2011 Issue No. 1
A MAGAZINE FOR AIRLINE EXECUTIVES
2011 Issue No. 1
Ta k i n g
y o u r
a i r l i n e
n e w
h e i g h t s
Caring More About You A Conversation With â€Ś Leo van Wijk, Chairman, SkyTeam Pg. 10
www.sa bre a irlineso lutions.com
18 Strategic commercial planning increases airline revenues
46 Avianca-TACA merger changed Latin America aviation
63 Merchandising through GDS gives airlines additional storefront
2011 Issue No. 1
making contact To suggest a topic for a possible future article, change your address or add someone to the mailing list, please send an email message to the Ascend staff at firstname.lastname@example.org.
For more information about products and services featured in this issue of Ascend, please visit our website at www.sabreairlinesolutions.com or contact one of the following Sabre Airline Solutions regional representatives:
Khaled Al-Eisawi, Elizabeth Bari, Chris Bird, Antonio Diaz, Greg Gilchrist, Helen Harden, Rebecca Herbig, Brian Houser, Beatriz James, Anthony Mills, Benjamin Mussler, Dana Netzer, Juan Parra, Kamal Qatato, Nancy St. Pierre, Chad Tibor, Susan Via.
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Editor in Chief
Stephani Hawkins Art Direction/Design
B. Scott Hunt
Bradley Bennett Contributors
George Lynch E-mail: firstname.lastname@example.org www.sabreairlinesolutions.com
Awards for Publication Excellence, 2009, 2008, 2007, 2006, 2005, 2004 ECO Awards For Excellence In Environmental Communications: 2009 Hermes Creative Awards: 2010, 2009, 2008 International Association of Business Communicators Bronze Quill: 2009, 2008, 2007, 2006, 2005, 2004 International Association of Business Communicators Gold Quill: 2006, 2005 International Association of Business Communicators Silver Quill: 2008, 2006, 2005, 2004 MarCom Platinum Award: 2010 The Communicator Award: 2010, 2008
Latin America Kamal Qatato General Manager Phone: +1 682 605 5399 Email: email@example.com Middle East And Africa Maher Koubaa General Manager Phone: +973 38350001 Email: firstname.lastname@example.org
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with Tom Klein President, Sabre Holdings
ears ago moving passengers from point A to point B was the main focus of an airline. While that is still a primary objective, today, passengers want more. They want to get what they pay for, and they want to have control over the financial side of their experience. But it goes far beyond finances and value. They want to move seamlessly through their journey from start to finish.
For that to happen, technology must, too, be seamless. Airlines have traditionally developed and deployed technology to address specific needs or areas of their business. However, that has led to divisions and silos among the systems and across departments. We need to remove barriers that exist between systems to allow airlines to operate more efficiently and respond proactively to the changing dynamics of the marketplace. That’s our focus — technology that frees you to conduct business seamlessly across your entire organization with a platform that enables you to do business the way you want and need to without constraints. We may not know exactly what the airline industry will look like 10 years down the road, but what we do know is that technology has to evolve before the industry evolves … not after the fact. Whether you work with our systems, your own systems or those of a thirdparty provider, we want to make sure all your systems work together smoothly. Providing that level of seamlessness and transparency is our vision not only near term, but well into the future. It’s a new way of doing business and managing technology, and we’ve built it into our long-term strategy to ensure you have
the tools you need to outperform your greatest expectations today, tomorrow and always. That’s why in recent years we’ve acquired a number of businesses such as EB2, f:wz, Calidris, Flight Explorer, Flightline and others to enable more capabilities. Some of the key technology we needed to move our vision forward already existed. So rather than reinventing the wheel, we brought some of the most advanced systems into Sabre Airline Solutions so we could provide you with solid, end-to-end solutions and services that work well together as well as with external applications. Calidris, for example, brought real-time revenue integrity to our portfolio. During the first four months of using our real-time revenue integrity technology, SriLankan Airlines generated more than US$11 million from the release of seats back to sales. And Kuwait Airways gained US$26 million in value benefits during the first five months of implementing the software. Those are the kinds of results we expect to deliver. And it’s only possible if we move away from technology platforms that lock you into a single approach and onto one that is completely open and transparent. We know that most airlines in the future will continue to rely on a mix of in-house technology in addition to technology from Sabre Airline Solutions and other providers. What’s important is that we offer solutions and a technology platform that will link to any and all systems … not just our own. For example, British Airways uses our business process solutions as the front
end to its Amadeus reservations technology, as well as various other systems, to provide employees with in-depth customer information, allowing for a personalized, seamless customer experience. A seamless experience far transcends your airline’s end-to-end operations. It spans across all your airline partners as well. For those carriers that have joined forces but continue to operate independently, it’s significant to them as well. And as partners come and go or changes are made among partners, they must be able to link up their technology to provide that seamless customer experience. It’s simply the way forward in our highly competitive industry. On our cover, SkyTeam Chairman Leo van Wijk discusses how joint service standards are required of its members to ensure their customers have a seamless travel experience. He talks about how IT link ups are the basis for providing quality services and meeting customers’ expectations. In our special section about industry alliances, mergers and consolidation, we talk about new revenue optimization business processes that help carriers maximize global revenue of mergers and joint ventures rather than the local revenue of individual member airlines. We also focus on the overall theme of partnerships — identifying which airlines make suitable partners, how partnering and alliance membership makes sense for the survival of some airlines, and the knowledge and tools that make these business shifts successful. I hope you enjoy this issue of Ascend, and I look forward to working with you to ensure your airline has what it needs to make every one of your customers’ journeys as seamless and pleasurable as possible. Tom
ASCEND I TABLE OF CONTENTS
INDUSTRY Air 18
Stategic Commercial Planning: A Winning Strategy A sound commercial planning strategy reaps monetary benefits
Peacock Proud SriLankan Airlines generates more than US$11 million using revenue integrity technology
Load Planning: Harnessing Aerodynamics Effective load planning saves airlines time and money
Caring 10 SkyTeam: More About You Leo van Wijk shares his ideas about several key aspects of the SkyTeam alliance
Betting The Company Airbus and Boeing have made massive investments in the development of their new flagship aircraft
Air Traffic Modernization: A NextGen Update Big plans are underway to secure a better ATC environment
Manmade Diamond Kuwait Airways makes millions using its new real-time revenue integrity system
Airline Merchandising Evolution Technology helps airlines and corporate travel programs achieve their respective goals
ASCEND I TABLE OF CONTENTS
SPECIAL SECTION 38 Silver Lining Identifying suitable airline partners can be simplified with appropriate knowledge and tools Growing Revenue Globally, Acting Locally New revenue optimization business processes help maximize the global revenue of joint ventures and mergers
Two Is Better Than One The Avianca-TACA merger changed the landscape of Latin America’s aviation industry
The Game Changer Sabre Airlines Solutions acquired f:wz for its extraordinary flight planning technology
Let’s Talk … Anytime Effective communication through a number of vehicles ensures airline customers’ needs are being met
Pushing Boundaries Technology must be easily adaptable for future modifications
Air Extras Merchandising through GDSs with new technology gives airlines an additional storefront from which to market and sell products and services
Aerodynamics Don’t Change; 66 Aircraft Load Planning Does Weight and balance and center of gravity are critical to legally and efficiently operating aircraft
69 Up In The Air The Sabre Qik Solution boosts customer service and operational efficiency
The Sports Car Southwest Airlines’ purchase of AirTran Holdings gives the airline access to new markets that appeal to leisure and business travelers alike
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. We’ve not only included this section, but we’ve appended a QR code to other areas throughout the magazine whereby additional information can be found.
High-Level View TRIP Linhas Aéreas selects SabreSonic ® Customer Sales & Service to help continue its aggressive expansion plans.
Air New Zealand and Sabre Travel Network ® introduce Sabre ® Branded Fares to Sabre Connected travel agents to market its products consistently.
Shanghai-based China Eastern Airlines, one of China’s largest airlines, has reported greater efficiency after automating its fleet planning and scheduling processes with the industry’s leading, flexible technology from Sabre Airline Solutions.
Virgin America selects SabreSonic Customer Sales & Service to power its reservations system and Sabre ® AirCentre ™ Enterprise Operations to integrate its flight operations and crew scheduling functions.
US Airways signs a multi-year, full content distribution and merchandising agreement with Sabre Travel Network, making all of its fares and schedules available to Sabre Connected travel agents, including its ancillaries.
ASCEND I PROFILE
SriLankan Airlines continues making moves to prosper, such as the recent implementation of a revenue integrity system that generated more than US$11M during the ďŹ rst four full months of use. .
By Lynne Bowers-Dodson | Ascend Staff
ASCEND I PROFILE
Platinum Award from the International Air Transport Association as one of the first airlines in the world to introduce a major innovation to tickets; A Merit Award at the National Best Quality Software Awards 2010 (NBQSA). The awards are remarkable considering that its home country has recently emerged from a 26-year-long civil war that ended in 2009. Sri Lanka has suffered a SARS epidemic, survived a terrorist attack at its international airline hub and recovered from the 2004 Indian earthquake that produced a devastating tsunami. It claimed thousands of lives and is one of the 10-worst earthquakes in recorded history.
Despite these overwhelming tragedies, Sri Lanka’s economy is expected to grow 9 percent this year — rates usually seen in China. The recovery can be attributed to Sri Lanka’s legendary beauty, fragrant spices, precious gems, rare pearls, sublime culture and hospitable people, all of which attract tourists from around the globe. Sri Lanka is called the Pearl of the Indian Ocean because of its position at the southern tip of the Indian subcontinent. For more than a thousand years, travelers from around the world came upon Sri Lanka or made the happy discovery by accident. Thus, this island paradise was also called SERENDIP, giving rise to the word “serendipity,” meaning “making happy discoveries by accident.” Whether by choice or happy accident, 600,000 visitors came to Sri Lanka in 2010, setting a record. Thanks to its “Visit Sri Lanka 2011” initiative, along with its role
as co-host to the ICC Cricket World Cup in 2011, the country anticipates 750,000 visitors this year. The Sri Lankan government doesn’t expect the numbers to drop and has declared a target of 2.5 million tourists annually through 2016. To prepare for the influx of tourists during the next few years, the tear-dropped shaped island off the southern coast of India is transforming Sri Lanka into a hub for aviation in the region. ColomboBandaranaike International Airport (BIA) is the only international airport located in Sri Lanka. It’s already the finest airport in the region with its modern aerobridges, plush lounges and well-stocked duty-free collection. Even so, it is presently in the middle of a major program to expand and upgrade its facilities. A second international airport is now under construction at Mattala in the southern Hambantota District. It is scheduled to be commissioned in 2012.
SriLankan Airlines, formerly known as Air Lanka, was set up by the government of Sri Lanka in July 1979 following the closure of Air Ceylon in 1978. As the country’s flagship carrier, SriLankan Airlines is crucial to the country’s tourism goals. Shortly after its management changed hands, the carrier began a re-fleeting program in April 2008. It acquired three Airbus A320s in 2008 and 2009 to replace old aircraft. SriLankan Airlines expects the delivery of seven new aircraft by the end of 2011. They include five Airbus A320s and two
Photo: SriLankan Airlines
pplause! Applause! The accolades keep coming in for SriLankan Airlines Limited. Last December, the carrier featuring a stylized peacock in its logo was the proud winner of the United States EFFIE award for travel and tourism for its hot-seat marketing campaign. The campaign offered Sri Lankans and friends traveling to and from Sri Lanka the best fares for travel on designated tickets purchased in advance. This latest award reaffirms SriLankan Airlines’ reputation as a leader among Asian airlines in: Service, Comfort (most seats have 18-channel seatback televisions, 22-channel audio channels and 16 video games), Reliability, Punctuality. In addition to its EFFIE award, SriLankan Airlines has in recent months won a series of international and national awards in fields ranging from passenger transport to marketing and Internet technology. They include: The Presidential Award for Airline of the Year; The Presidential Award for Outbound Tour Operator of the Year; First Runner-up in Global Breakthrough Business Intelligence Initiatives at the CIMA Global Awards; Top Airline by Growth in South Asia from Singapore’s Changi Airport; Foreign Carrier of the Year for South Asia for the fifth consecutive time at the Kuala Lumpur International Airport Awards;
EFFIE Award Winner SriLankan Airlines is a leader among Asian airlines in service, comfort, reliability and punctuality.
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Twin Otter float planes for the re-launch of its domestic service “SriLankan Air Taxi” this winter. “The three brand-new aircraft are scheduled to be acquired from May-November 2011, and will sport the latest comforts and entertainment systems, including audio-video on demand (AVOD) in both business and economy classes,” SriLankan Airlines Chief Executive Officer Manoj Gunawardena told reporters. “This will allow us to significantly enhance passenger service and give us the ability to fly to more cities in the Subcontinent, Middle East and Southeast Asia, and to also increase capacity to existing destinations in these regions.” The airline is also exploring the possibility of obtaining at least one more long-haul, wide-body aircraft to launch services to more new destinations in Europe and the Far East, Gunawardena said. In addition to increasing its fleet and destinations, SriLankan Airlines made significant investments in technology. Last year, the carrier contracted with Calidris (since acquired by Sabre Airline Solutions) via a partnership with Mercator for its Jupiter product. Mercator’s Jupiter product is a hosted end-to-end passenger services solution that provides a fully integrated real-time revenue integrity system. Subsequently, Sabre ® AirVision TM Revenue Integrity was implemented last July. During the first four months, it generated value benefits of approximately US$11.7 million from the release of seats back to sales. Mercator has worked with Calidris (now Sabre ® Iceland) for several years as a vendor of the real-time revenue integrity solution. “The partnership ensures that Mercator has the best revenue integrity solution for our customers on the Jupiter platform,” said Mercator Vice President Duncan Alexander. “Our airline partners work in challenging markets, and they need the best revenue integrity solution in place to handle all deliberate revenue abuse.” Revenue Integrity, a process automation system, removes bad bookings from the carrier’s inventory to help ensure seats are not occupied by false or spurious bookings. The solution looks at business problems including: Ticket time limits, Fake names, Duplicate bookings and duplicate segments within a booking, Fake or duplicate ticket numbers. Performing this in real time ensures that all new and changed bookings are pushed to Revenue Integrity at the end of a transaction. Using the solution, carriers typically see significant decreases in no 8 ascend
Seats Returned By Sabre AirVision Revenue Integrity 350,000 300,000 250,000 200,000 150,000 100,000 50,000
1,047,809 seats During the first four full months of using Sabre Revenue Integrity, SriLankan Airlines returned more 0 than a million seats to sales. August
1,047,809 Seats During the first four full months of using Revenue Integrity, SriLankan Airlines returned more than a million seats to sales.
shows as well as increases in load-factor percentages on their critical flights. In addition, there is better discipline enforced through their travel agents, and various costs savings are seen through reduction in specific areas such as: GDS booking fees from unproductive bookings, Denied boarding compensation, Push-back penalties, Churn, Meal wastage, Employee costs. However, the real value the solution delivers is normally calculated on the number of seats that it returns back to sales. During the first four full months of using Revenue Integrity, SriLankan Airlines returned 1,047,809 seats to sales, resulting in an estimated value benefit of US$11.7 million. This does not even take into account the numbers of warnings the system sends that are acted on by agents or other airline staff. “Choosing the correct partner for our upgraded revenue integrity solution was important for SriLankan Airlines,” Alexander said. “Not only was the airline looking for maximum value generation from a solution, but ongoing service support was also something it considered to be very important for future success. “Working with the best-in-class realtime revenue integrity solution with the support of Mercator and Sabre Iceland gives SriLankan this peace of mind ...
knowing its inventory is as clean as possible.”
An Iridescent Future
In 1998, SriLankan Airlines replaced the name Air Lanka. The logo featuring the peacock bird was redesigned to better suit the airline’s new identity as a modern, progressive carrier. Due to folklore and superstition, some Sri Lankans believed that the new SriLankan Airlines logo — featuring the peacock flying away from the aircraft — would bring misfortune to the airline, as opposed to the old logo that showed the peacock facing the direction of the aircraft in flight. Despite the direction in which it is flying, Feng Shui practitioners maintain that the peacock motif signifies growth, fame and abundance. If its recent successes and awards serve as a bellwether, SriLankan Airlines has a future as iridescent as its mascot’s spectacular plumage. a
Lynne Bowers-Dodson can be contacted at firstname.lastname@example.org.
The Sabre Travel Network logo is a trademark and/or service mark of an affiliate of Sabre Holdings Corp. ©2010 Sabre Inc. All rights reserved. AS-10-11515 0210 *2011 Business & Travel Meetings Show Innovation Award.
revenue within reach
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Caring More About You
ASCEND I PROFILE
uring its first decade, SkyTeam, the industry’s youngest global alliance, more than tripled its membership and doubled its number of daily flights. What began in 2000 as a four-member alliance, including founders Aeroméxico, Air France, Delta Air Lines and Korean Air, now has 13 member airlines with several newcomers scheduled to join this year and next. Coinciding with its 10-year anniversary, SkyTeam made tremendous strides toward expanding its global network last year. In June, it welcomed Vietnam Airlines and TAROM. This year, China Eastern and China Airlines will climb aboard, along with China Eastern-owned Shanghai Airlines. Next year, Aerolíneas Argentinas, Garuda Indonesia, Middle East Airlines and Saudi Arabian Airlines will establish SkyTeam membership. Going forward, the alliance plans to further strengthen its footprint in additional regions including Southeast Asia, India and Latin America. SkyTeam’s continued growth is paramount to its 395 million annual passengers who currently have access to 13,000 daily flights to 898 destinations in 169 countries. Adding carriers from untapped locations will give its customers access to many more markets at lower fares. SkyTeam’s slogan, “Caring more about you,” is heartfelt. The alliance diligently focuses on the needs and desires of its customers and strives to provide the best possible service across its network, which has paid off. For five consecutive years, SkyTeam has earned Best Airline Alliance by Global Traveler magazine. The magazine conducts an annual reader survey to determine the best airlines and airports in the world. In 2009, nearly 26,000 readers responded to the survey, which included 60 categories. SkyTeam continues to win this prestigious award based on the results of the survey. “We are honored that the readers of Global Traveler have selected SkyTeam as Best Airline Alliance for the fifth consecutive time,” said Fatima da Gloria de Sousa, SkyTeam’s director of brand and communications, who accepted the 2009 award on behalf of the alliance. “This confirms that our premium customers continue to value the benefits of our strong global network, which offers them unparalleled connectivity and seamless travel. As we continue to focus on steady growth and meeting our customers’ needs, we are confident that we will be back for more awards in the future.” Clearly, it’s nothing but a success story for SkyTeam, its member airlines and its mostvalued asset … its customers. In a recent interview with Gordon Locke, vice president of portfolio marketing and strategy for Sabre Airline Solutions®, SkyTeam Chairman Leo van Wijk shares his ideas about several key aspects of the SkyTeam alliance
including expansion plans, technology strategies and industry consolidation. Question: While most airlines have some form of partnership with other airlines, such as codeshare agreements, many have yet to join a global alliance. Why is now a good time for an airline to join a global alliance? Answer: It’s not necessary, or possible, that all airlines will join a global alliance. It depends very much on your strategy. If you have a local strategy, then an alliance is not necessarily the thing to do. But if you want to participate in the global game, or if you have a customer base that increasingly has global travel requirements, then joining an alliance makes a lot of sense. Given that alliances during the last decade have shaped up to a size that there are no longer many empty spots, it makes sense for airlines that have that global ambition or global need to consider joining an alliance now to not miss the boat, so to speak. Highlight
“ ... if you want to participate in the global game, or if you have a customer base that increasingly has global travel requirements, then joining an alliance makes a lot of sense. — Leo van Wijk, chairman, SkyTeam
Q: When selecting an alliance, what are an airline’s main considerations in determining the right fit? A: From an airline perspective, you must determine what your customer base really requires in terms of access to markets. That may be different for various airlines around the globe. Then you look for the alliance whose members offer the best fit and the best access to those markets. At the same time, if you operate in a certain part of the world that serves a lot of
global travelers, you look at markets that most frequently serve your country. Linking to carriers from those countries will offer new feeds to your system. You can do this on a bilateral basis, but given that the most important global airlines operate in alliances, it’s not always easy to just have bilateral relationships. Most of these airlines look at these questions in the alliance perspective. Q: What does SkyTeam deem most important when determining which carriers are ideal for membership? A: On behalf of the membership, we look for the right spots. Which markets are not currently served by our members? In which markets do they have an interest because their customers travel to these parts of the world? To give you two very clear examples for SkyTeam, one is India. We don’t have a partner in India. It’s an important subcontinent with potentially large growth, a lot of international global businesses and growing businesses. New, domestic carriers are becoming international players, so that market is of particular interest to us from a joined membership position. In that market, an Indian carrier makes sense for SkyTeam. Currently, we don’t have a South American partner. Aerolíneas Argentinas will effectively join in 2012. And it makes sense to look for additional partners in that region. Q: How involved is the process of joining your alliance? A: We currently have more than 100 membership requirements that cover multiple areas. They range from creating bilateral relationships to codeshare agreements and frequent flyer program linkage. These are key attributes for customers to really have benefits from an alliance. But we also have requirements about the signage of SkyTeam to be available in airport areas, on publications of airlines, et cetera. Another important element is the joint service standards that we have to make sure customers have as seamless as possible travel experience. Last and certainly not least are the requirements for IT link ups because they are the basis for providing service and giving customers the benefit of having a seamless experience. It’s not an easy process. That’s why it takes time. It depends on the level of bilateral relationships that have already been developed by the time a carrier enters the alliance. Q: What services does SkyTeam offer that assist airlines early on so they understand the considerations of joining the alliance and what the process involves? A: We provide assistance through the SkyTeam office, by helping airlines understand the requirements. In some cases we also assign within the membership a particular sponsor of the new member. The member airline helps the
ASCEND I PROFILE
Q: Many airlines have the perception that it’s too expensive for small and mid-size carriers to join a global alliance, yet they may need it to effectively compete. What are options for smaller carriers to join an alliance without taking a hard hit on the bottom line? A: We conduct an extensive analysis to determine the potential benefits an alliance can offer to a particular airline. That varies from airline to airline. We have different levels of membership to accommodate smaller airlines so they aren’t overburdened with requirements and costs. That ensures the hurdle rate for smaller airlines is as low as possible. Q: How has your alliance transformed since it began a little more than a decade ago? A: SkyTeam started with four members in 2000. During the first decade, we grew to 13 members. By 2012, we’ll have more than 20 airlines. We have covered most parts of the world, but there are still some white spots. So, in terms of size, we have grown significantly. During the last couple of years, we have invested a lot of energy in creating a strong position in China … the strongest thinkable. Also, there’s an area that hasn’t gotten a lot of attention but makes SkyTeam quite unique. The North Atlantic joint venture that was created in 1992 between KLM and Northwest Airlines was considered the most developed alliance in the world. As members of SkyTeam, we basically now have the oldest and most developed partnership. That has now been extended to Delta after taking over Northwest and Air France as well as Alitalia on the North Atlantic. So we have a very strong and deep alliance that goes well beyond just having codeshares in exchange of frequent flyer miles. I think that is really where the emphasis is going to be in the future … offering better services. Q: What are some untapped benefits that could be gained as your alliance continues to grow and evolve? A: There are many limitations to the exchange of frequent flyer miles and, generally speaking, there are more opportunities within a frequent flyer program than in between frequent flyer programs. That’s where a significant step forward can be made. Also, when looking at the management process of interlining, alliances so far have not gone all the way to the point where they do it for themselves. That’s where KLM and Northwest have really developed the joint venture to a point 12 ascend
… where it goes way beyond these types of things. We really have come as close as possible to the seamless travel experience by aligning our processes. We have created much broader IT links to exchange information about passengers who are traveling throughout the alliance network. I think that’s the way forward, but there’s a lot still to be developed to compete for the same customers. In essence, global alliances are overlapping to a large extent in major markets. Q: SkyTeam earned the “Best Airline Alliance” Global Traveler Award five years in a row. How does SkyTeam differentiate itself from oneworld and Star Alliance? What are the top selling points of SkyTeam versus the other two global alliances? A: I strongly believe the differentiator is going to be in the degree of cooperation and seamlessness you can achieve within the alliance. That’s why our strategy involves closing the gaps as well as creating the highest level of seamlessness. Pointing again to the experience we have between KLM and Northwest, we have developed that already … for almost 20 years. Of course, that’s not been an easy process. It’s difficult to give up part of your own decision-making
process and work in the best interest of the group. It also requires anti-trust immunity because entering into joint sales requires an attitude that is not necessarily easily adopted by independent allies that have tried to survive in difficult times. That really is an important element to make further progress in better serving your customers. Naturally, we have made our mistakes, but over the years, we have developed a scheme that is not easy to replicate because it’s not necessarily in documents. It’s very much in attitude and behavior, and that’s why I strongly believe that to be the main differentiator over time. Q: Of the three global alliances, SkyTeam currently falls in the middle in terms of annual passengers, destinations, number of members, etc. What are the advantages of not being the largest global alliance? Why, in terms of size, is bigger not always better when it comes to airline alliances? A: I don’t believe that size beyond a certain point matters. As I said, we have the No. 1 carrier in the United States. We have the No. 1 carrier in Europe. And with our Chinese partners, we have the strongest position in the Chinese market. Whether we have 40 airlines or 28, or whether we have 10 percent more passengers
new member fulfill any requirements. There are a team of specialists from the various members to provide support throughout the entire process of entering SkyTeam. It’s not just a quick, simple process. Quite a few things have to be arranged. But there is a lot of experience and support available within the membership to help a new airline member.
