1. DGL & Asoc – Consultora Aeronáutica - SABUTAI TECNOLOGIAJorge De Buono – Diego Garcia Laborde – Fernando LifsicIT&T AIRLINE SOLUTIONSLATAM ENTRY STRATEGYProducts - Providers and Solutions February 2012
2. Understand the Competitive Environment in LATAMBrief introductions of products, providers and solutionsThere are 12 or more stages in the passenger sales process. Starting from market intelligence to the relatively new elementof generating ancillary revenues.There are numerous systems and solutions available to the world’s airlines from several dozen suppliers. In LATAM some ofthere are present.Market ForecastThe ﬁrst stage in passenger sales is market forecasting, which involves analysing competitors’ schedules, capacities and faresto gain intelligence about a market’s size.The main providers of solutions in this ﬁeld ( MIDT ) are Amadeus, Lufthansa Systems, Sabre, SITA and Travelport. Only somemayor carriers in Latam has application on this.Reservations & Inventory - E-ticketing - Check-in & Departure ControlAmadeus and Sabre offers several products for reservations and inventory control, subdivided into: direct sales channels andairline websites; and off-line channels, such as travel agents, call centers and airline ofﬁces. Ticketing is closely associatedwith reservations, the majority of Latam airlines use e tickets.Check-in and the DCS as one of the core functionalities of the passenger sale and handling process, it is offered by all the largevendors. Have been developed in recent years to include more ways of checking passengers, including self service kiosks andweb-based check-in.Some airlines in Latam ( no many ) are now using check-in and departure-lounge time as opportunities to market and selladditional products and services offered by themselves and third parties to passengers. This includes ancillary revenueservices, so DCS systems have to communicate with these modules as well.For that reason it is recommended that the DCS platform include complete solutions of check-in modules including desk, web,kiosk and mobile check-in, as well as a passenger boarding system.If possible the airlines should be able to choose modules or the complete integrated suite and related solutions. There is areasonable opportunity to give DCS solution in Medium and Small airlines.In largest airlines chances are lower in Core Systems ( Booking – DCS – TKT )Distribution ( web )Several forms of distribution have evolved over recent years. In addition to the traditional GDSs, airlines now distribute theirproducts directly via their websites and indirectly via OTAs . The large providers in LATAM of traditional GDSs are Amadeusand, Sabre.Web distribution was implemented by most of the airlines in the last 4 years, and continue the improvements.Pricing & yield managementRM ( Revenue management ) and pricing is one of the most complex and specialized processes in passenger sales, so thereare few vendors that provide solutions.Navitaire offers its SkyPrice solution for RM, while revenue and yield management is an integral part of HITIT’s CranePaxproduct. Both have not presence in LATAMRevenue integrity & leakageRevenue integrity or protection is the process of ensuring that the correct fares and pricing rules have been applied, and th atfake and unticketed bookings, or double bookings that are unlikely to be ticketed, are cancelledAmadeus has robots that clean up inventory. These analyze all bookings to verify that correct fare rules have been used, andsearch for bookings with fake or suspect names, and bookings in the same name on the same or close ﬂightsCustomer loyalty CRM -Customer loyalty involves FF programmes and customer relationship management (CRM). Solutions are provided by the largevendors, as well as specialist providers. In Latam there are several providers on market and in general do not offer CRMsolutions.
3. Majority of Largest LCC in LATAM do not offer frequent pax programs.Amadeus offers two products for FF Programmes: Customer Loyalty for small and medium-sized airlines; and BLS for largeairlines. Both products manage FF points in terms of record-keeping, allowing and monitoring usage. ( Amadeus does nothave a CRM product, although its Altea Reservation system does use ranking from other CRM systems to adapt treatment ofcustomers ).HITIT’s with Crane FF, has a large opportunity in Latam included Crane 4C CRM, which allows airlines to track every piece ofpassenger correspondence so that passengers get a response to all communication with the airline.HITIT with Crane Intelligent Member Proﬁles (IMP) have a competitive advantage in the marketRevenue accountingRevenue accounting is a module provided by some, mainly big, vendors, but also a few specialists. Like DCS, it is a core part ofthe traditional passenger sales process.As integrated solution there are opportunities in the Latin American market.Business intelligenceBusiness intelligence, the process whereby an airline collects data on its own sales, revenues and passenger statistics anduses them to provide information on its performance there is not very developed in Latam ( specially in medium and smallairlines ).This is a specialized service offered by a few vendors in latam ( ie Calidris, which offers specialized revenue integrity andleakage solutions, also provides its business intelligence service Calidris Intelligence ).Ancillary revenuesThe major solutions vendors installed in Europe , USA and Asia now provide airlines with websites for checking schedules,seat and fare availability, making reservations, and completing transactions. They have since developed the ability to offer e-commerce and dynamic packaging technology to airlines, as well as systems for ancillary products, which include pricing rulesand product inventory and availability information and data.AirSavings as a specialist provider of ancillary revenue solutions is pushing on Latam market. Offer Its Airline Plus product asan aggregation platform for selling third-party products, and also provides dynamic packaging capability.AirSavings also offers Privilege Outlet, which invites passengers to an event on the internet, typically offering goods atdiscounted prices for a limited period.Farelogix it´s another specialist solutions provider, which launched its FMS2 product in January 2009 in Latam . FMS2 is aweb-based business-rules engine for the different products an airline offers.Modern technology that enables airlines to generate additional revenue will be the key in LATAM market.HITIT should consider offering it by himself or through an strategic partner.
