. Access to international capital markets, mobility of human resources and materials between countries; free market access for different companies; and freedom to determine the supply, quality and reasonable price of airport services have been critical variables in the sustained growth of the airline industry. LAN’s development would not have been possible without the right public policy environment. Q: Six years ago, the airline officially adopted the name LAN Airlines S.A. How has this change supported the company’s goal to reflect the values and attributes common to all of the airlines making up the LAN alliance and emphasize the organization’s internationalization strategy? A: During the past 16 years, LAN has grown from a purely Chilean airline into a
regional operator with affiliates in different countries throughout South America. We adopted a common corporate image in 2004 under the LAN brand to reflect the regional nature of our operations. Currently, LAN and its affiliates provide passengers and air cargo clients with the broadest connectivity for travel within the region, connecting Latin America with the United States, Europe and the South Pacific, thus creating the most complete network of international destinations to and from the region. LAN and its affiliates have the same philosophy, image and common values of service excellence and the highest international safety standards. Thus, when international passengers buy tickets on different routes, including domestic routes, they have the certainty that they will experience the same product with identical service standards. Q: Why did LAN launch premium business class four years ago? How has the new cabin service brought value to LAN and its customers? A: We have focused on investing in areas that will provide the best product to our passengers. The new premium business class involved a total investment of
approximately US$120 million and provides a service that only a select group of airlines in the world offer its passengers, featuring full-flat seats that offer complete rest on long-haul flights. This is in addition to a modern onboard entertainment system and a wine list featuring some of the finest selections from around the world. Q: In 2007, LAN launched a new business model for short-haul operations. What is the strategy behind the new model? How has it measured up to the expectations set forth by LAN executives and shareholders? A: The implementation of “low-cost” practices in domestic operations implied a revolutionary change that has broadened transport alternatives in such a way that even more people are considering flying as a means of transportation. LAN and its affiliates renewed their short-haul aircraft and increased aircraft utilization. In addition, sales and distribution, onboard service and airport processes were simplified and expedited, significantly reducing unit costs. All these efficiencies were passed on to passengers through lower fares, which have led to an explosion in terms of traffic growth, with three consecutive years of
Earlier this year, LAN CARGO committed resources to assist aid efforts in Haiti, carrying approximately 48 tons of relief items to Port-au-Prince, including medical supplies, portable toilets and water from local and national organizations. LAN CARGO team members accompanied the flight to help unload cargo on the ground.
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LAN’s new premium business class, an investment of approximately US$120 million, features full-flat seats that offer complete rest on long-haul flights as well as a modern onboard entertainment system and a wine list that includes some of the finest selections from around the world.
more than 20 percent growth in domestic markets. Q: LAN holds the largest market share of passenger traffic to and from Chile, Peru and Ecuador as well as domestic passenger traffic in both Chile and Peru. What keeps LAN at the forefront in these markets? What sets it apart from its main competitors? A: The pillars of LAN’s management are service, safety and efficiency. In service, the company has worked unflaggingly to provide a world-class, consistent and differentiated product on all its routes. In safety, LAN has incorporated latestgeneration aircraft and operates one of the world’s most modern fleets. The efficiency of all its production processes, together with an adequate cost control and technological improvements, has allowed the company to provide a better service at attractive prices, contributing to the industry’s development in the region and directly benefiting consumers. This would not have been possible without a team dedicated to professional excellence and highly committed to delivering the best travel experience to our clients on a daily basis. Q: As the leading air cargo operator within, to and from South America, how does LAN leverage operating efficiencies between its passenger and cargo divisions? 16 ascend
A: The approach LAN takes to integrating its passenger business with the transportation of air cargo is a distinctive element of LAN’s business model. We also transport cargo in the belly space of passenger aircraft, maximizing the utilization of the aircraft and increasing the efficiency of our operations. This is a competitive advantage for LAN, especially on long-haul routes where cargo operations are more significant. As a result, cargo has historically represented approximately one-third of LAN’s consolidated revenues, a much higher percentage than the industry average. Q: What are LAN’s future expansion plans for its passenger and cargo operations? A: We expect significant growth over the next years in both passenger and cargo operations. These expansion plans are based on significant fleet orders, which contemplate delivery of at least 45 narrow-body A320 family aircraft, 35 wide-body passenger aircraft and four freighters between now and 2018, with total fleet capital expenditures of US$5.5 billion over this time period. Q: In what ways has its membership in the oneworld global alliance benefited LAN and its customers? What value does LAN bring to other members of oneworld?
A: LAN Airlines this year celebrates its 10th anniversar y as a member of oneworld, the global alliance that includes the best airlines in the world. Being part of oneworld has allowed us to offer a truly global network served by partners with the same belief in high-quality standards, which represents an important advantage for our passengers in international travel. This enables us to offer passengers travel to hundreds of destinations that LAN does not serve directly, while at the same time LAN provides oneworld members with the most extensive network within Latin America. For much of its 10 years as part of oneworld, LAN has been the only airline in South America to be a member of any of the global airline alliances, playing a key role in establishing oneworld as the leading alliance in the region. Q: How has LAN’s staggered lease maturities over time created the strategic flexibility to expand or reduce capacity according to market conditions? A: Given attractive financing conditions, most of our aircraft orders are for aircraft purchases. Currently, 16 percent of our fleet is operating leases. These leases have staggered maturities, with a few coming due each year, allowing us to reduce the size of our fleet if necessary. This allows us ample flexibility to renew our existing fleet, reducing the
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average age and increasing efficiency. Q: Earlier this year, LAN signed an agreement with Boeing to adjust the delivery of 10 Boeing 787-8 Dreamliners to be incorporated into the company’s long-haul fleet, making it the first carrier in the Western Hemisphere to receive the Dreamliner. How does this help ensure the company’s sustainable growth while preser ving the environment and incorporating state-of-the-art technology to deliver the best travel experience for LAN’s passengers? A: LAN will effectively be the first airline in the Western Hemisphere and one of the first airlines in the world to receive the Boeing 787 Dreamliner. This is a significant milestone, allowing us to provide the best travel experience for our passengers and also result in important efficiency gains. The incorporation of the Boeing 787 — considered the world’s most efficient aircraft with a significantly reduced effect on global warming — ensures the company’s sustainable growth through a more efficient operation and competitive advantages over the long run. Q: More modern aircraft certainly helps preserve the environment. In what other environmental initiatives does LAN participate? A: Even though the impact of commercial aviation on global warming is relatively small, responsible for only 2 percent of CO 2 emissions, the industry as a whole and LAN in particular have significant concern for this matter and have adopted various initiatives and developed new technologies aimed at preserving the environment. These initiatives include the renewal of our fleet and the incorporation of the new 787, energy-saving initiatives, efficiency in fuel consumption and an extensive recycling program through which the company processes 90 percent of the waste generated on board its flights. We have also invested US$70 million in the installation of winglets on all our Boeing 767 fleet, reducing CO 2 emissions. In addition, LAN has been at the cutting edge of the industry’s move to electronic tickets. More than 95 percent of tickets issued by LAN are electronic tickets and LAN CARGO is the first airline in Latin America and one of the first worldwide to transport cargo using an innovative system to process cargo without the need for printed documents. The company has also decided on the creation of an environmental management position. This role will promote and strengthen these and other environmental
initiatives that will be launched in the near future. Q: What role does technology play in LAN’s immediate and long-term success? A: LAN is permanently concerned with innovation, incorporating the most advanced technology to its operations in order to achieve significant efficiency improvements and to offer a differentiated product. This is reflected in one of the world’s most modern fleets, with latestgeneration aircraft such as the Boeing 777 freighter and the Boeing 787 Dreamliner, which will be delivered next year. We are constantly developing innovative projects that improve upon existing technologies, such as a new navigation system using satellite technology that we implemented in the airports of Cusco in Peru as well as in Chile, allowing us to extend the range of our operations and offer the best punctuality standards. Technological innovation has also
LAN is permanently concerned with innovation, incorporating the most advanced technology to its operations in order to achieve significant efficiency improvements and to offer a differentiated product. — Enrique Cueto, chief executive officer, LAN
allowed us to improve efficiency in different areas. We have applied the world’s most advanced models to redesign our aircraft maintenance processes, allowing us to achieve a 50 percent reduction in the time that a plane remains on the ground.
Q: How does LAN support the communities it serves in terms of volunteer and fund-raising initiatives? A: As a leader in Latin America, LAN has an integral vision that includes sustainable entrepreneurial management. The company is aware of its social role in the communities it ser ves, which is why we have focused on promoting sustainable tourism, caring for the environment and heritage of the destinations in the region. Added to this is the company’s ongoing willingness to collaborate with different social organizations and support communities in transporting humanitarian aid when necessar y, especially if they have been victims of diverse natural catastrophes, where air transport can play a key role. Q: During the last five years, while much of the airline industr y has faced significant competitive and liquidity crises, how has LAN enjoyed a 20 percent compound growth rate in total revenues and remained consistently profitable? A: Airlines are constantly tested as the industr y is affected by the many external shocks that in one way or another impact demand for passenger and cargo transportation. LAN has successfully faced these challenges due to our geographical and business diversification, efficient cost structure and flexible operations. Q: Airlines around the world are becoming more creative with their marketing efforts to help build brand awareness and pique customer interest. In what unique ways does LAN market its brands to remain competitive? A: We want to position LAN as the best way to fly to, from and within South America, and are focused on constantly improving our reputation. We believe that the way to build a strong brand is through providing the best travel experience and communicating efficiently with our clients. We constantly monitor the best way to get our message to our target customers and obviously have been exploring the way to best use online and direct marketing tools. For instance, we are learning how to best use the social media revolution. Q: How would you describe LAN to the traveling public to win them over? A: At LAN, we have a simple promise to the world’s travelers: we will transport your dreams in a reliable way with all the warmth of South America … fly with us, and you will not only enjoy the accomplishment of your dream, but you will also enjoy the road to it. a
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LOVELADY & KC TEO
Cambodia Angkor Air, offspring of Cambodian and Vietnam governments, via Vietnam Airlines, has become Cambodia’s proud new national flag carrier.
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July 27, 2009, Cambodia Angkor Air launched its inaugural flight from Ho Chi Minh City to Phnom Penh. At the signing ceremony, Vietnam Deputy Prime Minister Truong Vinh Trong said the airline was not only a rare joint investment, but also a way to “improve the two Asian neighbors’ bilateral relations.” Under the US$100 million, three-aircraft venture, the Cambodian government holds 51 percent of the national carrier, and Vietnam Airlines retains 49 percent. The idea to launch a Cambodian national carrier with assistance from Vietnam Airlines was conceived by Cambodian Prime Minister Hun Sen, who recognized Cambodia’s rapid economic development — an 8 percent annual growth in the gross domestic product from 2006-2009, increased foreign investments and a stabilizing political climate — would further benefit from a vibrant airline industry, as would its thriving tourism industry. Prime Minister Hun Sen tracked the growth of Vietnam Airlines and after a review of potential opportunities in Cambodia’s market, approached the Vietnamese government. “Those were interesting times,” said Trinh Ngoc Thanh, chief executive officer of
Cambodian Angkor Air. “We had tremendous pressure to start the operation as soon as possible, but we also had to make sure we ran a professional operation.” The close cooperation between Vietnam and Cambodia is largely responsible for the continued success of the joint venture. As the national carrier of Cambodia, the airline is supported by its government, with essential business acumen provided by Vietnam Airlines, especially in the early stages. Cambodia Angkor Air receives comprehensive technical support from Vietnam Airlines, including crew training, aircraft maintenance and flight operations, ensuring its fleet of leased ATR 72-500 turboprop planes and Airbus A321 jets is maintained at the highest level of safety and reliability. Currently, the Cambodian carrier offers domestic and international flights between its hub in Phnom Penh and Siem Reap and Ho Chi Minh City, with plans to expand to additional destinations in the near future utilizing the six Airbus A321 jets it now has on order. By 2015, Cambodia Angkor Air plans to have a fleet of 16 Airbus A321s. All of the airline’s current 110 weekly flights
Photo: Cambodia Angkor Air
he story of Cambodia Angkor Air, the new national airline of the Kingdom of Cambodia, is an evolutionary one that continues to be written. In existence for a little more than a year, the airline is making steady and carefully measured strides to reach its goal of becoming a full-service carrier with domestic and international service within the Association of Southeast Asian Nations (ASEAN) and beyond. Perhaps even more importantly, the story of Cambodia Angkor Air is also one of unprecedented cooperation between two neighboring, yet traditionally rival, countries. After a succession of airline failures, the last of which ceased operations in 2001 under the burden of mounting debt, the Cambodian government officially requested assistance from the Vietnamese government to establish a new national carrier. The Cambodian government and Vietnam’s national carrier, Vietnam Airlines, initially met at the end of first quarter 2009 to discuss a possible partnership and investment opportunity. Within 100 days, a joint-venture agreement was signed by the two parties. The following day,
As part of its long-term expansion plans, Cambodia Angkor Air has ordered six Airbus A321 aircraft, and by 2015, it intends to increase its fleet of A321s by 10. Currently, the carrier operates two ATR 75-500 turbo props and a single Airbus A321.
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Vietnam’s flag carrier, Vietnam Airlines, in a joint venture with Cambodia’s government, owns 49 percent of year-old Cambodia Angkor Air and has provided comprehensive technical support to the start-up airline, including crew training, aircraft maintenance and flight operations.
operate under a codeshare agreement with Vietnam Airlines. Establishing the new Cambodian national airline has not been without its challenges. Because of limited airline knowledge within the Cambodian population, which numbers 14.5 million people, most of the airline’s first employees were actually “on loan” from Vietnam Airlines. Training local employees required sending them to Vietnam Airlines to learn and master the appropriate skills on a tight timeline. Despite the challenges, Cambodian Angkor Air continues to make steady progress toward establishing itself as a successful, independent national carrier. Initially, the carrier’s in-flight services were provided by cabin crews from Vietnam Airlines. After completing training in Vietnam, local Cambodian employees began staffing flights a few months ago, marking a significant milestone for the national carrier. In addition, Cambodian Angkor Air recently began using SabreSonic® Customer Sales & Service in support of its strategy to increase productivity using the best resources available while keeping costs to a minimum. By partnering with Sabre Airline Solutions® , the carrier has access to a comprehensive range of technology 20 ascend
that can effectively support it from the initial stages through various levels of expansion. “Cambodia Angkor Air is anxious to become a full-service carrier and expand its international services as soon as possible,” said Trinh. “Judging from Vietnam Airlines’ positive experience implementing Sabre Airline Solutions technology, we are confident SabreSonic CSS will similarly drive our plans forward quickly and successfully.” The advanced technology platform supporting SabreSonic CSS will enable the airline to cultivate interline and codeshare opportunities with other airlines, critical to its expansion plans. The sophisticated reservations system will also enhance Cambodia Angkor Air’s revenue through merchandising. With SabreSonic® Web, an Internet booking engine, the airline can capitalize on the solution’s new shopping services and capabilities to maximize the online channel. Later this year, Cambodian Angkor Air plans to implement a crew management system from Sabre Airline Solutions as well. “The proven solutions will play a large part in enhancing the operational capability of Cambodia Angkor Air,” said Trinh. “Our cooperation with Sabre Airline Solutions will
be further enhanced when we implement another of its solutions, this time to ensure optimum crew management by the end of the year. “We are determined to bring the best of aviation practices to our customers,” he said. “Every technology that we implement has the end goal of enhancing our customers’ experience.” Cambodian Angkor Air’s goal is to be a “flying ambassador” for the Kingdom of Cambodia. With more than 20 foreign airlines now offering direct flights into the country, Cambodia Angkor Air certainly has competitors, but with the ongoing support of its neighboring country, it’s the only airline that can proudly call itself the national flag carrier of the Kingdom of Cambodia. a
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Manage And Trade Wisely Under the governance of the European Union Emission Trading System (E.U. ETS), in 2012, airlines operating to and from Europe will be required to obtain carbon credits to continue operating in Europe. Airlines will need to report their CO2 emissions and plan for how their carbon credits will be used, and advanced technology is in place to assist with these efforts. By Christine Kretschmar, Brent Oâ€™Brien and Kamal Singhee | Ascend Contributors 22 ascend
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he E.U. ETS as related to the aviation industry went into effect in January with the majority of airlines filing their emissions tracking plans with their respective member countries. With these plans being approved and airlines tracking their emissions for 2010, the stage is set for the next steps of the plan, which, by March 31, 2011, includes: Submitting a 2010 ton-kilometer report, Submitting the 2010 CO2 emissions report, Applying for free emissions allowances. The E.U. ETS is a “cap-and-trade” system where the emissions in 2012 are capped at 97 percent of the 2004 through 2006 average. In 2013, the cap is further lowered to 95 percent of averages for the same period. Each airline, based on its 2010 ton-kilometer report, will be allocated a share of the total emissions pie as determined by the European Union. As an airline’s share is determined, 85 percent is deemed as free allowance while 15 percent is to be purchased from carbon markets — the trade aspect of the scheme. Revenue generated from auctioning the 15-percent credits will go to member countries. Using the submitted ton-kilometers data from all airlines and participating operators, the European Union will define the benchmark by Sept. 30, 2011, for determining the allocation for each participating airline/operator. The scope of this legislation is quite clear — any flight departing or arriving into an aerodrome situated in an E.U. member country is included for purposes of reporting. However, particular flights are exempt from emissions reporting, such as: Search and rescue flights; Flights performed exclusively for the purpose of checking, testing or certifying aircraft; Public-service obligation flights; Commercial aircraft operators with fewer than 243 flights per defined period (January to April, May to August and September to December). Recent events, such as disruptions due to volcanic ash and industrial actions, are expected to have an impact on airlines as they submit their 2010 ton-kilometer report. Lufthansa, for example, requested a one-year delay to the inclusion of airlines in Europe’s emission trading scheme due to flight disruptions from a volcanic ash cloud. The airline expressed its concern about using 2010 as the base year, due to the number of forced cancellations from the recent disruption. The industry is awaiting the direction from the European Union on how these events will be accounted in allocating free credits for 2012. Through the E.U. ETS process, airlines must work with a verifier to ensure accuracy of specific reports as well as properly manage credits and reporting.
Data collected by airlines/operators as part of the emissions reporting must be verified by an independent and accredited verifier. Each member country will publish a list of accredited verifiers that airlines will be responsible for working with to ensure emissions reports are certified before they are submitted to the responsible member state agency that oversees monitoring and managing emissions tracking. The verifier ensures: Completeness of flight and emissions data compared to air traffic data collected by EUROCONTROL, Consistency between reported data and mass and balance documentation, Consistency between aggregated fuel consumption data and data on fuel purchased or otherwise supplied to the aircraft performing the aviation activity. It also must verify the emissions and tonkilometer reports according to the monitoring and reporting guidelines (MRG) and issue an opinion stating that reasonable assurance of the reports are free of material misstatements and non-conformities. In addition, the verifier is required to provide the details of methodology used by the airline/operator and submit it with the emissions reports to the designated agency. Getting the report approved by a verifier may not be easy for airlines. They’ll need to collect various documents for each flight from different sources. If incomplete or inaccurate information exists, the verifier will reject the report, causing delays likely to cost airlines valuable time and money.
Managing Credits And Reporting
As part of submitting emissions reports, airlines must also present a request for free allowance by March 31, 2011. Based on the request and information collected from the emissions reports, in particular the ton-kilometer report, the European Union will determine the emissions allowance based on historical emissions. By Sept. 30 of the same year, the E.U. Commission will finalize the total quantity of allowable emissions, the free allowance and quantity to be auctioned. The calculations of the individual airline/operator and the associated free allowance will be available no later than Dec. 31, 2011. In 2012, with the allocation of free allowances and requirement to purchase 15 percent of the credits, airlines will need to plan their schedule to minimize the impact of emissions and manage the free allowances. This requires understanding the impact of CO2 emissions to be able to forecast the requirements of emissions credits. The forecasting capability requires knowledge of historical data and the use of a CO2 calculation methodology that meets the airline’s requirements. This information will be used as part of the schedule-planning process to incorporate the cost of emissions into the fleet assignment to determine aircraft types to operate a given sector. In addition to incorporating the cost, it will be vital to continuously understand the emissions forecast as well as track it against actual flight operations data. This exercise alone can provide a constant view of the requirements and manage them against the allowance. For example, a flight between Boston, Massachusetts,
Emissions Manager Forecasting Increase in overall emissions requires borrowing from other sectors
Helping understand the impact of emissions on an airline schedule
1.00 0.97 0.95
2012 Expected emissions
2013+ Expected emissions
E.U. ETS, based on a “cap-and-trade” system, begins with a baseline that is calculated from the average emissions used between 2004 and 2006. The CO2 emission cap is set at 97 percent in 2012 and reduced to 95 percent in 2013. Airlines need to include an overall E.U. ETS into their strategic decisions for future development and competitiveness.
