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A MAGAZINE FOR AIRLINE EXECUTIVES

Ta k i n g

y o u r

a i r l i n e

OCTOBER 2003

t o

n e w

h e i g h t s

EXTREME AIRLINE MANAGEMENT

A conversation with …

David Siegel, CEO, US Airways INSIDE

Traditional carriers launch low-fare subsidiaries

How airlines weathered "the perfect storm"

Cathay Pacific Airways’ crisis management process

© 2009 Sabre Inc. All rights reserved.

wearelistening@sabre.com


regional

regional Asia/Pacific in late 2002 in Taiwan and Hong Kong,

ture that allows members to select five

and it is looking to add sites in Korea,

preferred destinations and to be notified

Travelocity have met the unique needs of

Malaysia, Brunei and New Zealand in

via an automated e-mail message or on-

the Asia/Pacific marketplace. Travelocity

the next several months. ZUJI officials

site updates when a flight to a specific

quickly realized it could not merely

The unequaled ZUJI sites built by

Capitalizing on Consolidation

destination meets a pre-set price criteria.

are not only actively building “ We a regional network, but a strong and compelling brand …. ”

This gives ZUJI members the advantage of being the first to know about inventory-controlled promotional deals.

After its merger with two smaller airlines, a larger, more competitive China Eastern Airlines looks to draw on its new strengths to become a more dynamic factor in the world airline industry.

Sweet Sixteen

“The outcome is ‘win-win,’” Blume said. “Our members learn of deals to

Sixteen leading Asia/Pacific airlines have

said the response to the soft launch

places they are interested in traveling

joined with Travelocity to form ZUJI, a

indicated that Asian markets are ready

to, and suppliers have access to a

one-stop travel portal for the region:

to embrace online travel. Once the

targeted audience.”

By Hans Belle and Peter Wu | Ascend Contributors

All Nippon Airways

effects of the conflict in Iraq and the

Combining the expertise of the

outbreak of severe acute respiratory

region’s leading airlines and Travelocity

Cathay Pacific Airways

syndrome diminished, the portal’s book-

enabled ZUJI to overcome a number

China Airlines

A

ing levels quickly increased, exceeding

of challenges, including the region’s

EVA Airways

changes, many experts and analysts

pre-SARS levels.

multiple languages, currencies and local

Garuda Indonesia

have spoken of a need for carriers to

laws. ZUJI worked with Travelocity’s

Dragonair

consolidate their operations to increase

elers choosing to book and buy flight,

Sydney-based development center to

Japan Airlines

competitiveness.

hotel and car rental content from ZUJI,

create country-specific sites in native

Japan Air System

and we anticipate that this trend will

languages using local currency with

Malaysia Airlines

largely an abstraction for much of the

continue,” Blume said. “We’ll soon

secure transactions through VeriSign

Northwest Airlines

world, in China it is already a reality.

reveal a new hotel booking path, which

Payflow. To date, ZUJI offers sites in

Philippine Airlines

Three years ago, the Civil Aviation

has been designed and developed in

three languages (including two varia-

Qantas Airways

Administration of China announced

conjunction with Abacus. We have a

tions of Chinese) utilizing four Asian

Royal Brunei Airlines

that it would merge 10 of the nation’s

dedicated commitment to constantly

currencies. ZUJI also has adapted to

SilkAir

airlines into three roughly equal groups

improving the site and ensuring our

the local markets, which have different

Singapore Airlines

in order to strengthen the domestic

customers have the best technology

levels of development and infrastructure

United Airlines

industry. Each group would be centered

and travel tools in Asia/Pacific.

to support e-commerce, such as the

on one of the nation’s three main carri-

penetration levels of credit cards and

ers: Air China, China Eastern Airlines

“We’re seeing more and more trav-

“We are not only actively building a regional network, but a strong and compelling brand, which features our

costs of Internet access. The state-of-the-art net fare booking

transplant technology and business systems from the United States without

s the worldwide airline industry continues to undergo dramatic

While airline consolidation remains

Executives from China Eastern Airlines and Sabre Airline Solutions announce an agreement for the airline to use the technology provider’s flight operations suite to help integrate its airline operations center.

and China Southern Airlines. Now, with its consolidation largely

Shanghai-based China Eastern has

the resources to compete more effectively.