SkyTeam Expands In 2000, SkyTeam comprised four founders, Aeroméxico, Air France, Delta Air Lines and Korean Air. By next year, the alliance will have nearly five times its original membership.
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doesn’t matter. At this point, size does not create a differentiator. Q: Technology is vital to the success of any carrier, and synching up systems among alliance members often presents a challenge. What plans do you have for increased future integration of IT systems among your member airlines? What are your thoughts about an alliance needing a common platform? A: Having started out 40 years ago at KLM in the IT department, it’s one of my main areas of interest. I strongly believe that we’re living in a world where it is impossible to think that all the airlines will migrate to the same IT platform. When we developed the Air France-KLMNorthwest relationship, there was a need for a much greater exchange of information than was necessary in a normal hierarchal interline relationship. In the early days, we developed hard-wired links that have proven to be inflexible over the years if you have to allow for changes, developments or new carriers. Moreover, we have a situation where we link our systems progressively with more and more partners outside the airline industry. This requires all kinds of link ups and has basically led to the whole debate about open architecture, which has to be the basis for a free-serve relationship. That is basically what we work on in SkyTeam … to create open-architecture solutions among the airlines. We still see possibilities for the part of software that is required to support the connectivity and the management of the processes among the airlines on a joint basis. We are able and willing to develop joint software for the membership if that is the best solution. But that will still be in an open-architecture environment where it will be connected through open architecture with the existing platform of the airlines. That goes back to your earlier question about smaller airlines. They don’t necessarily have the same sophisticated systems as Delta and Air France. New members with a relatively low level of IT sophistication require quite a bit. And it could make a lot of sense for these airlines to develop jointly the type of software that is required to increase the seamlessness of our cooperation. Q: SkyTeam members use a number of systems from Sabre Airline Solutions®. How important is it that member airlines forge partnerships with single vendors when possible, including technology, catering, ground handling, etc.? A: It’s important that when a new member joins an alliance and has a requirement to upgrade its IT, that it doesn’t do it in isolation. In doing so, however, it should work with a limited number of vendors that are commonly used within the alliance. It makes a lot of sense for new things to be developed to support the alliance.
There are significant savings we can achieve in this area. That means we’ll use a limited number of vendors that can provide the best connectivity to the most common existing platforms. And then you end up with less than a handful. Q: Airline mergers and acquisitions have become more and more prevalent. What are your overall views about mergers and industry consolidation? A: Mergers between airlines on the same continent make a lot of sense because there is a lot to be gained. There are a lot of synergies. Mergers between carriers on different continents have a significant amount of complexity. In principle, they’re still not allowed, and I don’t see that changing very quickly. I don’t see that the Chinese government will allow Chinese carriers to be taken over or merged into Delta Air Lines or Air France-KLM, and vice versa. Q: What impact do mergers have on the industry as a whole? A: In the past, a large number of airlines were basically dictated by regulators that didn’t allow cross-national airlines to really operate. While this is disappearing, and alliances are filling in the gaps to a large extent, the normal line carriers that try to do the same thing in terms of network operators will have significant difficulties to survive because they don’t enjoy the same benefits. If you’re a regional niche carrier such as Alaska Airlines, the chances of survival are greater. But, if you’re a relatively small carrier in Europe, for instance, your chances to survive outside an alliance are next to none. So you likely have to come in with a different business model such as the low-cost carrier. Although after so many years, we’re seeing that low-cost carriers over time have lost their competitive advantage. Some are becoming hybrids and others are thinking about developing networks to continue to have the growth they have previously enjoyed. In most cases, certainly in the United States, they have lost their advantage over network carriers. In the end, in 10 years from now, we will have, in my opinion, a significantly lesser number of carriers. The survivors will either be in an alliance, part of an alliance or operating in a different business formula. Q: This marks your 40th year in the airline industry. In what way has your extensive airline background contributed to your success in leading the SkyTeam alliance? What are the guiding principles you set forth for the alliance? A: I can only speak about my own experience, and that has served me well over the years. A deep understanding of this complex industry is very helpful. We have seen in many carriers that relative outsiders have come in and tried to come to grips with the complexity of our industry. That’s not easy
to say the least. It’s not impossible, but it’s not easy. So, a deep understanding of the processes, and they’re very much linked. It’s not easy to delink, for instance, the engineering and maintenance process from operating an airline. It can be done, but given the marginal business, you have to be extremely careful if you do that because you can easily lose a lot of money rather than gain by outsourcing. It’s been helpful that I’ve been able to be in different positions during the first 20 years of my career. I started out in IT. Then I moved to cargo handling, cargo marketing, passenger marketing, and then strategy and corporate development before I became one of the top executives for KLM. I know the business in detail inside out, and that helps to understand where you have to move it forward. Q: What key objectives would you like to achieve during your stint as SkyTeam chairman? What do you want to see SkyTeam achieve long term? A: We operate in a regulatory environment that has shaped airlines in a way that they’re not easy to transform into airlines that can also be successful in this time and day. That requires a good understanding of how you can transform that airline. It requires a good visionary mind to see where the opportunities are to be more successful than others. These are two key attributes I’m trying to bring to SkyTeam. I’m trying to bring that experience and know how to build SkyTeam into the best alliance for the future. Q: Given 2010 was SkyTeam’s 10th anniversary … and we congratulate you … tell us what 2020 will look like for SkyTeam. A: I see an alliance that is not necessarily much larger. I think in numbers, we’ll be over 20 members. But I don’t see it in 2020 to be 50 because the other 30 airlines, except for a few white spots that I already pointed at, are not going to add a lot. Managing overlapping airlines make it difficult to manage in an alliance, because they don’t have the same interest. They’re competing more than there are synergies in incorporating. Our main mission for the next 10 years is to make sure that the customer benefits we can offer as an alliance will increase beyond codeshare and frequent flyer programs and that we really try to create as much as possible a seamless service. And there’s a lot to be gained there, but it is a complex issue … certainly in different cultures managing such a process. But we have a template that we have developed on the North Atlantic and that serves SkyTeam well to really use it as the way forward to become a stronger and, in my opinion, hopefully the leading alliance at the end of this decade. a
Manmade Diamond Kuwait Airways makes millions using its new real-time revenue integrity system
Kuwait Airways gained US$26 million in value benefits during the first five months of implementing real-time revenue integrity technology.
By Lynne Bowers-Dodson | Ascend Staff
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ewelers determine the value of a diamond by examining the “four Cs” — cut, color, clarity and carat. During the next few years, investors will assess the value of Kuwait Airlines by examining a different set of “four Cs — commitment, competition, capacity and capital improvements. Perhaps these investors will count to its credit the carrier’s remarkable comeback despite a recent past marked by intense heat and pressure reminiscent of diamond creation.
When asked about the future of his airline in March 2010, Kuwait Airways Chairman Hamad Abdullatif Al Falah described the carrier as a diamond. A look at the carrier’s 57-year history bares some striking similarities to one of nature’s most durable substances. Diamonds begin their journey as unpretentious elements of carbon. So too, Kuwait Airways had a modest start. In 1954, two local businessmen launched the Kuwait National Airways Company with US$72,979 in start-up capital and a fleet of three Douglas DC-3s. Flight operations began on March 16, 1954, connecting Kuwait City with Abadan, Iran; Beirut, Lebanon; Damascus, Syria; and Jerusalem. The company was renamed Kuwait Airways Corp. (KAC) the following year as the government acquired a half interest. The route network was expanded throughout the Gulf region with the addition of leased, four-engine Vickers Viscount aircraft in 1958. The government of Kuwait, which became independent from Great Britain in 1961, bought the remainder of KAC’s shares in May 1962 after the launch of rival Trans Arabian Airways made the competitive situation difficult. The government acquired a controlling interest in Trans Arabian in April 1964 and folded its Douglas DC-6 aircraft into the KAC fleet. In the meantime, KAC had begun operating its first jet aircraft, de Havilland Comets, in 1962. This allowed the company to venture into Europe with a six-hour nonstop to London. Newer planes, including Hawker Siddeley Tridents and BAC OneElevens, soon joined the fleet. The One-Elevens were leased off within a couple of years, but the Tridents were successful flying routes in the Middle East. KAC bought its first Boeing aircraft when it acquired three 707 airliners in November 1968 at a cost of about US$25 million. By 1976, the airline had retired its earlier jets and turboprops and was flying a fleet of eight 707s. Soon the company added midsize Boeing 737s and 727s, one of which was operated exclusively for the government. KAC received the first of four Boeing 747 jumbo jets in August 1978. The long-range aircraft allowed the airline to extend the London service to New York City as well as start service to Manila in the Philippines. In the 1980s, KAC took delivery
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and lost revenues; Seizure by Iraq of one dozen of the airline’s 20 planes, and another three owned by the Kuwaiti government (several of these planes were destroyed in the war); A spare parts inventory valued at US$150 million confiscated by the Iraqis; A loss of US$133 million in the 1990-91 fiscal years. Six of KAC’s Airbuses survived the invasion and were flown to Iran during the occupation. Following the war, KAC filed an insurance claim for US$694 million for loss of the planes; however, Lloyd’s of London limited its payout to US$300 million, its maximum for a single event. The dispute between KAC and Iraqi Airways (IAC) continues today and is the longest-running commercial case in the history of the English courts. Nearly 12 years of previous decisions have been dismissed by higher courts due to a series of findings of perjury and fraud against IAC. KAC now holds judgments totaling nearly US$1.2 billion against IAC and US$83.5 million against the State of Iraq.
Seats Returned By Sabre AirVision Revenue Integrity For Kuwait Airways In 2010. 500,000 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000
1,047,809 seats During the first four full months of using Sabre Revenue Integrity, SriLankan Airlines returned more 0 than a million seats to sales. April
Solving Real Problems Revenue Integrity solves business problems for Kuwait Airways such as ticket time limits, fake names, duplicate bookings, and fake or duplicate ticket numbers.
of four Boeing 727-200s; eight Airbus A310s; one Airbus A300-600; and three Boeing 767-200 ER aircraft.
US$1.6 billion in losses due to damage to the carrier’s fleet, computer reservations system
60 Availability %
According to science, the carbon that makes diamonds comes from the melting of pre-existing rocks in the Earth’s upper mantle. There is an abundance of carbon atoms in the mantle. Temperature changes in the upper mantle force the carbon atoms to go deeper where it melts and finally becomes new rock, when the temperature reduces. If other conditions such as pressure and chemistry are right, the carbon atoms in the melting crustal rock bond to build diamond crystals. However, there is no guarantee that these carbon atoms will turn into diamonds. If the temperature rises or the pressure drops then the diamond crystals may melt partially or totally dissolve. For KAC, rising temperatures from the Aug. 2, 1990, invasion by Iraq nearly destroyed the chemistry that was working to turn the carrier into a diamond to be admired throughout the Middle East. In the seven months following the invasion, Airliner World reported that more than 85 percent of KAC’s assets were destroyed or stolen. Among devastating wartime loses reported by the Financial Times:
The name “diamond” is derived from the ancient Greek “adámas,” which can be interpreted as “unbreakable.” During the invasion, and despite the odds, KAC adopted an unbreakable posture. The carrier conducted operations from a temporary base in Cairo even while its homeland was under occupation. Half of its employees, including then-Chairman Ahmad Hamad al-Mishari, had been out of the country during the invasion. KAC was operating a fleet of nine aircraft immediately after the war; all but one of these planes
Days before departure Before using Revenue Integrity
Using real-time Revenue Integrity
Demand for seats
Real-Time Revenue Integrity Real-time Revenue Integrity achieves significant results over other revenue integrity robots.
Today, KAC operates a fleet of 22 aircraft, mostly Boeing 777-200 ER, Boeing 747-400M, Airbus A340-300, Airbus A330-200, Airbus A320200 and Airbus A300-600R. The airline plans to include more aircraft in its fleet, bringing the total to 80 by 2012. Before the invasion, Kuwait Airways enjoyed a reputation for excellent in-flight service. As the flag carrier of a Muslim country, KAC did not offer alcoholic drinks, and meals were prepared according to Halal dietary principles. Current Kuwait Airways Chairman Hamad Abdullatif Al Falah believes the carrier can regain its reputation with an influx of investment capital spurred by privatization. The Kuwaiti parliament agrees and last year approved a budget that will transform the state-owned carrier into a private entity called Kuwait Investment Authority (KIA) with a number of local and international stakeholders: 35 percent will be sold at auction to foreign or local investors, 40 percent will be sold to Kuwaiti citizens at an initial public offering,
US$26 Million Kuwait Airways realized significant gains during its first five months of using Revenue Integrity.
20 percent will be reserved for state-run institutions, 5 percent will be distributed free to Kuwaiti airlines employees. In an interview with Marcopolis last March, Chairman Hamad Abdullatif Al Falah said, “Kuwait Airways is a diamond, and whoever buys with Kuwait Airways will be a winner. We have the best pilots, engineers, technicians and training center that serve many Arab countries. “Kuwait Airways is ahead of our competitors with regard to all of these aspects. Kuwait Airways is at the end because our aircraft are older and smaller in number. If we have a bigger number of aircraft we can offer more destinations and with newer aircraft we will be more competitive and we can capture more of the market.” Kuwait is clearly taking positive steps to improve its infrastructure and technology, which is key to boosting revenue for all its carriers. Last November, the government signed a contract to equip Kuwait with a new air traffic control system. In addition, it is developing a new terminal at KIA and new airports are under construction to support the growing aviation market. To help with capacity improvements, Kuwait Airways has contracted with Calidris (since purchased by Sabre Airline Solutions®) via a partnership with Mercator to provide a real-time revenue integrity system. Sabre® AirVisionTM Revenue Integrity was implemented in April 2010. During the first five months, it delivered value benefits to the airline from release of seats to the tune of US$26 million. Revenue Integrity removes bad bookings from the airline’s inventory to help ensure that seats are not occupied by false bookings from fake names, duplicate bookings and non-ticketed bookings (enforcing ticket time limits). Performing analysis in real time means that all new and changed bookings are pushed to the solution at the end of the transaction. This ensures that the airline’s inventory is as clean as possible and seats can be Photos: LAN
had been out of the country during the invasion, according to the Financial Times. Reservations and maintenance operations were shifted to outside facilities. Following the seven-month-long Gulf War, a Kuwait Airways spokesperson summed up the carrier’s intent: “Kuwait Airways aims to re-establish its network to reach more than 47 countries around the globe with a firm commitment to providing the finest service and comfort to passengers while continuing to rank safety as one of our highest priorities.” With that, the carrier began a massive rebuilding project. It ordered 17 new aircraft worth US$1.44 billion delivered in 1996. These included two new Boeing 747s to replace the old ones. KAC lost buildings as well as aircraft during the occupation. Construction of a new US$37 million, two-story headquarters began in 1993, and the airline moved into it in 1998. New hangars also were erected. The cost of rebuilding the ground infrastructure was reported at up to US$250 million by Airline Business. Capacity exceeded demand in the Mideast air travel market during the 1990s, setting up intense competitive pressure. In response, KAC developed limited alliances with other regional carriers such as Syrian Airlines, Middle East Airlines, Cyprus Airways and Thai International. In addition, the Kuwaiti government instituted an open-skies policy in 2006, and since then has signed open-skies agreements with the United States, Singapore, Cambodia, Myanmar, Laos, Brunei, Thailand, Austria, Poland, Georgia, the Czech Republic, Kyrgyzstan, Finland and Iceland. New market conditions have birthed new competitors. The airline that once held a monopoly in Kuwait now competes against newcomer Jazeera Airways.
Photo: Kuwait Airways
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sold to paying guests when there is demand for them. Real-time handling of the revenue integrity discipline ensures that maximum value benefits are gained by the airline. The flexibility of creating and defining the process rules in the solution enables airlines to focus on generating maximum value. Airlines can tailor processes to any attribute in the PNR down to the point of sale and segment-related information to ensure that: Revenue leakage is kept to a minimum, No-shows are reduced, Variation in no-shows is less volatile. The actual conditions for finding problem bookings are separate from the actions taken on those bookings. This gives the airline more control through process automation management rather than a simple robotic script. As the airline is in full control of its revenue integrity processes through Web clients, the carrier can change and create processes to solve revenue leakage business problems. “We were going through a major problem of no shows, which led to a huge number of seats spoilage,” said Hisham Alsuraye, Kuwait Airways’ senior expert for pricing and revenue management. “It affected our profitability by 7 percent to 10 percent on the network. Not only has it increased our profitability on the network by freeing resalable seats, but it has also decreased manpower. We highly recommend the system for implementing real-time revenue integrity.” Kuwait Airways continues to leverage technology — such as modern aircraft and advanced IT systems — as part of its strategy to stake a claim as one of the world’s most successful airlines. a
Lynne Bowers-Dodson can be contacted at email@example.com.
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Strategic Commercial Planning: A Winning Strategy Airlines that build a sound commercial planning strategy reap significant monetary benefits.
By Darren Rickey and Kevin Woods | Ascend Contributors
or most airlines, performance improvement comes from small, well-timed adjustments rather than large sweeping changes. Commercial planning is full of small adjustments and fine-tuning that, when viewed collectively, can make a significant impact on an airlineâ€™s profitability. What are these small changes, and how can airlines take advantage of them? The answer is strategic commercial planning. 18 ascend
What Is Strategic Commercial Planning?
Strategic commercial planning is a holistic approach to the commercial planning function that marries world-class business processes with advanced decision systems. Taking a holistic approach means viewing commercial planning as a set of interdependent functions that must coordinate seamlessly. Next, layer on top of those functions best practices that both work
within and between functions. Finally, adding decision-support technology enables the entire system to work together. Unfortunately, most airlines have yet to realize the full value of strategic commercial planning. Departments within commercial planning, such as revenue management and network planning, consist of silos where information is lost among these highly dependent departments.
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In other cases, an airline fails to incorporate best practices, especially around scheduling, revenue management and pricing. Advanced decision-support systems can help, but they are less effective without close coordination among departments, as well as business process best practices.
Why Strategic Commercial Planning?
Strategic commercial planning is the best way for an airline to achieve maximum profitability. First, there is a core principle of seamless coordination. The advantage of seamless coordination is best understood through an example. Take a situation where a large market is underperforming. It could have several causes, for example: Has network planning added too much capacity? Has schedules timed the flights such that they misconnect on a major O&D? Is the revenue management strategy spoiling seats? There are many possible culprits for the marketâ€™s poor performance. If each department evaluates the problem and makes adjustments independent of the others, the result would likely be even worse performance. Utilizing strategic commercial planning would enable representatives from each commercial planning group to analyze the causes of poor performance as a group and collectively decide upon the proper course of action. The result would be enhanced decision making and a coordinated approach that uses the most effective levers to improve performance. Expand this process from one market to the entire network and the airlineâ€™s profitability would improve substantially. There are a number of best practices employed throughout the commercial planning process. The business rules around revenue management represent one example. In a recent study, a European carrier compared its revenue management system with using analyst-defined business rules to the same system without any analyst intervention. It turns out that the system without analyst-defined business rules was superior. Diving deeper into the results, the business rules performed marginally better on peak flights but significantly worse on off-peak flights. The best practice is a robust set of business rules that allow the revenue management system to set inventory while only overriding the system based on analyst insights for high load factor flights. The final piece that brings strategic commercial planning together is systems integration. One powerful example is close-in re-fleeting (or demand-driven dispatch). A few weeks prior to departure, close-in re-fleeting uses forecasted demand from the revenue management system to upgauge high-demand flights and downgauge lower-demand flights in the fleet assignment system. The result is an increase in network revenue of up to 1 percent.