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Sabre AirCentre Emissions Manager Emissions management system Rules engine
Schedule and aircraft movement
Passenger management and payload information
E.U. ETS reporting templates
ESB Third-party verification regulatory submission
Designed to help airlines ensure compliance with E.U. ETS regulations, Sabre AirCentre Emissions Manager automates data collection, verification and reporting processes through defined integration with airlines’ operations, airport and reservations systems.
Managing Carbon Assets Planning to Operations Sabre AirCentre Emissions Manager Reporting Data collection Validation and alerting
Generating reports Connecting with verifier
Carbon forecasting Forecast to actual comparison
Manage by exception
Integration out of the box
Consulting and Support Update with access to new E.U. ETS schemes Consulting and health-check support
When managing CO2 emissions, they must be treated as an asset and their usage must be monitored from planning processes to operations. This information going forward will influence airline fleet selection processes, network planning and operations.
and Frankfurt, Germany, can generate approximately 125 tons of CO 2, costing more than US$750,000, and with 15 percent of purchased credits, it would cost an additional US$120,000 a year at the current prevailing rates. A flight between New Delhi, India, and London can generate around 175 tons of CO 2, costing more than US$1 million, and with 15 percent purchased credits, it would cost an additional US$170,000 a year. 24 ascend
the world adopt emissions trading schemes. Recent actions by the German government to introduce the Ecological Levy, estimated to be an additional cost of US$1.19 billion, will require airlines to better manage their emissions.
Operating without sufficient emissions credits will attract a fine from regulatory authorities (expected to be US$123 per ton of CO 2). On the other hand, if the airline has excessive credits based on the forecast, these can be traded within the confines of the allocated year. With changing market dynamics, it is important for airlines to understand, plan and manage their emissions footprint to avoid significant costs as other countries around
Sabre Airline Solutions® recognizes the importance of effectively and accurately managing emissions credits and offers state-of-the-art technology to help airlines not only comply with the E.U. ETS but also reduce costs and improve operations overall. The recently launched Sabre® AirCentre™ Emissions Manager collects, validates, stores and reports carbon emissions data, simplifying compliance with E.U. ETS requirements. The solution is designed to support requirements for emissions management and reporting such as data collection and storage for 10 years, validating the data when multiple sources are available, interfacing with an accredited verifier and reporting data in electronic form or through defined reports. The solution provides significant automation and data validation to ensure correct data is reported and enables airlines to manage emissions within the defined requirements. Additionally, Sabre Airline Solutions experts consult with airlines around the world to help them resolve current challenges related to emissions management. Its consultants are prepared to help airlines develop a strategy to reduce fuel consumption and emissions as well as implement the right solutions to comply with emissions reporting requirements. With reducing emissions in mind, these experts also assist airlines in applying for earned credits and setting up necessary programs to support their emissions initiatives. They ensure airlines are compliant with relevant regulations and help them benefit from essential credits to guarantee efficient and environmentally friendly operations. The E.U. ETS can present numerous challenges for airlines around the globe. However, a sound strategy combined with well-trained personnel, robust technology and knowledgeable industry experts can offset unnecessary costs and keep airlines aligned with the new trading scheme. a
Christine Kretschmar is a regional marketing manager of Europe, Brent O’Brien is solutions manager and Kamal Singhee is solutions director of Sabre ® AirCentre™ Enterprise Operations for Sabre Airline Solutions. They can be contacted at christine.kretschmar@ sabre.com, brent.o’firstname.lastname@example.org and email@example.com.
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As pure low-cost carriers evolve to a hybrid model, their key concern is how to add sophistication to their model without adding complexity and cost to the business, i.e. how to implement more sophisticated solutions that are able to increase revenue without adding processes and infrastructure to the business that would increase their cost base. To that aim, the airline evolution needs to be supported by future-ready technology that is flexible enough to enable the right and necessary new business processes. By Alessandro Ciancimino | Ascend Contributor
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ow-cost carriers have grown at a tremendous pace during recent years, and some of them have enjoyed healthy financial performance relative to the industry average. This success was originally and primarily due to the exploitation of latent demand for low-cost travel. LCCs’ success is based on a steady profitable revenue growth that ensures a continuous growth of their share value. If at any time the growth is clouded by events such as an unexpected decrease in load factor, then immediately the financial community issues a profit warning. Originally, about 75 percent of LCC passengers were due to stimulation of new traffic — passengers that did not previously considering flying as a travel option. It is clear though that such stimulation cannot continue indefinitely and that LCCs, to keep filling planes, have to find alternatives to fuel the growth. Beyond an inorganic growth, which has not been seen much among LCCs so far, what is prevalent in the industry are basically two macro-options by which LCCs can sustain a continuous organic growth: expanding in terms of the geographical footprint covered by the airline or increasing the customer base — addressing different customer segments rather than just the pure leisure one. Both options deviate from the pure original LCC business model. In fact, to grow the geographical footprint, LCCs must increase the average stage length of their network, which means flying longer routes that they did not initially or intentionally choose. Longer average flight times translate into less-competitive advantage in terms of aircraft utilization against the incumbent traditional carriers as well as not being able to “flood” such markets with many daily frequencies as LCCs typically do when they serve particular markets. Ryanair is a prime example of a low-cost carrier that pursues this avenue to sustain growth, and, recently, the airline started serving markets that require nearly a four-hour block-time sector that originally did not fit into its business model. This means, of course, increasing the cost base and, hence, having less competitive advantage versus the incumbents. There are actually a few LCCs that are successfully pursuing this option beyond Ryanair, such as AirAsia and Wizz Air. On the flipside, other LCCs, such as Air Berlin, easyJet, JetBlue Airways, Norwegian Air Shuttle, Vueling Airlines and WestJet Airlines, are achieving growth by increasing their customer base. This requires them to obtain new passengers in addition to those achieved through stimulation by cheap travel. In doing so, they must have an advantage, aside from low fares, over the competition, which presents a new challenge for LCCs. Until a couple of years ago, LCC direct competition was based on less than 10 percent of capacity because these carriers were able to avoid, for the most part, competition within the
Straying from the original low-fare business model, AirAsia and Wizz Air, as well as low-cost carrier Ryanair, have increased the average stage length of their network – flying longer routes that weren’t part of the initial plan – to successfully grow their geographical footprint and sustain growth.
low-cost sector. But now that further growing opportunities in potential LCC “virgin” markets are drying up, these carriers are beginning to compete for market share. At the same time, winning passengers from traditional, full-service airlines is not easy because they are fighting back by attacking their cost base and trying to emulate, with different levels of success, some features of the LCC business model such as unbundling products and boosting revenue through ancillary sales. This strategy is based on successfully winning traffic from the incumbents, which, even if it seems strange, was not originally the foundation of the LCC strategy and success. In either case, the ultimate goal is to increase the available number of revenue sources (through ancillary services obtained by intelligently unbundling products) or the revenue-generation capability (through innovative revenue management coupled with customer-centric functionality)
while at the same time keeping the cost basis under tight control. Many LCCs and hybrid carriers keep reminding that, first and foremost, they need to keep or even strengthen their cost-basis advantage (“cost is king”) and then focus on revenue improvement. However, in many instances, the LCC cost base has already “scratched the bottom of the barrel” or, in other instances, some LCCs, due to their smaller size compared to others, cannot achieve the same cost basis due to different economies of scale that can be realistically achieved. So while keeping the cost basis to a minimum is necessary for success, it is not sufficient. In addition to maintaining the low-cost structure, these carriers must also focus on revenue generation. When two LCCs with a similar cost basis, which cannot be substantially improved further, compete in the same markets, long-term
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success will be awarded to the carrier that is able to: Offer a more-lucrative product to the customer, Better distribute the product through multiple channels, Better revenue manage the market, Offer the right product to the right customer, Codeshare where appropriate to offer a wider network reach without investments, Provide more-effective customer care that ultimately translates into a better customer experience and improved loyalty. To a certain extent, LCCs will have to focus more prominently on actions and imperatives that are well known by the incumbents: finding new sources and diversification of revenue, developing new business processes around pricing and revenue management as well as customer care and, of course, keeping tight control on costs, all of which ultimately translates into using traditional paradigms in a non-traditional and innovative way. At first sight, these initiatives may appear to be a mission impossible, but they are not. Provided that airlines approach the hybridization (or sophistication) process continuously, with a sound strategy in place, it’s all well within reach. Offering a more sophisticated product means redesigning some business processes and implementing technology that will support them. Key challenges include: Avoiding any “over” redesign, re-engineering only the processes that would deliver a quick and substantial ROI where the investment is minimal or nonexistent, Continually changing processes upon changing market/competition conditions, Implementing robust, flexible technology that can easily adapt to changing conditions well into the future with little or no incremental costs. To achieve this, airlines must apply a customer sales and service approach that includes forward-thinking technology built around the capability of an airline to shape its business model according to its own tailored strategy. Important technology elements include open architecture as well as adaptive capabilities. Any solution should offer a futuristic design that will accept relatively easy customization and changes as the strategy and the business model of the airline evolves, even in a way completely unthinkable at present. To that aim, having a solution that can be easily modified through the implementation of natural language-based business rules without having to revert each time to the technology provider is definitely the way forward. This also means service-oriented architecture must isolate individual capabilities of an application so they can be used in multiple ways and combined with other services to create new functionality deployed across a service bus that facilitates easier integration and
Some low-cost carriers, such as Air Berlin, easyJet and Norwegian Air Shuttle, are increasing their customer base to achieve growth. To do so successfully, these carriers must have an advantage that transcends low fares and sets them apart from their competition.
communication among different applications of different providers. In line with the conventional LCC strategy to outsource non-core operations, solutions need to be provided on a Software as a Service (SaaS) basis as the most effective/least expensive method to source solutions. Keep in mind the demand of new technology has to be driven by changing business processes requiring new enablers, and not vice versa. Additional key success factors include: Evolving processes around a carrier’s own strategy, Redesigning processes in a manner that minimizes or avoids additional resources/ infrastructure, Outsourcing initial business process re-engineering activities at the time the new solution is implemented to the solution provider since this typically delivers the most effective outcome at the lowest cost, Investigating the possibility to partner with the solution provider on an ongoing basis to outsource the performance of some recurring business processes (e.g. maintenance of the business rules) to avoid adding resources and infrastructure in house when this proves to be economically ineffective.
The sophistication of the pure LCC model is likely unavoidable and highly recommended. The key to success for a low-cost airline is to tailor the sophistication around its own strategy, redesign some business processes accordingly and source technology solutions that support the new processes in the most effective, efficient way. This indicates that solutions providers will have to play an even more central role in the industry since they will support airlines not just from a pure technology standpoint but also, and maybe primarily, from a business advisory and business support perspective. To that aim, a true partnership between airlines and solutions providers is clearly the most successful way forward. a
Alessandro Ciancimino is vice president in Europe for Sabre Airline Solutions®. He can be contacted at firstname.lastname@example.org.
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More Smoke Than Fire The volcanic eruption in Iceland earlier this year created angst and uncertainty among airlines, travelers and numerous businesses alike. What could have been a long-term crisis for the air transport industry, however, was contained, but not without valuable lessons learned. By Kay Denton | Ascend Contributor
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Photos: Kolbeinn Arinbjarnarson
n March 21, the United Kingdom, Ireland and Iceland awoke to regionwide flight disruptions, travel chaos and potential financial losses due to a seldom active volcano, with the unpronounceable name “Eyjafjallajökull,” which a pundit translated as “I laugh at your losses.” For the aviation industry, only recently on the road to recovery from the global financial crisis, the volcanic disruption seemed like a final visit from the Four Horsemen of the Apocalypse. During the past decade, the aviation industry had been hit by war (the terrorist events of Sept. 11, 2001, that triggered wars in both Iraq and Afghanistan), pestilence (SARS and H1N1) and famine (in the form of skyrocketing fuel prices that airlines could not afford), but until March, the industry had been spared an act of nature approaching biblical proportions. The ash cloud slowly spread across Europe, and an eerie silence fell over the skies and once-bustling airports. Analysts expressed concerns for the health of Europe’s economies in the wake of what might be called “volcanic fever.” It seemed at the time that the rumble of the eruption might have been the harbinger of the death of the European aviation industry. A few months after the event, however, and the volcanic disruption is only a sharp “V” on demand, revenue and even profitability graphs for airlines. The interesting question arising from this event is, “Why wasn’t the volcanic disruption a bigger event?” Afterall, it seemed — at the time — to be a bigger issue than H1N1, but in the end, it held little more impact than the Y2K bug. A decomposition of the event perhaps sheds light on why the volcanic eruption ended up being more of a yawn than a roar. First, there is the matter as to why the airspace was closed at all this past March. On June 24, 1982, British Airways flight 009 inadvertently and unknowingly flew into a cloud of volcanic ash while flying near erupting volcano Mount Galunggung in Indonesia. During the course of a frightening hour, all four engines of the Boeing 747 failed, the windshield of the aircraft became scored to opaqueness by volcanic grit, the aircraft filled with smoke and ash, oxygen levels dropped in the cabin, and the aircraft hurtled toward the ground. Due to the bravery and prompt actions of the flight crew, however, the aircraft was brought under control and was able to land safely without the loss of life. This is a notable incident in aviation history and a point of reference that dictated the regulations regarding flying through volcanic ash clouds. Basically, as a result of this event in 1982, the civil aviation authorities of Europe have little tolerance for volcanic ash. At the time, there were few who questioned the airspace closure on safety grounds — regulators appeared to have the public’s best interests in mind when issuing the flying sanctions.
In the days following the initial eruption, ongoing eruptions caused the ash cloud to spread over Belgium, Holland, Scandinavia, parts of Germany and northern France and thousands of passengers were stranded across the globe. Trans-Atlantic flights were cancelled and customers bound for northern Europe had to fly to Rome or Madrid to make their way to European destinations. Travel disruption abounded, and ferries and trains across Europe were oversold as they endeavored to transport displaced passengers. The Eurostar terminals in Calais and Paris, France, overflowed and passengers had to pay for temporary accommodation amidst the uncertainty of when they could travel. In an interesting nod to mass psychology (or “herd mentality”) otherwise calm, experienced travelers suddenly started treating their existing location as little better than a penal colony. Business travelers who had enjoyed excellent weather in London suddenly had to find any means to leave the city. Of course, everyone wanted to return home, but many travelers resorted to extraordinary means that were reminiscent of scenes from “The Great Escape.” The press played its part in sensationalizing the extent of the disruption because bad news is much more interesting than good news. This is one of the reasons the recent volcanic event ultimately had little lasting impact. Unlike most major events to hit the aviation industry during the past decade, the eruption of Eyjafjallajökull did not result in a downturn in airline demand — even temporarily. To be certain, there was a downturn in capacity as the airlines were grounded, but there was no downturn in unconstrained demand. Instead, the volcanic disruption increased short-term demand and required several forms of intra-modal travel that resulted in a sharp uptick on the backside of the “V” when the airspace reopened. Intra-modal travel occurs when different forms of travel are mixed to reach the final destination. In the case of a passenger traveling from London to Dallas, Texas, for example, intra-modal travel may have required a taxi ride from London to Dover, a trip on a ferry from Dover to Calais, a train ride from Calais to Paris, a bus ride to Madrid and then a flight from Madrid to Dallas. The airports of Rome and Madrid became bursting European aviation hubs as traffic plentifully flowed through due to the principal airports of northern Europe (including Paris, London, Amsterdam and Frankfurt) being closed. As such, these southerly hubs experienced an increase in traffic and certain airlines, such as Alitalia, received a financial boost as they carried more passengers than usual to Asia and the United States while their more northerly competitors were grounded. In fact, Alitalia released narrower operating losses at the end of the second quarter than predicted due to an increase in international passenger volumes in the wake of the volcanic eruption. When the restrictions were lifted and flights recommenced, the load factor of many 30 ascend
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In the aftermath of Eyjafjallajökull, Iceland’s infamous volcano that erupted earlier this year, Rome and Madrid became aviation hubs due to the closing of many northern European principle airports. These southerly hubs transported much higher volumes of passengers to Asia and the United States as a result while many of the continent’s northerly airports were closed and airlines grounded.
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The eruption of Iceland volcano Eyjafjallajökull caused brief but significantly reduced restrictions on northern parts of Europe’s air transport industry, with severe warnings of imminent flight disruptions due to the volcano’s history of erupting for months at a time. However, after the initial eruption and airspace closures, there has been little lasting impact.
flights was near 100 percent for several days due to the backlog of passengers eager to reach their destinations. While many airlines have undoubtedly recorded losses from the Icelandic volcanic disruption, some carriers were winners, and the industry quickly bounced back — especially in markets such as Asia-Europe where the green shoots of financial recovery were only temporarily singed by airspace closures. At the tail end of the first week, several airlines started questioning the validity of the airspace closures. The weather in England, of course, did not help this situation. Late March can normally be counted on for cold drizzle and overcast grey skies — much like the remainder of the year. During the volcanic eruption, however, the weather was just beautiful in England; skies were gloriously blue during the day, the sunsets were blood red and spectacular, and temperatures were balmy — especially for the time of the year. Stranded travelers in England were forced into unthinkable acts such as praying for rain in March, which would be similar to praying for extra heat in Dubai in the summer. By the end of the week, airline executives — including Willie Walsh of British Airways — were asking if the airspace closures were truly necessary. Air France, British Airways and Lufthansa, among other airlines, operated test flights into the ash cloud then anxiously examined the aircraft. While they found some advanced wear on
some parts, there was little damage, and after seven days, almost all airspaces were re-opened. There were brief and greatly reduced restrictions on airspace with the subsequent eruption of Eyjafjallajökull and dire warnings of future flight disruptions because the volcano has been known to erupt for months at a time, but after the initial eruption and airspace closures, there has been little lasting impact. In the light of this event, however, there should be lessons learned. The first set of lessons learned should be for passengers. Travel insurance is specifically designed to address additional costs in the event of flight disruptions. It doesn’t cost a lot, mainly because the events it covers are fairly rare. Passengers should purchase travel insurance just for peace of mind unless they are really hooked on the adventure of intra-modal travel. Purchasing travel insurance will allow them to apply the second lesson: don’t panic when travel disruption occurs. Furthermore, passengers should not overly worry about returning to work or school; everyone will understand. After all, the disruption was pretty much the best example of force majeure impacting myriad lives. The second set of lessons learned should be for regulators. One event, such as the incident with British Airways Flight 009, should not create a trend. Regulators should be prompt to apply public safety measures, but they should also be just as prompt at testing the validity of their safety concerns. Test flights should have commenced
earlier in cooperation with airlines, and the airspace should have been opened earlier. Fewer flights means less taxation, so governments should be interested in seeing a prompt return to flights. Cooperation between aviation regulators and the industry works the best for addressing these types of issues quickly and efficiently. The third set of lessons learned should be for airlines. Airlines should take every step not to overreact when events are, for the most part, out of their control. The Great Volcanic Disruption of 2010 simply did not materialize because the industry is resilient to crisis, if for no other reason, simply because it has undergone so many shocks in the recent past. Of course, the costs of such disruptions should be contained, and airlines should be swift to take advantage of short-term opportunities that result from such challenges. Automated recovery of passengers, aircraft and crew can be a great aid to reducing the impact of disruptions and enabling costs to be contained. Nonetheless, airlines should not make knee-jerk reactions to these events simply because the press does. A final set of lessons should be understood by all stakeholders of the airline industry. Airlines are an economic enabler. When they operate on schedule, a host of other businesses operate efficiently. There are the primarily impacted businesses in related industries such as airports, ground handlers, freight forwarders, manufacturers, maintenance providers, fuel and catering suppliers, and airline technology suppliers. These are the chief businesses impacted by aviation disruptions. Then, however, there are secondary stakeholders such as manufacturing businesses, retailers, financial institutions and similar firms that rely heavily on airlines for transportation. These secondary stakeholders are greatly impacted when airlines are disrupted, even if the impact on them is not easy to measure. Finally, there is the remainder of the population that is impacted by macro-economic influences when airlines are disrupted. Airlines are the first businesses to be hurt in an economic downturn and the quickest businesses to rebound when economic forces improve. The lives of all stakeholders, which include most of the world’s population, are improved by a healthy airline business environment. The industry will be faced with similar impacts in the future — some foreseeable and some not. The ability of airlines to manage these events in a calm and efficient manner will provide the confidence to shareholders, regulators and, ultimately, to the traveling public that airlines are strong enterprises that react decisively to threats — even those threats from gigantic ash-clouds. a
Kay Denton is an account manager in Europe for Sabre Airline Solutions. She can be contacted at email@example.com.