‘Travel Guru’ personality,” Blume said.

engine, powered by Travelocity, was also

finding innovative ways to address the

complete, a restructured China Eastern

“set off for a new future,” company

As a result of the consolidation, China

“We’re experiencing consistent growth

developed specifically for the region.

region’s unique landscape. ZUJI, with

Airlines is poised to further raise its

officials said.

Eastern has approximately 40 percent

the knowledge and support of the

profile on the international aviation

in all of our markets.”

Gilliland said the partnership holds great promise for the future.

outcome is ‘win-win.’ Our “ The members learn of deals to places they are interested in traveling to, and suppliers have access to a targeted audience.

“Travelocity pioneered the online

region’s leading airlines and unmatched technology from Travelocity, is uniquely

travel space, and we have more than

positioned to meet the challenges of

seven years’ experience in the world’s

providing online service to the region’s

most competitive online travel market —

traveling public.

the United States,” he said. “We have learned that success in this industry

Frank Fotea is Travelocity’s

is driven by continuous investment in

vice president Asia/Pacific.

technology and the customer experience, ZUJI’s travel tools are designed to

focused marketing and distribution,

enhance the customer experience. Its

and great value content. ZUJI has

“Price Guru” tool is a customized fea-

these ingredients.”

64 ascend

Hans Belle is vice president of marketing, Asia/Pacific for Sabre Airline Solutions.

a result of the consolidation, “ AsChina Eastern has approximately 40 percent of the domestic Chinese aviation market.

Before the consolidation, the “huge

of the domestic Chinese aviation mar-

number, small size and lack of core competi-

ket. The combined China Eastern group

tiveness” of the nation’s multiple domestic

controls ¥47.3 billion (US$5.7 billion) in

carriers hampered the growth of China

assets, including 142 aircraft. The group

Eastern and other Chinese airlines, the

also has a combined 25,000 employees,

company said. Consolidation has helped

and it serves destinations throughout

China Eastern “achieve rapid expansion,

China as well as Asia, Europe, America

implement its business diversification

and Australia.

landscape and also to take advantage

strategy and form new mainstay lines

of events such as China’s entry into the

of business, thus becoming the new

the airline predicts it will have 180 large-

World Trade Organization.

starting point for future expansion.”

and medium-sized passenger and cargo

Through consolidation with China Northwest Airlines and Yunnan Airlines,

Consolidating with two smaller carriers has given the combined airline

By 2005, thanks to consolidation,

aircraft generating ¥24 billion (US$2.9 billion) in revenue.

october 2003

65


regional

regional

China Eastern said it sees the

president at China Eastern, said the inte-

tained several systems, which often

merging of the Chinese aviation indus-

grated AOC will streamline operations,

resulted in the duplication of tasks to

try as an opportunity to “build an air

enabling the airline to compete more

accommodate each individual tool.

transportation system of core competi-

effectively in the consolidated Chinese

Integration will also benefit the airline

tiveness; realize rapid, sustained and

aviation marketplace.

during irregular operations, helping

healthy growth; improve market com-

“Our ultimate aim is to reduce reporting lines in order to drive cost

schedule as quickly and cost-effectively

in international competitions; and

reduction,” Wu said. “We expect

as possible.

establish a world-recognized brand

this to be achieved by the continued

in the air transportation industry.”

improvement of our operations

the AOC includes the airline’s movement

and the reduction in our aircraft

control, flight planning, flight tracking,

utilization costs.”

load planning, meteorological function

Eastern plans to improve the profitability of its home Shanghai marketplace.

The AOC will integrate the airline’s

Europe, Middle East and Africa

From Russia, With Success

it efficiently return to its published

petitiveness quickly; fully participate

As part of its growth strategy, China

As Russia continues to emerge into a more open economy, the nation’s airliners are benefiting from the change. For the year, revenues per kilometer in the Russia market are up 7 percent, passengers boarded are up 6 percent and cargo volume is up 3 percent.

Despite an industry-wide downturn, a growing market and innovative practices have helped Russian carriers maintain growth and profitability.

The operational heart of the airline,

and data integration departments.