Long-Range To Close-In
Strategic commercial planning covers the full spectrum of planning. It begins years before departure with fleet planning by creating schedule scenarios and determining the optimal fleet to maximize profitability for those future schedules. From long-range plans to pricing and inventory adjustments just days before departure, and everything in between, strategic commercial planning looks at the process from beginning to end. In general, strategic commercial planning breaks down into three phases.
Phase 1 is long-range planning and takes place more than a year before departure. This includes fleet planning, network restructuring, new market development and alliance opportunities. Close coordination among departments plays a lesser role to systems integration where multiple scenario analyses are made easier by allowing data to flow among forecasting, fleeting and scheduling systems. That said, market insights from revenue management and pricing experts can be extremely helpful when identifying new market opportunities and hub structures.
Phase 2 takes the planning from one year to roughly three months before departure. It represents coordinated strategy among commercial planning departments. Phase 2 includes the addition of new routes, schedule connectivity and fleeting, and revenue management and pricing strategies based on seasonal factors and market forecasts.
Because of the strategic nature, seamless coordination among departments during Phase 2 becomes most critical. Each department must optimize within its responsibilities while ensuring that other departments are heading in the same direction. To maximize the effectiveness of this coordination, a business intelligence solution is essential for viewing consolidated network and market performance data across all of commercial planning. This facilitates coordination while helping identify revenue improvement opportunities.
Phase 3 begins three months out and ends at day of departure. It includes schedule modifications based on changes in the operating groups, revenue management closing lower-class inventory and pricing implementing its strategy by market. Due to the short timeframe and the need to fine tune the commercial function, both seamless coordination and systems integration play vital roles: Linking the route forecasting and schedules systems to allow for quick and effective evaluation of flight changes, Communicating schedule and aircraft gauge changes across functions, making any necessary adjustments immediately, Enabling close-in re-fleeting between the fleet assignment and revenue management systems, Linking revenue management and pricing systems to adjust inventory controls based on current fares, not historical,
Strategic Commercial Planning A holistic approach to the commercial planning function leverages world-class best practices with advanced decision systems among and between groups to enable close coordination.
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Commercial Planning Processes There are multiple points of coordination including close-in re-fleeting revenue management using real-time fares and schedule development.
Enhancing inventory availability through realtime links between revenue management and reservations inventory systems.
More Than Passenger Revenue
For most airlines, ancillary and cargo revenue play large roles in their financial performance. As such, strategic commercial planning includes these two areas throughout the planning process. This has two important impacts: Seamless coordination needs to reach both cargo and merchandising groups, areas that have traditionally been afterthoughts in the planning process, Systems integration greatly enhances seamless coordination. When cargo demand is included in the fleet assignment process, the performance of cargo revenue is significantly improved. Similarly, forecasts from passenger revenue management give the best estimate for cargo capacity availability, thereby enabling the cargo function to maximize its revenue. With merchandising, it’s becoming increasingly important that new route forecasts and revenue management availability take into account the total revenue generated by passenger classes. As ancillary revenue grows in proportion to seat revenue, it will become imperative that airlines optimize around total passenger value.
Technology As Strategic
Many people think of technology as a tactical tool, something that can automate repetitive and tedious tasks. That is undoubtedly true and enables people to focus on more strategic 20 ascend
activities. However, strategic commercial planning leverages technology to help drive additional revenue otherwise lost to an airline in three important ways: Scheduling, fleeting, pricing and revenue management systems enable airlines to optimize revenue-generation capabilities of the airline. This gets back to doing those small things that, over time, result in significant value for the airline. For example, with scheduling, it is critical to maximize the amount of aircraft time during peak demand periods. By properly sequencing at a hub, airlines limit taxi times. Similarly, carriers can satisfy more demand by keeping aircraft turns at minimum ground time during peak demand, then recover the operation during off-peak periods. Technology can play a key role in long-term planning. Through the use of forecasting, fleeting and scheduling systems, airlines can evaluate numerous scenarios more robustly than they ever could without these systems. Threeor five-year plans become much more insightful and helpful in guiding the airline through key decisions around new markets and new aircraft. In one situation, a major North American carrier used network technology from Sabre Airline Solutions® to evaluate a major restructuring of its largest hub in a way that would have been virtually impossible without these applications. Technology proved invaluable in helping the carrier identify the hub structure that best fit its profit potential. Capitalizing on revenue opportunities by integrating systems so data flows between inter-
dependent groups is a core feature of strategic commercial planning. It is also an attribute that more and more airlines require from their systems. These airlines have recognized the ability to capture lost revenue, as well as the improved effectiveness and productivity of their people. Ultimately, they need not worry about transferring data or making sure data is accurate.
Strategy Driver And Enabler
Strategic commercial planning must drive and enable an airline’s strategy. By leveraging integrated systems and best practices from throughout the industry, airlines can determine the optimal business model to fit their unique market circumstances. The move toward hybrid business models by network and low-cost carriers is an important trend. Network carriers have been simplifying their operations in markets lacking profitability, while LCCs are adding complexity to capture additional profits. Both business models require route planning systems to evaluate fleet changes and completely new network structures or markets. These strategic adjustments also invariably involve changes in revenue management and pricing strategies. What does it mean to enable an airline’s strategy? First, executives must have confidence in the systems and processes. To do so, several questions must be answered: Can revenue management adjust to a new pricing structure?
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Can new markets, beyond traditional routes, be added that will be competitive in the marketplace? Will the systems be able to scale to meet the demands of a larger business? With strategic commercial planning in place, including seamless coordination and best practices, the executive team will have the confidence to implement improved strategies that will drive profitability. Strategic commercial planning also relies on robust technology that can adapt to changing circumstances, including significant growth. Unfortunately, this is where too many technologies fall down, leaving airlines to manage manually while the demands are even greater. Through seamless coordination, best practices and robust systems, an airline should have the confidence to push the envelope in terms of capabilities that drive value. While it is important to have a solid strategy and the confidence to implement it, the market is constantly changing, whether it is passenger demand or competitor adjustments. As a result, strategic commercial planning must enable the commercial planning area to quickly identify changes in the marketplace and respond effectively. This means having business intelligence systems with a mix of external and internal data that is one version of the truth shared throughout commercial planning. The information must be evaluated regularly, across all commercial functions, using sophisticated systems that allow scenario analysis. After evaluating the situation as a team, a coordinated response is essential. Again, it comes down to shared data, best practices and seamless coordination. It’s a given that the marketplace is ever-changing, and with strategic commercial planning, an airline can stay several steps ahead of its competition. Strategic commercial planning is the next generation of methods and practices to improve revenue and ultimately profitability. It combines best practices from across the airline industry with seamless coordination across the commercial planning groups, including cargo and ancillary revenue. As more airlines adopt strategic commercial planning, it is becoming a critical component for airlines to succeed and win in the marketplace, ultimately driving an airline forward. a
Darren Rickey is vice president for Sabre® AirVisionTM Marketing & Planning and Kevin Woods is a solution marketing partner for Sabre Airline Solutions. They can be contacted at darren.rickey@sabre. com and firstname.lastname@example.org.
Pricing Fare-matching, off-tariff, and fare sales actions
Schedules Connectivity, local market times, operating constraints
Network Planning Frequency and gauge for existing routes, identify new routes
Sales Corporate and travel agency promotions, market intelligence
Revenue Management Availability adjustments based on spoilage and up-sell opportunities
Revenue Analysis O&D performance, competitive analysis, optimal flight timing
Cargo Identify incremental revenue opportunities
Marketing Promotions, loyalty programs, etc.
Commercial Planning Requiring close coordination across multiple functions, each needs a seat at the table for regular planning meetings.
Preparing For Strategic Commercial Planning When implementing strategic commercial planning, airline executives must consider several aspects, including:
Do all functions within commercial planning have regular coordination meetings for problem markets and new market opportunities? Does the strategic planning process represent every function?
Do you have a three- or five-year network plan? Have you optimized connectivity at your hubs? Is your fleet optimally assigned based on operational constraints and unconstrained demand? In revenue management, do you have a strategy for when to override the revenue management system and when to not? Do you look at competitors’ available fares to determine your inventory availability?
Are your fare classes aligned such that higher-level fare classes have higher fares (if you don’t know the answer, you may be surprised by what you find)? Is your pricing strategy driven by your relative competitive position in the specific market? Do you regularly review your codeshare flights for revenue maximization and monitor them to ensure connectivity?
Does your airline fleet its schedule close to departure based on actual forecasted demand from revenue management? Do you revenue manage based on current fares in the marketplace and not historical fares? Do you incorporate cargo and ancillary revenue into your commercial planning decision making? Do you have a business intelligence solution that provides “one version of the truth” across all commercial planning groups?
Load Planning: Harnessing Aerodynamics The forces of aerodynamics never change; however, the ability to manage them continues to evolve, saving airlines time and money while ensuring customersâ€™ safety. By Dana Knight and Dave Roberts | Ascend Contributors
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ransportation — from walking to driving to sailing to flying. They all have several commonalities — movement from one point to another and the laws of physics. In the case of aviation, the law of physics is aerodynamics. This is not about aerodynamics, but rather a view of: How aerodynamics affects aviation, The components that help deal with aerodynamics, How to make a flight more efficient considering the law of physics. Too scientific? Before talking about aerodynamics let’s identify other terms in airline operations that are affected by aerodynamics; terms many people even
in the aviation industry cannot define or provide the full meaning. For example, weight and balance, load planning, load control, center of gravity, lift, takeoff weight, zero fuel weight, and performance data. Would it surprise you to know that a departure control system by definition is more than a passenger check-in system? A departure control system also includes a weight and balance system that interfaces with the passenger check-in system. First and foremost when considering aerodynamics and the movement of an aircraft, whether on the ground or in the air (including takeoffs and landings), the major concern is safety. Safety is the common factor that is inherent from the design of
the aircraft to the actual operation of a flight.
The laws of physics and aerodynamics have not changed since the Wright brothers first lifted off more than 100 years ago. However, all of the other components of flying have grown by tremendous proportions — size, weight, distance flown and speed. Of course, fuel continues to be the source of energy that produces power that accelerates the aircraft down the runway and through the air. The price of fuel has grown in even greater proportions today compared to the other items listed above, and airlines are searching for any way possible to reduce their fuel costs.
Build-up Of Weight Associated With The Operations Of An Aircraft
+ Basic weight of aircraft
+ Crew and crew baggage
Catering, oil, water, equipment for flight
Dry operating weight
+ Payload (passengers, baggage, cargo)
= Zero fuel weight
= Takeoff weight
Burn-off or trip fuel
Weight Calculations There are multiple calculations to go from the basic weight of an aircraft to a flight’s takeoff and landing weights.
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Center Of Gravity
- Lift + 15 m
Aircraft Balance The balance of an aircraft can be achieved by maintaining its center of gravity through the proper distribution of payload, such as passengers, bags and cargo.
Adherence to proper load planning techniques and actual loading of aircraft to these plans reduces fuel burn. Allowing the aircraft to operate at the optimum flight attitude reduces drag and improves lift. Many airlines use automated load planning applications to generate the most-efficient load plans. While the principals of aerodynamics have been with us forever, we have become more aware of their effects since the beginning of mechanized flight in the early 1900s. Aircraft have two positive forces of aerodynamics — lift and thrust. An aircraft must be designed so lift and thrust will overcome the other two counter forces of aerodynamics — drag and gravity. To overcome these forces safely, an aircraft, when loaded with payload and fuel, must account for the weight of the aircraft while on the ground and in the air as well as the operational balance of the aircraft. Hence, the creation of the term weight and balance used to describe the loading of an aircraft. To better understand the many factors that are involved in the operation and flight of an aircraft, it’s necessary to examine the effects of aerodynamics, including: The weight of the aircraft, The methods to determine the balance and center of gravity of the aircraft, Load planning on the day of operation, How to use these areas to improve airline performance and manage operational costs. 24 ascend
As stated earlier there are four forces that make up the principals of aerodynamics — lift, thrust, gravity and drag. The aircraft, which is the focal point of these forces, must be able to provide sufficient lift and thrust to counter the force of gravity and drag. Rounded edges and smooth surfaces reduce the drag effect while the aircraft is in flight. The design of the leading edge and top of an aircraft wing force air to curve above the wing and move faster. This creates lift and allows the aircraft to fly through the air. The design and size of the engine, therefore, create the thrust to counter the force of gravity. The unfortunate reality is that by producing lift and thrust, there is an inherent creation of drag. But the smart designers of the aircraft ensure that there is enough lift and thrust to counteract the drag created by producing the lift and the thrust. A true vicious circle if you take a step back and look at it. Before discussing how an airline plans the passenger and cargo loading of an aircraft, it’s necessary to further analyze these two major components of aerodynamics of the aircraft — the aircraft weight and balance. There are several weight limits that must be adhered to for an aircraft. First is the maximum structural weight limit that an aircraft can weigh while on the ground or in the air. The three principal structural limits are the basic weight of the aircraft, the operating or dry empty weight, and the zero fuel weight. An aircraft’s takeoff and landing performance data and the resulting operating
weight limit for a flight are based on several conditions, including: Air temperature, Wind velocity, Length of the runway, Slope of the runway, Height of any obstacles along the takeoff or landing flight path. Unlike the structural limits of the aircraft, these operating limits change with conditions such as weather and airport. Load planners must calculate these conditions at the time of takeoff and landing. In general, the higher the aircraft weight, the more runway length that is required and, obviously, this must not exceed the runway length available. When operating from relatively short runways, it is not uncommon for an aircraft operator to reduce the operating weight or payload of a flight to accommodate operating conditions. It is important, therefore, to know the structural and operating weight limits for each aircraft and for each flight. This is the first important aspect of load planning — to accurately calculate the limits and compare them to the planned and actual flight weights. The second major component to consider in the safe operation of an aircraft is the distribution of the payload (passengers, bags and cargo) and fuel. A datum point called center of gravity balances an aircraft. Manufacturers design aircraft so that when adding fuel and payload to the aircraft in the proper manner, it will be within balance. In other words, the aircraft will not tip forward or aft when loaded with payload and fuel. Balance refers to the location of the center of gravity along the longitudinal axis. In loading an aircraft, the center of gravity must be within the permissible range and remain so throughout the flight to ensure stability and maneuverability. The airplane’s center of gravity is the precise point on the aircraft where all weight is theoretically concentrated or balanced. You can balance a model airplane on your finger to locate the center of gravity. The exact weight and location of each variable item on the aircraft, such as the tail, wings, doors and windows along with their resulting center of gravity, is critical to the aircraft’s performance characteristics and stability. Improperly loaded aircraft with a center of gravity outside the acceptable range can cause damage to the aircraft on the ground or instability issues when in the air. This could potentially lead to a major mishap. For this reason, it is extremely important to load aircraft within the acceptable center of gravity limits as determined by aircraft
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manufacturers and airline engineering departments. Aircraft weight decreases with fuel consumption while en route. The distribution of weight also changes and therefore the center of gravity changes. The load planner must take this into account and calculate the weight and balance not only for the beginning of the flight but also for the time in flight and the landing. Finally, for an aircraft and flight there is an ideal center of gravity that produces the optimum attitude for an aircraft in flight to achieve a greater lift capability for the wings and reduce the drag effect. The closer the load planner can plan the load on the aircraft to include fuel, passengers, baggage and cargo to achieve this ideal position, the more efficient the flight will be in reducing fuel consumption. Less drag and more lift reduce the effort of the engines and fuel burn.
For an airline, the placement of the aircraft load and the determination of aircraft weights and center of gravity location is the responsibility of the load planner. To arrive at the most-effective and safe aircraft load plan, the load planner must coordinate with: The flight crew, Dispatchers, Fuelers, Cargo agents, Check-in agents, Ramp personnel. Load planning is the detailed process of gathering data on items to be loaded on the aircraft and calculating the load plan. It is calculated based on dry operating weight (without fuel). Booked passengers, estimated bags, mail and cargo for a particular flight segment are included in the calculation. An aircraft is in balance before any fuel, cargo, passengers, bags or crewmembers are loaded. When adding fuel, passengers and cargo, aircraft load planners must monitor balance and structural weight limits to ensure the limits are not exceeded. In addition to the safety factor, an airline can load an aircraft for a flight to improve its operational efficiency and lower its operating costs. It can also load passengers’ bags strategically so they are the first items off loaded at the arrival airport. This improves the speed of delivery to passengers or to their connecting flights. Improved baggage delivery times leads to better customer service and potential for increased revenue. The load planner can prepare a load plan that has a more aft center of gravity that helps reduce the drag effect and improves
the fuel burn of a flight. Saving fuel is naturally a major goal of airlines in their cost-reduction efforts. Load planning and weight and balance calculations have improved exponentially with the introduction of automated systems. They calculate a flight’s performance data that determines maximum weights based on weather and runway conditions. Being able to dynamically calculate performance data has enabled load planners to optimize the payload potential of a flight based on the aircraft type, field conditions and performance data. Another key advantage to an automated system is the interface between the load planning calculations and the planned and actual passenger counts for a given flight. The number of passengers on a flight is the most flexible component of the flight. Accurate forecasting of the number of passengers by the load planning system is key to determining the amount of fuel and cargo an aircraft can carry on a particular flight segment. Working together, the passenger checkin and load planning solutions form a departure control system (DCS). The optimum DCS provides a tight link between the two systems to better forecast and calculate the flight weights and aircraft balance based on passenger seating distribution. An additional advantage of automated systems is the increase in resource productivity. The automated solution must provide a consistent, accurate and easy way to perform required weight-and-balance tasks for multiple flights simultaneously, thus increasing productivity. The number of flights a load planner can work has increased with automation versus the older, manual methods. The time to complete a load plan has decreased, and the load planner can now spend more time on more complex flights that may require more finite load planning. Graphical displays provide information about: Planned and required fuel; Maximum planning weights and performance weight limits; Pertinent data for each aircraft fuel tank; Current weight-and-balance status of the zero fuel, takeoff, landing and ramp limits of selected aircraft. The system identifies special loads and dangerous goods. Alerts display if the balance is out of limits. Improving an airline’s load planning functions while increasing profitability is an ongoing process. In doing so, it can strengthen its entire operations, increase integration and reduce fuel, all while maximizing payload.
Load planning systems automate the process of load control and provide a consistent, accurate and straightforward means of performing required weight and balance tasks. These systems, installed locally or hosted, provide user-friendly graphical interfaces and online help. They can be deployed in centralized (system operations control center) or distributed load planning (airport) environments. Included in these systems is a full range of features, including: Load planning management tools, Calculation of maximum and actual structural weight limits (zero fuel weight, takeoff weight and landing weight) for each flight section scheduled, Adherence to IATA and industry standards and aircraft design specifications. In some of these solutions, the system graphically displays the ideal center of gravity for the flight. The load planner can also view an illustrated representation of the current weight and balance status of the zero fuel, take-off, landing and ramp limits in the selected aircraft. Harnessing the forces of aerodynamics to achieve the optimum results during a flight has been a goal of airlines since the early days of powered aircraft. These forces have not changed, but aircraft have evolved in design, style, power, speed, weight and size. Automated systems continue to evolve to help airlines and load planners prepare more efficient and cost-effective load plans using more graphics to help visualize flight data and limits. While the forces will never change, the ability to manage them continues to improve significantly. a
Dana Knight is a solution director and Dave Roberts is senior principal in airline and flight operations strategic planning for Sabre Airline Solutions ®. They can be contacted at email@example.com and firstname.lastname@example.org.
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I Modernization A NextGen Update
While the Next Generation Air Transportation System progresses slowly, big plans are underway to secure a better ATC environment.
By Jon Hedblom | Ascend Contributor
t’s no surprise that programs as complex and impactful as the U.S. Federal Aviation Administration’s NextGen air transportation system don’t move quickly or smoothly. Today, we often focus on what is happening month-to-month, day-to-day and minute-to-minute. So it’s no revelation that we lose track of programs that won’t be fully implemented for 10 years. But these programs are going to impact our industry in a significant manner. Therefore, it’s important to remain updated and informed on the progress and the issues associated with the programs. The focus on NextGen during the past year has been on determining which companies would be awarded NextGen contracts and continuing to focus on the mid-term (2018) implementation plan. Last year, the FAA awarded umbrella contracts totaling more than US$6 billion to demonstrate the commitment of the U.S. government to the NextGen initiative. The contracts were awarded under an umbrella portfolio called System Engineering 2020 (SE-2020). SE-2020 has a ceiling of US$6.5 billion covering 10 years, making it the largest set of awards in the FAA’s history. Companies with the best and brightest aviation and systems engineering experts were awarded the contracts. The NextGen program cannot be accomplished solely by the government. Rather, it needs to be a collaborative effort between government and the aviation industry. This is required to successfully join emerging technologies with new policies and procedures into operational reality. Several companies were awarded SE-2020 contracts.
Boeing was awarded up to US$1.7 billion. It will focus on: Air traffic management modeling and simulation, Integration of ground and airborne technologies, Operations for all vehicle types (commercial and military aircraft, general aviation, unmanned aerial systems, and rotorcraft). Boeing will perform work to demonstrate NextGen procedures in real time on a large scale within the current air traffic system.
General Dynamics was awarded up to US$1.2 billion. It will perform mission-analysis support in areas such as: Air traffic management automation, Airplane design and analysis, Avionics systems operations and maintenance, Cost-benefit analysis, National Airspace System security, Large-scale demonstrations and NAS airtraffic facility certification. The company will provide systems integration, development and operations expertise, modeling and simulation, and ground and air-based information and communications systems upgrades.
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ITT Corp. was awarded up to US$1.4 billion. It will conduct leading-edge concept development work across all dimensions of air traffic control including: Ground systems, Avionics, Aircraft equipage, Air traffic control rules and procedures, Human factors, Safety and security, Environmental, Safety and security standards.
Metron Aviation was awarded US$1.15 billion. The work performed by Metron Aviation will complement the work of Boeing, General Dynamics and ITT under their SE-2020 contracts. The collective organizations will conduct large-scale demonstrations to see how NextGen concepts, procedures and technologies integrate into the current system.
Booz Allen Hamilton
Booz Allen Hamilton was awarded US$700 million. It will evaluate emerging procedures and technologies and perform systems engineering to determine the best way to deploy NextGen initiatives on a wide scale. It plans to bring to the program a broad range of: Systems engineering; Investment and business-case analysis; Planning; Forecasting; Business, financial and information management support services.