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The new Normal Barring government intervention, the airline industry can expect a vastly changed landscape with mergers on the rise. By Lynne Clark | Ascend Staff
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he media’s latest buzz phrase, “the new normal,” is pithy shorthand for more off-putting words such as “change,” “flexibility,” “uncertainty” and “transition.” Roughly translated, it means when the recession is over, things won’t go back to the way they were before. For the airline industry, which has suffered losses during the past decade of US$70 billion, most government leaders, airline executives, union members, analysts, stockholders and even the traveling public agree that a new normal couldn’t possibly be worse than the old normal. The groups diverge, however, when discussing how the new normal industry should look in the coming years. The conversation is heating up now especially in light of the mergers of UAL Corp.’s United Airlines and Continental Airlines, Inc., and British Airways and Iberia. The United/Continental merger — valued at more than US$3.2 billion — is moving forward following shareholder and regulatory approval. It will create the world’s largest global carrier, with combined annual revenue of US$29 billion. The British Airways/Iberia union — valued at US$7.5 billion — approved by the European Union, is also expected to close by the end of the year. Under the merger agreement, British Airways and Iberia will keep their separate brands and identities, but a holding company called International Consolidated Airlines Group SA would be created with a primary listing in London and a listing in Spain. The combined airline would be the third-largest airline in Europe by revenue and would carry more than 58 million passengers a year.
Ripe For Mergers
These mergers are just the latest in a spate of airline consolidations that have grown more commonplace in the aftermath of crippling events such as 9/11, SARS and record-breaking fuel prices. Since late 2008, for example, Lufthansa — which absorbed Swiss International airlines in 2005 — has acquired Brussels Airlines, Austrian Airlines and, last year, took full control of its bmi subsidiary. Delta Air Lines and Northwest Airlines merged in 2008 and last year reached an expanded partnership agreement with Air FranceKLM that seeks to control about 25 percent of passenger flight capacity between the United States and Europe. And in the last few weeks, South American carriers LAN and TAM and North American LCCs Southwest Airlines and AirTran Airways have announced merger plans. Analysts say next year is ripe for more merger deals. In June, Qantas Airways Ltd. and Virgin Atlantic Airways Ltd. said they’re open to merger proposals to further efforts to cut costs and boost traffic. Their list of possible marriage partners is growing as previously unprofitable smaller carriers shore up their bottom lines. Those open to courting include Malaysian Airline System Bhd., Scandinavia’s SAS and Poland’s LOT.
With most traditional carriers teaming up, the only obvious U.S. network carrier combination left is American Airlines and US Airways. Experts who have studied the industry’s current condition and future prospects say that unless American and US Airways can find a way to combine with each other, their prospects are bleak. But American Chief Executive Officer Gerard Arpey has repeatedly dismissed the arguments. “I was asked that question in Los Angeles a couple weeks ago at a oneworld meeting that we had,” he told reporters in May when asked about the inevitability of an American Airlines merger. “I guess I would express the same view I did then, which is that I think that we have a strong network today; I’m confident in our cornerstone strategy because I think our footprint is in the most important business markets in the United States already. We’re not necessarily threatened by talk of consolidation in the industry; in fact I think Tom [American Airlines Chief Financial Officer Thomas Horton] and I both commented publicly about the fact that consolidation could be good for the industry.” He maintains the trans-Atlantic partnerships with British Airways and Iberia would be “a big step forward on the revenue side,” thus eliminating the merger pressure. Low-cost carriers, though not as hard hit, are not immune to mergers. Last April, Republic Airways announced the fate of its two holdings: Frontier Airlines and Midwest Airlines. Both airlines will combine into one, keeping the name Frontier Airlines, although it will retain Midwest’s famous chocolate chip cookies. The headlines for possible consolidation talks among Alaska Airlines, JetBlue and Air Canada could prove interesting. “Given the ferocity of competition in established and emerging markets, over capacity on many key routes, intractable fixed asset costs and high-leverage fuel pricing and hedging risks, strong unions, and softening long-haul revenues, it’s no surprise airlines are revisiting their business models,” said Gary Bowerman, travel writer and industry observer.
Consolidation Is Inevitable
Pro-merger advocates argue consolidation through mergers is inevitable for an industry that can’t get to sustained profitability even after more than a decade of cost slashing, capacity cutting and postponing investments in aircraft, facilities and other expenditures. “Mergers and consolidation is a must,” said Giovanni Bisignani, IATA’s director general and chief executive officer. “No other industry is so fragmented, so we have to consolidate in order to build more efficiency.” Bisignani has called for regulatory support for barrier-free mergers across borders, explaining that different legal frameworks have hindered extensive global industry consolidation, particularly among U.S. and European carriers. “I am raising the agenda of freedom on consolidation because we cannot do the same thing 34 ascend
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According to industry analysts, 2011 is ripe for more mergers in the airline industry. In recent months, Qantas Airways Ltd. and Virgin Atlantic Airways Ltd. said they’re open to merger proposals and each has a growing list of prospective partners.
(as in Europe where some cross-border mergers have been helped by unified legal frameworks) between an American and a European carrier,” he said. Most industry observers agree consolidation is key to survival. “Airlines look at consolidation as a solution, or perhaps just the last arrow they have in the quiver,” Wall Street Journal Travel Editor Scott McCartney wrote in an April post to his blog, The Middle Seat. “In a network business, like aviation or phones or banks for that matter, the bigger and broader your network is, the more revenue you can capture. Two airlines combining their customer bases and networks can do better, especially since they aren’t competing against each other.” Adding to the ripe environment for mergers is the number of open labor contracts. The Air Line Pilots Association is in bargaining with half of the 38 airlines where it represents pilots. Perhaps, surprisingly, ALPA head Captain John Prater told reporters early this year that consolidation is “inevitable.” “We’re for the right consolidation, consolidation that actually protects and enhances jobs and creates a profitable carrier,” he told reporters in New York. Some industry experts believe mergers are the only solution to getting rid of what they say is the underlying industry problem: overcapacity.
“In the final analysis, the industry tends to produce seat capacity beyond the level that would allow the industry to earn a rate of return that attracts and maintains shareholder support,” Vaughn Cordle, CFA Airline Forecasts, LLC wrote in a June article published by Centre for Asia Pacific Aviation. “I term this phenomenon the ‘destructive growth prerogative.’ Without capacity discipline — and this requires an elimination of excess capacity in the system — the industry will continue to destroy economic and shareholder value and, as a result, the quality of the product will only get worse. “Letting the number of legacy carriers shrink to a sustainable level of as few as three healthy ones might be the best way to ensure that fliers can get services they have lacked for so long,” Cordle wrote.
Bad For Consumers
Merger opponents argue that mergers don’t always work to fix what ails the airline industry, that they cannibalize market share and are harmful to the flying public. A long-time and vocal opponent to consolidation is James Oberstar, representative of the U.S. state of Minnesota and chairman of the House Committee on Transportation and Infrastructure. “This is the antithesis of the structure I voted for when Congress deregulated the industry in 1978,” he said in a May editorial released
to news organizations. “Deregulation promised robust competition and innovation — not market domination by a few powerful carriers.” His opposition has gone so far as to threaten industry re-regulation. “Hardly a day passes by where I don’t walk out on the floor that someone asks me, ‘When are we going to re-regulate the airlines?’” he said. Oberstar’s sentiments were echoed by machinist union head Robert Roach Jr., who was the only labor representative to testify at the House hearings. “The Machinists Union opposed deregulation in the 1970s and have been calling for re-regulation ever since,” he said. “It is clear that airline deregulation has failed to deliver on its promises of a stable and profitably industry.” At a June hearing of the U.S. Senate Committee on Commerce, Science and Transportation, more than a few senators shared concerns of House members and those testifying against the United/ Continental merger. “I have never been a big fan of mergers,” U.S. Sen. Byron Dorgan told Continental Chief Executive Officer Jeff Smisek and United CEO Glenn Tilton, who were testifying before the committee. Dorgan said he was concerned about passenger safety, citing the airline practice of outsourcing flights to smaller subcontractors. He blamed the process for the 2009 fatal crash of Colgan Flight 3407, marketed as a Continental flight. It crashed upon approach to Buffalo, N.Y., in a February winter storm. “The crash, in many ways, was an issue of size,” he said. U.S. Sen. Kay Bailey Hutchison, representative of the U.S. state of Texas, told the CEOs she was concerned about the merger’s impact on Continental’s headquarters in Houston. Under the merger, Continental is moving its headquarters to Chicago, costing jobs in Houston. Sen. Hutchison also voiced concern that the merger would mean loss of service to smaller community airports. While many opinions and opposition on the controversial topic of airline mergers exist, one thing remains … what was once “the norm” is now basically unrecognizable. Fasten your seatbelts and get ready for a “new normal” in the airline industry. a
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British Airways and Iberia, under a merger valued at US$7.5 billion, intend to keep their separate brands and identities, but a holding company called International Consolidated Airlines Group SA will be created with a primary listing in London and a listing in Spain. The merged carriers make up the third-largest airline in Europe by revenue and expect to carry more than 58 million passengers annually.
Lynne Clark can be contacted at firstname.lastname@example.org.
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While world economic recovery may be lopsided, there appears to be a “pony” out there with most regions of the world seeing measurable signs of an upswing. By Lynne Clark | Ascend Staff
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ormer U.S. President Ronald Reagan’s favorite story, or joke, lends a buoyant perspective on dismal world economic news. The story was published in a book written by Peter Robinson, who spent six years as a speechwriter in the Reagan administration, and President Reagan enjoyed telling this story over and over again. “Worried that their son was too optimistic, the parents of a little boy took him to a psychiatrist. Trying to dampen the boy’s spirits, the psychiatrist showed him into a room piled high with nothing but horse manure. Yet instead of displaying distaste, the little boy clambered to the top of the pile, dropped to all fours, and began digging. ‘What do you think you’re doing?’ the psychiatrist asked. ‘With all this manure,’ the little boy replied, beaming, ‘there must be a pony in here somewhere.’” In a year marked by gloomy headlines about oil spills, massive worldwide deficits and stagnant employment rates, it is startling that a “pony” can be uncovered in news about the hard-hit, beleaguered airline industry. However, the “pony’s” arrival was predicted earlier this year by many cautious prognosticators, but it wasn’t until June that it was actually spotted. In June, Paul R. La Monica, editor-at-large of CNNMoney.com, wrote that a group of 13 leading airlines’ stocks was trading at its highest level in more than a year. “The NYSE Arca Airline Index, which includes U.S. giants such as American Airlines parent AMR, discounters Southwest Airlines and international airlines such as Ireland’s Ryanair and Brazil’s GOL, is up about 9 percent since the end of April,” he wrote. “What gives?” The International Air Transport Association also in June signaled cautious optimism when it revised a March outlook saying it expected airlines to post a US$2.5 billion profit this year, recovering from two years of ailing business. “What gives” according to IATA is increasing passenger travel, a climb in cargo trade and effective cost-cutting measures that will continue to accelerate the industry’s rebound. “The global economy is recovering from the depths of the financial crisis much more quickly than could have been anticipated,” IATA Director General Giovanni Bisignani told reporters. “Airlines are benefiting from a strong traffic rebound that is pushing the industry into the black. We thought that it would take at least three years to recover the US$81 billion drop in revenues in 2009. But the US$62 billion top-line improvement this year puts us about 75 percent on the way to pre-crisis levels. “The recovery from this crisis is asymmetrical. Worsening conditions in Europe are in sharp contrast to improvements in all other regions,” Bisignani said.
Low-cost carriers, such as AirAsia and Tiger Airways, have been instrumental in the rise of passenger growth by growing network expansion, introducing additional international routes and increasing flight frequency, completely changing the dynamics of Asian aviation.
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Leading the recovery charge is the Asia/Pacific region. Kunal Sinha, aerospace and defense consultant for Frost & Sullivan, said in a press release that the World Bank forecasts the Asian economy to grow by an average of 6 percent this year, translating into an estimated 12 percent growth in the demand for air services. As a result, the region’s carriers are expected to deliver the largest profit at US$2.2 billion. “Asia/Pacific’s aviation prospects are improving much faster than other regions, and within Asia/ Pacific, 217 million more passengers are expected to take to the skies by 2013,” Sinha said. “As with the industry in the United States, the global economic downturn took its toll on air travel in Asia as well. However, the APAC region is rebounding quicker than many parts of the world, largely attributed to its relatively healthy economy and rising incomes that make it affordable for people to fly more frequently.” He said the region’s two largest markets, China and India, are expected to expand by 9 percent annually for the next few years. To accommodate this growth, airlines will buy nearly 9,000 new aircraft for service in the Asia/Pacific market during the next 20 years. The relatively fast recovery and encouraging signs have made the people in the region more confident about flying. Sinha said that struggling U.S. and European airlines are increasingly looking to Asia to bolster their fortunes. For U.S. carriers, Asia represents a way to diversify overseas as their domestic market share continues to be whittled away by low-cost carriers such as Southwest Airlines. “They are forging new alliances with Asian airlines, increasing flights to major cities and are competing to launch services in fast-growing markets in the region, like Malaysia,” he explained. Growing network expansion, inauguration of new international routes and increased flight frequency by low-cost carriers such as AirAsia, Firefly, SilkAir, Tiger Airways and Jetstar Airways have played a major role in the surge of passenger growth. “The low-cost movement, which has now become an integral part of the mainstream of the industry in Asia, has completely changed the Asian aviation dynamics,” said Sinha. “Considering the benign regulatory stance, the LCC movement will prosper, driving economic integration and a more widespread network of air transport services throughout Asia. In the future, the interests of economic development and the region’s growing tourism sector are expected to be better served by LCCs than full-service carriers.”
Economists with Kiplinger said in June they expect a 3 percent gain in gross domestic product this year for the U.S. economy with a net gain of 1 million jobs. That will be a welcome change after two years of job losses, but the payroll gains will still leave the unemployment rate at close to 10 percent. 38 ascend
Along with many other airlines around the world, carriers in Central America are experiencing a positive shift in the economy. Panama-based Copa Airlines late last year boosted to 15 its order for Boeing 737-800 aircraft.
“Recoveries from a financial crisis are slow,” said Nigel Gault, chief U.S. economist with IHS Global Insight. U.S. corporate earnings are likely to remain impressive, business analysts predict. As earnings season begins to heat up, the spotlight will likely shift from the trouble overseas to the relative strength at home, especially in the wake of heavy cost cutting that has made companies much leaner. Earnings “have been outstanding across virtually all sectors,” Peter Kenny, managing director at Knight Capital Group, told Fox Business. “That’s the rebound story. Companies are delivering on the earnings.” For the airline sector, IATA forecasts American carriers will return a profit of US$1.9 billion, a major improvement over the US$2.7 billion the region lost in 2009. Driving the recovery are improved efficiencies as a result of demand in growth, capacity cuts and domestic mergers. Speaking at a June Bank of America Merrill Lynch Transportation Conference, airline executives said recovery in business travel has accelerated alongside gains in international and domestic passenger revenue, bucking lingering concerns about higher fuel prices.
Most major U.S. carriers forecast doubledigit gains in average revenue for the second quarter, helped by more corporate travel after the unprecedented declines of as much as 40 percent seen a year ago. The revenue picture has strengthened through the quarter, with United Airlines’ parent UAL Corp. leading the industry with a forecast for an increase of 26 percent to 27 percent in the three months to June 30 from a year earlier. “We’re also seeing corporations beginning to allow their employees to travel in the premium cabins,” said Gerard Arpey, chairman and chief executive of American Airlines parent AMR Corp. Some executives, however, remain cautious despite the positive trends. “Business travel, although it’s improving, is still nowhere close to fully recovered,” said Southwest Airlines’ treasurer Laura Wright. “Unemployment remains very high.”
“Latin American countries weathered the global economic crisis of 2009 relatively well, with GDP contracting 3 percent overall, a decline largely attributed to Mexico’s exceptionally difficult year,” said Shelly Shetty, senior director
for Latin American sovereign ratings at Fitch Inc. in New York. “Latin America has been more of a spectator in this global crisis.” The region should recover to 4 percent growth this year, business analysts estimate. Adding to the recovery are Latin American carriers, which are projected to show a profit of US$900 million, up slightly from the US$800 million previously forecast. Having posted a US$500 million profit last year, Latin America will be the only region to post two consecutive years of profit. The region’s commodities are closely linked with Asian growth and supported by a 3.9 percent GDP expansion this year. The pervading optimism in Latin American aviation is also demonstrated by the flurry of financial transactions executed last December. In Brazil, the region’s largest market, the National Bank for Economic and Social Development approved an additional US$640 million for Argentina’s purchase of 20 Embraer 190 aircraft for Austral Líneas Aereas. Embraer also signed a three-year, US$2.2 billion memorandum of understanding with CDB Leasing, a branch of China Development Bank, for new regional aircraft destined for Chinese airlines. Last September, Embraer reported that its aircraft order backlog added up to US$18.6 billion and that it was on track to close the year with a company record of 232 units delivered. In Panama, Copa Airlines announced toward the end of 2009 that it had increased a previous order to 15 Boeing 737-800 aircraft. Other signs of progress come from commercial airline flight expansion. For example, in Uruguay, the Civil Aeronautics Board has presented to the executive branch a “free skies” policy proposal for the Punta del Este airport. If passed, the measure would largely open traffic to all non-regular flights at the country’s second-largest airfield. But while profits are up, ongoing safety concerns make a sustained recovery shaky. Last October, ALTA members, representing some 40 Latin American and Caribbean airlines and government organizations, addressed the concern and issued a set of resolutions for 2010. The top concern was air safety. They agreed to establish a centralized entity to develop and oversee technical certification standards and improve international aviation relationships.
Most of the Middle Eastern economies are expected to enjoy a recovery in 2010 as oil prices stabilize and OPEC increases production. The Middle East and North Africa together are predicted to grow by 4.5 percent this year and 4.8 percent next year. IATA said Middle Eastern carriers are expected to post a profit of US$100 million — their first since 2005. This is significantly better than the previously forecasted US$400 million loss and the US$600 million that the region’s carriers lost in 2009. GDP growth of 4.3 percent is outstripping the global average, and Gulf carriers continue to
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A significant indicator that the airline industry is returning to good health is the increase in aircraft orders from the main manufacturers. For example, earlier this year, Emirates Airlines announced it would purchase 32 Airbus A380 aircraft at a list cost of US$11.5 billion. This brings to 90 the firm orders Emirates has placed for the super jumbo jets.
gain market share through their hubs in Europe and Asia/Pacific even as capacity is being added at a more cautious rate. Willis Aerospace executive director Stephen Doyle told reporters in June that all signs point to strong economic recovery. He said that, particularly in the Middle East, low-cost carriers could play a major role in boosting the industry’s growth. “It could be said that the low-cost carrier segment has benefited from the challenges of the legacy carriers,” he said. “The Middle East and parts of Asia have not been hit as hard as other parts of the world, and it will be interesting to watch how the recovery develops.” One indicator that the industry might be turning the corner is Emirates Airlines’ recent announcement that it will buy 32 Airbus A380 Super Jumbo Jets at a list cost of US$11.5 billion. “It’s very good news, and Emirates is a strong customer,” said Airbus spokeswoman Maryanne Greczyn. “It is a strong airline in a greatly emerging economy. So it’s a good bellwether for the industry.” A survey by MEED of senior management executives at firms with business interests in the Middle East revealed 62 percent of companies expected to spend more on business travel in 2010 than last year, another sign the region is on the road to recovery. The majority of companies surveyed expected to make up to 25 visits to countries in the Middle East and North Africa this year. Of the Gulf Cooperation Council (GCC) countries planned to be visited, the United Arab Emirates ranks the highest, followed by Saudi Arabia and Qatar. This reflects the fact that these countries have the
largest economies in the region and the highest number of projects under way.
African carriers are expected to post a US$100 million profit, their first since 2002. This reverses the US$100 million loss previously forecast in March and the US$100 million that the region lost in 2009. The turnaround can be attributed to an increase in Africa’s average GDP growth, which is predicted to rise to 4.5 percent this year and 5.2 percent next year, according to a report by the Organization for Economic Co-operation and Development. “The good news is that the continent has proved resilient to the crisis,” said Henri-Bernard Solignac-Lecomte, head of the Europe, Africa and Middle East desk at the OECD Development Centre. “The bad news is that, despite rebounding growth next year, the downturn could make it more difficult for some African countries to meet the Millennium Development Goal of halving the number of people living in poverty by 2015.” The recovery will not come at the same rate across Africa: Southern Africa, which was affected the most by the crisis, is forecasting only 4 percent growth this year and next, while East Africa, which fared best on the continent, could achieve 6 percent on average during the same period. There are many outside influences spurring this growth. China is investing heavily in Africa to procure natural resources needed to fuel its ever-hungry economic engine. U.S. companies also have longstanding relationships built on business surrounding oil and other resources. Tourism
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is strong and growing, and trans-Atlantic flight frequencies are increasing. Still, there are hindrances that could slow aviation growth. While the U.S. Trade and Development Agency has estimated that nearly 90 projects worth US$2.6 billion will modernize African airport infrastructure in the next three years, the continent still has significant safety issues. In a December 2009 interview with Aviation & Allied Business, Manoj Ujoodha, chief executive officer of Air Mauritius, said that African airlines also suffer from the competition of major network carriers as well as from the Middle East. “These carriers operate hubs and have synergies with partners worldwide,” he said. “Their competitive advantage is exacerbated by the economies of scale they benefit from, and many African carriers find it difficult to compete. “The latter operate within limited isolated markets and don’t have access to the critical mass that would give them the means to attract the resources and operating capabilities that would enable them to compete on a level playing field,” Ujoodha said. “African carriers would only be able to compete if they can find synergies among themselves and benefit from the support of crucial stakeholders like their respective governments.” At its November 2009 conference, The Africa Airlines Association (AFRAA) urged the continent’s largest players to work with smaller carriers to create codeshares, joint ventures, cross-border and equity partnerships. “I think the message of cooperation is not a fancy, trendy word, but an absolute necessity for Africa,” Kenya Airways chief
operating officer Bram Steller told AFRAA conferees.
