IT hosts help airlines to soar again

Disputes between Boeing and Airbus spiral. In the US, Delta and Northwest are in Chapter 11 bankruptcy protection. Fuel prices are rising and, in Europe, officialdom itches to penalise the carbon emissions that attend flights.

Passengers meeting discrimination or delay can now invoke regulations to back their complaints. There have been scares about deep vein thrombosis. There have been strikes, and the destabilising effects of natural and medical disasters.
Above all, there are fears about security, and new measures – for example, biometric passports – that go with those fears.

It’s all pretty gloomy for the airlines, except for the low-cost ones. But if the global airline business could really up its game, it could boost the productivity of the world economy.

Airlines’ old legacy systems are tough to maintain. They are costly to update, and costly, too, to interface with other systems. Such costs, together with the licence fees still paid for legacy systems, make it hard for airlines to fund innovation.

Result: most airlines now outsource their IT operations to specialists, such as Amadeus, Sabre, Galileo or Worldspan. These firms also link airline data to travel agents, in what are called global distribution systems.

Analyst firm Gartner has commented for a decade on what it calls the “hype cycle” of technologies, from initial trigger, through peak of expectations and trough of disillusionment, to a final “slope of enlightenment” and “plateau of productivity”.

Yet the new generation of airlines’ customer relationship management (CRM) systems could confound the cynics.

Last month, United Airlines and Lufthansa German Airlines, part of the Star Alliance, announced that they would replace their legacy IT systems. They are going over to Altea, a £400m hosting service, based on the Unix platform and an Oracle database organised by Amadeus.

With developments such as this, there is the hope that, when you’ve had a run of bad flight connections, check-in staff may actually be able to recognise that fact on their terminals and offer some redress. Within the protections of privacy afforded by state regulators, staff can be given prompts about customers.

In principle, airlines will be able to recognise individual customers and their revenue value on all occasions through the entire course of the journey – from airline lounges through to baggage reclaim areas.

Apart from beginning to deliver on the promise of genuine CRM, airlines may come to exemplify the economic merits of outsourcing. In their useful book Strategic Outsourcing: Exploiting the Skills of Third Parties (Hodder & Stoughton, 2002), Ian Benn and Jill Pearcy identify various risks to that strategy: getting locked into something only to find your strategy changes; failing to integrate separate service providers; relationship breakdown; suppliers getting into trouble; and weak competitive differentiation.

With their new generation of IT, airlines may show that these risks are often exaggerated. And with luck, airlines will shake off the malaise they have endured over the past few years.