CSSI was awarded US$280 million. CSSI and Flatirons Solutions will provide similar services as Booz Allen Hamilton. FAA Administrator Randy Babbitt voiced his support of the industry participation in the program. “Partnership is absolutely critical to our success in NextGen,” he said. “With these [contract] awards, we’re partnering with some of the most qualified companies in the aviation community.” Work performed under the SE-2020 umbrella will complement NextGen programs that are already in full deployment such as Automatic Dependent Surveillance Broadcast (ADS-B). Satellite-based system controllers use ADS-B to monitor and separate aircraft in the skies over certain parts of the country. It will be deployed nationwide in 2013. Companies awarded contracts under SE-2020 will research emerging procedures and technologies and perform systems engineering to determine the best way to deploy the NextGen initiatives on a wide scale. It is apparent that significant benefits, such as safety, performance and efficiency, can be gained through the implementation of NextGen. In the area of efficiency, performance-based navigation (PBN) operations will bring “green” efficiencies to the overall system. This is achieved by permitting more direct routing and closer spacing 28 ascend
ATC Progress The FAA awarded umbrella contracts of more than US$6 billion to show the U.S. government’s devotion to the NextGen program.
between aircraft and more optimized landing and take-off paths. According to experts who gathered at a recent global PBN summit, PBN objectives include: A 3 percent to 10 percent increase in airport capacity, A 10 percent reduction in delays, 8 percent to 10 percent reduction in fuel burn, Up to a 30 percent decrease in overall noise patterns. These efficiencies should spill over into the area of airport planning and capacity management, according to Dan Elwell, former assistant FAA administrator and current vice president of civil aviation for the Aerospace Industries Association. “The implementation of more precise flight operations should reduce the need to continue to add costly airport capacity,” he said. However, for that to occur, aircraft operators must be ready and willing to equip their aircraft with the new, certified avionics necessary to realize the planned benefits. The FAA and operators understand the importance of having NextGen equipment on the aircraft to reap the desired benefits. Herein lies one of the many conundrums that currently exist within the NextGen implementation plan. The FAA maintains that the 2009 governing principles for accelerating NextGen equipage remain in effect. However, there is no defined direct government assistance coming to the operators, and business case development is in its infancy. One of these principles that Babbitt continues
to stress is the concept of “best equipped, best served.” This concept is in place to encourage early adoption of the equipment to support NextGen by incentivizing those aircraft with priority in the NAS. The best-equipped aircraft will receive priority routing and handling by FAA air traffic controllers. How this will work given the mix of equipped and non-equipped aircraft, especially in the highest traffic areas, is still a work in progress. How well the incentives are working is questionable at this point, but the FAA remains steadfast in support of it. The FAA has even recently encouraged the airline community to invest through some unique financing methods. “We are working very hard to come up with ideas to really speed up the implementation of NextGen,” said John L. Mica, the new U.S. House of Representatives aviation subcommittee chairman. He said the House is considering “loan guarantees and other ways” to help airlines finance equipage in the latest version of FAA reauthorization legislation under development. In addition, the FAA recently announced it would spend US$4.2 million to equip 35 JetBlue aircraft with certain onboard equipment. This is part of a program designed to convince other carriers that day-to-day operational savings justify such investments. Also, an investment group led by ITT Corp. has developed a novel funding mechanism aimed at supporting airlines in buying and installing NextGen avionics beginning next year. The funding mechanism, involving a mix of commercial borrowing and private equity in excess of US$1 billion, would finance new avionics for up to 5,600 Part 121 aircraft, the majority of the United States fleet.
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The equipment would be leased to air carriers. Repayments would be based on the FAA reaching agreed milestones for supporting ground infrastructure. The commercial financing solution, in the works for more than a year, comes as other options are being discussed to fund NextGen equipage, mainly involving federal dollars. The Aerospace Industries Association has proposed a “Cash for Carbon” program that would see government grants or government-backed loans issued in exchange for a commitment by airlines to achieve carbon-neutral growth from 2020 onward. The business-case generation will not be straightforward. It will initially require several assumptions to be made as well as having the systems engineering component firm up requirements. Simulations and human-in-the-loop experiments will be necessary to build sufficient business cases for operators to invest in the necessary upgrades. In addition, solutions providers will need to modify their current flight planning applications to take into account new parameters. Solution providers, such as Sabre Airline Solutions® , with an extensive solutions portfolio and knowledge of the industry can benefit airline operators by using a combination of current solutions along with new algorithms associated with NextGen to: Estimate optimal flight plans by user class (major airline, regional airline, business general aviation), Compute optimal flight plans for new bestequipped, best-served scenarios (such as unconstrained flight plans), Visualize best-equipped, best-served benefits mechanisms using Sabre® AirCentre™ Flight Explorer,
Provide data access for modeling and analysis. The FAA Office of Inspector General noted in a report late last year that FAA’s policy challenges include adopting the best-equipped, best-served policy. The FAA currently requires aircraft to be cleared for landing on a first-come, first-served basis regardless of equipage. The best-equipped, best-served policy would give priority to users equipped with new systems, which would encourage airspace users to equip their aircraft with advanced avionics and thereby advance NextGen. Extensive analyses will determine if the policy can be safely implemented. This would include addressing concerns about mixed equipage as aircraft transition to the NextGen system. In addition, solution providers need to work in tandem with airlines and the NextGen program to ensure legacy flight planning applications are updated with new parameters and algorithms. Once the aircraft completes the optimized flight profile, the airport and ground handling support must be linked into the ground-based communications systems to complete the full cycle of efficiency. Full benefits of optimizing flight profiles cannot be achieved if the same efficiencies are not planned for and implemented in the cockpit and airline operations control centers. The most efficient, bestplanned ATC system will not achieve the stated objectives if the system breaks down once the aircraft lands and cannot get to the gate and offload passengers efficiently. A holistic approach will require that airline operations centers are upgraded. Solutions providers will need to be involved in the planning and implementation of the NextGen program. With the awarding of the umbrella contracts in 2010, the industry should
begin to see detailed development and implementation plans from the companies and the FAA during the next few months. This activity is critical to the goal of keeping the overall mid-term implementation plan on track for the benefits expected by 2018. Key providers and officials continue to worry that the programs will bog down due to a lack of integration among the programs and the FAA leadership. All of this activity is further clouded by the fact that the leadership in the U.S. Congress has been passed from long-time committee chairman Jim Oberstar to John Mica. Finding a clear path forward for the operators and their solutions providers remains a difficult but necessary task to support the future generation of global air traffic systems and to realize the savings in dollars, air quality and time that NextGen offers. a
Jon Hedblom is partner for government sales and business development for Sabre Airline Solutions. He can be contacted at email@example.com.
+count it up 43,300+
The approximate combined number
The amount of roses Lufthansa Cargo
The percentage of cancelled flights
of daily departures by oneworld,
transported for delivery on Feb. 14,
in 2010 by U.S. carrier Hawaiian
SkyTeam and Star alliance members.
equivalent to 34 million roses or 14
Airlines. The carrier held the lowest
Members for the three global
fully booked MD-11Fs.
percentage of canceled flights for the
alliances carry approximately 1.4
year, followed by Frontier Airlines
billion passengers a year.
with 0.6 percent and Alaska Airlines with 0.8 percent, according to the U.S. Department of Transportation’s Bureau of Transportation Statistics.
Merchandising Evolution Photos: Shutterstock
Airlines can help ensure business travelers embrace ancillary products As the industry embraces the era of ancillaries, technology keeps pace, delivering the best of both worlds to help airlines and corporate travel programs achieve their respective goals. By Shelly Terry | Ascend Contributor
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s airlines continue to develop and explore new ways to cater to business travelers and build customer loyalty through stellar service and product offerings, they could be overlooking one of the most important things corporations and business travelers crave: simplicity and transparency in airline shopping. Airlines are being innovative in attempts to grow and create new revenue streams with unbundled pricing models and a renewed emphasis on merchandising. But there are critical behind-the-scenes elements to effectively serving business travelers that some airlines may not have considered. Agencies need to help corporations effectively manage travel budgets. Doing so is best achieved through efficient processes around shopping, booking, fulfillment, itinerary management and reporting. Corporations need to apply travel policies to help maintain budgets and ensure the safety of employees. They must have access to complete, transparent flight information to help keep business travel expenses manageable and viewed by executives as worth the costs. Technology companies are eager to make it all happen and keep everyone happy. The reality … it can be done. As complex as merchandising can be to effectively execute in your daily operations, corporations have similar concerns.
Here are some questions to consider when thinking about merchandising and its implications for corporate travel programs.
Is Airline Merchandising New For Corporations?
Merchandising is top of mind today, but it’s not really new. Of course, corporations want to know how to integrate new options into their travel programs while still tracking and controlling purchase behavior. And they want data in hand to provide a complete view of travel spend for program governance and preferred airline performance tracking. Airline merchandising has existed for many years in the form of corporate negotiated fares, bundled fares, differential pricing for non-stop versus connecting service, bulk fares, different cabin classes and more. The ancillary approach represents a new layer of fare add-ons in a model that is already built to sustain a complex marketing mix. With the right technology, airlines can market and sell their products to millions of travelers while corporations can offer ancillaries within the existing framework of their travel program, helping them stay on budget.
Can Technology Support It?
Technology to support merchandising within the corporate marketplace has been around for many years. It has kept pace and evolved with the
Corporate Travelers Nearly 60 percent of all travel transactions are made by business travelers.
needs of airlines, agencies and corporate travel programs. Travel distribution technology has historically led the way in enabling airlines to connect to a wide reach of consumers. Global distribution systems connect directly to airlines, facilitating millions of interactive selling capabilities on a daily basis such as real-time availability access and interactive seat maps. For example, XML connectivity alone drives 160 million transactions a day in the Sabre® global distribution system. This volume and reach includes those who book nearly 60 percent of all travel transactions — corporate travelers. Significant investments are being made to ensure airlines are able to broadly, rapidly and efficiently distribute ancillaries to this high-yield customer base, utilizing new industry technical standards through ATPCO, ARC and IATA.
Do Industry Technology Standards Preclude Airline Differentiation?
For airlines, technology standards allow them to quickly implement new products and services in all sales channels to help differentiate their offerings and generate additional revenue. For business travelers, technology standards allow disparate systems to communicate and present information side-by-side in an efficient, transparent manner to help them make informed decisions. When the dialogue takes place about industry standards, it’s not about standardizing product. It’s about standardizing the technology that provides airline product information to travel agencies, corporations and consumers.
Is Merchandising Just About PostBooking?
Corporate buyers need transparent product information and pricing before booking. Travelers
want to make informed decisions, agencies want to provide optimum service and value, and corporations want to apply policy. And corporations like it to take place during the shopping process. Post-booking add-ons lead to surprises en route and purchases corporations can’t track, report on or build into company travel policy.
Do GDSs, Agencies And Corporations Support It?
Change can appear painful and costly at first, but when taking a closer look, it’s understandable that airlines want to compete on product. GDSs and agencies are in the business of supporting airlines. A healthy airline industry benefits all the travel industry constituents, including agencies and corporations. It’s the GDSs’ role and the basis for the functionality they provide to support airlines in efficiently distributing their full product line to the broadest range of buyers possible. The GDSs for years have been leveraging technology to facilitate efficient distribution of the complete range of airline products in the corporate market. The model is already proven, and if the technology is in place and costs don’t rise, agencies will embrace it.
The Corporate Travel Buyer
Airlines understandably seek to control costs and grow revenues. Exploring the ancillary model with unbundled pricing, product differentiation and add-on features is one way. Another way is to consider the economics surrounding how product is distributed and channeled to corporations. “On average, for a major network carrier, twothirds of the airline’s revenue is realized through indirect channels including traditional travel agencies and online distributors,” said David Gross,
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senior vice president of airline distribution for Sabre Travel Network ®. Indirect channels help provide airline products to the broadest consumer base possible worldwide. And when talking about the broad consumer base, 60 percent of it is business travelers who provide significantly higher yields, resulting in even higher ROI on distribution costs. Corporations need aggregated content (the majority of airlines in one channel) available through an efficient shopping process that enables complete visibility into their travel spend. The features included in corporate booking tools such as GetThere ® are especially relevant to corporate buyers. These systems are built specifically to support business travel policy, with features not found on disparate, direct airline sites. Consider just a few examples: Aggregated unused ticket information, Corporate policy and preference icons, Travel arranger user portals for executive assistants and administrators responsible for multiple business travelers, Customer profiles and complex itineraries, Account code validation fields.
How is it done today? While industry standards were in development, airlines already had the ability to distribute branded fares through the GDS via unique functionality designed by Sabre Travel Network. With GDS technology, agents can see features attributable to bundled fares such as: Premium cabin and service; Refund rules; Change fees or restrictions; Other purchase features and requirements such as bundled seats, baggage and frequent flyer miles. These fares and attributes are available in the corporate environment via an online booking tool so companies can integrate the fare features into
travel policy and travel management workflow. When it comes to an unbundled merchandising approach, the GDS has already implemented payfor-seats products. Airlines can promote premium seat products and charges, and shoppers can purchase. For example, United Airlines’ Economy Plus seats are accessible to travel agents and corporations using the Sabre GDS and GetThere online booking tool. “United has been very thoughtful about its Economy Plus strategy, and it understands the value the Sabre GDS provides,” said Suzanne Neufang, general manager of GetThere. “By offering its Economy Plus seats directly to corporations, we believe that United will continue to better serve its customers and see an increase in Economy Plus sales.” United Airlines intends to leverage the technology to boost sales through Economy Plus. “Three out of four customers who purchase Economy Plus say they will do so again, and we are pleased to build upon our current capabilities in the Sabre GDS and make these popular seats available to even more customers through GetThere,” said Robert McDowell, managing director of sales and distribution for United. “Extending this service agreement to our corporate customers will provide more options for business travelers to customize their trips.”
Merchandising Today And Tomorrow
With the strides GDSs and technology companies have already made in a non-standard, customized-by-customer merchandising world, imagine what could be accomplished when the industry comes together to adopt existing technology standards. “Again, we’re talking about technology standards, not airline product standards,” said Gross. “Technology standards enable broad and rapid deployment of new merchandising
Transparency During the shopping phase, prior to booking, corporate buyers want transparent product information and pricing.
offers, growing revenue for airlines and maintaining efficiencies for agencies and corporations. Appropriately developed and deployed, these standards lay the foundation for virtually limitless product differentiation — exactly what airlines are seeking.” The current fare filing system facilitated via the Airline Tariff Publishing Company (ATPCO) enables airlines to push both public and private fares to GDS shopping engines used by agencies and corporate booking tools around the world. Hundreds of millions of fares are searched and sorted through in a matter of seconds to deliver product responses to corporate travel shoppers that align with corporate policy. Additionally, ATPCO recently implemented an optional services category, the OC field, enabling airlines to promote à la carte offerings in all sales channels to gain new sources of revenue. The ability to use this new ancillary fare filing capability ensures travel booking data is integrated into agency and corporate workflows. It provides vast differentiation opportunities for airlines to offer customized products. Consider that ATPCO supports nine frequent flyer tiers and 130 currently defined ancillary categories. The custom merchandising scenarios are virtually boundless. Airlines can use any number and combination of the 130 ancillary categories across multiple frequent flyer tiers. This equates to billions upon billions of differentiated end products — more than the number of people on the planet. This means current technology standards can support the ultimate custom merchandising scenario — granular, one-to-one marketing to the individual traveler. Collectively, it appears the corporate travel industry can and will support new airline merchandising initiatives that add value and are effectively integrated into the corporate procurement process. Industry players including agencies and corporations seek options as well as transparency and efficiency in the shopping and buying process. The marketplace will decide which airline merchandising initiatives and product offerings are the most successful. There are solutions at hand that some technology companies aim to provide without additional fees. Sabre Travel Network has made it clear it will distribute ancillaries across its user base, using the industry standards, at no additional cost. Airlines can differentiate and grow revenue, and agencies, corporations and consumers can provide and receive great service and value when travel shopping via the distribution channel they choose. a
Shelly Terry is senior director of airline merchandising for Sabre Travel Network. She can be contacted at firstname.lastname@example.org.
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BETTING THE COMPANY Aircraft manufacturers bet their success on two flagship products During the halcyon days prior to the global financial crisis, both Airbus and Boeing made massive investments in the development of their new flagship products.
By Kay Denton I Ascend Contributor
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igh profile, widely anticipated launches of new aircraft attract attention. Every flaw and delay is subject to media commentary and scrutiny. This begs a key question, “Are the start-up costs and risks of developing new-generation aircraft so great that a manufacturer has to bet the company on the success of its delivery?” In the days of high passenger-demand growth — 2005 through 2007 — airlines around the world ordered more than 6,500 aircraft. That included more than 200 Airbus A380s and more than 750 Boeing 787s, even though these two aircraft had never flown a single commercial flight. Then, however, the global financial crisis prompted airlines to rethink capacity decisions. Manufacturing defects coupled with production delays gave these airlines the excuse to blame Airbus and Boeing for their continued financial woes. Both manufacturers have paid massive penalties on the two most innovative and majestic aircraft to be conceived in recent history. The A380 and B787 aircraft have experienced serious delays. From this, Airbus was the first to pay large penalties for manufacturing defects and its failure to deliver. The A380 entered into service with Singapore Airlines in October 2007 after a delay of more than two years due to production issues. Since then, it has been delivered to various customers including Air France, Emirates, Lufthansa and Qantas Airways, often to operate high-profile routes. In the case of Emirates, it has proven hugely popular with customers, resulting in consistently high load factors. Customers seem keen to fly on an aircraft that offers spacious seats and aisles as well as a smooth journey. Air France similarly flies the A380 on prestigious routes to New York, Tokyo and Johannesburg. The carrier will serve Beijing, Mexico City and Washington Dulles, following upcoming deliveries of the super jet. The downside to using the A380 for high-profile services occurs when there is an aircraft out of service without an A380 spare as demand exceeds the capacity of replacement aircraft. The A380 capacity is almost double that of another aircraft. In November, following an uncontained engine failure, Qantas Airways’ A380 fleet was grounded. Its entire network was fraught with chaos while trying to provide sufficient capacity in lieu of the super jet. It took a lot of time to reaccommodate displaced passengers. Qantas only started reemploying its A380 on the Los Angeles route on Jan. 16, while the London route recommenced in November. The airline received a substantial
Airbus Delivers Despite lengthy delays, the Airbus A380 has been delivered to launch customer Singapore Airlines along with several other carriers around the world.
amount of criticism for passenger displacement during the holiday season. Airbus invested between US$15 billion and US$20 billion since 1991 to develop the A380. The manufacturer’s aim when developing this model was initially to build an ultra-high-capacity airliner and challenge Boeing’s dominance of the market. One could argue that it has achieved both of these objectives in providing the largest capacity carrier ever as well as increasing its market share and decreasing that of Boeing’s. In 2009, Airbus achieved 54 percent of market share in aircraft that have more than 100 seats. Nonetheless, its new-found leadership in this sector has come with substantial cost. The A380 is a high-profile, desirable flagship for the Airbus fleet. However, the complexity of manufacturing has led to delays that have cost the Toulouse, France-based company an untold but very large amount of profits paid out to airlines in penalties for late delivery. In January, Airbus announced the biggest sale in aviation history when Indian airline IndiGo placed an order for 180 planes (30 A320 “classics” and 150 A320-neos). Such an order early in the year gives a huge boost to the company; however, none of these orders are for the A380. “It’s definitely an attractive flagship for airlines, but it will never be the mainstay of anyone’s fleet,” said Richard Aboulafia, vice president of U.S.-based Teal Group. This prompts the question, “Should Airbus have spent less money investing in the A380 and more funds in aircraft such as the A320-neo?” It has the ability to be a best
seller and a workhorse aircraft for airlines across the globe. Launch customer ANA planned to unveil the Boeing 787 in September 2009. However, delivery delays caused a setback until the third quarter 2010. But before delivery could occur, there was a fire onboard a test flight in November 2010, which has pushed back delivery to the third quarter. ANA has ordered 55 B787s for operation on both long-haul and domestic flights. The airline plans to start operating the first B787 within one week of receipt. “The move into commercial service takes a very short time,” said ANA President and Chief Executive Officer Shinichiro Ito. “It could just be one week from the delivery.” Because of long delivery delays, ANA seeks compensation from Boeing despite acknowledging that this is a regular occurrence in the industry between the airline and the manufacturer. Ito believes that once the aircraft arrives it will be worth it, provided Boeing delivers what it has promised. Other carriers with orders for the B787 include Ethiopian Airlines, JAL, Kenya Airways, Korean Air and Qatar Airways. The aircraft has more pre-production orders than any new aircraft. The aircraft model should help transform, develop and grow the airlines’ international operations. Ethiopian was set to be the launch customer for the B787 for Africa. Despite two years of delays, the carrier also believes the outcome will be worth the wait. However, the carrier has voiced concerns about the handling of the delays. “Unfortunately, Boeing is not run by commercial people,” said Akbar Al Bakar, CEO
of Qatar Airways. “Boeing is run by bean counters and lawyers. We have some serious issues with them, and if they do not play ball with us, they will be in for a serious surprise.” Despite these concerns, as late as last December, Al Bakar maintained his confidence in Boeing in spite of his disappointment by the delays. As it looks like Boeing may now delay the delivery of the first B787 for production use until the third quarter there will undoubtedly be substantial penalties owed to its customers. Penalties certainly impact manufacturers’ bottom lines; however, airlines are not able to easily cancel orders. They typically must pay about 40 percent of the list price of an aircraft in pre-delivery payments. These payments are paid well in advance of the aircraft being delivered and are forfeited by the airline if the order is cancelled. Additionally, the payments acquire inflation costs. So, as the economy recovers, even airlines that have made orders are already seeing the cost of their aircraft increase in pace with inflation. The increases in aircraft costs will undoubtedly offset some of the penalties. Because there are only two main suppliers of wide-body aircraft in the industry, it is not a buyer’s market with unlimited choice. So airlines experiencing delays can only go to the other competitor to secure a better deal. In doing so, they might experience a similar delay for a flagship product. While Airbus and Boeing are the only viable options for wide-body aircraft, there will be fewer risks associated with these delays and manufacturing defects for suppliers. Regardless of these penalties and the potential loss of reputation, it appears that the introduction of these two innovative aircraft were good decisions by the manufacturers despite the massive risks. First, airlines and passengers have short memories. Delivery difficulties were soon forgotten when the A380 was finally delivered. History will undoubtedly repeat itself once the B787 goes into operation. Second, critics aren’t always right. They thought the Boeing 747 would be short lived. They believed production would cease after 400 aircraft. Despite skepticism, it exceeded the production of 1,000 aircraft in 1993. Today, it remains a popular aircraft. The Boeing 737, with production in excess of 6,600 aircraft and more than 2,000 still to be delivered, is regarded the most successful commercial airplane. These different examples show that flagship products such as the A380 and the B787 have a good chance for success even if there are difficulties early in their introduction. The philosophies of the two major wide-body aircraft manufacturers differ
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ANA Compensation Dreamliner launch customer ANA seeks compensation after extended delivery delays.
significantly with reference to their flagship developments. Airbus sought to focus on specific highdensity routes where airport space and slots are constrained. It wanted a large aircraft that could provide unprecedented lift and low costs per seat to service these dense markets. Boeing’s outlook with the conceptualization of its B787 Dreamliner was to construct an aircraft of medium size but very long range with outstanding operating cost characteristics. (The aircraft is predominantly carbon fiber, making it much lighter.) This would support point-to-point operations between cities that are not super-high demand. Airbus maintains that its approach serves the most markets, allowing connectivity over major hubs. Boeing can point to a more tailored customer experience, resulting from an excellent travel experience between cities where the true demand is growing. Both companies are right. There is room in the marketplace for both of these aircraft for exactly the reasons intended by the manufacturers. Furthermore, these aircraft both have outstanding “green” credentials at a time when environmentally friendly transport is garnering a great deal of public attention. The A380 is green because it carries up to 800 passengers on a single flight. It is less damaging to the environment because fewer flights are necessary to carry the same amount of traffic. Meanwhile, the all-carbon-fiber construction of the B787 makes the aircraft lighter so it uses about 20 percent less fuel for flying
the same number of passengers over the same distance as a conventional aircraft. The future looks promising for both the A380 and the B787. Orders are on the increase as air traffic demand continues to rise. The A380 has 40 aircraft in operation with a further 234 on order, and the B787 has 847 orders to fulfill during the next decade. Given the unprecedented attention both aircraft have garnered and the substantial impact they will have on the industry, it is fair to say that the manufacturers can focus on more standard aircraft for the coming years because they have delivered their showpieces. Airbus and Boeing have had to bet their success on these two flagship products. However, it appears the investment is well worth the risk. Both aircraft types have sparked huge interest in the airline industry and advanced aviation into a new century of innovation. a
Kay Denton is an account manager in Europe for Sabre Airline Solutions ®. She can be contacted at email@example.com.