Economic growth in the European Union will solidify toward the end of the year and accelerate in 2011, according to Economic and Monetary Affairs Commissioner Olli Rehn. “We assume that economic growth will be around 1 percent in 2010, which will solidify toward the end of the year so that next year, economic growth would be on a scale of 1.75 percent in the European Union,” he said. According to IATA, European carriers will be the only ones in the red with a US$2.8 billion loss. This is a downgrading from the US$2.2 billion loss previously forecast in March, although it is an improvement on the US$4.3 billion that the region lost in 2009. GDP growth of 0.9 percent is not enough to support a recovery, and the currency crisis clouds the future with uncertainty. April’s eruption of the Eyjafjallajökull volcano in Iceland and the subsequent closure of European airspace because of the ash cloud drove profits down in Europe. IATA’s Steve Lott said the Greek economic crisis and the fall of the Euro against the dollar have also slowed profits in Europe. “Europe has seemed to have lagged the rest of the world in terms of economic recovery,” he said. “Some of that is due largely to the Greek debt crisis and some of the financial problems in other countries. Germany announced major budget cuts and problems with its budget. And this is all really accumulating in a weak European economy.”
prices recovered in June to US$75 per barrel. Conflicting signals from the Middle East contribute to the uncertainty of which direction oil prices will head. IATA expects 2010 oil prices to average US$79 per barrel. However, David Greely, chief commodities strategist at Goldman Sachs Group Inc., told reporters in June that oil prices will return to a higher-price environment, trading between US$85 and US$95 a barrel by the end of this year. Oil may reach US$100 by 2014 on future supply constraints, he said. “Unfortunately, there is a risk that the fuel goes up faster than the economy, and so this creates a problem,” said IATA’s Bisignani. “It will be difficult to apply fuel surcharge in this weak environment. “Seeing black on the bottom line is a great achievement. The resilience of the industry has been strengthened by a decade of cost-cutting, restructuring and re-engineering processes,” Bisignani said. “But even with all of our hard work, the result is just a 0.5 percent margin that does not even cover our cost of capital. The industry is fragile. The challenge to build a healthy industry requires even greater alignment of governments, labor and industry partners. They must all understand that this industry needs to continue to reduce costs, gain efficiencies and be able to restructure itself if it is to be sustainably profitable. We must all be prepared for a greater change.” a
The wildcard in a sunnier outlook for air carriers is jet fuel prices. After a three-week slump, which saw the price of WTI crude down to almost US$60 per barrel in late May, oil
Lynne Clark can be contacted at email@example.com.
+count it up 7.8 billion
The amount in U.S. dollars, U.S.
The percentage of international tourists
The amount in U.S. dollars air
airlines collected in ancillary rev-
who travel by air, according to enviro.
transport pays annually to use air
enue in 2009, according to the U.S.
aero. Aviation now transports more than
transport and air navigation services
Department of Transportation. Of
2.2 billion passengers annually.
infrastructure through specific land-
that amount, US$2.7 billion was from
ing, passenger and air traffic control
baggage fees alone.
fees, according to enviro.aero.
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By Ben Mussler | Ascend Contributor
New technology standards promise to provide a customary platform crucial to the way ancillary services are leveraged by airlines, sold by agencies and purchased by travelers.
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arlier this year, many of the industry’s leading travel management companies, online agencies and global distribution systems, along with several airlines, proclaimed their support for plans to implement recently developed, industry-wide technology standards for ancillary services. These standards, proposed by a strategic partnership program composed of International Air Transport Association and Airline Tariff Publishing Company members — airlines, travel agencies and GDS companies — are designed to better enable shopping, booking, payment and reporting of ancillary services for airlines, travelers and agencies. Proponents of such open and transparent technology standards believe that by driving consistency, these standards will also drive efficiency through the way ancillary services are handled, such as accessing ancillaries via GDSs in the same manner as fares are accessed today. “It is essential that our valued agency partners have the ability to sell these products to our guests in a way that is efficient and convenient,” said Catherine Dyer, vice president of distribution for WestJet. Matt Beatty, vice president of global supplier management for Carlson Wagonlit Travel agrees that “with the GDSs providing quick and easy access to ancillary products and services, we can help our clients and their travelers make better-informed choices.”
The standards utilize the ATPCO category for optional services (OC) fare filing capabilities along with a complementary technology — electronic miscellaneous documents (EMDs). When combined, these filing capabilities will give airlines the ability to quickly introduce ancillaries to the broadest travel audience through both direct and indirect channels — supporting easy-to-manage “à la carte pricing.” For airlines selling in both their indirect and direct channels as well as for travel agents selling in the indirect channel, the ability to offer an ancillary product and settle the payment for it in an efficient manner is key. “Both ATPCO OC and EMDs offer tremendous opportunities,” said Kyle Moore, vice president of information technology and consulting services for Sabre Holdings® . “The OC fare filing enables an airline to quickly and easily put its product on the shelf in the GDS, readying it for shopping and booking, while EMDs enable the payment and funds settlement for the OC-filed product. This cohesive combination creates an end-to-end solution — from shopping and booking through fulfillment. It also 42 ascend
ensures that the information necessary to manage this process during the day of travel is actionable by systems throughout the lifecycle of the trip, particularly important if there are irregular operations. Finally, agencies and corporations will also have the data they need to effectively manage travel spend on ancillary services during the pre-travel sales period, something that is of increasing importance. “We hear every day from both our airline and agency customers that they want to better manage this process,” Moore said. “Accomplishing this via standards actually speeds the introduction of the ancillaries around the industry. It’s a smart business move for multiple carriers to use the same underlying infrastructure across a wide variety of products. Airlines aren’t reinventing the wheel over and over and over for each new ancillary introduced by each and every airline. This is true for the simple sale of a product, but it is particularly true for more complicated situations such as managing post-booking changes, flight cancellations, and refunds and exchanges.”
Ultimately, these standards are designed to make the purchase of ancillaries seamless and easy for the end traveler — and that is good news for the industry. Travelers rarely book trips through the same channel for all of their travel needs. Business trips, for example, are often booked through corporate travel management companies, whereas leisure trips are commonly booked through a consumer-oriented agency or website. Offering ancillary services in a consistent manner through all channels is one way to improve customer satisfaction. If properly used, the proposed standards could benefit the airline that leverages them. Supporters of the new standards believe consistency will enable airlines to implement these services and products quickly — rolling out new revenue opportunities in a matter of weeks and to all channels, online and off.
will become of private fares that don’t follow ATPCO standards such as private fares outside the automated fare rule categories of Cat 15/25/35? And what about existing and in-work projects that certain airlines have with third parties to enable merchandising capabilities? To this end, those in favor of the new standards would remind concerned parties that many capabilities enabling the sale of ancillary services already exist within the GDS environment. Take, for instance, the variety of airlines offering branded fare bundles available in the Sabre ® GDS in which customers can choose from among the items they value most. Pay-for-seat is another example of a merchandised offering that many travelers take advantage of today in the Sabre GDS. The proposed standards are not technology specific. Varying customer touch points enabling merchandising will exist, as they should and do today — through the Web, ticket offices, GDSs or reservations centers; even on the day of departure. But while technology approaches have differed and the products, services and business models airlines employ are virtually limitless, consistency in the technical approach is becoming the norm. “Delta supports this development of technology that facilitates the potential distribution of new ancillary products and services,” said Jim Cron, senior vice president of global sales and distribution for Delta Air Lines. “We are continuously seeking distribution methods that satisfy the marketplace, and this technology is an option we are considering. It is important that we work with our agency partners to find the best possible solution for our customers.” And that is exactly what the industry — airlines and agencies alike — will continue to do. a
Like the launch of many previous technology undertakings that were yet to be proven, the announcement of these standards has not come without questions. During the past year, many airlines have evolved their business model in an effort to generate incremental revenue by either creating product bundles that differentiate their offerings or by unbundling various products and services, such as premium seating or baggage fees. Given myriad ways this merchandising has been accomplished, critics question whether the standards proposed will be truly open. For example, what
Benjamin Mussler is an airline distribution solutions marketing partner for Sabre Travel Network ®. He can be contacted at benjamin. firstname.lastname@example.org.
Sabre Airline Solutions and the Sabre Airline Solutions logo are trademarks and/or service marks of an affiliate of Sabre Holdings Corp. ÂŠ2010 Sabre Inc. All rights reserved. AS-10-11617 0210
complete the picture
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Donâ€™t Delay Under the new tarmac delay laws, passed by the U.S. Congress in April, airlines face harsh penalties of approximately US$27,500 per passenger for extraordinarily delayed flights of more than three hours.
By Michael Clarke | Ascend Contributor
he U.S. domestic airline industry has experienced phenomenal growth during the past 30 years since deregulation. In spite of major geopolitical events that have caused temporary reductions in passenger traffic, the number of passengers traveling within the domestic market as well as the number of aircraft movements has increased three fold. At the same time, there has been little growth in the underlying airport and air traffic control system necessary to support this immense growth. As a result, there has been a consistent increase in the number of delayed and cancelled flights as measured by the U.S. Department of Transportation. Year over year, there has been a pronounced increase in the number of cancelled flights. Looking back at the month of May, for example, there were 6,716 cancelled flights reported by the 12 major carriers, representing a 40 percent increase in cancelled flights versus May 2009. During the first half of 2010, nearly 25 percent of flights were delayed,
cancelled or diverted. Of those flights arriving late, passengers experienced an average delay of 57 minutes. The majority of flight delays in the United States result from network effects across the system driven by problems in the national airspace and aircraft routings. When a weather pattern develops, air traffic control authorities introduce a traffic management program depending on the severity of the disruption. This includes, for instance, a ground delay program where all scheduled flights are metered into an impacted airport and given a specified arrival time to reduce the demand on the airport. Alternately, ATC authorities would initiate a ground stop that prohibits any flights from departing to a given airport until a prescribed time and/or restrict a flight from departing until a required airspace sector is available. The distribution of flight delays is strongly correlated to the level of scheduled flights, which has pronounced bias toward the eastern seaboard of the United States, with the New York City area airports experiencing the worst delays.
Not far behind are major hub airports such as Hartsfield-Jackson Atlanta International Airport, Chicago Oâ€™Hare International Airport and Miami International Airport. Since a large number of flights are connected to these chronically impacted airports, flight delays are prone to propagate throughout the entire U.S. national airspace. An alarming and disturbing trend observed in delayed flights is a significant increase in duration of taxi-in and taxi-out times, in some cases exceeding five hours. With limited gate availability at major hub airports, airlines are often forced to board flights and reposition aircraft to holding areas until they receive departure clearance. On arrival, inbound flights often end up waiting until gates open, where, in some cases, outbound flights at the occupied gates are waiting for delayed crewmembers on inbound flights. These tarmac delays, signifying any additional time a passenger sits on an aircraft while itâ€™s on the ground and away from the terminal, are measured from the time the aircraft door is locked or unlocked.
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Based on observed data collected by the U.S. DOT, the majority of these excessive tarmac delays occur during flight departure. While the occurrence of such extreme delays are small relative to the number of scheduled commercial flights in the U.S. domestic network, when they occur, there is a lot of visibility and media coverage. Last year, less than 0.20 percent of scheduled flights were subject to excessive delays, with the majority of those (91.5 percent) observed during departures. In addition, excessive tarmac delays are often observed during flight diversions when the alternate airports are not able to support the sudden increase in unplanned operations. After the summer of 2009, many airlines developed internal
Number of Regularly Scheduled Flights
processes and procedures to better manage and track flight diversions to help reduce excessive tarmac delays. Nonetheless, there was a growing call for governmental regulation and/or oversight to be implemented to improve the overall passenger travel experience. In the aftermath of several high levels of tarmac delays observed in December 2008, June 2009 and July 2009, the U.S. Congress published legislation to penalize airlines for situations where there are excessive delays beyond three hours. In April, the new tarmac delay regulations officially went into law with severe penalties of US$27,500 per passenger on an excessively delayed flight (more than three hours). For a fully booked Airbus A320 or Boeing 737-800
Tarmac Times of 3 Hours or Longer Total
with 160 passengers, an airline is now subject to a penalty of US$4.4 million for any flight violating the tarmac delay rule. Ironically, in many situations, such excessive delays on departure are due to factors beyond an airline’s control, such as prevailing weather conditions, U.S. Federal Aviation Administration-instituted air traffic flow management programs and limited airport resources including de-icing equipment and cleared active runways. In response to the new legislation, most airlines have become very conservative in their operating procedures and often prefer to cancel a flight subject to a rolling delay versus continuing their traditional “wait-and-see” approach for managing delays. As a result,
Stage Of Operation Of The 3-Hour Tarmac Time Prior To Cancellation
Multiple Gate Departure
At Diversion Airport
2010 April 2010 March 2010
Jan. 2009* Cutline to go here.
2009 Total 2008
Source: Bureau of Transportation Statistics The stage of operation by which tarmac delays occurred is broken down by “prior to cancellation” (the flight left the gate but was cancelled at the origin airport), “multiple gate departure” (the flight left the gate, then returned and then left again to resume normal operation), “taxi-out” (the time between gate departure and wheels-off), “taxi-in” (the time between wheels-on and gate arrival) and “at diversion airport” (the tarmac time at the alternate airport). Of which, the majority of excessive tarmac delays occur during departures.
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Tarmac Times Of More Than Three Hours
4 April 2010
0 Oct. 2008
Source: U.S. DOT Research and Innovative Technology Administration
During the course of nearly two years, from October 2008 through April 2010, the U.S. national airspace has observed excessive tarmac delays where passengers were stranded for three hours or more on the tarmac. As a result, the U.S. government has passed a law that will severely penalize carriers for lengthy tarmac delays in an effort to reduce the number of impacted passengers.
an increase in the level of flight cancellations as a direct byproduct of this new rule is anticipated. Since the penalty only applies to boarded passengers, airlines have also decided to postpone the boarding process and keep passengers in the terminal until they are confident the aircraft can depart within three hours of block off. Consequently, airlines are being forced to use additional gates and potentially increase their ground resources and staffing levels to meet the higher level of operations once there is clearance for resumed operations. If an airline elects not to increase its ground resources (gates, ground equipment, staff, etc.), the result could be additional departure delays on flights where passengers are no longer stuck on the aircraft but rather in overcrowded terminal buildings. If the current situation continues unchecked, passengers will potentially be exposed to unnecessary additional flight delays and cancellations unless airlines and regulatory bodies act now to do something to change the rules of engagement. For starters, airlines must be better equipped with the necessary decision-support tools (see related article on page 82) that will enable them to monitor their operations for prolonged tarmac delays. They need to be more proactive in making informed decisions about whether or not to return an aircraft to the gate before exceeding the three-hour threshold limit. Working in conjunction with the FAA, airlines need to better sequence their outbound traffic, especially at airports with congested taxiways and/or limited runway capacity. In situations where there are active ground stops and/ or ground delay programs, flights should be released from the gate based on the estimated departure control times that are provided by the central air traffic control center. Based on anticipated taxi times and the number of departing aircraft, airlines and air traffic control can better manage the flow of aircraft, thereby reducing the potential of departure queues developing at the end of active runways. a
As a result of the new tarmac delay legislation, passed in April, airlines are sometimes forced to use extra gates, causing a need to potentially increase resources and staffing levels to accommodate the higher level of operations once there is authorization to recommence operations. If a carrier chooses not to increase its ground resources, there could be further departure delays on flights where passengers are no longer stuck on the aircraft but rather in overcrowded terminal buildings.
Michael Clarke is a solutions director of Sabre ÂŽ AirCentreâ„˘ Enterprise Operations for Sabre Airline Solutions ÂŽ . He can be contacted at email@example.com.
Freedom To Execute The game has changed for airlines, and a new era of execution on profitability, nimbleness and competitive differentiation has emerged.
The Digital Pendulum Talking Technology ... With Robert Wiseman, Senior Vice President and Chief Technology Officer, Sabre Holdings
Processes At The Heart of Competition An in-depth analysis of an airlineâ€™s business processes combined with its ability to make necessary process adjustments using specific technology provides a balanced strategy that exceeds customer expectations and promotes efficiency across the entire operation.
THE FREEDOM TO EXECUTE The game has changed for airlines, and a new era of execution on profitability, nimbleness and competitive differentiation has emerged.
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
By Tom Klein, President, Sabre Holdings
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safe, secure, sustainable and profitable airline industry that provides good value to customers is in the best interests of our governments, economic recovery and global competitiveness.” That premise was shared during a speech to the U.K. Aviation Club earlier this year by Air Transport Association Chairman and UAL Corp. President, Chairman and Chief Executive Officer Glenn Tilton. It’s a powerful principle … one we should all embrace for the betterment of the entire industry. Luckily, to help support this call to action, a new era in airline technology is upon us. And whether or not your area of expertise is directly related to technology, you’ll be interested in the shift we are making to ensure your airline is prepared for the long term. At Sabre Airline Solutions®, we have changed the conversation from an “open-systems” debate to a higher standard of freedom through empowering technology, applications and services that create speed-to-execution for airlines and enable, rather than inhibit, changes to your airline’s strategy. Our approach creates freedom for airlines by combining the leading airline Software as a Service (SaaS) portfolio, an innovative Platform as a Service (PaaS) approach for real-time data, Web services enablement and a progressive cloud-computing environment. Our Sabre® ASxSM Airline Services Exchange, a future-facing PaaS solution, ensures a complete portfolio of service-based solutions built on integration, scalability, flexibility and performance. Through the ASx exchange, an airline can leverage a state-of-the art customer domain, rules engine, toolkit and application standards to use real-time data across its enterprise to detect and proactively manage patterns in its business. Whether strengthening alliance needs through superior data models and information exchange or marrying an airline’s applications with ours, we are changing the foundation of how an airline can execute. Our mission is to help airlines gain freedom from their constraining IT infrastructures to conduct business today the way they want and to be prepared for the future. We are among a small group of software providers across multiple industry verticals to embrace this strategy, and we work diligently to make sure our technology direction meets and exceeds our customers’ needs. To support a growing community of customers that need to boost revenues, increase productivity and enhance their customers’ experience, we have invested in and created three distinct technology advantages: 1. A superior cloud-computing environment through our PaaS strategy,
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2. Flexible applications engineered and tested for the demands of an airline, delivered in a SaaS model, 3. A services foundation that enables a multitenant architecture for integration and realtime analytics. Why focus on these three areas? Because “open” is not enough. While it is necessary to provide open solutions, an open environment and even open collaboration, the rush to “open systems” in and of itself has not meant better execution by and for airlines. For a number of airlines, an open-systems product was delivered with a “walled garden” approach. This meant not being able to use data as intelligence and has driven compromises in terms of integration ease, cost reduction, flexibility and timeliness of delivery. Clearly, this is the opposite of freedom — it is simply new technology that brought new constraints. This point was validated in a May meeting by our executive advisory board, a body of chief information officers and IT executives from across the industry using multiple technology providers. According to discussions during the meeting, we have the right technology strategy to address the enterprise-wide needs of an airline and have been executing. Still, we recognize the need to move even faster.
Five Radical Shifts
Further, in a 2010 study called “The Future of Corporate IT,” conducted by the Corporate Executive Board’s Information Technology Practice, five radical shifts — information over processes, IT embedded in business services, externalized service delivery, greater business partner responsibility and diminished standalone IT role — that correlate with our IT strategy and the way airlines are evolving as businesses are addressed. It points to shifts that we embrace, and every enterprise, airlines included, should consider:
Information Over Processes
“The rise of technology delivered as a service, or the cloud, will significantly reduce sources of competitive advantage from information technology. In theory, a start-up could use the cloud to obtain the same functionality, scale and quality as an industry leader. Differentiation will lie in how an organization manages change, integrates its service portfolio and, critically, exploits the information the services generate. The nature of demand for information technology also is changing. Most employees are now knowledge workers. Social media is becoming vital for customer and internal communication, and data volumes continue to rise. As a result, in the business areas that drive growth — innovation, marketing, sales, customer service — up to 80 percent of IT enablement opportunities relate to business intelligence, collaboration or the customer interface. At the heart of each of these opportunities is the need to capture, 52 ascend
Customer Touchpoints And Applications
real-time operational data
Natural language rules engine
Travel data Warehouse
Booking history • Contact • Demographic information • Identification/document • Alliance, loyalty, ID and tier • Preferences • Value score • Targeted ancillary offers • Service event flags
Ticketing information Revenue accounting Operational information Check-in Baggage information Shopping data
With our unparalleled technology platform, you can use real-time data throughout your operation to ensure all employees have the same information exactly when it’s needed for optimal decision making.
integrate and interpret information, both structured and unstructured.”