4. Technological trends. BriefThe priority investments on IT&T of mayor and medium LATAM airlines ( Full Services or LCC ) are focus on Improvingcustomer service , Supporting revenue opportunities and Reducing cost of business operations. Most airlines are planning toinvest in mobile passenger services. The outlook remains positive, expecting IT&T spend to increase in 2012Mobile services top the investment priority list, with a 40% increase in the number of airlines planning major investments inthe passenger area, compared to last year. Passenger processing such as check-in, flight status notifications and electronicboarding passes are the main focus, while travel distribution via mobile phones is also on the rise.Upgrades to airline core passenger management and customer relationship systems will also receive significant investmentsover the next years.IT&T investment programs in the next years Major Programmes R&D/pilot No plan Mobile device based services for passengers 27 30% 43% Integrating electronic documents (e.g. EMD, aircraft parts, boarding passes) 34% 16% 50% Upgrade core passenger management system 47% 16% 37% Improve direct customer relationship system functionality ( CRM ) 44% 39% 17% Mobile device based services for staff ( ei YADA ) 26% 16% 58%As we know mobile phones are set to become a significant sales channel in the future. However few LATAM airlines areactively involved right now. Only major airlines are planning to sell tickets on mobile phones by 2014.In addition, these major airlines plan to extend mobile distribution services and sales onboard services.Airlines are also looking to add new sales channels. Kiosks and social network sites are the latest addition to a growingchannel mix. Early adopters are already integrating social media sites in the sales process. 40 % of total airlines sell or plan tosell tickets via social media networks by 2014.As in the rest of the world, 15 % of regional passengers expected to use mobile phones for check-in. Airlines has just begun toreduce agent-led passenger operations in favour of more self-service options.Check-in via Internet is usual all over, and mobile phones, are predicted to grow fastest in major airline segment.Strategy for kiosks 40 % No kiosks and no plan to implement 40 % Increase total number of check-in kiosks 20 % Increase number of kiosks for other usage 25% Others 15 % 20 % 25 % 15 %DistributionAll the Airlines are continuing to gain more control of ticket distribution, selling via “ directly controlled channels”. The process of Ancillary it is just starting in LATAM . The suppliers of these technologies will be the key to penetration, evenfor other software. Ancillary services are primarily sold through airlines own distribution channelsInfrastructureImplementation of all virtualisation and cloud services has increased, with Infrastructure-as-a-Service as the airlines’ mainarea of investment. 70 % of airlines have or plan to have Infrastructure Virtualisation/Service implemented by 2014
5. Map Segments, Market penetrationIn the segment of the major airlines ( Traditional and LCC / Hybrid ) principal suppliers on core systems of passenger sales (bookings - TKT – DCS ) are Sabre, Amadeus and Navitaire. These providers have a dominant market position in this particularsegment.Nevertheless , there are an interesting market and opportunities on complementary suites especially Loyalty, CRM andBusiness IntelligentTraditional Major Airlines - Initial view of Core Sys, Providers and SuitesIn the Core Systems ( Reservation - DCS - etc ) the airlines have suppliers in all cases, but in suites there are moreopportunitiesHigh Medium Low MAYOR AIRLINES IATA core sys providers suites providers traditional Res - DCS - tkt hitit posibility web FRM mkt & Plannig FF - Loyalty Business Inteligent Revenue Acounting Consulting hitit posibilityAerolíneas Argentinas AR Sabre sonic Sabre Sonic Web aerolineas plus no noAeroméxico AM Sabre sonic Sabre Sonic Web Sabre air vision on request on request Indra ARACS FX noAvianca AV Amadeus Altea on request on request LifeMiles on request on request IndraCopa Airlines CM on request on request OnePass on request on request on requestLAN Airlines LÁ Sabre sonic on request Indra LANPASS Indra on request on requestLAN Argentina 4M Sabre sonic on request Indra LANPASS Indra on request on requestLAN Perú LP Sabre sonic on request Indra LANPASS Indra on request on requestTACA TA Amadeus Altea on request on request LifeMiles on request on request IndraTAM Airlines JJ Amadeus Altea on request on request TAM Fidelidade Sabre - Airvision Indra ARACS FX noMajor LC / Hybrid Airlines - Core systems providers and suitesThe concern for web development in this segment is high. There are more opportunities in suites.High Medium Low MAYOR AIRLINES IATA core sys providers suites providers Low Cost / Hybrid Res - DCS - tkt hitit posibility web FRM mkt & Plannig FF - Loyalty Business Inteligent Revenue Acounting Consulting hitit posibilityGOL G3 Navitaire Navitaire on request smiles on request Indra ARACS FX on requestAZUL AD Navitaire on request on request Tudo Azul on request on request on requestWEB JET WH Travel Tech.Inter Mac Media on request NO on request on request MacquiereINTERJET 4O Navitaire on request on request CLUB INTERJET on request on request on requestVOLARIS Y4 Navitaire on request on request NO on request on request on requestTRIP LINHAS AEREAS 8R in house on request on request NO on request on request on requestVIVAAEROBUS VB EzyFlight on request on request NO on request on request on requestMedium and Small Airlines by country - Core sys and suitesThe segment of medium and small airlines is where a provider have the best opportunities, not just the ability to install orchange the existing Core Sys ( Reservation – DCS etc ) but also for the suites. Most of the medians and small airlines are justbeginning the IT&T process.High Medium Low LATAM quantity Basic Core Sys Suites Medium - Small airlines - Start Up of airlines percentage airlines with HITIT posibility percentage airlines HITIT posibility ( start up Core Sys installed ( Install or change ) with suites CRANES FF - 4C -OCC - SP - IMP Country Included ) ( web included ) Crane Pax solutions installed SLOTS - CREW - RCA . POPArgentina 8 80% 20%Bolivia 9 85% 15%Brasil 26 80% 30%Colombia 15 80% 30%Chile 10 86% 40%Ecuador 7 75% 30%Peru 9 75% 30%Uruguay 4 50% 40%Venezuela 15 76% 35%Mexico 30 90% 50%others 38 85% 30%
6. Potential market penetration – Core Sys ( preliminary )Global market by airlines ( total )There are 171 airlines in Latam between large, LCC and mediumand small airlines.In the group of major airlines and some medium (51 airlines)potential penetration of a medium provider in Core Sys is almostnil ( because of the difficulties posed by migration to othersystems and commercial ties initiated in a while betweensuppliers and airlines ).But there is large segment of medium-sized and small airlinesthat has a patchwork of software (not integrated) in which arenoted with strong ability to penetrate with Core Sys and withspecific software solutions integrated ( ie CRANE Pax and FFLoyalty - Intelligent and web solutions )Major Airlines by pax – Core SysThe 10 most important or major traditional airlines ( full services) in LATAM carry about 130 million passengers per year .Of this total a medium providers like Hitit ( ie Crane Pax ) hasopportunities to reach 20 million ( pax / PNRs ) and possibility ofanother 10 million ( pax / PNRs ) per year, in this particularsegment.The task will not be quick or simple, but there are opportunitiesespecially in secondary or feeder airlines under the control ofmajor airlines.Major LCC/Hybrid by pax – Core SysIn the market segment of the largest LCC / Hybrid ( 7 airlines inLATAM region including Mexico ) possibilities like Crane Pax byHitit are more interesting than the traditional segment.From a total estimated 14 million passengers / PNRs of the largetLCC, a medium provider ( ie HITIT ) could access 5 millionpassengers / PNRs. depending marketing strategy and pricepolicy.The advantages of technology integrated ( ie CRANE Pax andothers solutions of HITIT ) will be the key.In the latest survey conducted by Sabre ( January 2012 ) to decision makers and influencers in the field of InformationTechnology (IT) in 77 of the top 200 carriers of various business models and operations, including global networks, low-costcarriers, regional and domestic , had these results. Reflect the views of officers, directors, managers and analysts in the airlineindustry.
7. They also represent a sound basis for Sabre Airlines Solutions, to understand the challenges specific to the industry, anddevelop appropriate solutions to meet these requirements.Sabre Airline Solutions provides technology solutions for the international aviation industry. Offers Softwares business aslargest service industry with its innovative reservation system, business planning and operations software used by over 300airlines and 100 airports worldwide.Each year more than 450 million passengers board planes through the technology of Sabre. Sabre Airline Solutions is part ofSabre Holdings, a global technology company dedicated to the travel industry and tourism, the most widespread in the world.