Identifying suitable airlines with which to partner is multifaceted. The process can be simplified with appropriate knowledge and tools.
Two Is Better Than One The “merger of equals” between Avianca and TACA substantially changed the landscape of Latin America’s aviation industry.
Growing Revenue Globally, Acting Locally Joint ventures and equity participation across alliance members require new revenue optimization business processes to maximize the “global” revenue of mergers and joint ventures as opposed to the “local” revenue of each single member.
The Sports Car Southwest Airlines’ purchase of AirTran Holdings gives the airline access to new markets that appeal to leisure and business travelers alike.
Joint Ventures, Alliances, Mergers, Acquisitions, Consolidation
SILVER LINING Identifying suitable airlines with which to partner is multifaceted. The process can be simplified with appropriate knowledge and tools. By Geoffrey Southgate | Ascend Contributor
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Through extensive research studies, Sabre Airline Solutions ® revealed several key drivers for airline mergers, including: Improves capacity utilization, Enhances coverage of sales force, Provides the opportunity to consolidate staffing levels, Improves economies of scale, Smoothes out seasonal sales trends, Offers access to new suppliers or distributors, Provides a gateway to new technology, Potentially reduces tax obligations, Streamlines maintenance.
he past decade has been challenging for the airline industry. But behind that dark cloud there’s a silver lining. It just had to be found. Many carriers around the world found it through building strong, longterm partnerships with one another. Partnerships and mergers present an opportunity for strengthening airlines’ chances of long-term survival because they boost revenue generation through network sharing. They also promote cost reductions as a result of collective buying power and economies of scale. Most airlines have reached out to other carriers to build that ideal global partnership, whether through basic interline or codeshare agreements or through a moreformal alliance relationship with one of the three global alliances. Each solution offers pros and cons, but not all partnerships are right for all airlines. For some, it’s more than aligning. It’s a question of, “Why join them if I can buy them?” That’s where a merger or megamerger comes into play. “The trend toward consolidation will become more intercontinental in the next years than is currently the case,” said Stefan Lauer, the head of Lufthansa’s subsidiary airline brands. “It remains an exciting topic.” The industry has witnessed a lot of consolidation during the past 10 years among some of the most powerful airline brands. It has experienced higher intensity in recent years with the announcement of multiple mergers … whether through investment or mutual agreement. Those most prominent being: Air France-KLM, America West-US Airways, American Airlines-TWA, Avianca-TACA, British Airways-Iberia, Delta Air Lines-Northwest, LAN-TAM, Southwest-AirTran Airways, United-Continental.
Latin Forces Airline mergers have been more popular in the United States and Europe until now with Latin America’s LAN-TAM and Avianca-TACA following suit.
While all airlines focus on many of these drivers for success, attempting to do this on their own presents significant challenges. Uniting with others helps share the risk and ultimately increases the opportunity for success. Merging with another airline is one way an airline can strengthen its market position, secure economics and have a tighter control over its destiny.
Making It Work
Shopping for an airline to buy or partner with is not an everyday occurrence. The investigative process can be lengthy and involves multiple interest groups. In addition, there are legal and government regulatory concerns to be considered. Added to these daunting hurdles is the unfortunate knowledge that history is littered with mergers or partnerships that have, for many reasons, failed. Choosing the right partner or partners is therefore paramount to the success of the merger. There are various factors to take into account in finding that right partner or potential takeover candidate before considering the overall cost and investment needed. To be successful, the ideal candidate should have a network or schedule structure that is compatible. It must possess markets with potential growth opportunities. Expanding a network is costly, so successfully leveraging existing markets that blend with an airline’s own business
philosophies, as well as quickly create revenue opportunities, are essential to the success of the merger. The prospective airline should also have similar processes and a culture that is easily adaptable to ensure a smooth transition between companies. Speed for merging seems to be a lesson from the past. The longer the merger process, the more challenges. Good examples of mergers that have moved rapidly include Delta Air LinesNorthwest, where technology, processes and logistical locations were completed well within a two-year period. United-Continental expects to complete their merger in 12 to 18 months. But for some airlines, such as US Airways, pilot contracts have dragged out for more than five years, creating many challenges for employees and the new merged company. “There have been more bad mergers than good ones,” said Gordon Bethune, former chairman and chief executive officer of Continental. “It can take decades for airlines to fully merge operations, and many mergers fail to produce the benefits that managers foresee and end up only eliminating flights and opening up opportunities to more nimble competitors.” Using a consulting service to investigate and research the possibilities of a potential partnership can help objectively look at potential candidates. An experienced consultant will delve deep to uncover historical details, trends, successes, failures
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and potential future opportunities that will provide valuable content to identify a viable candidate and help move forward with the merger. Consultants from Sabre Airline Solutions can determine how well a potential partner will logistically integrate within the established airline. They also identify possible challenges that could loom on the horizon.
While the theoretical review of what makes a merger work is important, one other area is often overlooked. How will public perception view this merger? Public perception can factor into the success — or failure — of a joint venture. In the past, the media has been critical of airlines, and businesses in general, that want to partner with their competition. Especially damaging is the idea that airlines are “buying” competitors to create an “unfair” advantage in the marketplace, which contributes to negative public sentiment. An article printed in London’s Telegraph in September harshly criticized British Airways and its merger with Iberia, claiming the merger wouldn’t work. “Mr. [British Airways CEO Willie] Walsh’s pursuit of consolidation is more aggressive than most, but his belief that it is the answer to the industry’s chronic problems is widely shared,” the article said. “The rationale goes like this: there is too much capacity. Too many airlines, too many planes. Only by making acquisitions will airlines be able to cut costs sufficiently to restore profitability. The economic slowdown has already spurred a renewed push for consolidation: as well as the BA-Iberia deal, United Airlines and Continental are joining forces in the United States. Will it work? I wouldn’t count on it.” And then there are those who believe passengers are victims of consolidation. “Perhaps the biggest losers among any merger are the die-hard loyalists — the elite frequent flyer who has sacrificed to maintain allegiance to one airline,” wrote Joel Widzer in a Forbes.com article. “Elite flyers can suffer much the same way that employees will suffer from reduced seniority. The newly merged airline will transport a larger pool of elite flyers with reduced capacity, meaning that the real prize of elite membership — first-class upgrades — will become harder to get. Essentially, any airline merger will downgrade elite membership with over capacity, upsetting the already tenuous relationship between elite frequent flyers and loyalty programs. This could lead to a loss of loyalty that airlines can ill afford.” You can count on everyone having an opinion about this industry whether good or 40 ascend
bad. But in the long term, public sentiment can affect the potential success of the proposed airline merger no matter how perfect the situation appears. This drives the need for prospective partners to proceed with caution and take all aspects of the joining businesses, including the social side, under extreme consideration.
The Perfect Partner
Mergers have multiple faces, but generally speaking, a merger is buying a controlling interest in or outright purchasing another airline or even making a mutual investment in each other. Generally, airline mergers have an amicable approach, after all this is not viewed as some hostile takeover bid, which is witnessed in other areas of the corporate world. Strategically, merging needs to make sense for both airlines to gain synergies and improved efficiencies. It must be determined, when weighing all factors, which companies make ideal partners. Networks are the bread and butter for airlines, and this is the first area they must consider when defining their merger ambitions. The Delta Air Lines-Northwest merger, and even the United-Continental merger, highlight clear, distinct network synergies that, when combined, complement each other. The new Delta Air Lines was able to add to existing trans-Pacific routes that would support its domestic operations and strengthen its European presence, rounding off a solid global network, which complements its alliance membership in SkyTeam. The United-Continental merger leverages Continental’s solid South America services and intra-Pacific/Asia connections with United’s trans-Pacific presence. Added to these market offerings, both merged airline groups have a strong alliance association that now can truly capture new market segments while effectively leveraging combined fleets, crews, maintenance operations and technologies. For mergers such as British Airways and Iberia, which have mutually formed a cooperative operation via holding company IBA, networks are closer linked or even overlap in some key markets. It was their combined international services that made for a robust business against the competition, keeping customers within a single, shared, seamless journey for longer, thus maximizing revenue opportunities for the holding company. This can also be said of Air France and KLM, which share many similarities of operation but are now strengthening both airlines through shared European services and international operations. Another factor when identifying the right partner is how to achieve seamless
processes and services. Combining two previously competing cultures presents a major challenge. As seen with British Airways-Iberia, it was made easier because both airlines operated within the oneworld alliance under common service practices. Air France and KLM also worked together as members of the SkyTeam alliance prior to merging. Thus, from the onset, they had like standards that made the merging of cultures slightly easier through common alliance standards. Merging with a partner in an alliance appears to be a theme. Perhaps this is a key ingredient for identifying a potential partner that understands and operates using similar service processes and has a complimentary network. Compatibility is the key for establishing a smooth, successful airline merger. This is especially true when addressing another critical factor … technology.
Combined airlines can and do represent better buying power, one of the main benefits of a merger. Increased buying power equals reduced costs, whether for modern aircraft or IT systems. But what happens when these joining entities have two of everything once they merge? Airline technology can be complicated given that it spans all areas across the organization — from reservations, airport check-in and aircraft support to planning and scheduling, network management, and Web services. These are all duplicated when two or more airlines come together. Essentially, there are four technology options to consider with a merger: 1. D ominant partner — The governing airline in the merger dictates or directs that its solutions and processes are the new standard. 2. B est-of-both — Both airlines collectively identify the best solutions from their existing systems and create a new platform based on the combined technology. 3. T he consultant — Industry experts work on behalf of the joining carriers to identify a proven alternative that provides a complete, fully managed, supported turnkey solution. The consultants provide a fully integrated platform that addresses all requirements of the new organization. Going forward, the new organization would utilize and leverage new technologies and integrate new processes as part of the continuing solution evolution. 4. S tandalone — The airlines operate as separate entities, running independently, but seamlessly, as partners of a joint venture. They would continue using their
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existing platforms and processes the same as many airlines do today within alliances. Once the technology direction has been set, airlines must focus on how to implement the IT strategy to benefit the new organization(s). They can opt to do it themselves through an
in-sourcing program or they can subcontract it through a number of outsourcing options.
The new airline structure may elect to build its own technology platform to suit all airlines
involved. Many airlines view this as a way to take full control of their destiny. For example, Air New Zealand has its own reservations and departure control systems that have evolved through the years, integrating with new industry requirements and taking advantage of new technologies such as the Web. Similarly, Emirates operates its own in-house solution called Mercator. Many airlines have also developed their own loyalty solutions. A downside to this approach is that technology is extremely dependent on the overall success of the airline and has to compete with other business units for valuable investment and operational dollars. It requires a capital outlay as well as dedicated resources for maintenance, upgrades, enhancements, etc., to remain modern.
Outsourcing: External Suppliers
Airlines often partner with external suppliers, such as Sabre Airline Solutions, that employ industry-experienced experts with an in-depth understanding of airlinesâ€™ needs and requirements. A substantial benefit includes being part of a large airline community. This gives member airlines an opportunity to help define the direction of the solutions they use and offers a cost-shared option for acquiring advanced technology. External suppliers offer a wider range of services and solutions, allowing an airline to better align its IT strategy with its business objectives and goals. External suppliers also offer consultative services that help identify areas for cutting costs.
Photo: American Airlines
Top Airline Brands Merging isnâ€™t new to carriers such as American Airlines and Air France, and it continues to be a popular practice among some of the most prominent airline brands.
An alliance can outsource services to an external supplier or to another member airline, the latter scenario a rare but nonetheless viable option. For example, it would work with other member carriers to determine if thereâ€™s a solution that can be utilized by another member airline or mimicked. The alliance could instigate on behalf of its members to develop a necessary solution. The airline then being a single point of contact can decide whether or not to subscribe to that solution. Additionally, the alliance could recommend services or platforms to its current or potential members to ensure consistency across the organization. Finally, the alliance could mandate services as part of an airline membership, again, to remain consistent throughout the organization.
Outsourcing: Airline To Airline
Although a rare option, there are situations where an airline outsources certain areas to another airline. In some Asian countries where the home airline owns the
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GDS or dominates the market, it can also supply the systems for other local airlines. Within a merger scenario, it’s possible for two airlines in a cooperation to swap or share solutions within the merged organization. This typically is part of the initial negotiation that occurs between airlines in the process of merging. Even for what outwardly appears to be a simple passenger-service solution, the complexity is massive. It spans many involved and adjacent service components that make up a fully rounded solution. Sabre Airline Solutions has made significant investments to help solve some of these challenges, including: The Sabre ® ASx SM Airline Services Exchange offers a state-of-the-art custom-domain rules engine, toolkit and application standards that utilize real-time data across an airline’s enterprise. This approach allows airlines to detect and proactively manage patterns in its business. This applies to both merged airlines that need superior data models to help strengthen their integration, or to airlines that need to marry their application to existing Sabre Airline Solutions technology. SabreSonic® Customer Sales & Service multi-carrier platform capabilities enable a group of airlines to operate within a common umbrella seamlessly. In doing so, they still maintain their individual identities. This solution is ideal for airlines that, for regulatory requirements, must remain independent but need to operate seamlessly within a family group or holding company.
Merging cultures of two previous competitors into a single, unified team can present numerous challenges. For instance, if a work group, such as pilots and flight crews, becomes disgruntled as a result of the joint venture, they can block merger talks and refuse to sign new contracts in protest of perceived disadvantages from the proposed merger. It took US Airways five years to resolve a pilots’ dispute over seniority following the merger with America West. Employees have considerable influence on the successful outcome of a merger. Often times, one group of employees feels like the underdog; as if the group is at a disadvantage compared to the other group. And there’s always the fear of layoffs due to duplication of resources. That type of negative environment causes anxiety and insecurity as well as puts a damper on morale. It breeds negativity, which leads to a dysfunctional environment. 42 ascend
To avoid angst among workers, leaders from all joining entities must open the lines of communication with employees. They should always be spoken to in a direct, upfront manner. Employees shouldn’t read about a major event impacting their company or hear it on the news. Executives from joining airlines should
“The trend toward consolidation will become more intercontinental in the next years than is currently the case ... It remains an exciting topic.” — Stefan Lauer, head of Lufthansa’s subsidiary brands
come together as a unified executive team when addressing employees. They should be as forthcoming as possible about the details, and they should give ample opportunities for employees to ask questions. From the onset, employees should feel like part of a winning team. That comes directly from the trust they have for management and the enthusiasm that has been displayed by managers. Next would be to get through the process quickly. Lengthy, protracted mergers lead to an increase in disgruntled employees and a loss of productivity. The need to rapidly provide a sense of unity within the new organization, again, through open conversations with clear direction, aids the creation of team spirit as the merger progresses forward. Those that acquire their competitors outright must determine the location of the new organization. For example, Delta Air Lines defined its existing headquarters in Atlanta, Georgia, as the new combined location. Similarly, United and Continental will share locations for specific functions in both Chicago and Houston, thus providing
a cultural plus for employees in both camps as well as opportunities within the new organization for enhancing careers. New opportunities for employees of the merged organization can abound. Airlines can better leverage employees from many countries to contribute to the new sales and marketing organization, thereby addressing any cultural sensitivities. If the new organization deems it best to implement a completely new technology platform that is most suitable for the combined carriers, there are opportunities to overcome cultural differences. For example, if all employees are facing retraining due to an overhaul of technology and processes, unification could be quicker and smoother, given that now everyone is equal in the new organization.
A Smooth Ride
Merging airlines is a complicated, complex process. Juggling myriad aspects can create a nightmare for prospective investors. However, those who learn from others’ mistakes as well as take advantage of industry expertise will find that joining forces can be a smoother exercise. The consulting team at Sabre Airline Solutions is prepared to fully support airlines and their goals for growth or expansion. When joining an alliance or acquiring another airline, these industry experts provide objective consultation to aid in the decision-making process throughout the engagement. They will help identify the right technology platforms that best suit the new organization and its goals, whether in house or outsourced. a
Geoffrey Southgate is a solutions manager of alliances and partnerships for Sabre Airline Solutions. He can be contacted at firstname.lastname@example.org.
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Growing Revenue Globally, Acting Locally New revenue optimization business processes maximize global revenue for airline partners Joint ventures and equity participation across alliance members require new revenue optimization business processes to maximize the “global” revenue of mergers and joint ventures as opposed to the “local” revenue of each single member.
By Alessandro Ciancimino | Ascend Contributor
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he revenue management system of each airline in an alliance, with few exceptions, maximizes the revenue of that particular airline. Therefore, an airline may reject an itinerary if the transfer price undervalues the real-time value of its seats. This is true even if the total revenue from the itinerary, across multiple carriers, is large. Thus, inventory control rules in a global alliance environment are often dictated by the local, single-airline-related, revenue-optimization procedures. Given the deficiencies of such static schemes, some airlines are considering dynamic methods including the use of the real-time opportunity costs of seats (or bid prices) as transfer prices. In this industry, there is interest in such dynamic schemes but also much uncertainty. There are certainly technical and regulatory barriers to implementation. However, another significant barrier is uncertainty over how revenue-maximizing airlines would respond and react to dynamic schemes. At times, accepting a booking on a segment is profitable for the alliance but not for the operating carrier. Therefore, procedures and a real-time proration methodology must be agreed upon. Alliance revenue optimization is questionable when alliance partners are insulated from each other and there is no joint venture in place. However, when there is equity participation among carriers or for markets operated under a joint venture agreement, global optimization becomes a must. In fact, when airlines scratch the bottom of the revenue barrel to exploit the full commercial potential of markets, leaving revenue opportunities on the table due to inadequate business processes or technology barriers is unacceptable. Though such a statement seems straightforward, its implication in the operational environments of the individual airlines is not straightforward at all. It requires a whole new set of capabilities from a technology viewpoint to enable new business processes. Airlines must understand the new set of business requirements and how technology has evolved to address them. To do this, it’s best to start from a high-level picture of how consolidation is shaping up in the airline industry. The corporate structure of airline mergers is often designed to have a “top company” (TopCo). It typically includes all corporate commercial functions of the merged entity and at least two operating subsidiaries (OpCos) that are the capacity providers of the TopCo. OpCos incorporate operations-related functions of the merged entity and often are kept as separate operating entities with, for example, different: 44 ascend
Sabre ASx Environment
Products Airline SOA Orchestration
Mash-up Container A (A-is salesforce.com)
Mash-up Container B
Application A (e.g. Revenue Management)
Application B (e.g. Revenue Integrity)
Fake Name Analyzer
Demand Forecaster Event Process and Services Repository
Application C (e.g. Airline.com)
Availability Optimizer Core Platforms Business Process Mgmt
Data Analysis Framework
Operational Systems Inventory
Ticketing, Revenue Accounting
Revenue Generation The evolution of industry consolidation, mergers and acquisitions, joint ventures, and alliances poses business challenges to airlines. Revenue management processes can address such challenges to exploit the full potential from a revenue-generation standpoint of global entities while acting locally at each individual airline level. Sabre ASx Environment can be leveraged in this respect.