IT Embedded In Business Services
“The corporate center is in flux. All corporate functions have the same problems — their capabilities overlap, they do not control the outcomes they enable and, after many cuts, they struggle to find the next big efficiency. And for organizations growing in emerging markets, many corporate functions lack the scale or expertise to provide sufficient local support. The IT function shares these problems. It has skills in strategy, program management, business process design and sourcing. All are valuable, but none are needed solely for delivering technology, and so they can all exist elsewhere. Second, no amount of alignment and partnership changes the fact that the IT function enables business outcomes that someone else controls. Much value has disappeared down the hole that this situation creates. Finally, cost pressures mean many chief information officers face the unwelcome choice of cutting delivery resources needed to “build things right” or management resources that ensure IT “builds the right things.” The need for efficiency and joint accountability for execution and outcome will change the IT function’s delivery model and organizational location. Technology will be consumed as part
of business services as the IT function merges into a business-shared services group alongside other corporate functions.”
Externalized Service Delivery
“Externalization of applications development, infrastructure operations and back-office processes continues, gradually eroding the “factory” side of the IT function. The pace will accelerate as the cloud enables the externalization of up to 80 percent of application lifetime spend. As this occurs, internal roles will shift from being technology providers to technology brokers.” (Although this came directly from The Future of Corporate IT study, and it may sound like one of the many pie-in-the-sky promises of technology, I believe this one will largely be true, and progressive companies are seeing the benefits already.)
Greater Business Partner Responsibility
“Technologies for collaboration, business intelligence and the customer interface all require experimentation and iteration; use nonlinear, user-driven workflows; and offer value from diversity across the organization. None of this is easy for a central function to fulfill. A generation of business leaders and end users is emerging with greater technology
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corporate travel management company
online travel agency
airline Web site
airline call center
airport direct ticket counter
Ancillary sales don’t have to stop at your website. You can sell merchandised offerings through multiple channels, capturing more revenue for every type of trip your customers take.
knowledge and confidence. They see advanced, user-friendly technology as an everyday occurrence and can recite stories of companies gaining industry leadership through technology. At the same time that business leaders’ expectations, and their ability to articulate those expectations, are quickly rising, the cloud gives them access to unprecedented technology scale and expertise. The fact that cloud services cannot be extensively customized, but offer greater configurability in most cases, levels the playing field; business units cannot customize cloud applications but neither can the IT function. Together, these trends point to a greater role for business partners in areas where the value of differentiation outweighs the need for integration. This is not a return to local control of IT resources, rather, it is a shift in responsibility for technology decision making.”
Diminished Standalone IT Role
“As IT roles migrate to business services, evolve into business roles or are externalized, the scope of the IT function will diminish, and its headcount will fall by 75 percent or more. Strategy, architecture, risk, program management, user support and relationship management will exist at the businessservices level, not within the IT function. The CIO position will expand to lead this broader group or shrink to manage technology procurement and integration. Roles remaining
in the IT function will organize around build and run, and adopt an agile operating model to allow rapid value delivery and resource mobility. Organizations that do not make these shifts will be left behind as they struggle to effectively exploit technology and manage an inefficient IT function and an underperforming corporate center. For IT leaders, too, the shifts present risk and opportunity. Those who do not adapt, face a much diminished role in a group with little strategic impact. But the opportunity is also significant. Leading a business-shared services organization offers new levels of resource and accountability for business outcomes. Another option is a leadership role in a newly empowered business unit that thrives on exploiting technology for competitive advantage.”
Our current technology approach and the path forward sync ideally with these objectives, which were taken verbatim from The Future of Corporate IT study. Our ASx exchange as a platform and services environment creates an advantage for an airline. It provides preeminent application performance, seamless consumption of new capabilities and a leading method of delivering data between applications and points of sale and service. The result is better combinations of applications and data for the businesses within airlines to effectively execute. In addition, airlines see increased
user adoption through application accessibility and configurability via an advanced community portal and an enterprise consumption of usable operational data. Airlines can say goodbye to the old world of siloed data and welcome true real-time business intelligence that takes enterprise operations to a new level. An airline can deliver its promise to its customers more efficiently with realtime data and a rules engine that ensures it has an accurate array of knowledge about its customers. It is important if airlines feel constrained by their technology that they look at ways to get ready now for the future, to think about the rapid shifts IT is experiencing and the evolution of smarter customers. While some airlines are working with us on large-scale transformation today, small shifts can be made with big gains. A primary example is how many airlines can look into our portfolio of service-enabled solutions to enhance the technology environments they already have, such as Web services, executive data dashboard, revenue integrity and other light applications that are easy to implement. We are working with a number of airlines, offering unique operational data services, added applications, helping with methods to create new capabilities from composite services, employing a rules engine and overlaying systems with new configurable user interfaces at points of sale or service, to get out of their systems what they really want. A white paper titled “Forecast: Partly Cloudy And A Chance Of Applications” published by The Keynote Benchmark, a website for mobile and Internet performance review, hints at how customers are navigating new terminology while weighing the advantages of cloud computing at the same time. Terminology aside, with SaaS, the “cloudiness” disappears when the technology is real and applications perform. The paper goes on to say, “speed of implementation is a real advantage for SaaS.” We continually recognize the real need airlines have for fast execution, and we relentlessly evaluate our software and infrastructure strategy and have been aggressive in delivering advanced technology and services to support the growth of airlines. We are also dedicated to ensuring world-class delivery of technology and applications — speed being a critical focus. We’ve completed more than 500 successful small and large technology deliveries in 2009 and will do the same this year. Thus, as the largest SaaS provider to airlines, we have removed the cloudiness from technology conversations, ironically, with cloud computing. The objective is to free airlines to focus on flying and running their businesses as well as enable changes in strategy, offer the ability to experiment with different models and react quickly to market changes … all enabled by technology, as opposed to being hindered by it. We have proven this ability at airlines of all
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Sabre AirVision In-Flight
Sabre AirVision Revenue Manager
Sabre AirCentre Flight
Sabre AirVision Schedule Manager
Sabre AirCentre Load Manager
Sabre ASx Sabre AirVision Cargo
Airline Services Exchange
Sabre Airline Solutions Application
A future-ready services-oriented architecture, Sabre ASx technology empowers you to quickly make the changes you need for your business. This game-changing technology gives you the freedom to quickly assemble data and capabilities to act on business opportunities as well as enables you to leverage existing systems while easily integrating new ones.
sizes. The importance of SaaS is reinforced in the Keynote Benchmark whitepaper. It discusses other advantages from cloud computing and SaaS inherent in the Sabre Airline Solutions mindset, that are a direct correlation to what airlines want. It states, “another checkmark in the plus column is that instead of highly disruptive and expensive process of upgrading on-premise, SaaS upgrades can often happen without disruption to normal business processes.” This means that, over time, technology can more easily evolve with a business, preventing wholesale changes that are painful or localized. There are a number of areas across our broad portfolio and client base that point to the success of our future-facing architectural foundation, real-time operational data and services-based applications. First, we have delivered the newest solution for reservations, departure control and inventory to market that enables our airline partners to evolve or move from rigid customer management platforms and inflexible passenger service systems (PSS). Up and running at JetBlue, Vietnam Airlines, Volaris, WestJet and, soon, LAN and others — the combination of platform and SaaS, and nimble, configurable applications means airlines can see complete enterprise implementations 54 ascend
faster and adopt them quicker into steady state. The added bonus being, they have a solution that is generationally equipped for the long term — it is ready for many technology iterations to come. Additionally, airlines can tap into a robust offering of business and data analytics applications, the most advanced revenue integrity capabilities, intelligent merchandising and e-commerce, operational data services and airline toolkits that enable some of the world’s most prominent airlines to improve upon what they have today. Second, airlines need more than just great technology to improve customer sales and service. They require operations solutions that integrate well with all other systems for a persistent view of the customer, the disposition of aircraft and ground operations. We have put the ASx exchange to work in creating innovative irregular operations recovery, dynamic customer reaccommodation, state-of-the-art inventory controls and an electronic flight bag solution, to name a few. More importantly, the data becomes usable in how it is extracted from operations to feed other applications that span an airline. Our data dashboard aggregates day-of-operations and moment-of-operations information for faster decision making. Another example is the combining of customer and operational data in a rules engine
that drives innovative customer value scoring that is configurable to fit an airline’s unique customer experience strategy, and it is a landmark development. Third, the use of the ASx exchange creates a seamless relationship between an airline’s functional areas such as marketing and planning, enterprise operations, and customer sales and service, enabling airlines to connect in a one-tomany fashion our portfolio with airlines’ existing systems and other third-party applications. Thus, data and composite services combine to generate new capabilities and possibilities. For instance, the concept of integrated commercial planning is no longer just a concept. Creating real-time, actionable intelligence across revenue management, pricing, revenue integrity and revenue accounting is priceless. This is difficult for various product providers and airlines to stitch together. The answer lies within the combination of capabilities via Web services across the revenue-generating and tracking spectrum. Shared actionable data, leading algorithms and a high-performance Platform as a Service make it happen, making it possible for airlines to manage ancillary revenues proactively, compete more vigorously, price smarter, consider operational impacts and account for revenue by channel, flight, market and promotion in time to shift sales and marketing tactics. More than 300 airlines depend on our delivery, innovation, broad SaaS portfolio and collaboration within the largest global airline community. A technology environment built to evolve through multiple generations, configurable solutions and real-time intelligence is creating freedom to evolve. Game changers, service leaders and leading brands alike are taking note. Customers such as Aeroflot, American Airlines, British Airways, Cathay Pacific Airways, Ethiopian Airlines, Jet Airways, JetBlue, Kingfisher, Lufthansa, Volaris, WestJet and, soon, Aeromexico and LAN, are using our services, applications and technology to bring about this freedom. The industry’s 2.4 billion passengers expect it. I like to think about it this way. According to an article “All Too Much” in the February issue of The Economist, between 2010 and 2015, the compounded annual growth rate for global data volumes across all industries will be an astounding 60 percent. So, even if you want to believe in only incremental passenger growth and little change in consumer behavior, the onslaught of data is coming. For the airlines that prepare now, it means great results. Is your airline ready, and do you have the freedom to do business the way you want? We’re more than ready. a
Tom Klein can be contacted at firstname.lastname@example.org.
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Processes At The Heart Of Competition An in-depth analysis of an airlineâ€™s business processes combined with its ability to make necessary process adjustments using specific technology provides a balanced strategy that exceeds customer expectations and promotes efficiency across the entire operation. By Chris Bird | Ascend Contributor
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If Excess Baggage Deny Bag(s) If Excess Baggage
Compute Fee & Verify Ability to Pay
Continue with Check-in
The traditional check-in process begins with locating a passenger’s reservation prior to checking in baggage. However, increasingly, arguments about excess baggage fees cause friction and slowdown in the check-in process, often causing the agent to waive the excess baggage fee and resulting in lost revenue for the airline. The bottleneck happens in the “unwilling-to-pay” branch of the logic flow and takes valuable time from the check-in agent. An airline can perform data analysis from the processing engine to gain insight into the impact the current process has on a particular airline.
All Reservations With Checked Baggage July 2010 Check Baggage
12,000 10,000 8,000
CHART TO FOLLOW
The data analysis showed that in July, less than half of all passengers had checked baggage. Of those that processed checked baggage, a relatively small number had excess baggage fees to pay.
All Reservations With Checked Baggage And Excess Baggage To Be Charged
6,000 5,000 4,000
CHART TO FOLLOW
Compute Fee And Verify
here is a constant tension in any business between delighting customers and managing costs. Erring too much on the side of pleasing customers can result in an unsustainable business model. Leaning too far on the side of managing costs can bring about a growing dissatisfaction among customers. In the airline industry, you constantly hear the “process” word with customer interactions — “The boarding process will start in 10 minutes” or “To expedite the security process, please remove ….” As such, we expect to perform business actions according to set processes (often found in process and policy manuals), but often technology isn’t leveraged to its full potential when assisting with process development and implementation. When developing a strategy around key processes, several questions come into play, such as: Where are the bottlenecks in the check-in process? Which steps in the baggage loading process are the most expensive? Which of your processes generate the most criticism from your customers? With the advent of new technologies, should you change any of your processes? How will you go about making process changes? Does the same process apply for check-in at every airport (training efficiency versus local custom; large/small/domestic/overseas; local regulations/workforce rules, etc.)? Should it? Do you need to take a different flow through a process dynamically based on current data? Check-in for “elite” versus non-elite customers, Ramp processes for different equip ment types/kinds of load, How to apply rules with processes. In each case, how do you know there’s an issue? What action will you take to address it? What will the necessary changes cost? There’s a theme here. We need to know what’s working and what’s not working with current processes and then employ a method to systematically analyze, make decisions and implement changes to processes with specific goals in mind … all while keeping the business operating in its current mode. Enter the world of “business process automation and management.” When you buy solutions, you want to implement your processes. When you execute your business processes, you want to be able to measure how well those processes are working for you. When you are planning, you want to be able to redefine your processes, making informed decisions, with the technology being an enabler and not an impediment.
This prompts the question, “Is the distribution of excess baggage arguments uniform across the flights, or are there some flights that tend to have more arguments than others?” Analysis of the data shows that the top five flights contribute the most arguments and that this is relatively consistent across the entire month.
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Top 5 Unwilling To Pay = 85.37% Of All Unwilling To Pay In July 140 120 100
CHART TO FOLLOW
80 60 40
Unwilling To Pay-All Flights Unwilling To Pay -Top 5 Flights
It may therefore make sense to change the process so discussions about excess baggage are handled by a special team prior to actually retrieving bookings, resulting in a process flow where the computation of willingness to pay is handled separately.
built in. When partnering with your airline, we’ll begin with our pre-determined reference processes, which are then refined to optimally support your business needs. The refined process flow uses prebuilt components from our solutions and other components within your business for execution. The components that are embedded in your processes are those enabled by the ASx exchange platform. During the execution of a refined process, metrics are captured (business activity monitoring) that enable you to see and report on the flow through the process. Simple metrics collected for each step in the process include: The length of time taken, The number of times the step was executed,
Of course, process change requires considerable modification in the organization. Processes need to be redefined, labor negotiations undertaken, customer satisfaction surveys conducted, IT systems adapted to the new process, etc. The changes to IT are in some ways the least predictable and, because the changes often come late in the change-management cycle, they are often rushed and need heroic efforts by IT groups, suppliers, domain experts and others — not exactly a freeing experience. Our vision with the Sabre® ASxSM Airline Services Exchange process management strategy is that we deliver our solutions on the ASx exchange platform with reference processes
Unwilling to Pay
If Excess Baggage Compute Fee & Verify Ability to Pay
The person who completed the step (role based or individual based), if it was a human interaction, The number of times it was completed normally/abnormally. From a study of these metrics, you can drill down to discover problems. For example, one human step appears to take a lot of time. Why? Or you expected to check in 100 passengers per hour at the premium desk with five people but are only getting 70 passengers per hour checked in. Why? Using the refined processes and accompanying metrics, you now have the opportunity to understand what is happening during the execution of the process and then make staffing adjustments accordingly. As a matter of course, many of the interactions during check-in are captured on video, so by analysis of the actual numbers taken from the process capture along with video footage of the scene, better insight into the process can be discovered, resulting in significant improvements to the process — in customer experience and staffing costs. Without actual numbers, process improvements are simply guesswork — often good guesswork based on the experience of the personnel involved. However, having precise numbers provides a base for experienced airline professionals to make even better process decisions. While check-in processes have been used as a prime example, the methodology is applicable across your entire business. Key to a successful strategy includes: Formalizing the process to allow for accurate measurement, Leveraging the measurements, which provide the baseline data, to make improvements, Rapidly implementing those improvements via the ASx platform. Business processes across your organization are vital to your airline’s success. Being able to quickly identify gaps in processes and refining those processes to collectively meet the needs of customers and your entire enterprise is the difference between simply breaking even, or falling short, and excelling in one of the world’s most competitive industries. a
Continue with Check-in
This process does not have to be standard for all flights or for all airports. The key is that they have the freedom to quickly describe a new process, place it in limited roll out for a handful of flights. It doesn’t require system-wide training; it is only needed by the people who actually execute it for the trouble flights at the trouble airports.
Chris Bird is chief architect for Sabre Airline Solutions®. He can be contacted at email@example.com.
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The Digital Pendulum Private Cloud Computing Talking Technology â€Ś With Robert Wiseman, Senior Vice President and Chief Technology Officer, Sabre Holdings
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understand that computers existed before I first worked with them, but in the scale of time, certainly in the scale and pace of computer time, it doesn’t seem as though it was that long before. In 1978, I was still in my native England, working at a drill company in the northern city of Sheffield (where the movie “The Full Monty” was set), at the time, the steel capital of the world. My home was a farming town 15 miles away. This was a great distance by English standards, at least by 1970s English standards, which amazed many of my city-dwelling workmates who would often ask me how I could stand to travel so far each day. In truth, it wasn’t an easy journey: two buses and a mile walk to get there in time for my morning shift as a computer operator. The shift started at 7 a.m., so I had to leave my house by 5 a.m. to get there on time. But waiting for me at the end of each epic journey was one of those wonderfully mysterious “computer things.” A refrigerator-sized, black, brand new IBM 370-135 — and that always kept me going. It didn’t have as many flashing lights as I’d first imagined it might, but this was more than made up for by the fact that it had the first CRT (cathode ray tube) I’d ever seen plus several mechanical cabinets that housed those whirring, menacing tapes that never seemed to be able to decide which way to spin. My first role as a computer operator consisted of a number of standard manual tasks — mostly feeding the giant and voracious chain-link printer that seemed to eat its way through endless boxes of greenstriped, three-ply carbon copy paper, which frequently jammed as it sped through the printer’s violent, clanging machinery. Once the people there decided I wasn’t a total country bumpkin, I was allowed to touch “the keyboard” to actually control what the computer did — more or less. To be honest, back then at least, operators’ skills relied mostly on their ability to follow a simple script that was printed out each morning with instructions such as: when you get this question, always type this; when you get this question, always type this; when you get this question … you get the idea. About seven months into my job, I was made shift leader (it was a very small company) and immediately looked at ways to automate the process so the scripting tool (job control language) would answer its own rhetorical questions. This resulted in very smooth and, frankly, rather more boring shifts. Three months later, either
impressed by my initiative or annoyed that I’d created a surplus of operators (possibly a little of both I suspect), they moved me out of operations and into the programming group where I was taught to program reentrant Assembler (a type of Assembler that allows its code to be executed simultaneously by multiple processes, meaning that any switch/flag changes need to be made outside of the program boundaries). Maybe it was a punishment after all. In the 1980s, I moved to America, still working on IBM mainframes, still coding Assembler, trying to learn as many details and nuances as I could about the mature and seldom-changing environment. Then in the late ’80s and early ’90s, a big change, called client server, hit the computing industry. Almost at once, every new product had to have its own server hardware, database, fat-client application and dedicated team of specialists to maintain it. It was around this time that I first began to move out of the mainframe world and into this “new” and confusing world where, it seemed, everyone had a different way of doing what we’d been doing all along on “big iron.” Processing data! I was definitely taken by the cool presentation capabilities of the newer technologies that were vastly superior to their mainframe/green-screen counterparts. Even today, though, mainframe interfaces are still surprisingly popular because of their simplicity — this is even true in places where customers have options between text and GUI — despite being a tad clunky and severely disadvantaged in what they can display. The “dumb terminals,” as they were aptly named, had neither sufficient processing power nor “imagination” to participate in anything other than an exchange of RUDIMENTARY DIALOGUE, which is how it appeared “back in the day.” The other thing I really liked about the newer technologies was their low start-up and scaling costs. Now, for the first time, companies could get off the ground with just a few thousand dollars of hardware — and when the Internet revolution arrived, and brought with it another wave of technology that would challenge the bourgeoning client-server movement, that’s exactly what happened. The biggest concern I had with how client server was evolving, at least in the company where I worked, was the unchecked sprawl. So many vendors, chip technologies, hardware models, operating systems, databases, languages, test tools, etc. The pendulum, it seemed, had taken a long and arching swing away from monostandard to hetero or totally non-standard and, although far less expensive to acquire,
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much of the compute power (very much if you include the “client” hardware as well), was grossly underutilized, resulting in wasted capacity, power, space, cooling and capital. Although probably a slight exaggeration, it now appeared as though no one was sharing — initially because of a lack of planning and controls and then eventually because respective system incompatibilities and lack of established standards prevented them from doing so. When the Internet revolution came, it brought with it many valuable attributes — and in the context of this discussion, two really stand out: 1. The Internet browser. Initially, most people saw this as just an external, consumer-facing tool and kept marching right along with their client-server plans. But early on, a smart colleague of mine asked, “Why wouldn’t we develop browser solutions for professional agents as well as for consumers?” Others, too, began to question: had the pendulum swing from “dumb terminal” to “master terminal” gone too far? Soon, the time and cost of maintaining and deploying thick-client apps — almost exclusively via floppy disks or CDs back then — forced a swing correction to the mix of presentation solutions we have today: full-client-based applications (MSWord); rich-client applications (Google Earth and MySabre™ agent booking portal) and an entire range of browser applications with a variety of thicknesses measured by the number and size of downloads (Flash) needed to execute them. 2. Horizontal scalability. New-entrant companies, that had missed out on the “American Idol” of computer technologies in the early ’90s, were now able to select from a narrowed field of fast-maturing final contestants. This largely meant that they settled on a single, low-cost “pizzabox” solution, with the hopes of scaling it out for low-cost processing, targeting stability through redundancy and trying to get as much reuse as possible. This was the right plan, of course, but scaling horizontally is much more difficult than “people” — that is those odd groups of us who tend to think about these kinds of things — tend to think they will be. It takes a lot of planning and coordination — and it requires telling developers how they need to develop their code. And as anyone knows, developers don’t like being told how to develop their code. I was one once — and I know. Good design practices, such as serviceoriented architectures (SOAs), go a long way in terms of enabling the ability to scale across thousands of servers, but we need much more than just “good 60 ascend
During his first four years as chief technology officer for Sabre Holdings, Robert Wiseman moved the company to its first enterprisewide set of infrastructure standards, which are managed by his organization. He has 32 years of experience in information technology; 24 of which have been in the travel industry.