The airline also plans to concentrate

flight scheduling, flight planning,

domestically on Shanghai, Beijing and

crew rostering, payload and dispatch

with China Eastern Airlines brings to

Guangzhou while further developing the

departments, which will work seam-

five the number of carriers in the region

Xian and Kunming markets. The airline

lessly through an integrated suite of

utilizing Sabre Airline Solutions for

to continue — the country’s Civil Aviation

discover its convenience. Yet, the average

also plans to strengthen international

software provided by Sabre Airline

integrated operations centers. Other

State Services says the aviation crisis

middle-class Russian has similar prefer-

routes and develop cargo transport lines

Solutions, including Sabre ® AirOps ™

carriers include Cathay Pacific Airways,

in Russia is over, projecting that the

ences for travel as his or her Western

in Hong Kong as well as other parts of

Movement Manager, Sabre AirOps ™

China Southern Airlines, Air New

industry in 2003 will grow between 5

European counterpart, indicating that

Asia, Europe and the United States.

Dispatch Manager and Sabre ® AirOps ™

Zealand and Virgin Blue.

percent and 10 percent, continuing to

the growth of this segment will likely

build on the about 10 percent growth

mean an increasing demand for travel,

in 2002.

particularly air transportation.

The airline group also plans to pursue a diversification strategy that

®

By Inna Kizenkova | Ascend Contributor

Load Manager. By using integrated systems, China

incorporates importing/exporting,

Eastern will streamline data entry,

financial services, hotels and tourism,

data management and data integrity,

and air catering.

resulting in superior operational control. Before integration, China Eastern main-

As it prepares itself to compete

Announced in April, the contract

Hans Belle is vice president of

So, how have the Russian carriers

marketing, Asia/Pacific.

The move to a free economy

managed to excel during a time when

caused an explosion in the number of

Peter Wu is a Beijing-based account

the rest of the industry has battled to

carriers operating in Russia. However, the

director for Sabre Airline Solutions.

keep its head above water?

past few years have seen consolidation

domestically and internationally, China

One of the main advantages

Eastern plans to standardize its fleet

enjoyed by Russian carriers is the

planning, marketing strategies, services,

hile much of the airline industry

country’s continuing emergence into

continued struggling in 2002 to

a free marketplace. After years of

training and maintenance across the

W

organization.

cope with the lingering effects of the

stagnation under the Soviet-planned

severe economic downturn, Russian air

economy and a decade of adjusting to

dardization strategy, the China Eastern

transportation bucked the trend thanks

a free market, real incomes of Russians

group has invested in new technology,

to an expanding economy that enabled

are increasing and the Russian middle

including decision-support tools to

more travelers to take to the skies.

class is growing.

In conjunction with its new stan-

For the second consecutive year,

help integrate its systems operation

continued move toward an “ The open economy gives Russia an underdeveloped market with enormous potential.

within the industry — the number of

The continued move toward an

airlines declined from a high of 393 in

Russian carriers overall reported profits

open economy gives Russia an underde-

1994 to 235 in 2002 — as some airlines

as well as growth in the numbers of

veloped market with enormous potential.

acquired smaller carriers, some went

that it would integrate its flight opera-

passengers boarded. For the year,

Analysts estimate the potential Russian

bankrupt and some were unable to meet

tions into an airline operations center

revenues per kilometer in the Russian

air travel market at 90 million passengers

more stringent licensing requirements

in order to improve efficiency, improve

market were up 7 percent to US$64.5

boarded, although only 26.5 million, just

implemented by the country’s Civil

communications among departments

billion, passengers boarded increased

29 percent of the total potential market,

Aviation State Services. In 2002, the

6 percent to 26.5 million and cargo

were boarded in 2002. Because air travel

five largest airlines controlled 48 percent

volume increased 3 percent.

is still seen as somewhat of a luxury

of the market and the top 25 carriers

in Russia, many people have yet to

controlled 80 percent.

control center. China Eastern announced in April

and enhance the airline’s ability to respond to irregular operations. Captain Wu, Yu Lin, senior vice

66 ascend

As part of a government-ordered consolidation, China Eastern Airlines joined with two other carriers — China Northwest Airlines and Yunnan Airlines — to form one of the three largest carriers in China.

The positive trend is also expected

october 2003

67


CapitalizingOnConsolidation_OCT_2003