Air operator certificates (AOCs), Employment contracts, Different (to some extent) IT systems. British Airways and Iberia represent a merger where the International Airlines Group (IAG) is the TopCo and British Airways and Iberia are the OpCos. The extent and the timeframe in which the IT systems of the OpCos are and will be kept distinct is still to be seen and understood. This certainly won’t be established in a short period of time and will depend on the structure of the merger. There are examples in the industry of entities that merged almost a decade ago where OpCos are still almost insulated from each others’ core IT systems. A key priority is addressing how to run the commercial function of the TopCo when the OpCos behave not just independently
from a pure operations perspective but also from an IT perspective. The same issue is valid for joint ventures where, by the nature of the agreement itself, the carriers keep their operational independence. What this means from a revenue management perspective, for example, is how to optimize the TopCo’s or joint venture’s revenue when the OpCos or the operating carriers of the joint venture operate distinct inventories through different IT systems. Optimizing revenue generation locally, for instance, performing the revenue management function independently and locally within each distinct inventory, maximizes the revenue of the OpCos individually. This, though, clearly does not represent the revenue maximization of the TopCo, which ultimately in joint ventures and mergers is the shareholders’ objective. This is a straightforward, practical example
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of the well-known difference in mathematical programming between local and global optima, where the objective function value (in this case the alliance or joint venture revenue) at the local optima is worse than or equal to the value at the global optimum. In other words, the global optimum (the TopCo revenue maximization) does not coincide with the maximization of the revenue of the OpCos independently. The same rationale about revenue management holds for mergers and joint ventures around other functions as well, such as customer service, FFPs and any customer data. All in all, the requirement that manifests itself as one of the key success factors for mergers and joint ventures is how to share, access and act upon OpCos (or joint venture carriers’) data across the board and in real time. Simply put, the new mantra for mergers and joint ventures is how to make any OpCos data available and actionable by any other OpCo in real time and at a reasonable, if not negligible, cost. In the prior revenue management example, such capability would translate into sharing bid prices in real time across OpCos or joint venture carriers. Or, to an extreme, it would make OpCos‘ inventories available to the TopCo to allow it to perform global revenue management and provide globally optimized bid prices to the OpCos. Beyond revenue management, the need is for sharing real-time data such as passenger name records, ticketing data, FFP data, etc., to overcome the barriers of OpCos operating different systems. The Sabre® ASx SM Airline Services Exchange can be leveraged in this respect. Such technology changes the paradigm for realizing real-time availability of actionable data when coming from different sources within the same organization or across different enterprises. The ASx advanced environment for applications and integration increases airlines’ business performance and agility by removing the constraints of legacy systems, associated silo processes and sub-optimal workflows. It provides technology for designing, implementing, managing and automating new processes to optimize operational effectiveness and support the introduction of differentiated services that enhance the travel experience, improve passenger loyalty and increase revenues. Legacy systems have created operational silos within airline organizations. This prevents data sharing and leads to sub-optimal processes and workflows. As a consequence, carriers are restricted by the capabilities of these systems and associated working practices. As a result, they are unable to effect strategic business change. The ASx exchange breaks down these silos by layering over existing systems to create a unified data layer and common process platform. It provides business intelligence and
business process management tools to enable sophisticated performance analysis and the design and implementation of new processes. This holistic approach liberates airlines from the constraints of legacy systems, enabling them to enhance operational effectiveness and align IT to support key business objectives and goals. Operational systems implement the standard airline processes. These include areas such as: Reservations, Ticketing, Fulfillment, Revenue management, Revenue integrity, Revenue accounting, Movements, Schedules. The ASx exchange does not replace the operational systems of OpCos. Rather, it pulls out valuable services and applications to be implemented at higher levels with a uniform software development kit and data model. This enables viewing the order as a whole as opposed to breaking it up into processes/ silos. The operational systems are integrated into the ASx architecture through the integration layer, which abstracts the systems and provides a common interface to the higher layers. There are two directions to integrate the flow of incoming data as well as actions on the operational system.
The domain layer consists of a near realtime database as well as the population and data integration logic. This layer provides a common data model for the airline industry. It is the basis for writing applications that require information derived from multiple systems. The data model is not affected by old legacy data models (such as PNRs). It provides better support for automation. The core data can be extended to higher layers by adding attributes to existing entities (dynamic attributes) and introducing new entities (dynamic entities). Thus, applications do not need to maintain their own copy of the data elements and added attributes with the benefit that the added data automatically becomes available to other applications.
events, and enables applications to subscribe to and generate new events. Data Services enable applications to get data from the domain layer in standard XML format by a variety of criteria. It also allows applications to define new entities/attributes and modify that data. Action Services provides a unified manner to execute actions on the operational system. These actions are sent to the integration layer, which executes them using system plug-ins. Other components are there to simplify writing certain classes of applications. They include: Business process management, Data analysis framework, Data viewers, Data synchronization. Business process management enables creation of multi-step rule-based applications. Each step consists of a condition and a set of actions that are executed when the condition is fulfilled. Between process steps, there exist states that allow waiting for a certain time until the next step is executed. The steps can be executed automatically or with manual intervention. BPM is event based and executed whenever the data changes. The data analysis framework provides a programming model to implement modules that analyze incoming data elements for specific situations (such as cancellations and no-shows). It also adds the result of the analysis to the data elements using dynamic attributes. The domain and core platform layers enable airlines or vendors to build components and applications in the ASx architecture. The goal is to allow extending applications by interchanging components. For example, an airline or a vendor might provide a good forecasting module that an airline would like to incorporate into its revenue management system. Airlines or vendors are free to use any technology to implement their applications, provided they can communicate with the standard Web services in the domain layer. The ASx exchange has the potential to empower commercial, planning and operational processes across different OpCos. For mergers to run global processes maintaining distinct operating environments, it’s a must have. a
Core Platform Layer
The core platform layer provides basic services to applications in the ASx environment. Applications do not directly access the database. They access data through services. The three core components include: Event Publisher generates core events as data changes, allows defining custom
Alessandro Ciancimino is general manager in Europe for Sabre Airline Solutions. He can be contacted at email@example.com.
Two Is Better Than One Avianca-TACA merger forever alters Latin America’s airline environment The “merger of equals” between Avianca and TACA substantially changed the landscape of Latin America’s aviation industry. By Lauren Lovelady | Ascend Staff
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hile much of the world’s aviation industry has struggled in recent years, the emerging Latin American airline industry has experienced above-average traffic growth. Many industry analysts and the region’s airline executives believe there is still significant growth potential, especially for carriers willing to rethink their strategies and operate proactively. As with the rest of the global market, the current trend in Latin America is toward airline consolidation. This would result in fewer, bigger and stronger carriers that are better able to withstand competitive pressures, economic downturns, volatile fuel prices and other challenges. Even airlines with successful individual brand identities, such as Avianca and TACA, are forming partnerships to capitalize on opportunities to: Obtain stronger market position, Develop geographically diversified networks, Offer increased choices and more efficient connections to passengers, Enable reinvestment in product offerings to improve customer service.
In February 2010, privately owned Colombian flag carrier Avianca formed a strategic merger with Grupo TACA, an El Salvador-based airline that has been owned by the Kriete family since 1961. Avianca holds a 67-percent stake in the partnership, while TACA has 33 percent. The new management team overseeing the
partnership draws equally from both carriers. Despite the seemingly inequitable share distribution, the partnership has been called a merger of equals. It is specified as such under the shareholder agreement governing it. “Avianca and TACA are successful brands in very distinct markets,” said Estuardo Ortiz, chief operating officer for Avianca-TACA. “Both airlines have unique strengths, and each makes an equal contribution apart from pure numbers.” TACA brings to the table international operations experience, with O&D networks across South, Central and, particularly, North America. The carrier also has expertise in the management of a multi-carrier and multi-hub business model across a number of countries. Avianca has a strong presence in Colombia and other South American markets. Its wide-body aircraft operations open the door to new passenger and cargo opportunities from San Salvador and Lima. More than operational compatibility, the carriers also share similar customer and brand strategies, including a commitment to highquality service. In addition, both airline cultures focus on talent development within their respective operations. “The talent and commitment of the people of Avianca and TACA, aligned with the same objectives and similar cultures, is a major advantage,” said Ortiz. “With these shared strengths and values, the new airline group will be able to capture synergies faster and create value sooner. “The partnership will capitalize on two of the best-known airline brands in Latin America
TACA And Avianca The new merger partners seldom compete for customers given that there is only a 1 percent overlap between their route networks.
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increased demand for air travel. It makes sense for airlines to continue to look for partnerships to capture most of the ever-growing markets.” Recent acceptance of Avianca-TACA into the Star Alliance further solidifies the partnership’s standing in Latin America. And it opens the door to myriad global opportunities through the 28-member alliance. “Becoming part of the largest and most important global alliance is a major step forward in our commitment to establish our airline as the best in the region, supported by our operational standards and exceptional service,” Ortiz said. “We will be able to offer our passengers travel alternatives to approximately 200 countries.” The carriers project a continued growth in passenger traffic resulting largely from its ability to capture new market opportunities and
Merger Of Equals While Avianca holds a 67-percent stake in the partnership with TACA, the two still consider it a merger of equals.
with world-class product offerings, strong hubs and complementary networks, as well as two uniquely entrepreneurial and service-oriented cultures with highly motivated employees.” The strategic merger, however, does not create a single airline — at least at this time. Both TACA and Avianca have strong customer bases. This makes their individual brands valuable assets that they plan to retain for the foreseeable future. Because there is only a 1 percent overlap between the two carriers’ route networks, Avianca and TACA rarely compete for the same passengers or revenues. “We are focusing on harmonizing the service levels and standards so we can deliver the exact same customer experience at both airlines,” Ortiz said. “Then, and only then, will we consider having only one brand, and it will be based on customer research and in the best interest and success of the airlines.” Instead, the focus is on the creation of synergies to build a financially strong partnership with the opportunity to generate myriad synergies and provide more stability for the approximately 12,000 employees now part of the new airline company. The merger will also generate new cost savings in the range of 2 percent to 3 percent as the two carriers renegotiate supplier contracts. A key step in the creation of uniform service standards is the simplification and upgrade of the airlines’ combined fleet of 129 aircraft. A fleet renovation process will phase out Avianca’s current Fokker aircraft and 48 ascend
replace them with newer, more efficient planes in terms of capacity and fuel consumption. “We are in the process of defining a single Airbus A320 configuration for the partnership that utilizes each airline’s best practices in terms of avionics and interiors,” Ortiz said. “This will provide us with great synergies. However, we don’t feel it’s necessary to move to a single fleet type. Instead, we are looking into an optimal combination of aircraft to serve our five-year and long-term network plans.”
Altering Latin America Aviation
The impact of the merger — the first in Latin America — reaches well beyond the two carriers’ daily operations. It significantly alters the landscape of the region’s aviation industry and creates an airline network comparable to the size and scope of some U.S. and European carriers. Together, the airlines offer more than 100 destinations throughout Latin America — the largest number of any airline. In addition, there are further opportunities for more efficient connections, increased frequencies and the expansion of services within the Americas and to Europe through Avianca-TACA’s Bogota, San Salvador, San Jose de Costa Rica and Lima hubs. “Avianca-TACA took the first step in Latin America,” Ortiz said. “And we expect to see that trend continuing as we did last year with the announcement of a merger between LAN and TAM. We operate in an emerging region with a growing economy, resulting in an
“We operate in an emerging region with a growing economy, resulting in an increased demand for air travel. It makes sense for airlines to continue to look for partnerships to capture most of the ever-growing markets.” — Estuardo Ortiz, chief operating officer, Avianca-TACA
improve service offerings rather than from drawing market share away from other Latin American carriers. While the merger provides Avianca-TACA with a competitive edge in the region, particularly if seat capacity eventually outpaces demand for travel, the focus is more on building a profitable network and stimulating economic growth. The combined airlines carry around 15.4 million passengers annually, and an effort is being made to communicate the benefits of the merger to each one. Customer reaction, Ortiz noted, has been very positive.
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“We recently entered the Peru domestic market, for example, with the objective of developing that market to reach its full potential by offering more options to passengers and therefore positively stimulating tourism and business travel within the country,” he said. “As we grow, we naturally increase employment opportunities in the countries where we operate,” Ortiz said. “Our employees benefit from the partnership’s greater geographical diversity and stronger platform for career development.”
Key To Success
Both airlines have previous experience with the acquisition and consolidation of several smaller carriers into their current business models. Even so, the strategic merger of the two Latin American carriers has not been without challenges. “Without a doubt, a multi-carrier business model has several complexities,” Ortiz said. “However, our past experiences have taught us how to manage this type of model, and we believe we are very well positioned to unite Avianca-TACA under a similar business model.” A critical component in the success of any merger, he said, is a well-designed roadmap of the implementation. For the Avianca-TACA
partnership, this includes a comprehensive threeyear synergy plan detailing specific priorities and resources. A continued focus on the base business of operating an airline is important throughout the transition as well. “The key success factor,” Ortiz emphasized, “is about people and change management. You must prioritize, focus, watch the day-to-day operations and take care of people.”
Envisioning The Future
Many aviation industry analysts and airline executives worldwide, including Ortiz, believe the industry will further consolidate as increasing numbers of carriers realize the benefits of mergers, alliances and partnerships. In the Latin America region alone, there will most likely be two or three major carriers in the years to come. In addition, revenue-sharing and joint-venture initiatives with U.S. and European carriers may soon develop in the region. This provides Latin American airlines with the benefits of partnerships without the complexities of traditional mergers and acquisitions. “Partnering two compatible airlines allows the parties to combine the best practices, the best talent, the best strategies and the best experiences
from each airline,” Ortiz said. “Growth opportunities are increased, and protection against a volatile industry is enhanced. When a merger is well executed, competitive advantages can be enormous and truly strengthen the airlines.” As for the Avianca-TACA strategic partnership, the roadmap has been developed, the journey is underway, and the destination determined. “We have a short-term focus with a long-term vision. Our vision is clear: To be the preferred Latin American airline around the world and the best place to work while generating superior value for our shareholders,” Ortiz said. “We believe we have all the elements to fulfill that vision. “We have been very successful in the past as separate airlines, but we are convinced we are more competitive and more sustainable after the merger.” a
Lauren Lovelady may be contacted at firstname.lastname@example.org
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The Sports Car Southwest Airlinesâ€™ acquisition of AirTran Airways opens new opportunities Southwest Airlinesâ€™ purchase of AirTran Holdings gives the airline access to new markets that appeal to leisure and business travelers alike.
By Mark Hess | Ascend Contributor and Lynne Bowers-Dodson | Ascend Staff
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share at Boston Logan and New York LaGuardia. Southwest expects the acquisition will generate roughly US$400 million in annual savings by 2013. “Combining with AirTran makes good business sense for Southwest; it can add 38 cities relatively quickly, and many of these new markets are on the East Coast, where Southwest has had weak coverage,” said Tom Parsons, CEO of BestFares.com. “Without this acquisition, it would take Southwest eight to 10 years to add that many new cities.”
The Maturing Maverick
From its modest beginnings, linking Houston, Dallas and San Antonio, Southwest Airlines was a maverick set on revolutionizing air travel. It was affordable and it was fun. Its freewheeling culture, which famously showcased “hostesses” wearing skimpy hot pants who kept up an exuberant banter with passengers, was in stark contrast to the buttoned up network carriers. Throughout the 1980s, Southwest remained the scrappy upstart, pioneering a new type of low-cost, low-fare, low-frills flying experience. It disproved the prevailing notion that passengers preferred service over price and stole market share from major carriers. The carrier’s “cookie-cutter” method of moving into a new city and sharply cutting fares and driving up traffic was a driving force for dropping overall fares in its new markets. The so-called “Southwest Effect” was a phenomenon studied in business schools and by the U.S. Department of Transportation. In a 1993 report, DOT observed, “The principal driving force behind dramatic
fundamental changes that have occurred and will occur in the U.S. airline industry over the next few years is the dramatic growth of low-cost Southwest Airlines.” Southwest grew organically and through acquisitions during the 1980s and 1990s. In the mid 1980s, it bought Dallas, Texas-based Muse Air. Nearly 10 years later, it acquired Salt Lake City, Utah-based Morris Air. In 2005, it purchased assets from bankrupt ATA, but in 2009 it suffered a setback when it lost a bankruptcy court-sponsored auction to buy Frontier Airlines Holdings, Inc. Undeterred, CEO Gary Kelly said the carrier was still in the market for another deal. So it’s puzzling that the AirTran Airways acquisition last fall took much of the industry by surprise. Their route structures are complementary. And of their combined 604 unique markets, only 26 are served by both, less than a 5 percent overlap. In a PBS interview, USA Today columnist and industry analyst Ben Mutzabaugh said the merger makes it apparent that Southwest plans to transform itself from a no-frills carrier into one that is more focused on business travelers. “If you are going to be a serious business travel [carrier], you have got to be in the markets like Washington Reagan National, New York La Guardia, Boston and Atlanta,” he said. “And this merger really positions them for that.” Wall Street Journal analysts observed that Southwest has hinted for some time that it wants to shed its mantle as a traditional low-cost carrier. When the merger was announced, the news agency remarked that Southwest “is planning
Photo: Southwest Airlines
uying a flashy sports car has long been held as a tell-tale sign that a man is speeding toward a mid-life crisis. The stereotypical event is triggered usually when the man realizes he wants to take a new direction in life rather than traveling down the same path. Similarly, does AirTran Airways represent the “sports car” that signals a new phase in the life of Southwest Airlines? Business experts acknowledge that at some point in the lifecycle of every business, stakeholders come to the realization that fundamental change is needed. The first course of action is coming up with a vision of where the business is headed. For Southwest Airlines, the US$1.4 billion AirTran Holding purchase last year signals that it envisions a future where extended service to new domestic and international markets will accelerate its goal to boost profits and achieve financial targets. The blockbuster deal will create the most expansive network of any low-cost carrier in the United States. It will also give the airline a chance to grab business travelers in the nation’s busiest markets. Through the merger, Southwest, which already carries more domestic flyers than any other U.S. airline, will for the first time go head-to-head with Delta Air Lines on its home turf at Atlanta’s Hartsfield-Jackson International Airport, the busiest passenger airport in the world. It will also gain access to Reagan Washington National Airport in Washington, D.C., as well as capture increased
LCCs Consolidate Southwest Airlines’ purchase of AirTran Airways forms the most expansive network of any U.S. low-cost carrier.
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Conventional management wisdom says that companies, like people, must pass through a life cycle. Blogger Donald Sull, faculty director of executive education at London Business School, describes the progression. “Start-ups begin their life in a period of rapidfire experimentation, pass into the organizational equivalent of adolescence as the company scales its business model, eventually mature into the dull reliability of middle age, and then lapse into unavoidable decline,” he said. Sull rejects the inevitability of the metaphor, pointing out that companies do not pass through lifecycles. Opportunities do. Companies can avoid mid-life crisis and decline simply by seizing opportunities. And that’s exactly what Southwest and AirTran Airways executives did last year as they read the handwriting on the recessionary wall. Both carriers recognized that a flurry of legacy consolidations, such as Delta-Northwest and Continental-United, as well as the expansion of alliances, had created behemoth competitors for low-cost carriers. That combined with rising oil prices left stand-alone, low-cost carriers particularly vulnerable. When the merger announcement came, AirTran Airways CEO Bob Fornaro stressed in a conference call with reporters that his airline had “done a lot with not much” in terms of financial resources, but that it was becoming less clear that AirTran Airways had the ability to grow and remain competitive in an industry where the size of a carrier’s route network is increasingly important. “Southwest has, relative to AirTran, vast resources,” Fornaro said. It became clear that “we could do more with Southwest resources” than AirTran Airways could do on its own. The combined airline will fly more than 100 million passengers a year out of more than 100 airports in the United States, the Caribbean and Mexico. And by creating a truly nationwide low-cost carrier, the merger will make Southwest a tougher competitor in the lucrative domestic business-travel market.
a raft of measures as it seeks to transition from a discount airline. The moves include a recently unveiled revamp of its frequent-flyer program to boost its appeal to high-value business travelers, a new reservations system, its planned US$1.4 billion takeover of discount carrier AirTran and the purchase of bigger planes.” Still, Southwest executives say they have no plans to stray too far from the essential elements that have allowed the airline to post profits for the past 37 consecutive years. “We have open seating; we have no plans to change that,” said Gary Kelly in a press release announcing the merger. “We don’t charge for bags; we have no plans to change that. We have single-class service; we have no plans to change that.”
US$1.4 billion purchase The purchase of AirTran Airways last year offers Southwest Airlines immediate access to 38 cities on the U.S. East Coast.
A merger will also open up more choices to budget-conscious leisure travelers since the Southwest Effect most likely will compel other carriers to match its low fares to virtually every corner of the country. Last September, Parsons told USA Today reporters, “America needs this now. With this deal you can now go just about anywhere in the country, and to the Caribbean and Mexico, on Southwest. All the legacy airlines will have to set their prices based on whatever Southwest does.”
The End Of An Era?
Not all industry insiders agree with Parsons’ assessment that fares will remain competitive with a new super-sized Southwest. In fact, some think the opposite is just as likely. Chief among the naysayers is blogger Carl Unger, who writes for Today in Travel. “Southwest’s costs have risen dramatically over the past 18 months, and are currently the highest among low-cost carriers,” he wrote last October. “Its costs are still well below those of United, Delta or American, but the gap is shrinking. More and more, too, Southwest seems to be morphing into a somewhat traditional network carrier. “Southwest has major hubs, especially in Baltimore, Chicago and Houston, and funnels much of its cross-country traffic through those cities. All of this — plus the fact that Southwest is eliminating a major low-cost competitor — suggests Southwest’s role in the airline industry could be on the verge of changing. Even before the merger, SmarterTravel readers were noting that
Southwest no longer seems as low-priced as it had been. Perhaps that change is already under way.” David Grossman, veteran business traveler and former airline executive, also voiced concern that the Southwest-AirTran Airways deal may have implications beyond the merger of two airlines. By agreeing to merge with Southwest, Grossman posits that AirTran Airways executives have conceded that their business as a stand-alone airline was at risk. If other low-cost carriers concur, he said in an article he wrote for USA Today, “this will likely not be the last merger or major action taken by an LCC. It could spell the end of LCCs as we know them if more consolidate, join alliances or morph into something better resembling traditional network airlines. That may not bode well for those who have enjoyed an extended spell of low airfares.” Only time will tell if Southwest Airlines’ midlife opportunity becomes a midlife crisis for a struggling low-cost carrier business model. Or perhaps the merger is added to the long list of things the carrier has done well throughout its impressive history. a
Mark Hess is manager of airline planning consulting for Sabre Airline Solutions. He can be contacted at mark.hess@ sabre.com. Lynne Bowers-Dodson can be contacted at email@example.com.
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The Game Changer History was made in the world of flight planning as Sabre Airline Solutions速 acquired Austria-based f:wz and incorporated its flight planning software and services into its enterprise operations business.