practices.” At the types of volumes we run at Sabre Holdings ® — 32,000 transactions a second, operating globally, 7x24x365, with agents and airlines of all sizes, dependent upon our systems for their livelihood — our solutions have, to say the least, high demands on them. We strictly enforce well-proven architectural tenets in all of our systems — tenets that improve the resiliency of our software. We validate the implementation of those tenets every day in our high-performance labs. We ensure that they will scale and can withstand volumes at far higher rates and for far longer periods than they will ever experience in production. We also do this with third-party products. If they can’t survive our scalability “boot camps” — and many don’t — they don’t graduate to our list of approved products. These tenets include strong alerting and reporting so we have clear visibility into the health and performance of the application software as well as the infrastructure on which they run. We make sure that something as simple as a bad log file doesn’t cause threads to back up and that failure points (database, memory capacity, etc.) have been reviewed and thoroughly tested. Three years ago, as part of a continuing effort to improve system resiliency via greater simplification, we implemented a single set of “cookie-cutter” standards across the company — SOA middleware, blade ser vers, database and operating system. By the end of the year, the vast majority of our applications will run on our single cookie-cutter standard. This is a significant accomplishment in such a short time. With this level of interoperable uniformity in place, the next problem to solve is the over isolation of applications on dedicated server farms that have either sprung up independently or were inherited via acquisition. Getting these systems onto a standard foundation enables us to benefit from the types of sharing that the mainframes offer so well, but at a price and level of flexibility they traditionally do not. Mainframes are still the undisputed, seasoned masters of dependability. If you want something you can count on to run multiple types of services at very high volumes, they are the standard by which all others are measured. Open systems will catch up eventually, but they aren’t there yet. Of course, from a simple unit cost standpoint, every time Moore’s Law does its thing, the number of calculations you get for your dollar increases. This is incredibly significant to the future of
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computing. I once read on FutureTimeline. net that in the year 2000, a thousand dollars would have bought you compute power capable of processing the same number of calculations per second that an insect’s brain processes. This year, that thousand dollars will buy you compute power equivalent to a mouse’s brain. That’s a pretty impressive increase in such a short time. By 2038, your thousand-dollar computer will be comparable to your own brain in terms of how quickly it will think — and if that’s not impressive enough (or scary enough depending on how you look at it), in 2060, your thousand-dollar computer will have enough compute power to go toe-to-toe with the combined brainpower of every human being on the planet. I’ll be dead by then and, between you and me, I think that’s OK. None of this is true for mainframe computers — at least not as they are currently priced. And, as a result, the unit-cost gap between the technologies will get wider every year. Now I say “unit cost” because it’s important to stress the point that the cost of the hardware isn’t all you pay for with open systems. With all of that equipment, there is simply a lot more to manage, maintain and operate. Today, those extra costs eat up much of the cost differences between the two environments, so that’s where we are currently focusing our efforts. In 2007, I was with two members of my team (let’s call them Jim and Glenn) sitting in a bar in San Jose, California, postulating the maturity gap between mainframe and open systems and what might be done to bridge it. One big advantage the mainframe has, we all agreed, is that its operating system has all of its resources laid out before it and can subsequently manage load where it best sees fit. Mainframe central processing units (CPUs) aren’t dedicated to specific tasks and, accordingly, don’t sit idle while other CPUs are gasping for help. Some mainframes — indeed some large Unix servers — even offer CPU capacity on demand. That is, you don’t buy them until you decide that you need them. Why couldn’t we do the same thing with blade servers? Lots of blade servers! One damp, scribbled napkin and lots and lots of testing later, we have developed an autonomous private cloud concept we call Organic Server Management, or OSM. The dynamic nature of OSM is the key to its importance because it finally allows us to gain consistent quality of operations by not only recording and retaining valuable experience, but also building on it in a process of “continuous improvement.”
The workload of today’s operators is undoubtedly more complex than when I was a lad, following and automating simple, rhetorical scripts, but the basic concepts are still the same. They observe an “action” and then determine the appropriate “reaction.” The more skilled and experienced the operators, the better they can recognize various patterns as they emerge, such as observing the fact that a set of services is slowing down could suggest a number of possible conditions to a novice operator whereas the more seasoned among them may know that this particular ser vice
We strictly enforce wellproven architectural tenets in all of our systems — tenets that improve the resiliency of our software.
has an occasional tendency to run out of available threads at this time and needs to have them cleared. The operator may notice that a certain service’s garbage collection pause times are starting to climb and knows to alert the development team and that he should relieve the situation by recycling the server — after first ensuring that it has completed processing its current workload and no more is sent to it. The decision processes that operators (or in fact any of us) go through are mentally assembled each time they observe a condition and learn how to respond to it. More often than not, the more experienced the operator, the more likely he is going to know what to do. And then he leaves the company … either to finish off his days gardening or to get a job at one of our competitors. Then the process starts all over again with more-junior, less-skilled personnel who see the same conditions but either don’t have the experience to know what to do or forget this particular situation because it’s not that common or maybe they’re just having an off day. It happens. “To err is human,” said the human, rather
apologetically, I imagine. So maybe we need something else, something better. OSM comes with a policy engine that allows us to automate repeatable behaviors — just like we do millions of times a day in the application software that powers our business. We’ve designed it to evolve organically to introduce itself to its human counterparts gradually, starting off with suggestions to simple conditions, such as: “The Web ser vers are running at 70 percent capacity, and we are about to enter our peak period. Based on historical data, which I can show you if you would like, I recommend that we provision an extra 50 percent capacity. Click ‘yes’ if you would like me to do this for you.” Or maybe something a little less wordy. If the operator disagrees with the recommendation, he or she will select “no,” and the designers and tuners of OSM will work to understand what correction needs to be made so eventually they will say “yes.” At which time, OSM will dynamically provision the ser vers with the appropriate software (OS, DMBS, COTS, OSS, applications, etc.), storage and network capabilities, which then come online to begin their day. After the recommendations have been successfully accepted a sufficient number of successive times, the steps will be automated and the message changed to read: “Web ser ver farm hit 70 percent capacity at 09:02:18, 50 percent extra capacity is currently being added. Click ‘Cancel’ to abort or ‘Suspend’ to adjust.” Then, slightly more-complex conditions will be tackled: “Pricing Ser ver 14 has stalled. Developer team has been notified, recommend recycle. Click ‘yes’ to continue.” And so on. As more and more conditions are automated, the opportunity for human error is diminished. Stability improves and, along with it, so does our ability to more efficiently use our resources, both technical and human. Our mainframe costs are already being surpassed by our open-systems costs, simply because that’s where our development and transactional growth resides. More content, more shopping options, more features equals more ser vers and, potentially, more complexity. Organic Ser ver Management, and solutions like it, are going to revolutionize the world of midrange, open-systems operations as much as they are going to rationalize and bring order to it so we can continue to focus more and more of our resources on those aspects of our business that differentiate each of us from our competition — and fewer resources on those aspects that don’t. a
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Organic Server Management
Container 309, Server 299 Container 309, Server 300 Container 401. 7. Usage Trends — A record of the hourly peaks by server and across application suite. Data is used to more accurately predict peak and valley forecasts for capacity planning, both server environment increases and decreases. 8. Alerts — Application and system metric alerts, e.g. CPU utilization, memory utilization, I/O (input/output) utilization, application errors, warnings, time-outs, etc. 9. Rules — Alert condition rules: every time an alert is submitted, the OSM monitoring will execute each rule against the new alert and — if a matching condition is found — execute corresponding script, e.g. IF memory, CPU or I/O utilization is >85%, execute provision script for Container XXX. 10. Scripts — A list of scripts that will handle provisioning, de-provisioning, batch jobs, etc., as a result of a rule match condition. 11. Provisioner — A service that will dynamically provision a server with all the software (OS, tools, packages, patches, databases,
SM is an autonomous private cloud offering that proposes a policy-managed environment that requires minimal human intervention — except, primarily, for manual tasks such as physically installing computer equipment, blade server installations, etc. Why private cloud? Cloud (or Infrastructure as a Service) solutions that are offered publicly definitely have their value, but they are limited to non-proprietary, non-sensitive, non-critical uses such as serving up static content such as photographs of hotel properties. For systems that touch (store, process, pass) breach-sensitive or time-sensitive data, they are the wrong choice — at least today. Why autonomous? OSM’s policy-driven engine will allow us to allocate, reallocate and de-allocate our processing load more efficiently than even mainframes can. Allocate: by dynamically provisioning and making available extra capacity on demand, based on current and forecasted factors. Reallocate: by observing shifts in applicationsystem needs and dynamically re-provisioning servers with new software configurations so they can be ready to accept growing demand from some countries or customers based on service level agreements on response time or volume requirements — or as demand throughout the day changes from one type of service to another. De-allocate: by dynamically powering down excess capacity/servers; reducing the carbon footprint by turning down power and cooling needs outside hours of peak usage. Primary objectives of OSM include: Employ policy-driven resource management, Use capacity-on-demand model, Achieve maximum server utilization, Consolidate standby capacity, Reduce operational management costs and complexity, Provide self-managing, self-provisioning, self-sustaining operational environment, Minimize human interaction, Increase availability and uptime leading to higher SLAs.
e.g. Server 102 : HP BL680, 3.2 GHz chip, 64GB RAM. 2. Software Asset Library — A repository of all licensed software including the count, expiration date and terms of that software, e.g. Oracle 10G, 100 licenses, Effective 01/01/2001 Expires 01/01/2020. 3. Application Configuration Requirements — A list of all software (COTS, OSS, internal) that is required for each application to satisfy a request type (or group of requests) that will be processed in the OSM environment, e.g. Application XXX : Linux 5.0, Oracle 10G, FUSE ESB 4.0 4. Software Container — A collection of software, pre-packaged in accordance with the requirements specified in the Application Configuration Requirements table. 5. Change Log — A record of each change that has occurred in the system, e.g. 200901012314 Server 300 Provisioned with Container 401. 6. Run-Time View — A record of the realtime configuration status of each server in the OSM environment, e.g. Server 298
Application Configuration Requirements
Messages deposited onto the message oriented middleware (MOM) queue are rapidly pulled for consumption by the blade server resident clients (the vertical bars, color corresponding to the circular messages), which have been dynamically provisioned to meet the message capacity demands observed by the OSM “eye.” The criteria that direct OSM to execute scripts to perform its actions are controlled by applying each alert to the corresponding rules shown in the top three files. The data files at the bottom contain the information necessary for OSM to deploy the correct software onto the appropriate server(s).
The main components required to support OSM are: 1. Hardware Asset Library — A record of installed hardware and the features of each,
OSM: Organic Server Management
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applications, etc.) it requires to perform its duties, execute requests, commands, database calls, etc. 12. OSM Orchestration — One or more tools capable of monitoring the alerts, finding matching rules, executing those rules and, as applicable — under match conditions — any corresponding scripts, as well as the service calls requested by those scripts.
Example Use Cases
Using the high-level objectives and functional components defined shows how OSM would handle two fundamental operational tasks: 1. Insufficient Capacity a. OSM Orchestrator monitors alerts and executes each one against the rules in the rules table. b. Rules engine finds a matching condition suggesting a capacity threshold has been reached and executes the associated, applicable script. c. Script engine executes the provisioner with the container type needed to supplement that environment. d. Provisioner checks hardware assets, software assets and software container to ensure all building blocks are available and initiates provisioning service. e. Change log is updated with all activity during this process. f. Run-time view is updated to reflect the changes. g. In a pull model (where the application pulls message requests from a queue), the newly provisioned server automatically begins consuming targeted message requests. h. In a push model (router/load balancer), the provisioner updates the load balancer/router routing table with the virtual IP address of the newly provisioned server, which then begins receiving traffic and consuming its targeted message requests. 2. Server Failure — Recycle/Add New Server a. OSM orchestrator sees a rapid succession of alerts for timeouts indicating that an abnormal condition or failure has occurred. It executes them against the rules in the rules table, finds a match and executes the associated, matching script. b. Script engine executes command to locate the unresponsive server and recycles it X times.
The key features of a new automated computing environment takes the main advantages of mainframe computing — simplicity, scalability and the ability to make its resources available on demand — and applies them to today’s low-cost, highly redundant blade servers. Adding intelligent policy-driven controls to this produces an autonomic environment with the types of stability and efficiency the mainframes offer so well, but at a price point and level of flexibility they traditionally do not.
c. Change log is updated to reflect the recycle attempts and their success rate. d. Alerts continue after recycling the server “X times,” and the server remains unresponsive indicating that server is in a “down” condition. e. Rules/script engines determine if there is sufficient capacity to support the current message volumes, targeted at the down server, without replacing that server. f. If not, the provisioner service is called with the container type needed to supplement that environment. g. Provisioner checks hardware assets, software assets and software container to ensure all building blocks are available to begin provisioning. h. Change log is updated with all activity during this process. i. Run-time view is updated to reflect the changes. In a “pull” model, the newly provisioned server automatically begins consuming its messages as it
pulls them from the queue as soon as it’s active. In a “push” model, the new server’s virtual IP address is passed to the load balancer, which then begins passing it messages. 3. Application exceeds maximum connections a. OSM orchestrator gets alerts showing sudden velocity increase in connections, finds a matching rule and executes the associated, applicable script. b. Script engine executes the provisioner with the container type needed to supplement that environment (as above). Introduction of OSM is built to be phased in organically, starting with no rules in the rules engine with the human operator monitoring the alerts, responding accordingly and initiating requests to the provisioner as applicable. Simple rules will be added first and as confidence and experience grows, more and more human tasks should be migrated to the automated OSM rules process.
While technology, industry best practices and sound processes are a must for airlines around the world, they are only as good as those employing them. Sabre Airline Solutions 速 continually invests in its training programs, via the Sabre 速 Airline University, to ensure airline employees are armed with the knowledge they need to help run a successful operation.
By Jeanette Frick I Ascend Contributor
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ow much value can an automated solution provide if the user doesn’t fully realize the extent of its capabilities, understand the business it supports and envision the scope of future possibilities? Based on this premise and a dedication to drive value and facilitate the adoption of its solutions and services into airlines’ operations, Sabre Airline Solutions continuously invests in providing consistently high-quality education, training and certification programs to its customers. As part of this investment, Sabre Airline Solutions has launched the Sabre Airline University virtual campus, essential to advanced airline education and certification to customers and eventually others in the aviation industry. Accessible via the Sabre® Community Portal 24 hours a day, 365 days a year, the university is a key component of the company’s solution and service offerings. A tour of the virtual university reveals a clean, modern, eco-friendly campus with extensive facilities and resources, a networked user community, numerous training and certification programs, and unprecedented access to subject matter experts from Sabre Airline Solutions.
Today’s Virtual Campus
Today, the core student population of Sabre Airline University comprises Sabre Airline Solutions customers, with many of the current training and certification programs designed specifically for them. To promote consistency and enhance solution and industry knowledge, Sabre Airline Solutions employees can also participate in the
training courses and receive similar types of information. Currently, Sabre Airline University hosts four main colleges: Commercial Solutions, Customer Sales & Service, Operations Excellence, Distribution & Merchandising. These colleges employ a blended learning approach, offering a mix of classroom training, selfpaced online courses, workshops and conferences facilitated by Sabre Airline Solutions subject matter experts with a deep knowledge of the solutions and wide range of experience in the travel industry. All training courses focus on more than just the features and functions of Sabre Airline Solutions products, incorporating information on best practices and business processes as well. In addition, the Colleges of Customer Sales & Service and Operations Excellence offer basic to advanced certification programs in specific solutions areas. By yearend, the College of Commercial Solutions will have incorporated these programs into its curriculum as well. Certification credentials are designed to validate a student’s ability to effectively use and manage specific solutions and business functions with a high degree of competence. Response from both customers and employees to this year’s educational offerings has been positive. As of this summer, more than 300 attendees participated in 62 courses, with more than 60 additional online courses planned by yearend. The majority of training currently offered by Sabre Airline University is classroom based and
Through Sabre Airline University, airline employees can take advantage of a blended learning approach, leveraging a combination of instructor-led classroom training and online courses designed to meet the needs of any airline worldwide. Using this approach, airline employees are first introduced to a solution’s terminology, features, benefits and best practices via Internet to better prepare for onsite, hands-on training.
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In addition to the classroom-based, instructor-led training provided by Sabre Airline University, the majority of training content will be accessible online by 2012. Currently, the university offers 62 online courses with an additional 60 new online programs planned by the end of the year. The self-paced training courses will be available 24/7 via any computer worldwide, and special provision will be made for those with limited or no Internet access.
instructor led. By 2012, the university’s aggressive growth plan estimates the majority of training content will be accessible online. Still in the initial stages, Sabre Airline University already encompasses more than just training courses and certification programs. Students can network with other students as well as Sabre Airline Solutions subject matter experts, retrieve solution documentation and keep abreast of the latest travel industry news. And there’s more to come.
Tomorrow’s Virtual Campus
During the next three years, Sabre Airline University plans to open its doors to prospective customers, aviation suppliers and educational/trade organizations. Both current and potential customers will benefit from training courses and workshops focused on the various aspects of managing and operating airlines. Expanded certification programs offering basic, advanced and expert credentials will enable students to not only gain proficiency in certain solutions areas but also better understand solutions integration and business process design. Armed with greater knowledge about the travel industry, suppliers, such as aircraft manufacturers and caterers, will be able to fine-tune their businesses and produce products and services that more adequately meet carriers’ needs. Airlines, in turn, will most likely prefer to purchase products and services from suppliers that understand their business and its unique challenges. Colleges, universities and specialized training centers are clamoring for airline industry and 66 ascend
technology experts. By partnering with the Sabre Airline University, these educational/training organizations will have access to subject matter experts in all areas of the travel and technology industries. And these subject matter experts will most likely be transferring their knowledge to future airline, travel industry and solutions provider employees. By 2011, the majority of the virtual campus will be in place, with the establishment of the Business Process & Quality Center and the College of Airline Management & Consulting, additional training and certification programs, an alumni center, faculty offices, career counseling and a bookstore. One idea generating the most buzz is the university’s plans to offer “white-label” training sites to customers, who will choose the courses they want to offer, brand them with their own names and logos, and allow their employees access. All sites will link back to the Sabre Community Portal hub; however, to the student, it will appear to be the airline’s own training program.
Benefits Of Going Virtual
The traditional business model has changed dramatically during the past decade. Economic downturns worldwide have forced businesses, including airlines, to find more cost-effective ways of operating such as officing employees remotely or even at home, cross-training staff to perform a number of different functions, curtailing travel in favor of Web and video conferencing, and increasingly utilizing online resources to market and sell products and services, networking within the marketplace and training employees.
The Sabre Airline University virtual campus supports these efforts, providing airlines with a number of tangible benefits in terms of cost savings, efficiency and flexibility, including: A single source for all Sabre Airline Solutions training and documentation, The availability of online, self-paced training courses via any computer worldwide with an Internet connection around the clock (special provisions will be made for airline employees with limited or no access to the World Wide Web), Access to industry and subject matter experts from Sabre Airline Solutions offices worldwide, Increased solutions and business process proficiency, A reduction in travel time to and from offline training sites and the associated costs, as well as the amount of time airline employees must be away from their jobs and carriers must shift resources to accommodate their absences, The availability of training to a greater number of airline personnel than ever before, The ability to easily cross train airline employees and cross utilize resources, Significantly shorter training cycle times for large employee groups trained in stages, such as reservations staff (the initial training is conducted in the classroom, with refresher courses available online, which is especially helpful for staff members trained in the initial stages), Continuous addition of new online courses and updating of existing ones as necessary. Although Sabre Airline University is focused on aggressively growing its online training and certification programs during the next three years, there will still be situations when a blended learning approach or the “personal touch” offered by classroom training is more beneficial and even desirable. A recent customer training session, for example, utilized both instructor-led classroom training and online courses from the university. The airline’s employees were initially introduced to the terminology, features, benefits and best practices surrounding Sabre® AirVision™ Marketing & Planning solutions in an online course and were then prepared for the Sabre Airline Solutions team that provided onsite, hands-on training. Whatever the venue, the primary objective of Sabre Airline University is to be a reliable source of consistently high-quality solutions and industry training and information that equips airlines to meet the challenges of the volatile industry and economy — now and in the future. a
Jeanette Frick is vice president of Global Customer Services for Sabre Airline Solutions. She can be contacted at firstname.lastname@example.org.
he Sabre® Airline University virtual campus is accessible to Sabre Airline Solutions® customers via the Sabre® Community Portal. Several of the university’s facilities have already been established, and more are in development based on an aggressive three-year expansion plan and customer feedback. The campus design is simple, straightforward and eco-friendly, enabling visitors to easily and quickly navigate among the various facilities free from distractions. Today’s campus includes: Admissions: Welcome to Sabre Airline University. Tour the university’s virtual campus and preview its various offerings. Operations Excellence: Enroll in training courses and certification programs focused on airport operations, crew management, flight operations and maintenance routing, and find documentation related to Sabre® AirCentre™ Enterprise Operations. Student Community Center: Meet and interact with other university students as well as Sabre Airline Solutions employees and subject matter experts via the Sabre Community Portal hub. Similar to Facebook, the Hub provides a forum for members to post questions and answers and form groups. Industry Relations Center: Link to the latest aviation industry news from the top travel magazines and news sources, as well as Ascend.
Faculty Offices: Learn about university staff members and instructors who create, manage and conduct training programs. Post questions and get answers from subject matter experts. Library: Find hundreds of pages of Sabre Airline Solutions product documentation and search through the most frequently asked questions to find immediate answers. Customer Sales & Service: Enroll in training courses and certification programs focused on sales, reservations, ticketing, codesharing, airport check-in, loyalty management and customer service, and find documentation related to SabreSonic® Customer Sales & Service. Commercial Solutions: Enroll in training courses focused on in-flight services, schedule development and optimization, slot management and fares management, and find documentation related to Sabre® AirVision™ Marketing & Planning. Distribution & Merchandising: Enroll in training courses focused on the distribution of airline products and services, and find documentation related to Sabre® AirCommerce™ Distribution & Merchandising. Tomorrow’s campus will also include: Career Counseling: Obtain information on a variety of positions and careers within airlines and explore the wide variety of basic and elective training courses available. Airline Management & Consulting: Explore the complexities of the various aspects of the airline business. Workshops
and training courses will be led by members of senior executive and consulting teams for Sabre Airline Solutions. Sabre Airline University News: Find the most up-to-date information related to Sabre Airline Solutions and the university, as well as testimonials from other customers. Business Processes & Quality Center: Learn more about solutions implementation and support lifecycle, agile development, testing plans and other related processes. Bookstore: Access various airline-related publications or sign up for publication subscriptions via partnerships with well-known online sellers. Books, t-shirts, mugs and other university-related items may be purchased. Events Center: Obtain information regarding customer conferences and other events sponsored by Sabre Airline Solutions. Coffee & Tea House: Take time to relax or compete with others in contests and games related to the airline industry. Learn about other cultures or fascinating destinations, or visit with Sabre Airline Solutions professionals in offices throughout the world. Alumni Center: Network with other Sabre Airline Solutions customers that have taken training courses or completed certification programs. Administration: Register for instructorled classes or online certification training courses. a
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Satisfaction Guaranteed Sabre Airline Solutions 速 acquired Flightline Data Services for its crew scheduling software and services capabilities, which bring all phases of the monthly crew schedule bidding process online. The solutions provide automated, remote management for crew schedulers while simultaneously enabling real-time schedule bidding for crewmembers from almost anywhere, anytime. By Tom Samuel | Ascend Contributor
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uch of crewmembers’ job satisfaction comes from their schedules — where they fly, how often they fly, whether they fly on weekdays, weekends or holidays, as well as their typical duty hours and flight patterns. Crewmember schedules are generally assigned by airline crew planners using varying levels of automation. Depending on the specific airline’s regional crew management practices and the airline’s crew agreements, the schedule assignment may be based on crewmember seniority, crewmember preferences, fairness or a combination of those factors. Once a schedule is assigned, crewmembers can request changes to their schedules via a process most commonly known as “trip trading.” Crewmembers who have more control over their schedules likely experience higher job satisfaction, and certain industry practices enable crewmembers to better control their schedules. Providing crewmember control, however, often requires airlines to invest in sophisticated technology, but if optimally employed, the investment generally pays back many-fold in terms of crew satisfaction and productivity, resulting in lower absenteeism, reduced reserve utilization and lower crew-related costs. Americans of all ages and income brackets continue to grow increasingly unhappy at work — a long-term trend that should be a red flag to employers, according to a report released in January by The Conference Board, a not-for-profit organization that has studied and reported on business management practices for more than 90 years. The report, based on a survey of 5,000 U.S. households, finds only 45 percent of those surveyed say they are satisfied with their jobs, down from 61.1 percent in 1987, the first year in which the survey was conducted. “While one in 10 Americans is now unemployed, their working compatriots of all ages and incomes continue to grow increasingly unhappy,” said Lynn Franco, director of the Consumer Research Center of The Conference Board. “Through both economic boom and bust during the past two decades, our job satisfaction numbers have shown a consistent downward trend.” While some may wish to blame the most recent survey’s low satisfaction numbers on the current economic downturn, such an easy answer would be inaccurate. An analysis of the job satisfaction data produced by The Conference Board finds that, unlike the economy, this increasing worker unhappiness is not cyclical. Thanks to technology, however, airlines have new opportunities to address three of the most common causes of job dissatisfaction — work schedules, job empowerment and communication.
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Preferential Bidding: Addressing Work Schedules
North American airlines often use senioritybased line bidding or preferential bidding to determine flying schedules for future months. While carriers outside North America traditionally follow a “fair and equitable” planning process, preferential bidding has been implemented by several large carriers in recent years and is becoming a more common practice. A preferential bidding system matches crewmembers to pairings (pre-built trips) based on individual crewmember preferences and factors such as airline seniority while protecting pre-planned events such as training and vacation. Airlines that use preferential bidding often need an automated system to accomplish these complex scheduling tasks. A preferential bidding system creates greater crewmember satisfaction due to crewmembers’ ability to influence their future assignments. The airline benefits by having reduced attrition and absenteeism from industry-standard practices, increased crew utilization (absences have been accounted for so crews can operate their published schedule) and greater control over reserve crew coverage. An airline choosing to implement a preferential bidding system has to spend some money for automation, but it achieves increased crewmember satisfaction and productivity in exchange (without trying to increase crew satisfaction through significant pay increases). About 75 percent of North American airlines still use seniority-based line bidding practices, so these airlines have an opportunity to take advantage of preferential bidding to give their crewmembers better control over their schedules while increasing productivity. Airlines outside North America have the opportunity to further satisfy employees and employee groups involved in the control of the planning process without having to revert to adopting hard rules that can impact productivity and overall crew costs.
Automated Trip Trading: Empowering Employees
Trip trading is a global crew management practice where crewmembers are allowed to drop or add portions of their assigned schedule (commonly in the form of unassigned trips) or exchange trips with other crewmembers. Based on the agreements in place between the airline and crewmembers, and the automation available at the airline, one of the following may be true at a particular airline: Trading is not allowed due to airline overhead costs to manage legality checks, crew communications, etc.; Manual trip trading is allowed, where crewmembers call airline crew scheduling staff to manage trading (this practice costs extra in the form of higher crew scheduler costs); 70 ascend
Crewmember alerts and mobile access are critical aspects of daily crew operations, giving airlines the ability to promptly communicate schedule changes to crewmembers as well as offering crewmembers increased access to their schedules. When a change has occurred to their schedule or a desired trip has been made available for trade, crewmembers can be instantaneously notified via their hand-held or mobile devices.
Automated trip trading is enabled, which allows crewmembers to drop, add, advertise and exchange trips through the Web, and the crew schedule maintained by the airline crew management system is updated through automation. In cases where crewmembers are not able to “swap out” portions of their schedule they cannot or do not want to fly, they are likely to take sick time, leaving the airline with the daunting task of covering the open flying by either extending the duties for other crewmembers (and paying premium pay), assigning crew on their days off or using reserve crew. Each of these possibilities could add up to a material increase in crew costs. Automated trip-trading capabilities give crewmembers more control over their schedule, thus increasing crew productivity as crewmembers look to proactively change undesirable portions of their schedule. Automated trip trading also saves crew schedulers time and helps airlines reduce crew-related costs. Another benefit of automated trip trading is more efficient reserve utilization — this is accomplished through active reserve balancing. This feature automatically uses crewmember trades to improve the balance of unassigned
trips on a day-to-day basis, reducing the peaks and valleys of unassigned trips throughout the month and decreasing the overall requirements for reserve crews. Automated trip trading is more popular in North America today, but gaining popularity globally.
Mobility Solutions: Solving Communications Challenges 24/7
Crew communication is an important aspect of daily crew operations. Crewmembers want to have anytime, anywhere access to their schedules and to be notified of schedule changes as quickly as possible. Airlines want the ability to use automation to notify crewmembers of schedule changes as quickly as possible and to get confirmation that the crewmember has been notified of such schedule changes. Crewmember alerts and mobile access are two vital components of providing airlines with the ability to quickly and efficiently communicate schedule changes to crewmembers as well as providing crewmembers with increased access to (and control over) their schedules. Alerts can be used to notify crewmembers through their hand-held or mobile devices
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.
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when a change has occurred in their schedules or when a desired trip has become available for trade. Mobile access is an increased area of focus for airlines and enables crewmembers to view their schedules, confirm notification of changes and even request changes to their schedules. Mobility solutions are another area of technology that provides crewmembers with increased visibility and control over their schedules, resulting in more efficient and cost-effective communications and airline operations.
Through the acquisition of Flightline, Sabre Airline Solutions is now able to provide airlines with an array of new capabilities, including: Initial bidding (line bidding) — Distributes bid packages online, sorts lines by preferences, electronically highlights and sorts pairings, collects bids, and processes and displays the final award; Preferential bidding — Supports multiple crewmember preferences and builds individual custom work schedules avoiding conflicts with carry-in, vacation, training and other known events; features more than 20 preference types, and each preference can be combined with up to 10 criteria for powerful trip selection; provides a unique model-as-you-go bid sheet interface, enabling crewmembers to spot and correct costly bidding mistakes in advance of bid submission; Reserve preferential bidding — Autoconstructs reserve schedules to meet daily reserve requirements according to work rules and legalities and avoids conflicts with carry-in, vacation, training and other known events; permits crewmember input to reserve schedules through preferences such as specific days off, specific days on, work pattern and maximum number of consecutive work days; may be used as a reserve line generator to create optimal reserve schedules; Open time live — Fully automates and processes crewmember open-time requests for drops, adds, swaps and trades (with another crewmember) interacting live with the airline’s crew management system; displays updated schedules and available open time with pairing sort capability; processes requests in real time with optional crew scheduler intervention; includes management of reserve buffers; Trade board — Provides an electronic bulletin board for crewmembers to advertise pairing and vacation trade requests, communicate requests online and view responses from other crewmembers; Reserve open time — Crewmembers submit requests for pairings that operate on their reserve days; pairings are assigned
Giving crewmembers the ability to better control their schedules not only increases job satisfaction and productivity but also results in lower absenteeism, reduced reserve utilization and lower crew-related costs.
according to the airline’s timing requirements and rules; affected reserve periods are replaced with the pairings; Reserve assignment — Crewmembers submit requests for specific reserve duty periods as defined by the airline to replace currently assigned reserve periods; the solution assigns specific duty periods based on crewmember input; remaining crewmembers are assigned the leftover reserve duty periods; Vacation bidding — Automates annual vacation bid process and final award; calculates accruals; supports instant processing of ongoing vacation requests for drops, adds, swaps with available periods or trades with another crewmember; requires no management intervention; System bid (vacancy/displacement) — Collects crewmember bids for upgrades and/or transfers by base, equipment and position within the company; processes awards using airline rules; Training bid — Collects crewmember bids for preferred training dates and processes awards according to airline rules; Electronic documents — Electronically distributes documents to user-directed groups and/ or classes of crewmembers; enables management tracking of mandatory items by individual receipt;
Electronic messages — Offers two-way messaging capabilities with secure plain-text e-mail; messages can be sent between management and crewmembers or crewmember to crewmember; Crew mobility services — Offers iPhone and other mobile device applications, pilot data sheets and trip alerts for airline crews. Flightline’s crewmember solutions are widely used today with nearly 62,000 active crewmember accounts. During a recent, single one-month period, Flightline supported 1.8 million Web sessions, totaling 36.5 million minutes. Flightline’s crewmember solutions are already integrated and work with Sabre Airline Solutions crew management systems at 17 airlines today, helping them lower crew-related costs and provide airline management with cost-effective tools to improve crewmember satisfaction. The combination of rapid return on investment, reliability and ease of use represent the hallmark of Flightline’s products and services. a
Tom Samuel is director of airline operations for Sabre Airline Solutions. He can be contacted at email@example.com.
Revenue Integrity: Beyond All Boundries Sabre Holdings® acquired Reykjavík, Iceland-based Calidris ehf to bring airlines the world’s most robust, innovative revenue integrity technology. . By Stephani Hawkins | Ascend Editor
company that sits idle and conducts “business as usual” day after day is one that likely won’t be around long. Building and growing a business requires a powerful strategy that supports all the current and future needs and expectations of a company’s customers, employees, shareholders and communities. Sabre Holdings is no exception. In March, the technology company acquired Calidris for its best-in-class revenue integrity, business intelligence and data solutions. The acquisition is part of Sabre Holdings’ long-term growth plans and continued investment in its airline and airport portfolio, and its main objective is to offer its customers
breakthrough technology with the flexibility to help them generate additional revenue and move beyond the traditional processes of simply preventing revenue loss. “Calidris has been validated by some of the world’s leading airlines and is a very innovative company that has developed some powerful technology that will move the airline industry forward in the area of revenue integrity,” said Steve Clampett, president of Airline Solutions and Products for Sabre Airline Solutions®. “This technology reaches beyond all boundaries in this particular arena.” Calidris began developing revenue integrity solutions in 1997 (then known as Stonewater International), and within two short years,
Icelandair became the first airline to implement Calidris Integrity, realizing a 24 percent decrease in no-shows during the first three months. Since then, Calidris partnered with numerous carriers including Adria Airways, Aegean Airlines, Austrian Airlines, Avianca, British Airways, Cathay Pacific Airways, Croatia Airlines, CSA Czech Airlines, Emirates, Finnair, Malaysia Airlines and Royal Jordanian. Each of these carriers has achieved significant results. For example, as the first airline in the world to adopt real-time revenue integrity, Finnair realized total return on investment after only two weeks of using the innovative technology, which cleaned the airline’s inventory of bad bookings.
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Aegean Airlines aimed to utilize a market opportunity by offering a low yet well-controlled fare. Adding a single line to the TTL rule table, creating one watch item and one relatively simple process, the carrier was able to successfully offer aggressive fares without running the risk of flooding its inventory with speculative bookings. For Avianca, an opportunity to assess revenue integrity functionality and standards arose when the airline decided to migrate from its previous legacy platform. This presented an ideal time for the carrier to seek out the best options to improve its revenue integrity performance. “Choosing the correct partner for our revenue integrity solution was important for Avianca,” said Avianca Chief Executive Officer Fabio Villegas Ramirez. “Not only were we looking for maximum value generation from a solution, but ongoing service support was also something that we considered to be very important for our future success. The Calidris integrity solution provides us with much better tools to manage and change our business processes and rules than our previous revenue integrity system. Calidris also offered the value, flexibility and service support that Avianca expected.” Calidris’ technology has enabled British Airways to create one of the airline industry’s 74 ascend
Icelandair, the first carrier to employ Calidris Ingetrity, achieved a 24 percent decline in no-shows during the first three months of utilizing the innovative technology.
first order data stores, which uniquely combines customer information from across the complete booking-to-fulfillment lifecycle in a single unified data layer. Using Calidris’ intelligent process design and automation tools, the Europe-based carrier can now implement new business processes that bridge disparate global distribution systems and passenger service systems and action sophisticated workflows against end-toend customer orders. This capability facilitates the implementation of new business models and helps the airline accelerate its transformation of the IT function into a business enabler to support key business goals and initiatives. “One of the enduring challenges of the airline industry has been linking data and workflows between legacy GDSs and passenger systems,” said British Airways Chief Information Officer Paul Coby. “The legacy systems are optimized around servicing individual bookings one at a time and contain a lot of poorly structured data. The Calidriss technology allows us to manage complex processes across multiple customers and flights in a way that was impossible before, giving us opportunities to improve customer service as well as solve operational issues and address lost revenue opportunities. We believe the use of this technology to create the ODS is a significant breakthrough, and we look forward to a successful partnership with Calidris that will help keep BA at the forefront of business transforming, technology-led innovation in the air transport industry.”
Finnair, the first airline in the world to adopt real-time revenue integrity, attained total ROI after a short two weeks of using Calidris technology, which successfully eliminated bad bookings from the airline’s inventory.
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For Avianca, Calidris presented the best option for improving its revenue integrity performance. The solution provides the carrier with advanced tools to manage and change its business processes and rules, which surpass that of its previous revenue integrity system.
Calidris offers the level of expertise and innovation that is aligned with Sabre Holdings’ long-term strategy. The enhanced revenue integrity solution allows quick and easy access to business data, making it an integral part of successful revenue planning and revenue generation not previously available. It also gives airlines a more responsive, smarter, well-tuned and fluid customer sales and service environment. Having this type of access to the world’s leading revenue integrity solution offers airlines myriad different aspects where value can be measured, such as: Seats returned, Labor cost savings, Better sales channels liaison, Improved agent behavior, In-flight food savings, Reduced denied boarding, Improved forecasting, Increased customer satisfaction, Service improvements. The technology is based on a wide range of capabilities depending on an individual carrier’s needs. For example, newcomers to revenue integrity that are seeking an immediate return on investment have access to a strictly Software as a Service model that manages issues such as ticket firming, fake names and
duplicate tickets. And on the other end of the spectrum, airlines that have utilized revenue integrity solutions but want to break free from the limitations of the legacy environment can exploit the latest technology to support a new and more competitive business model. As part of the acquisition, Calidris’ revenue integrity, business intelligence and data capabilities have become part of Sabre Airline Solutions’ broad integrated suite of airline products, and they are now made available to more than 300 airlines that currently use the technology company’s solutions. “We understand airlines must have the most robust technology available to be true longterm, forward-thinking leaders in the industry,” Clampett said. “And we are confident the acquisition of Calidris is another key driver of our strategy that will deliver nothing less than top-caliber revenue integrity, business intelligence and data collection solutions to our airline partners.” a
“And we are confident the acquisition of Calidris is another key driver of our strategy that will deliver nothing less than top-caliber revenue integrity, business intelligence and data collection solutions to our airline partners.” — Steve Clampett, president, Sabre Airline Solutions
Stephani Hawkins can be contacted at firstname.lastname@example.org.
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Checking In New check-in technology using a single, robust platform enables airlines around the world to manage end-to-end check-in and departure control operations with precision and ease.