By Michael Hoppin I Ascend Contributor
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“f:wz is an outstanding company that has set new, innovative standards in cost reduction and fuel optimization within the flight planning industry.” — Steve Clampett, president of airline products and services, Sabre Airline Solutions
has the opportunity to support the combined United/Continental merger. It is impressive that a large carrier such as United has selected a small entrepreneurial company like f:wz, and now United has Sabre Airline Solutions behind it to provide a new foundation for growth as it becomes the largest airline in the world with the Continental merger.” A relatively small company of 60 employees based in Vienna, Austria, f:wz was a fairly new player to the flight planning industry, having entered the ring in 1987. It was founded
by Capt. Raimund Zopp, Capt. Gregor Resch, Peter Radler and Christoph Prinz, who were quickly considered innovation leaders. They built a strong customer base of more than 20 airlines with operations around the globe. They continued to set the standard for flight plan cost efficiency, building on the collective talents of an employee group with real-world airline experience. The benefits for airlines around the world come from combining Sabre Airline Solutions’ large customer base and the industry’s most capable and comprehensive enterprise operations portfolio of products and services with one of the industry’s premier flight planning products. As a result, airlines have access to unmatched flight planning technology in addition to Sabre Airline Solutions’ industry-leading crew management and crew services, flight operations and tracking, and airport resource planning and management products and services. The incorporation of f:wz’s technology and services into the Sabre AirCentre Enterprise Operations portfolio has been described as “game changing” by current and prospective customers alike. Several global carriers support the value of the acquisition, including:
Virgin Atlantic Airways
“Virgin Atlantic Airways considered the acquisition a very positive move for f:wz and Sabre Airline Solutions and looks forward to the ongoing support of Sabre in Virgin Atlantic Airways’ operations. We, along with
Photo: Hawaiian Airlines
n average flight planning system simply isn’t enough … not for the world’s most successful airlines. They need advanced flight planning technology to support one of the most important aspects of their business. And that’s why it was critical for Sabre Airline Solutions to embark on a large investment project to ensure airlines around the world had access to leading flight planning solutions. As part of the initiative, the technology company conducted a build-versus-buy analysis to determine the best approach to offering airlines an unmatched flight planning solution. The analysis indicated an acquisition was the best approach for the future of flight planning, and after an extensive search, f:wz presented a perfect match, offering a best-of-breed flight planning solution. In September, f:wz was acquired, and its solutions were incorporated into Sabre® AirCentre™ Enterprise Operations. Sabre Airlines Solutions will leverage the strengths that both systems bring — its previous flight planning system along with the newly added technology — and continue investing in the combined system to offer the most powerful flight planning solution available in the industry. Through the acquisition, the company now offers a “connected” data service bureau offering to provide multiple levels of support services and outsourced flight planning services. It will continue to leverage the SaaS (Software-as-a-Service) model in combination with data and flight planning services to provide a cost-effective overall technology solution to its customers. The f:wz solution has been renamed Sabre® AirCentre™ Flight Plan Manager and has a solid, forward-thinking reputation in the industry as one of the first flight planning systems to offer four-dimensional cost optimization. This means route, altitude, speed and time are all analyzed simultaneously against fixed operating and over-flight costs to produce flight plans that are less costly on a flightby-flight basis. f:wz has been successful in marketing this capability and set a new theme in the industry regarding the value of this newgeneration flight planning system. “f:wz is an outstanding company that has set new, innovative standards in cost reduction and fuel optimization within the flight planning industry,” said Steve Clampett, president of airline products and services for Sabre Airline Solutions. “We already offer airlines some of the best-in-class flight planning tools, so as we integrate f:wz’s offerings into our portfolio, we will have flight planning solutions and services that are second to none. “f:wz has established a very solid reputation in the industry as a flight planning market leader,” he said. “United Airlines selected f:wz as its mainframe replacement flight planning solution a few years ago, and now, f:wz
Strategic Move Hawaiian Airlines supports the combining of f:wz technology with Sabre Airline Solutions.
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our subsidiaries such as Virgin America, need to consider a common vendor going forward for our operational solutions.” — David Kistruck, general manager of flight operations
“The acquisition of f:wz by Sabre was a nice move and should work out well.” — Marc Kup, senior director of flight operations engineering
United is currently an f:wz customer. Based on a recent conversation with Sabre Airline Solutions, the airline is excited about the
overall value Sabre will bring to its operation with the integration of Flight Plan Manager to Sabre® AirCentre™ Flight Explorer. Sabre can now combine Flight Plan Manager with its other solutions to provide United Airlines with technology that can scale and support the largest airline in the world. Sabre Airline Solutions also received supportive comments from Air India, Atlas, Iberia and Turkish as these existing customers look forward to what Sabre and f:wz together can bring to the aviation industry. Unique features, functions and services within Flight Plan Manager include: Variable cost optimization — The tool’s distinctive route-selection algorithms are
Overwhelming Support United Airlines and Virgin Atlantic Airways both view the acquisition of f:wz by Sabre Airline Solutions to be a positive move for the airline industry.
able to resolve all operational cost factors simultaneously to calculate an optimized four-dimensional flight path. All cost factors are taken into account by the algorithms to resolve the lowest-cost arrival time that meets specific mission requirements at the lowest possible fuel burn. Multi-routing comparison — The system provides functionality that allows for multiple routing permutations and combinations to be calculated for any flight using upper-wind data and aircraft performance. The optimal vertical and horizontal profile is determined on a flight-by-flight basis, taking advantage of airways and direct routing, accounting for FIR fee impact, and complying with restrictions and FAR or JAR OPS 1.255 requirements and customer policy. Results are ranked by cost, allowing decision makers to choose the lowest-cost options when solving complex operational flight planning problems. Delay cost management — These capabilities integrate a cost model for flight delays as a non-linear time-cost input to the flight profile optimizer, enabling an airline analyst to apply complete mission management to all flight operations. Auto optimization — This feature allows the system to be set to control all flight plan calculations and to run them automatically based on time or other event triggers. It significantly reduces dispatcher workload in the preparation of flight plan calculations. NOTAM management — This is available as a stand-alone NOTAM management system or as an integrated component. This service provides for the management and distribution of all state system (Class I) NOTAMs plus tools for creating and publishing internal company NOTAMs. Acquiring f:wz is much more than just bringing in another solution to fill a gap. “The acquisition is game changing because it takes a world-class software tool and places it inside an organization that has adopted world-class delivery and support models,” said Greg Gilchrist, senior vice president of global sales for Sabre Airline Solutions. “It catapults our Sabre AirCentre conversations into large SOC projects that span many of the key business functions across an airline’s operations.” a
Michael Hoppin is a solutions manager for Sabre Airline Solutions. He can be contacted at firstname.lastname@example.org.
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Letâ€™s Talk ... Anytime Photos: Shutterstock
Sabre Airline Solutions communicates with customers Finding every means possible to communicate with customers to ensure their needs are being met is critical. Itâ€™s an effective way to create goodwill with customers as well as boost productivity and build confidence in the relationship. By Anita Allen | Ascend Contributor
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hen it comes to running a successful business, it pays to know your customers. It seems simple enough in theory, but truly knowing who they are, what they want or need, where they want to go, and how you can help them get there is more complex. Running a successful business takes ongoing communication, commitment and collaboration. For Sabre Airline Solutions®, this takes a community — the Sabre community. We recognize the value of communicating with our customers, not just “to” them. Over the years, we have invested time and resources to create an airline community that is unparalleled in the industry. At every level of engagement — from airline executives to end users — we provide a way for our customers to engage with and among the largest airline community in the world 24 hours a day, seven days a week. Today, more than 380 airline industry companies partake in some facet of our community.
The Community: Then And Now
In our early days, customer communication primarily consisted of teletype, queue messaging and printed newsletters. Except for conferences and phone calls, communications were more one-sided, not collaborative. Today, we use technological advances to enhance customer communication at every level. Customers participate in various on- and off-line community forums to give opinions, preferences and suggestions about the solutions they use. Because these discussions occur in a passwordprotected environment or by invitation only, the conversations tend to be candid and the level of detail explicit.
Frank Community Discussions
One of the more common ways we connect with customers is through our customer council calls, which occur on a regular basis to provide insight for solution enhancements, upgrades, releases, development and any range of other solution development activity. “It was always my personal goal to be very transparent with our customers, especially during customer council calls,” said Alicia Probasco, former Customer Care manager and now client delivery executive for Sabre Airline Solutions. “Despite times of harsh criticism, we stuck to our objectives and adjusted our support processes to get the best for everyone. A tough job — and often a thankless one — but we play to win for our customers.” The Sabre Airline Solutions Executive Advisory Board is another forum where 58 ascend
Sabre ® Community Portal Hub Airline Executive Advisory Board Conferences Product Planning And Usability Studies Sabre ® Community Portal
Implementation Feedback And Training
380+ Airlines Collaborating
Customer Care Sabre Airline University
World’s Largest Airline Network Nearly 400 airline industry companies share, learn and engage with each other through the Sabre community.
frank discussions occur between airline executives and our company. The first executive advisory board was held in 2007 to candidly discuss business strategy and direction, obtain feedback, and provide networking opportunities. These forums are held twice a year, with memberships rotating every few years to ensure we have new voices in the discussions. For airline end users and managers, community conferences and events are held throughout the year. These ongoing events provide in-person opportunities to: Collaborate in small or large groups, Engage with frontline development and product managers, Exchange ideas, Learn from and network with airlines around the world. The “voice of the customer” is a specific forum held during conferences with a group of airline customers, one or two Sabre executives, and a correspondent to capture topics of discussion. These discussions are extremely direct and often result in action items to do, research or enhance. For nearly 10 years, our customers have also been able to submit, prioritize and vote on ideas for future solution enhancements. Each year, customers outline their list of enhancement ideas that are later voted on and prioritized by the entire airline community. Since many enhancement ideas require development work, customers are regularly asked for their input on functional requirements. Enhancement rollout schedules are
then posted for customers to view on the Sabre® Community Portal. The Community Portal is a central online resource that enables customers to have single-sign-on access to their solutions and profile-driven information. More than 20,000 users access the Community Portal for their: Applications, Customer care, Delivery, Training, Solution management expertise, Business networking. This figure has more than doubled during the last year. “When you consider the number and different types of airlines we have in our community — all the various solutions and offerings these customers have as well as their different needs — it makes our community experience very unique,” said Susan Via, manager of community marketing and engagement for Sabre Airline Solutions. “The fact that these airlines regularly come together to help each other based on their knowledge and experience is not only impressive, it’s also quite innovative. We’re building solutions that evolve airlines and honor their uniqueness in channels that would historically be closed lines of communications.” Our community also helps “put a face with a name” through the Sabre ® Community Portal Hub, our online business networking tool that helps customers
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stay connected with industry colleagues. At customers’ request, we created the Hub in 2009 so customers could: Ask or answer questions, Discuss ideas for future enhancements, Share perspectives and knowledge, Obtain information about their solution, Network with other members of the community. Last year, we realized a year-to-date increase of 141 percent in membership profiles. “Not every customer is always going to engage in an online forum or community discussion due to the competitive nature of the business,” Via said. “Many times, customers prefer to contact us directly,
better solutions that benefit our customers and the industry overall.
It’s one thing to hear it from us, but it’s another to hear direct feedback from our customers through a variety of communications such as surveys, conferences, advisory boards and on the Community Portal. A few remarks we have received from our airline community members include: “Thank you for providing us the opportunity to share ideas and gain knowledge through each others’ experiences,” said Kashif Karim, assistant manager of revenue management for Pakistan International Airlines.
Today, we use technological advances to enhance customer communication at every level. Customers participate in various on- and off-line community forums to give opinions, preferences and suggestions about the solutions they use.
but the thoughts and postings found in the community can promote more meaningful discussions, insight and direction.” Customers can also develop their skills through individual courses and self-paced learning via Sabre® Airline University, located on the Community Portal. Depending on the solutions purchased, customers may have on- and off-line resources available 24 hours a day, seven days a week. A bookstore and certification programs are available. Through the Alumni Group on the Sabre Community Portal Hub, individuals who are certified in at least one course are first to hear about new training courses that are available as well as have a voice in what is coming next. Last year, visitors to the site increased more than 50 percent with recent enhancements, such as adding a virtual campus and an increased number of self-paced (computer-based) learning opportunities. These are just a few of our Sabre community components and how we leverage them to move the industry forward through aviation technology, services and programs. Through customer insight and suggestions, we are able to streamline, enhance or create
“The networking was good, and understanding each other’s businesses makes it easier to interact and know where someone is coming from,” said Mike Croucher, head of IT architecture and delivery for British Airways. “I have seen Sabre take on some of the previous suggestions. It makes you want to contribute more. It’s worthwhile.” “I am relatively new to the airline industry,” said Kris Kutchera, vice president of information technology for Alaska Airlines. “I wanted to meet others in the industry. I enjoyed the amount of networking, and the discussions have been better than I expected.”
Service Trends For 2011,” the customerservice market has continued to evolve, with an increasing number of companies focused on improving customer support. In fact, more than 80 percent of North American companies use customer experience as an area of differentiation. On the watch list for 2011, the report cites continued: Growth of self-service adoption by customers, Use of social media for customer service, Challenge in viewing a customer across all communications channels, Power to customers through their actions, voice and social media channels, Focus to make customer service an even bigger differentiator, Increase in customer-to-customer support. “Social media is still a growing trend, but we are ahead of the trend, and we offer advanced tools to boot,” said Gordon Locke, vice president of portfolio marketing and strategy for Sabre Airline Solutions. “We take great pride in our community and the differentiator it is for us. Whether it’s having an automatic customer call-back feature for customers to use or the ability to report their contractual metrics online, our focus is to help airlines increase revenue, reduce costs and provide a better customer experience through our expertise and leading technology.” Collaboration doesn’t have to be limited to the confines of a conference room or an online meeting. At Sabre, community conversations and knowledge sharing occur in person and in virtual environments all around the globe, with no cubes or conference rooms required. We’re available to chat … anytime. a
At Your Service
Social media has seen explosive growth during the last few years, signaling it is dynamic, demanding and here to stay. Having a plan and knowing how to engage customers to your mutual benefit is critical to harvesting loyalty, customer satisfaction and sustained growth. According to the recently published Customer1 report, “Top 10 Customer
Anita Allen is a member of the Sabre Airline Solutions community marketing team, which is primarily focused on customer engagement. She can be contacted at email@example.com.
Pushing Boundaries Powering Airlines With Future-Ready Technology Today Technology must work effectively in an airlineâ€™s current environment as well as be easily adaptable for future modifications.
By Gordon Locke I Ascend Contributor
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s airlines around the world entered 2011, and view 2012, they have done so with more commonality in a cadre of challenges than perhaps at any other point in aviation history. In the past,
singular threats have been the mainstay of reactive business planning. However, three distinct challenges have emerged that all airlines must now grapple with and plan proactively to be prepared for the future. The converging challenges harness the true promise of: Better performance and profitability; Rapid growth of mergers, acquisitions and new partnership models; More passenger traffic. Travelio.net recently featured an article, sourced from Travel Daily News, called “Airlines: Surviving In A Changing World.” The article looked at 2011 and beyond and summarized the challenges and opportunities in two ways: In most parts of the world, the international airline industry is evolving from a heavily protected business with government-run activity to a commercial hybrid business, presenting airlines with massive challenges. Some airlines adapt more effectively by tackling one or more of the following: Rapid fleet and network development; A new business model; Innovative products and services; Consolidation or cross-border joint-venture activity; Financial outperformance (or financial distress). At Sabre Airline Solutions®, we offer many airlines the solutions and expertise they need to flex their business models and see the rapid, competitive profit-making change they need. Our strategy is to help ensure airlines are ready today for tomorrow’s challenges. In doing so, we make it possible for them to put in place the capabilities they uniquely need for the way they want to do business — without having to make sluggish, expensive wholesale technology platform changes. Granted, some airlines need wholesale technology changes end to end. We can make that happen as well with faster implementation timeframes. That is the premise of powering airlines today with future-ready technology. Three examples best illustrate this, including: 1. Evolving the user experience,
2. Becoming alliance-ready faster than ever before, 3. Realizing a better total cost of ownership from solutions adopted to solve the industry’s many challenges.
At first blush, user experience applies only to travelers’ needs and does not transcend to the needs of customer-facing airline employees. To the contrary, the experience of using a solution on the employee side of an airline is just as important as the customer side. Both will significantly determine the success of a point-of-sale and point-of-service strategy. The science of user experience is also far more complex than examining and changing navigation. The ability to address the changes needed for most airlines has been daunting until now. Why? Because airlines have not been able to marry real-time and near-real-time data with superior, flexible user interfaces that offer a unique no-touch to high-touch brand experience. Changing and adapting the user experience on the personnel side of the equation is critical. The ability to flexibly set business rules or learn, adopt and administer solutions quickly defines a “fast” airline from a slow-to-respond one. It’s the difference in how a customer: Sees fares, Receives a promotion, Gets availability, Has a unique value score assigned to him, Views his experience at the airport (via self service or full service). We currently provide a number of airlines with a combination of strategy-enabling capabilities. They range from up-to-the-second data to easier consumption of that same data through advanced GUIs. Our Sabre® ASxsm Airline Services Exchange platform helps airlines implement or build user interfaces with state-of-the-art toolkits. Thus, end to end, we help airlines: 1. Launch the user experience and supporting interfaces they want more rapidly, 2. Use valuable data they otherwise find hard to access, 3. Empower airline staff with relevant customer or operational data, 4. Support on-the-fly configurable scenarios using an advanced rules engine.
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As the largest SaaS provider with airline domain expertise and a powerful portfolio, our value proposition goes beyond lower total cost of ownership. We also place great emphasis on total benefits of ownership. While this is achievable with our complete customer sales and service solution, we also support an airline’s current environment with these options should it be locked into an inflexible technology platform that needs to be “opened up.”
Joining an alliance is a considerable change for an airline. The attractiveness, and sometimes necessity, of joining an alliance to compete and drive loyalty, also falls into the aforementioned scenario of the user experience and supporting interfaces. There is more at stake though. Alliance membership impacts the entire airline enterprise across commercial planning; customer sales and service; and airport, crew and flight operations. Achieving alliance membership has typically been slowed by what may appear to be an endless sea of business process changes and hype about the need for an alliance platform. The real challenge simply involves customer and operations data within and among airlines. The premise of an alliance is not just a common reservations platform. It’s about gaining more passengers and creating a customer experience across multiple airlines. Alliance membership is typically a long-term commitment, and effective adoption is paramount to success and a quicker return on investment. Therefore, it is crucial that we provide software and services that help airlines look at the entire picture. For example, if you look at our partnerships across SkyTeam, you see that the majority share of members in the alliance use some 118 solutions from across our portfolio. 62 ascend
As this footprint continues to grow with SkyTeam, and other global alliances, we continually look well into the future to ensure we provide an unmatched, cohesive alliance technology model. It must be one that addresses airlines’ needs across the entire operation. Succeeding in an alliance means: Fast adoption of technology, Flexibility in how the data is used across all solutions (not just reservations), Configurability to meet alliance needs while not erasing a member’s unique brand. We are helping airlines such as Aeroflot, Aeromexico, Ethiopian Airlines, Kingfisher Airlines and Vietnam Airlines maximize their alliance presence or join one. Our employment of the ASx exchange proves that to innovate, an airline doesn’t always have to replace technology or change platforms. With a powerful platform and Software-as-a-Service model, you can also tap into and configure new business rules and create new outcomes with data and, therefore, execute faster. Since forging great technology is the nature of our business, we utilize SaaS applications and platforms that will define the next decade of solutions for the industry. The case is also there for groundbreaking technology that empowers new types of alliances. One example is our partnership with LAN and our new multi-carrier platform that enables all airlines under LAN ownership to work together as one. The LAN group of airlines must maintain independent operations while also creating a seamless customer experience among its airlines and oneworld members. Our new technology supports that need.
Total Cost Of Ownership
Finally, there is the dimension of total cost of ownership. To adapt and rapidly evolve capabilities in step with consumer trends (staff productivity or requirements for new business relationships), change must be affordable and deliver a faster return. The value of technology is not only in its flexible features and functions. It must serve long term and offer the ability to adapt with evolving capability needs. Without this, an inflexible platform or hard-to-configure applications can paralyze an airline. Further, the solutions also must have a transparent commercial model so total cost of ownership is clear. Otherwise hidden costs, polling charges, inefficient workflow and added integration create an opaque commercial relationship that greatly stalls progress. Today, many airlines face long migrations, impractical business process changes and protracted adoption. This makes the cost of owning and benefits hard to measure short term. We take a different approach. Our model provides a complete view of an airline’s
customer and operational data. It helps determine how to best use the information across the enterprise. Our platform represents an environment for better total cost of ownership that includes the right architecture and toolkits an airline needs to create new capabilities on its own or teaming with us to do it. The result? Better workflows, improved interfaces and configurable solutions that drive fast adoption and can serve long term. Beyond technology, we provide expertise to support an airline. As the largest SaaS provider with airline domain expertise and a powerful portfolio, our value proposition goes beyond lower total cost of ownership. We also place great emphasis on total benefits of ownership. With our solutions, the benefits continue well after the initial return is measured. We provide healthier IT operations so airlines can focus on flying and operating their businesses. At the same time, they benefit from a nimble platform whereby new capabilities can be augmented long term. This, coupled with clear, transparent pricing, means airlines can predict costs and enjoy benefits with greater clarity. The ASx exchange creates that reality. By the end of the year, close to 70 airlines will leverage our ASx platform and realize its powerful capabilities. Some already doing this include Aegean, Aeroflot, Emirates, Air New Zealand, British Airways, Cathay Pacific Airways, Croatia, Qantas and Virgin Blue. The decade ahead is about business model adaptation when needed and proactive competitive response as a day-to-day way of operating. Consumer expectations are already shifting more rapidly, thus airlines need online storefronts and a service experience that caters to airline customers and their respective cultures. Airline employees need advanced tools that are easy to use. This enables them to seamlessly assist loyal customers traveling from one alliance member to another. Additionally, given the volatility of oil prices and other converging challenges, airlines cannot afford to use technology that is restrictive, has a limited lifecycle or drives unpredictable costs. We are onboard with these needs. And we are committed to innovation and transparency to help you push boundaries today and see a clear path into the future. a
Gordon Locke is Vice president of portfolio marketing and strategy for Sabre Airline Solutions. He can be contacted at firstname.lastname@example.org.
Empowering airlines with ancillary options
Merchandising through GDSs with new technology gives airlines an additional storefront from which to market and sell products and services. In doing so, customers get what they want, when they want it.
By Lauren Lovelady I Ascend Staff
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fter suffering through years of financial losses and almost every conceivable cost-cutting program, carriers are evolving their business models. In doing so, they augment fare- and schedule-led selling with merchandising techniques to generate incremental revenue. These techniques usually do not involve large-scale investments but instead focus on airlines’ current and potential product and service offerings in relationship to consumer demand.