By Mavis Borg Conti | Ascend Contributorr
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uring the first 50 years of scheduled passenger travel, the airline industry was slow to evolve; however, technology and a need to be more efficient and economical quickly took over. Advances in self-service solutions, such as online bookings and Web, kiosk and mobile check-in, have been an explosive force in the travel industry. These advances have caused airlines to build highly desirable self-service tools while reaping the rewards of lower employee costs. The impact of the global recession compelled airlines to find new and innovative ways to generate revenue, at which time ancillary services, such as baggage charges and seat fees, became a necessity for new revenue streams. All these advances led to a pioneering decision by Sabre Airline Solutions ® to invent a new check-in system. For many years, Sabre Airline Solutions supported two airline check-in systems — SabreSonic® Check-in on the ACS platform and SabreSonic Check-in on the ACSI platform. The two systems traditionally targeted different global markets — ACS has been widely used by airlines in the Americas, whereas ACSI was designed for international carriers in Europe, the Middle East and Africa as well as Asia/Pacific. Sabre Airline Solutions has made a multimillion dollar investment to merge the best of both check-in systems to create a single, robust system. With this investment, SabreSonic Check-in paves the way to service all airlines worldwide, from the small, niche, boutique carrier to the megainternational airline. The upgrade of the Sabre Airline Solutions departure control system incorporates both SabreSonic Check-in and Sabre® AirCentre™ Load Manager, making this an industryleading airport and passenger processing solution. The advanced SabreSonic Check-in simplifies and improves product management, development and delivery practices. It supports foundational check-in, boarding and load control functions; offers enhanced passenger recognition and service; and promotes operational efficiency. The flexible, configurable technology promotes increased revenue-generating opportunities as well as ensures operational integrity, delivering industry and securitycompliant applications on the most reliable, stable platform. The SabreSonic departure control system is truly groundbreaking in terms of its graphical user interface, its ability to handle large volumes of passengers and aircraft schedules, and its unique groundhandling capabilities. New features within the upgraded solution include:
Complete integration with reservations, ticketing, inventory and customer profiles; A single unique seat map with an easy-touse graphical user interface for reservations, check-in and load control; One source of data for all flight schedules; Real-time updates to PNR and inventory; New seating features, such as tier-preferred seating, zone boarding and adjacent seat blocks; Intuitive GUI that guides check-in agents through workflows and reduces training costs; Merchandising functionality based on business rules that enables airlines to collect fees, such as baggage and standby, as well as delivery of fare families and bundled services; Self-service processing tools such as Web check-in, self-service kiosks and mobile check-in using both SMS and browser-based check-in; Airport tools including a check-in PDA device with a mini boarding pass printer for roving agents and a dynamic boarding application integrated with the check-in system for gate agents; Improved data sharing across all customer touchpoints. With government mandates and more advanced technology on the rise, Sabre Airline Solutions programmers and developers are freed to concentrate on a single best-of-breed check-in system, thus avoiding unnecessary replication that previously took place with two systems and bringing enhancements to all airlines in a shortened timeframe. Development of the new check-in system began in November 2008 after receiving feedback from airlines about precise functional requirements necessary for running their day-to-day operations. Via survey of all ACSI customers, a priority of project enhancements was determined. For example, gender and mandatory bag weight were considered imperative for all ACSI customers and were among the first enhancements to be developed in the new check-in solution. Workshops were held in Bangkok, Moscow and London to help define requirements and form development and customer support plans. Since then, programmers, designers and developers have worked hand in hand to ensure all necessary features of the two current systems have been combined to suit a niche carrier, such as Bearskin Airlines, a launch customer for the new check-in system that implemented the solution in July (see related article on page 6). “Since we first learned that we were a launch customer for the project, we
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have been impressed by the potential of improving our agents’ productivity and customer service at all our locations,” said Dave McCarthy, project coordinator and training manager for Bearskin Airlines. “Throughout the project, we have received great support from the Sabre Airline Solutions team. The Interactive Pilot phase provided excellent product instruction and super supporting documentation in training our folks for this conversion. We were also successful with our testing of the product. We’ve been more than ready to make the conversion happen and be on the new platform.” The SabreSonic Check-in upgrade project comprised teams from Sabre Airline Solutions marketing, training, development and delivery. Experts from around the world, including Dallas, Texas; Phoenix, Arizona; London; Malta; Buenos Aires, Argentina; Montevideo, Uruguay; and Bangalore, India; worked directly with airlines to ensure the new check-in solution was designed with every region and culture, as well as government regulations, in mind. “I am keenly aware of the importance of this project and the effort involved for our partner carriers to be successful,” said Karen Davis, project manager for the SabreSonic Check-in upgrade initiative. “The check-in system is the heart of an airline’s operation, and our goal is to partner with each airline worldwide to achieve a smooth conversion and transition to the new platform.” Carriers on the ACSI platform will migrate from their existing check-in system to the upgraded SabreSonic Check-in. Current customers seamlessly benefit from the upgrades. Migration is being carried out in four stages, depending on the complexity of each airline’s individual requirements as well as the availability of carrier-critical features. Carriers will also need to convey their readiness for the migration in terms of training and delivery resources. All migrations are expected to be completed by the end of 2012. The SabreSonic Check-In departure control system meets and exceeds the standards required with its core TPF-based solution and open-systems interface that provides unsurpassed reliability and availability for all airlines that use the technology. A user community of more than 60 airlines make the new SabreSonic Check-in the world’s largest by volume of passengers boarded. a
Mavis Borg Conti is a SabreSonic Check-in solutions marketing lead for Sabre Airline Solutions. She can be contacted at mavis. email@example.com. 78 ascend
Crew Balancing Act
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Carriers, such as Atlantic Southeast Airlines, have access to a complete
range of crew recovery technology that enables them to retain control over their schedule and crew recovery processes and, in essence, over their entire operation, during schedule disruptions. By Lauren Lovelady | Ascend Staff
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nexpected disruptions resulting from severe weather patterns, aircraft maintenance issues, security challenges, system congestion and crew unavailability can wreak havoc on an airline’s daily operations. According to statistics from the U.S. Department of Transportation, on a typical day, approximately 10 percent of a carrier’s scheduled revenue flights are affected by some type of irregularity. These disruptions can impact all aspects of an airline’s operations but are particularly detrimental to its basic resources — aircraft and flight crews, both of which may end up at the wrong place. Getting a carrier back on schedule requires those overseeing the airline’s operations to make real-time decisions, while under pressure, that may impact flights and crews for hours and even days to come. Crew recovery, in particular, is a tedious process that must balance flight schedule modifications with resource availability to generate a solution that satisfies all operational and crewmember considerations while minimizing costs. The quality of the solution is determined by the airline’s ability to effectively utilize the operational data already available from its computer systems. To assist with this process, Sabre Airline Solutions® recently introduced Sabre® AirCentre™ Recovery Manager, a robust, comprehensive real-time decision-support system that integrates aircraft routing, crew availability and network constraint information to effectively generate optimal crew reassignments for revised schedules. By minimizing the impact of operational disruptions on aircraft, crews, flights and maintenance schedules and, ultimately, passengers, the proposed solutions help airlines: Reduce additional recovery costs, Minimize lost operating revenue, Improve resource allocation and utilization, Improve on-time performance, Increase customer satisfaction. Recovery Manager also enables carriers to pre-plan — minutes or even hours ahead — for anticipated schedule disruptions. In the case of Atlantic Southeast Airlines, the launch partner for Recovery Manager, both anticipated and unexpected schedule disruptions are a routine part of daily operations. The airline operates more than 900 scheduled daily flights as a Delta Connection and United Express carrier at some of the world’s busiest airports, including Atlanta Hartsfield-Jackson, Chicago O’Hare and Washington Dulles. These airports are prone to air traffic congestion coupled with extremes in weather conditions, depending on the season. Winter storms can be devastating to Atlantic Southeast Airlines’ Chicago O’Hare and Washington Dulles operations, while spring and summer thunderstorms can leave the carrier’s Atlanta schedule in shambles. To effectively deal with these disruptions, Atlantic Southeast Airlines needed a robust solution to facilitate the return of its 80 ascend
Recovery Manager, which minimizes the impact of operational disruptions on aircraft, crews, flights and maintenance schedules, brings significant benefits to airlines by reducing additional recovery costs, minimizing lost operating revenue, improving resource allocation and utilization, boosting on-time performance and increasing customer satisfaction.
schedule and crews, which are based in Atlanta and Washington, back online as efficiently as possible. Throughout the design and development of Recovery Manager, crew scheduling and tracking managers from Atlantic Southeast Airlines and Sabre Airline Solutions employees participated in a series of workshops based on agile development principles to review the airline’s business requirements and build acceptance criteria for the solution. As the project progressed, the airline provided feedback and suggestions.
Users may also manually input this data into Recovery Manager from other systems or processes. Proposed solutions are delivered as what-if scenarios in easy-to-read Gantt charts for review and further analysis by crew trackers/ schedulers. Proposed solutions can be manually adjusted using the system’s drag-and-drop capabilities. Once the user is satisfied with a proposed solution, Recovery Manager seamlessly deploys it back to the crew management and movement control systems for publication.
The Solution In Action
Each time a scheduled flight is disrupted and subsequently delayed, an airline must determine if each crewmember on the flight can complete his or her assignment based on prevailing operating conditions and crew-specific needs and regulations without becoming illegal. Extending duty periods or utilizing move-up, reserve or deadheading crews may result in significant penalties that translate into equally significant costs. The additional costs must be weighed against the revenue contribution of the flight to the network, not just the number of passengers on the aircraft, during the schedule rebuilding process. Using a powerful combination of what-if capabilities, optimization-based algorithms and an extendable, flexible rules engine, Recovery Manager evaluates these factors and generates proposed solutions based on user-defined parameters, giving airlines full control over the schedule rebuilding process and crew reassignments. Unlike other pairing-based solutions in the marketplace, Recovery Manager solves schedule
When challenged by a potential or existing schedule disruption, crew trackers/schedulers in an airline’s operations control center must work closely with aircraft dispatchers and flight control officers to place the carrier’s schedule and crews back on track as quickly as possible. Recovery Manager supports this process, integrating with all Sabre® AirCentre™ crew management systems and Sabre® AirCentre™ Movement Control to automatically retrieve and analyze information vital to generating the most feasible, desirable and cost-effective solutions. Movement Control interfaces with an airline’s reservations system to display real-time flight information, including: Flight number and date, Aircraft assignment, Fuel data, Planned and actual passenger counts, Original, revised, estimated and actual departure and arrival times for each scheduled flight.
Features And Capabilities
disruptions at a roster-based level. Proposed solutions consider crew availability, preferences, expenditures and pre-assigned activities such as training, vacation and rest times. The system also determines the minimum cost of reassigning disrupted crews to revised flight schedules based on monthly hours flown, current partial pairings flown and future assignments. Penalties for extended duty periods and deviation from planned flight assignments can be incorporated. Government, business and contractual regulations can also be considered in the process. In addition, Recovery Manager enables crew trackers/schedulers to view detailed information about move-up, reserve and deadheading crewmembers and restrict their selection by domicile, rank and qualifications as well as the percentage in each category to include in schedule reconstruction. Specific crewmembers and deadhead flight candidates can be removed from the proposed solution as needed. If an airline decides it is beneficial to extend crew duty periods, the system will notify crew trackers/schedulers regarding the allowable length of the extension before or after assignment periods as well as the penalties for exceeding these thresholds. Based on the detailed information available for each crewmember, Recovery Manager also helps users prioritize the order in which crewmembers are incorporated into the schedule recovery process. Recovery Manager generates multiple reports, providing crew trackers/schedulers with a comprehensive view of this information before deploying the proposed solution back to Sabre AirCentre crew management systems and the Sabre AirCentre Movement Control system. Reports include: Solution summary report — An overall summary of the proposed solution including the number of disrupted, move-up and reserve crews utilized; number of deadheads and ground transport required; modified pairings; and segments and pairings that remain uncovered; Consumption report — A summary of the disrupted and moved-up crewmembers (regular and reserve) and their crew bases and ranks as well as the distribution of pairing types for each category of reserve crews; Positioning report — A summary of deadhead (online and offline) flights and ground transportation required for crews; Accommodation report — A summary of overnight (layover) and daytime hotel rooms required for crews; Utilization report — A summary of deadhead promotions, trip extensions, unscheduled overnights and reserve assignments. Sabre Airline Solutions will continue to expand the capabilities of Recovery Manager to meet the needs of various types of airlines worldwide. Future plans call for the addition of cross-rank recovery, in which various levels of
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Atlantic Southeast Airlines, which operates more than 900 scheduled flights as Delta Connection and United Express, is the launch partner for Recovery Manager, a solution designed to help airlines optimally manage both anticipated and unexpected schedule disruptions. The technology enables carriers to pre-plan, minutes or hours in advance, for expected schedule disruptions.
crewmembers can be reassigned together as well as augmentation and downranking. Augmentation involves the assignment of crewmembers based on the length of a flight and/or number of passengers onboard. In some cases, downranking may be used to cover a specified crewmember position with a higher-ranking crewmember, such as when a captain is assigned to serve as a co-pilot on a designated flight. To fully experience the benefits of Recovery Manager, airlines may need to rethink their existing business processes and current technologies. Solution consulting offered by Sabre Airline Solutions helps carriers facilitate the integration of the system into their operations to receive the maximum value from their IT investments.
While schedule disruptions will likely always be part of “normal” daily airline operations, a carrier’s ability to effectively manage the challenges presented will determine its success. Recovery Manager provides airlines with a comprehensive set of user-defined parameters, enabling them to retain control over the schedule and crew recovery process and ultimately, their entire operation. a
Lauren Lovelady can be contacted at firstname.lastname@example.org.
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Get Off The Tarmac Airlines have access to the industryâ€™s most innovative technology designed to prepare for, avoid and rapidly recover from potentially costly tarmac delays, resulting in an efficiently run operation that promotes customer goodwill. By Rachel Olson | Ascend Contributor
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n April, the U.S. Department of Transportation passed a bill prohibiting U.S. airlines operating domestic flights from permitting an aircraft to remain on the tarmac for more than three hours without allowing passengers to deplane (see related article on page 44). This also applies to international flights, operated by U.S. carriers into and out of the United States; with the differentiation that the carrier must specify in advance the time limit where passengers will be allowed to exit the aircraft. In addition, food, water and restrooms must be made available after a delay of two hours. The hefty fines of up to US$27,500 per impacted passenger for exceeding the threshold make avoidance of the three-hour or greater delays imperative. A common alternative used to avoid violation of the tarmac delay rule is to cancel flights when extensive taxi delays are anticipated. While the loss of revenue is significant, it pales in comparison to facing significant per-passenger fines. A much-improved option is available, however, that enables an airline’s operations team to anticipate and proactively react to these delays as well as plan and prepare in advance to avoid them completely. This would result in maintaining the revenue for that flight and facilitating passenger goodwill by providing passengers a smoother travel experience and less likelihood for rerouting their itinerary, avoiding frustration and inconvenience. Sabre Airline Solutions® offers a variety of robust technology to assist airline operations centers in handling irregular operations. These tools can be utilized to prevent long taxi delays from occurring and identify and alert operations if a long delay is imminent.
due to overcrowding of gates, taxiways and/ or runways. By explicitly taking into consideration airport constraints, such as air traffic flow control programs, Recovery Manager enables airlines to maintain viable operations while not exceeding operational levels that would result in severe tarmac delays. During the process of recovering a flight schedule in response to an irregular operation by suggesting flight delays, cancelations and diversions, Recovery Manager gives airline analysts the ability to specify several airport constraints including the maximum number of aircraft at gates and on the ground as well as the arrival flow rates. This enables the user to simulate and manage airport flow rates and manage the impact to ramp congestion. Recovery Manager recommends schedule time adjustments to ensure airport constraints
are not violated. For instance, flights may be delayed in their departure station to prevent overcrowding at an arrival station and a possible extended wait time on arrival. Furthermore, by explicitly incorporating posted ground delay program slot restriction times into the recovery process, Recovery Manager will determine the approximate departure time from the gate so an outbound flight is not subject to additional tarmac delays during the departure procedure. Based on the average taxi time at the airport, the flight would be released from the gate in time to meet its assigned GDP slot time at the arrival station.
Movement Management And Control
During irregular operations, the operations controller is most likely handling multiple issues. Using technology to quickly identify
The likelihood of tarmac delays increases with each occurrence of schedule disruption. Airlines that employ technology to quickly and proactively resolve schedule disruptions while minimizing overall operational disruptions stand a greater chance of avoiding tarmac delays. Sabre ® AirCentre™ Recovery Manager is an automated, optimization-based flight operations decision-support system used to quickly and proactively resolve schedule disruptions while minimizing overall operational disruptions (see related article on page 79). Recovery Manager supports effective decision making, including compliance with new consumer compensation legislation for tarmac delays, and recommends real-time schedule adjustments and aircraft assignment changes to resolve disruptions. Recovery Manager has valuable features that enable airlines to prevent situations that could result in tarmac delays 84 ascend
A common alternative used to avoid violation of the new tarmac delay laws is to cancel flights when extensive taxi delays are anticipated. While the impact on revenue is substantial, it’s preferred to paying steep per-passenger fines.
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Under the new laws passed earlier this year by the U.S. DOT, airlines that remain on the tarmac for more than three hours without offloading passengers will be fined US$27,500 per passenger. For tarmac delays of two hours, food, water and restrooms must be made available to all impacted passengers.
issues and analyze options will assist the controller and decrease the potential for a flight on an extended taxi delay to be overlooked. Sabre® AirCentre™ Movement Manager and Sabre® AirCentre™ Movement Control
provide operations control personnel the means to easily monitor the status of flights and reduce the impact of disruptions to the schedule, helping ensure a positive travel experience. These solutions provide operations controllers with configurable
time-on-the-ground alerts to inform them of situations that could result in an extended tarmac delay. A special tarmac delay alert can be set, which is triggered if an aircraft has an out time but not an off time, an on time or an in time after an airline-configurable time threshold. In a situation where an aircraft has left the gate but is not airborne and a designated period of time has passed, the controller will receive an alert notifying of an aircraft that is nearing a potential tarmac delay violation. This alert will indicate that the controller needs to monitor the flight and take appropriate action if the flight will not be airborne in time. In a similar situation where an aircraft has landed but has not yet made it to the gate for passengers to deplane and the alert is generated, the operations controller knows arrangements must be made with the appropriate ground personnel to allow passengers to disembark prior to the threehour threshold.
Among a number of advanced solutions designed to help airlines respond to and overcome tarmac delays is Sabre AirCentre Gate Manager, a system that generates an alert when an aircraft has landed and its designated gate is occupied.
At the airport, inclement weather and other disruptions can lead to an abundance of non-scheduled aircraft on the tarmac and occupying gates. Airports that utilize technology to streamline their operations are better equipped to handle unplanned aircraft on the ground. Sabre ® AirCentre ™ Airport offers forecasting and planning technology that uses
demand-driven resourcing to determine the most efficient resource levels, including airport staff, gates and equipment required to meet the work demands for a given flight schedule. Sabre AirCentre Airport provides airport controllers with alerts to identify and prevent long tarmac delays. Users of Sabre ® AirCentre™ Staff Manager can create alerts based on a threshold of elapsed time since the flight departed the gate. If the flight is not off the ground within certain user-defined minutes from the departure time, the system generates an alert. In addition, Sabre ® AirCentre ™ Gate Manager generates an alert when an aircraft is on the ground and the gate of the aircraft is occupied. In the near future, Sabre Airline Solutions will introduce new ground movement tracking situational awareness technology designed to take advantage of ASD-B and other surface surveillance radar to chart the position of aircraft maneuvering around airfields. The solution will provide visual alerting to the consequences of airfield congestion and ground-stop programs,
offering real-time situational awareness to the SOC and supporting the decisionmaking processes of the operator, including compliance with new consumer compensation legislation for tarmac delays. In conjunction with data and messaging capabilities already available in Movement Manager and Movement Control, airlines will have a complete picture of airfield operation and performance. This new solution, when complimented with Sabre ® AirCentre™ Flight Explorer, will provide full gate-to-gate visualization of an airline’s flight operations. Flight Explorer offers alerting capabilities to track the elapsed time from the departure of the aircraft, signified by the out message, until airborne. There are two alerts in the Events Manager module within Flight Explorer — Aircraft Taxi-Time Warning and Aircraft Taxi-Time Critical. User-definable thresholds have been created as the elapsed time from departure grows. The two events are differentiated with unique colors. In the future, similar logic will be put in place for arrival alerting based on ON and IN messages.
Utilizing the most advanced technology will assist airline operations personnel in recognizing, proactively reacting to and preventing costly tarmac delays as well as increasing passenger satisfaction and retention. a
Rachel Olson is a solutions manager of Sabre AirCentre Flight for Sabre Airline Solutions. She can be contacted at email@example.com.
+count it up 2050
The year by which worldwide
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The percentage by which emissions
aviation’s CO2 emissions from
emissions accounted for by the trans-
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percent, based on a forecast by the
to enviro.aero. Aviation is responsible
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U.N. International Panel on Climate
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all transport sources, compared to 76
of hydrocarbons from aviation have
emissions footprint is 2 percent.
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been reduced by 90 percent.
The amount in tons of CO2 that are
The number of jobs the air transport
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industry generates globally, according
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to infrastructure inefficiencies, according
to enviro.aero. Of those, 14.7 million
route taken by a form of land
account for direct/indirect/induced jobs
The percentage by which air transport covers the shortest distance between
transport, according to enviro.aero.
and 17.1 million direct and indirect jobs through air transport’s catalytic impact on tourism.