How Was Your Travel Experience?
An airline doesn’t just sell a seat on a flight; it sells a travel experience. In fact, the question, “How was your flight?” can more accurately be phrased, “How was your total travel experience?” because passengers’ answers usually take into consideration every aspect of the trip. Of course, many passengers still focus on getting from point A to point B at the lowest possible cost. However, others are willing to pay additional fees for the little extras that help make air travel more pleasurable. These extras, or ancillary services, include, but are not limited to: Additional legroom, Premium seats, Meals, Headphones, On-demand movies, WiFi access, Supervising unaccompanied minors, Pets in the cabin, Upgrades, Lounge passes, Checked baggage. Leveraging this ever-expanding array of products and services, airlines are finding they can differentiate themselves by bundling or unbundling their offerings. They can do so even further by charging additional fees or not collecting fees at all.
Processed nearly three-quarters of all online and traditional travel agency sales in the United States in 2008; Accounted for 21 percent of all European travel revenue and 47 percent of airline bookings that same year. In short, a GDS is a robust platform for the wide distribution of airlines’ merchandising programs. Sabre Travel Network® supports two merchandising techniques through the Sabre® global distribution system. The introduction of Sabre® Branded Fares, or bundled fares, in 2007 enabled airlines to promote and “sell up” to a higher fare family with pre-defined services included in the cost of the airfare. The following year, Sabre® Air Extras, or unbundled fares, enabled carriers to offer optional services to travelers for additional fees plus the cost of airfare. In essence, passengers can choose the services they value most.
Recent enhancements to Sabre Air Extras support diverse airline operations as well as the global airline industry by utilizing ATPCO’s optional services (OC) product as well as an electronic miscellaneous document (EMD) to facilitate fulfillment of the optional service. The flexible, yet standardized, format enables airlines to remain competitive while tailoring their product and service offerings
to different market segments and/or regions of the world. It also provides an additional venue for marketing those offerings and generating revenues. Once an airline has in place the internal processes and support systems necessary to introduce a new ancillary service through the Sabre GDS, it can simply file the offering and associated fee through the ATPCO OC category using the standardized format. Sabre Air Extras reads the filing and displays the offering in the GDS. This consistent, user-friendly filing method greatly reduces the time once necessary to prepare carriers’ products and services for display and subsequent fulfillment through GDSs. The enhancements also enable carriers to quickly modify their offerings in response to competitors’ actions. For example, an airline may offer a premium seat in a specified market for a US$40 fee. However, the competition is offering premium seats in the same market for US$30. With a few simple clicks, the airline can almost instantaneously adjust its price in the Sabre GDS to enhance its competitive position in that market. Fulfillment of Sabre Air Extras is done via electronic miscellaneous documents, technology complementary to ATPCO’s filing services. Similar to electronic tickets, EMDs are stored electronically in the issuing airline’s database and detail each ancillary service purchased and the associated fee.
The GDS: A Powerful Merchandising Tool
Recent innovations in the technology that supports merchandising through global distribution systems provides carriers with an additional storefront from which to market and sell products and services. This further defines consumers’ choices. GDSs are an integral part of airlines’ overall marketing efforts, which also include travel management companies, travel agents and online travel agencies. According to travel industry research authority PhoCusWright, GDSs: Powered more than US$268 billion in travel revenue worldwide in 2008 through 1.1 billion transactions, the equivalent of 2,100 transactions per minute; 64 ascend
Enabling Travel Agents Sabre Air Extras helps agents efficiently offer complete service to their customers and fulfill special requests without the need to contact the airline during the process.
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Because carriers can now immediately process electronic bookings and payments, trends are more easily identified and revenues realized earlier in the process. An airline can determine why premium seats are selling well in some markets, but not in others. Are the fees for this service too high in those markets? Or perhaps, passenger demand for this offering is not as great as the demand for another service, such as extra legroom. With the enhanced filing capabilities, airlines can easily adjust the levels and fees of service offerings in individual markets. The electronic process also helps airlines generate more accurate forecasts and identify potentially lost revenue sources. For instance, an airline may have a rule stating only two pets are allowed in the cabin per flight segment. Previously, when a passenger booked a flight and requested to bring a pet onboard, a message was placed in his or her itinerary noting the request. This was the case even though the service fee was not collected until the traveler arrived at the airport. Once the two pet-in-cabin limit per flight was reached, subsequent passengers requesting
the service were informed it was no longer available. If one or two passengers decided at the last minute not to bring a pet onboard but did not notify the airline in advance, both planned and potential revenues were lost.
Sabre Travel Network implemented enhancements that provide a seamless, consistent solution for displaying, booking and now selling Sabre Air Extras to travel agents through the GDS. Introduced in a phased approach to the travel agent and OTA communities, Sabre Air Extras can be accessed via several touch points, including: City pair availability, Shopping, Pricing, Booking, PNR, Fulfillment. Prior to the enhancements, travel agents and OTAs could view services and fees filed by airlines but were unable to fulfill passengers’ requests or collect fees in advance. Today, Sabre Air Extras provides agents with the content and automated tools necessary to efficiently provide end-to-end service to
Giving Customers Choice While many airline customers simply focus on getting to their destinations, a good portion are willing to pay for extra amenities such as lounge access.
their customers and fulfill specific requests without the need to contact the airline during the process. As a result, agent productivity is significantly increased.
Most airlines readily acknowledge that the majority of travelers seek the fastest and cheapest way to reach their destinations. Conversely, most travelers do not rate an airline on price alone. With this in mind, Sabre Air Extras was designed as a one-stop shopping resource for travelers, giving them the ability to prioritize, choose and enjoy the services they value most. The information is now readily available to agents in a format that is quick and easy to display, book and fulfill, allowing travelers to purchase these ancillaries from travel agencies worldwide.
It’s simple: travel agents and OTAs can’t sell what they can’t see, and travelers can’t choose if they don’t know they have a choice. Whether an airline offers a wide array of ancillary products and services with varying fees for different market segments, simply charges a flat US$25 for every checked bag or even chooses to provide these services at no extra cost to customers, Sabre Air Extras provides a valuable channel for carriers to differentiate themselves from the rest of the playing field and realize additional revenues earlier in the game. Even if a carrier’s merchandising roadmap is not fully implemented, Sabre Travel Network will partner with an airline to begin selling ancillary services one step at a time. With the standardized, flexible filing capabilities of Sabre Air Extras, a carrier can continue to develop and diversify its plans and easily add services as they become available to remain competitive. Even the smallest steps can lead to great results. a
Lauren Lovelady can be contacted at email@example.com.
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Aerodynamics Don’t Change; Aircraft Load Planning Does Photos: Shutterstock
Strict aircraft and flight limits must be considered during flight preparation With its continuing rapid development and deployment, the electronic flight bag doesn’t simply represent Weight and balance and center of gravity are critical to legally and efficiently opthe future. Electronic flight bags, in fact, are already erating aircraft while reducing costs and maximizing revenue. By Lauren Lovelady I Ascend Contributor on many commercial carriers’ flights today. By William Kikuchi, Dana Knight and Dave Roberts I Ascend Contributors
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aw of physics and aerodynamics that apply to aviation don’t change. However, other components of flying, such as size, weight, distance flown and speed continually evolve (see related article on page 22). Therefore, preparation for a flight must adhere to strict aircraft and flight limits. Aircraft must be loaded so structural limits are not exceeded. It must be loaded correctly so it maintains its balance from takeoff through landing and unloading. Consideration must be given to each component being added to aircraft. This includes the additional weight and distribution of fuel, cargo, bags and passengers. Load planners use Sabre ® AirCentre ™ Load Manager to manage the loading of flights for an efficient, legal and on-time departure while maximizing flight revenue. Load controllers plan multiple flights within a short time frame to accommodate passengers, bags, cargo and required fuel. In addition to planning flights, Load Manager can transmit a series of informative messages about passenger and cargo loading on aircraft to downline cities. Load Manager provides a load plan that determines distribution of cargo and bags. It also accounts for passenger seating distribution by evaluating the balance effect based on assigned seating. It does the same for the distribution of fuel. To accurately and efficiently plan the loading of an aircraft for a flight or series
Passenger Data The cabin summary screen includes passenger data used by a load planner to retrieve the number of passengers booked on a flight from the corresponding passenger check-in system.
of flights, Load Manager contains four basic software screens that a load planner completes to produce a flight load sheet. The load sheet is a printed document that captures necessary load information used by flight crews to set their takeoff, en route and landing weights. To produce the load sheet for crew, load planners accumulate various pieces of data and
populate the four basic screens of Load Manager.
Dry Operating Weight Screen
The dry operating weight screen enables load planners to adjust aircraft weight based on the number of flight crewmembers, catering supplies and any other factors that affect the dry operating weight and center of gravity index of the aircraft.
Cabin Summary Screen
The cabin summary screen contains passenger data for a flight. The load planner retrieves the number of passengers booked on the flight from the corresponding passenger check-in system. Load Manager can interface with the passenger check-in system to retrieve both booked and checked-in passengers. This is dependent on the planning stage of the flight. The number of passengers and their seat assignment changes the flight’s weight and balance. City pair or origin city determine passenger and bag weights. Nonlisted city pairs default to a predetermined value. The benefits of having these options increase the accuracy of the calculations for each flight.
Cargo And Baggage Placement The deadload screen contains a robotic tool to plan the aircraft bin locations for baggage, mail and cargo. While planning the flight, the screen enables a load planner to easily monitor shifts in the center of gravity as cargo or baggage are added to the load plan.
A critical aspect of weight and balance is the planning and placement of cargo and baggage. The deadload screen provides an automated tool to plan the aircraft bin locations for baggage, mail and cargo. Using this screen while planning the flight, the load planner can easily monitor shifts in the
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delivery or transfer to another connecting flight. Fuel savings achieved through proper load planning and adherence to the load plan is extremely important to an airline’s operational costs. Load Manager provides an aft center of gravity, which reduces fuel consumption in flight. Successful airlines carefully calculate passenger, cargo and fuel weights to attain the most effective load plans that reduce fuel burn en route. These airlines create optimal aircraft center of gravity balance to meet these goals as well as save fuel. Load Manager improves weight calculations by allocating weight according to passenger type: adult male or female, child or infant. Unused weight allowance is reallocated for additional revenue passengers or cargo. Load Manager is an integral component of the Sabre ® AirCentre ™ Enterprise Operations solution. It helps airlines manage change while reducing costs in fuel and labor. The solution helps deliver your promise to your passengers, employees and stake holders to provide the best day of operations. a
Adjusting Aircraft Weight Using the dry operating weight screen, load planners can adjust aircraft weight based on the number of flight crewmembers, catering supplies and any other factors that impact the dry operating weight and center of gravity index of the aircraft.
center of gravity as cargo or baggage are added to the load plan. A key benefit of Load Manager is that it is configurable to interface with cargo and check-in systems, resulting in an efficient process and significant cost savings. The type of deadload screen depends on the aircraft type. Separate screens are designed for narrow- or wide-body aircraft and their corresponding container positioning.
Flight Plan Airport Analysis Screen
The flight plan airport analysis screen identifies the amount of fuel that is required for the flight based on the calculated flight plan. Load Manager is integrated with Sabre ® AirCentre™ Flight
Plan Manager to provide an automated population of fuel information. Once these four screens are completed, the load planner produces the load sheet for flight crews to determine takeoff speed, flap setting and other important aspects of takeoff and landing. The primary importance of exact load planning for an airline is legality and efficiency. Efficient loading and unloading of cargo and bags is extremely important to an airline’s ground operations and good passenger service. Load Manager optimizing algorithms prioritize baggage and cargo locations on the aircraft. The correct placement of cargo and baggage on the aircraft can expedite unloading for quicker baggage
William Kikuchi is senior business systems analyst, Dana Knight is a solution director and Dave Roberts is senior principal in airline and flight operations strategic planning for Sabre Airline Solutions ® . They can be contacted at william.kikuchi@ sabre.com, dana.knight@sabre. com and firstname.lastname@example.org.
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Technology such as Sabre® Qik® Solution enables airlines and other travel-related companies to paint the illusion that successful customer service — and profitable, efficient operations — are as natural as a smile.
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ll the things you probably hate about travelling — the recycled air, the artificial lighting, the digital juice dispensers, the cheap sushi — are warm reminders that I’m home,” said Ryan Bingham, a modern road warrior portrayed by George Clooney in the 2009 blockbuster hit movie “Up In The Air.” “Up in the Air” offers a fictional view of modern-day air travel, portraying carriers as powerful, on-time machines with: Smiling gate agents, Pleasant first-class attributes, Slick technology. The ideal does exist, although real road warriors would say it doesn’t exist every day. But as more and more carriers and travel-related companies invest in the “slick” technology it takes to deliver consistently on the promise of on-time arrivals, smiling gate agents and a pleasant travel experience, fiction comes closer to reality. Importantly, the technology also reduces costs and increases revenue.
A “Qik” Solution To Complex Processes
Today, more than ever, companies in the travel industry are seeking to simplify operations to reduce costs and remain competitive. They do so while striving to increase revenue and maintain high-quality customer service. In a business environment that demands change, frontline personnel must have immediate access to the right information to win and keep a customer’s business. In addition, the need to reduce costs — especially through reductions in data entry and process errors — is imperative. However, as new initiatives are put in place to achieve these goals, companies face the challenge of readily accessing data that snakes across multiple databases, operating systems and platforms. Automated offline processes are necessary for a company to increase sales and revenue, improve operational efficiency, cut costs, and raise customer service levels. That’s why many airlines turn to the Sabre Qik Solution. The solution offers a combination of latest technology and process, application development, and interface design consulting. This enables companies to create and deploy effective applications. The combination facilitates better customer service and meets specific business needs at the lowest possible lifetime cost.
Reduces Time And Costs The Developer Tool significantly decreases processing time with fewer errors as well as reduces time and telephony costs.
travel companies worldwide for call center/ reservations, ticketing, check-in, ramp/ weight and balance and many other business functions. In fact, it is the tool used to create the Interact interface, the highly configurable, workflow-driven SabreSonic ® Customer Sales
& Service user interface for reservations centers and airports. Because the solution is customizable, the benefits vary by company. However, all would agree the technology is a profit enhancer when it comes to productivity, training costs and overall cost reduction.
The Sabre Qik Solution is widely considered the industry pacesetter for the creation of intelligent user interfaces. It includes software and a variety of professional services preferred by more than 300
Airport Application The tabs in the runtime screen provide easy access to basic airport functions such as check-in, seating and boarding.
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Enhanced Job And Customer Satisfaction
By doing away with long data entry formats and streamlining job functions, the Qik Solution eliminates the need to gather relevant data from multiple data sources and applications. The solution instantly pulls together the information. This enables employees to serve customers better, faster and with fewer mistakes — increasing the number of satisfied customers.
A “Qik” Tour
The Qik Solution offers components that complete the end-to-end business management technology solution.
Airline Availability Display The tabs in a reservations application provide easy access to basic reservations functions such as selling air, car or hotel segments, pricing the itinerary or adding passenger details.
By integrating specific business processes and rules into the Qik applications, users are presented with decisions based on their company’s specific business rules. The Qik Solution: Simplifies complex procedures, Eliminates the need for users to consult job aids, Reduces error frequencies, Automates multi-step processes. The solution facilitates the integration of Internet and intranet content into business processes by presenting a single, focused user interface. The end results are increased productivity, improved accuracy and higher sales conversion rates. When British Airways needed to increase productivity and customize how ramp and airport agents work, it looked to the Sabre Qik Solution to deliver the right information to its agents at the best time to serve customers. “The Sabre Qik Solution met important needs as we moved our current customer systems forward, and is an integral part of our service-oriented architecture and multichannel strategy,” said Mike Croucher, head of IT architecture and delivery for British Airways. “What we like best about the solution is that it’s a truly innovative tool that is completely configurable and simple to use. We can customize how agents work by delivering the information they need most at the right time to best serve our customers.”
Reduced Training Costs
Training users to operate complex native host systems is both labor and time intensive. As a result, users focus more on how to operate the system than on
providing customer service. By delivering graphical user interface front ends, or intelligent user interfaces, that are easier to use than traditional host systems, the Qik Solution significantly reduces training time and increases productivity. Instead of memorizing system commands, users can focus on customers. In addition, when data from multiple systems is required, the solution seamlessly integrates the data. This eliminates the need for users to switch among systems by using multiple access procedures. According to airlines that have recently implemented the system, its use has reduced newhire training by as much as 50 percent while increasing employee productivity.
Sabre Qik Solution performs local error checking, retains host reservations information and combines host transactions, all significantly reducing host communication costs. Customers that use the suite of tools report seeing a return on investment in as little as three months.
Expanded Sales Solicitations
The Qik Solution lets companies create applications that provide easy access to data and present the data at the appropriate time during the user’s workflow. This enhances the effectiveness of sales personnel by improving information accessibility and providing more up-sell opportunities. In addition, sales prompts are used to assist frontline employees in closing the sale. Finally, the applications eliminate the need to memorize or search for seldom-used transactions, such as those required for car hire and hotel booking.
The Developer Tool, a component of the Sabre Qik Solution, enables companies to more costeffectively integrate data and systems into their intelligent user interface. As a result, the right information is accessible to the right customerfacing employees at the right time via a flexible technical platform. The Developer Tool is used by Sabre’s own development teams, airlines, call centers, tour and travel agencies, government entities and other travel-related companies around the world. It supports two scripting languages, a variety of graphics formats and a fully graphical screen painter. The flexible, powerful tool enables developers to quickly create graphically rich applications specific to the travel and transport industries. Users report the tool’s intuitive user interface framework and the option for developing interfaces for automated repetitive tasks have significantly reduced processing time with fewer errors. It has also reduced time and telephony costs.
Peripheral Manager/Multitask Manager
Peripheral Manager, another component of the Sabre Qik Solution, allows for effective communication with airline backend systems. It also supports interaction with the many and varied physical devices required to run airline back office, airport, reservations, and other locations. Printers, scanners, card swipes and gate-boarding devices can be incorporated into a company’s end-user solution using Peripheral Manager. To round out the software suite, Multitask Manager, another component of the solution, allows for sophisticated control and management of “robotic” applications created using the Qik Solution. Robotic applications automate manual tasks and free up employees, thus increasing efficiency and accuracy while saving labor costs. Multitask Manager gave Travelocity® the ability to create its own solution whereby 98 percent of bookings are ticketed automatically. “The Qik Solution is the life blood of our mid-office system,” said Rob Mabry, senior manager for Travelocity. “Every booking made on our website is routed through our Sabre Qik applications running on the
ASCEND I SOLUTIONS
Multitask Manager system. Of those, 98 percent are ticketed by robotics and never require human intervention. “We also have more than 2,500 users in call centers around the globe managing customer contacts with customized versions of Turbo Sabre® desktop application and other Sabre Qik tools. These applications support both the Travelocity leisure business and its corporate brand, Travelocity Business® . It’s an incredibly flexible application development environment that has allowed us to support a dynamic business with more than a million tickets a month with a small team of developers.”
The Developer Tool, combined with the power and flexibility of Sabre® Qik® Professional Services, provides a complete solution with rapid returns. This transcends a typical technology solution with an off-theshelf application development environment. Incorporating industrial engineering and business processing expertise allows efficient solutions designed to meet the unique needs of many diverse customers. The solution is backed by technical expertise of architects and developers. This ensures that it remains ahead of customer and travel industry needs. Customers enjoy 24-hour and 365-day online and telephone support for their development teams as well as various community offerings to interact with fellow Sabre Qik Solution users. “One of the key differentiators for our Sabre Qik Solution is the fact that it’s been engineered from the ground up to be
reservations and departure control systems ‘agnostic,’” said Ellen Ehrlich, senior vice president of SabreSonic Customer Sales & Service for Sabre Airline Solutions. “So not only do our SabreSonic airlines derive great value in the Qik Solution such as the Interact interface they use in reservations and airports, but non-SabreSonic carriers globally can also see similar benefits regardless of what reservations or departure control system they use. This also gives the extra benefit of a unique and very strong Qik Solution user community comprising not only SabreSonic airlines but other airlines and affiliated companies worldwide using virtually any reservations, DCS, frequent flyer or other back-end solution from Sabre Airline Solutions or other vendors.”
Custom Solutions Delivered
The scope of a solution using the Qik Solution and the Developer Tool crosses a broad range of functionality and delivers unique benefits to each company. For example, company “A” may use a Qik solution that completes a single automated task, such as a quality control check before ticketing. Company “B” may utilize a Qik solution for its call center interface that incorporates computer telephony integration functionality, access to multiple CRSs and a productivity-focused workflow. Company “C” may use a Qik solution as a CRM enabler to pull information from multiple data sources, access multiple host systems, use automated tasks, interact with third-party applications and integrate Web content.
Southwest Airlines called on Sabre Qik Solution when it wanted to rapidly enable Web service and redesign the look and feel of its existing application. “The Sabre Qik Solution enabled us to rapidly move forward technologically by transitioning from legacy formats to services,” said Southwest Airlines. “Our new intelligent interface is more visually appealing. But more importantly, it allows our staff to be more productive. This new application has positioned customer service and support for the future.” As seamless as it looks, the “Up In The Air” experience is a fine-tuned symphony of technological triumphs performed from the moment a ticket is booked until a bag is delivered. And that’s what Ryan Bingham and countless other travelers are counting on. So too, are the thousands of airline industry professionals who depend on loyal, repeat customers for their survival. a
Paul Feheley is a principal of the Sabre Qik Solution for Sabre Airline Solutions. He can be contacted at email@example.com.
+count it up 2020
The year by which industry research
The amount per 100 passenger
The percentage by which the
programs aim to achieve a further 50
kilometers modern aircraft achieve in fuel
European Union is committed to
percent fuel and CO2 savings and an
efficiencies, according to enviro.aero.
reducing its emissions from 1990
80 percent reduction in oxides
The next-generation aircraft (Airbus A380
levels by 2012 under the Kyoto
of nitrogen (NOx), according to
and Boeing 787) use less than 3 liters of
protocol. The E.U.’s emissions trading
fuel per 100 passenger kilometers (78
scheme is Europe’s principle
passenger miles per U.S. gallon),
mechanism to achieve its Kyoto
exceeding the efficiency of any modern
compact car on the market.
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18 Strategic commercial planning increases airline revenues
Published on May 6, 2011