Introduction to Airline Information System

Slide 1: Introducing Airline Information System By Siddhartha Tripathi Thursday, August 30, 2007

Slide 2: Agenda 1. Evolution of Airline Industry 2. Classifying Airlines and Introducing IATA 3. Airline Industry Value Chain 4. Introducing Airline system Components 5. Challenges facing Airline Industry 6. IT trends in Airline Industry 7. Developing IT Roadmap for Airline 8. Most Urgent IT Improvements IDC Recommendations 9. Using IT to Improve Operations:- Visiting few Airline Operations 10. IT Enabled Airline Success Story 11. Before we say “Thank You”

Slide 3: Evolution of Airline Industry We have evolved from this … Contd..

Slide 4: And this Contd..

Slide 5: To this Contd..

Slide 6: And Some Stats to think !! • 28% of all online purchases are travel related • Travel & Tourism market: – 1999: $2.1 trillion – 2010: $3.9 trillion (Source: Satellite Accounting Research) • Online Travel Booking – 1999: $6 billion – 2002: $30 billion (Source: PhoCusWright) Contd..

Slide 7: And Some More Stats to think !! US majors – internet sales Carrier % Flown Booked Online Alaska Airlines 36% America West Airlines 33% US Airways 24% Delta Air Lines 24% Continental Airlines 22% Northwest Airlines 22% United Airlines 22% American Airlines 20%

Slide 8: Types of Airlines( US Classification) • Acc. To US Federal Government Airlines categorized into – Major • A major airline is defined as an airline that generates more than $1-billion in revenue annually. • There were 12 major airlines as of 2000 – National • Scheduled airlines with annual operating revenues between $100-million and $1-billion. • Examples of national airlines include Aloha, Atlas Air, Airtran, Emery Worldwide, Evergreen, Hawaiian and Midwest Express. – Regional • Airlines service particular regions of the United States, filling the niche markets that the major and national airlines may overlook  Large regional - These are scheduled carriers with $20-million to $100-million in annual revenue. They operate aircraft that can accommodate more than 60 passengers.  Medium regional - These airlines operate on a smaller scale, with operating revenues of under $20-million, and often use only small aircraft.  Small regional - These airlines don't have a set revenue definition, but are usually referred to as \"commuter airlines.\" They use small aircraft with less than 61 seats. Contd..

Slide 9: Prominent Organizations In Airline Industry • IATA – International Air Traffic Association between 1919 and WWII – International Air Transport Association since 1945 • IATA* has two functions – Trade Association (technical, legal, financial, traffic services and most agency matters); – Tariff Coordination (passenger fares and cargo rates, agents' commissions). *IATA only controls International flights

Slide 10: Introducing SITA, OAG and ATPCO. • SITA – Societe Internationale des communications aeronautiques (SITA) handles shared communication means, including network and devices • OAG – Official Airline Guide – Published by the homonymous company – contains the airline schedule information, so for every flight essentially: • The departure and destination airports, • The departure and arrival times, • The flight number. – OAG maintains an airline schedules database, which holds flight details for 1000 airlines and more than 3000 airports and is updated around ten times a second. • ATPCO – Airline Tariff Publishing Company (ATPCO) is a fare distributing company

Slide 11: Introducing GDS • GDS:- Global Distribution System, 4 Major GDS • System architectures are largely based on a mainframe TPF (Transaction Processing Facility) – Sabre • Created by – American Airlines – Amadeus • Created by – Air France – Iberia – Lufthansa – SAS – Galileo • Created by – Aer Lingus – Air Canada – Alitalia – British Airways – KLM – Swissair – TAP – US Airways – WORLDSPAN • Created by – Delta – Northwest – Trans World Airlines

Slide 12: Airline Industry Value Chain FIRM -Financial Policy - Accounting -Regulatory Compliance - Legal - Community Affairs INFRASTRUCTURE Flight, route and HUMAN Pilot Training Baggage Handling Agent In-flight RESOURCE yield analyst Safety Training Training Training Training MANAGEMENT training Product Computer Reservation System, In-flight System Baggage Tracking TECHNOLOGY Development Flight Scheduling System, Yield Management System System DEVELOPMENT Market Research Information Technology PROCUREMENT Communications •Route Selection •Ticket Counter •Baggage System •Promotion •Lost Baggage Service •Passenger Service •Flight •Advertising •Complaint Follow-up Operations •Gate Operations •Advantage System Connections •Yield Management •Aircraft •Rental Car and Program •Travel Agent System (Pricing) Operations Hotel Reservation We Need •Fuel •On-board Service System Programs •Flight •Baggage Handling •Group Sales Process and EfficientScheduling •Crew Scheduling •Ticket Offices System, •Facilities Planning To derive value •from Acquisition Aircraft Value Chain INBOUND OPERATIONS OUTBOUND MARKETING SERVICE LOGISTICS LOGISTICS AND SALES from Competitive Advantage: Creating and Sustaining Superior Performance, copyright 1985 by Michael E. Porter.

Slide 13: Airline system Components Inventory and Content Distribution Compliance and Network Security Emergency Response & Business Continuity Pricing And HR Management Air Cargo Revenue Management CRM System System System System Maintenance And Business Processing Sales and Marketing Engineering Airport Management System System System System Flight Operation System Finance Central Reservation Crew Management System System System Agile Business Process and Demand Mgmt.

Slide 14: Airline system Components Inventory and Content Distribution Compliance and Network Security Emergency Response & Business Continuity System to book ticket on airline. Should at least provide for Central Reservation 2. Internet booking:- Internet Booking System enables passengers, travel System agents and corporate customers to search for flights and fares, and book airline seats on the internet. 3. E Ticketing:-e-Ticketing replaces a conventional paper ticket with an electronic ticket. All booking and ticket details are stored in the airline’s computer system. Passenger is issued e-ticket receipt for security and immigration purposes. 4. Booking through ATM and Kiosk 5. Integration with Major Global Distribution’s 6. Integration with call center for telephonic booking Agile Business Process and Demand Mgmt.

Slide 15: Airline system Components Inventory and Content Distribution Compliance and Network Security Emergency Response & Business Continuity Remember 80/20 rule. 20% customer give 80% revenue. CRM The CRM system should provide System 3. Prediction into customer buying behavior 4. Identify frequently flying and high profile flyers 5. Integrate to DW/BI system 6. Forecast demand 7. Identify customers for marketing campaign based on customer profile and past data 8. Provide for customer feedback through various touch points ( SMS, PDA, Survey):- Involve Customer The crux is to identify behavior of customer/ prospect for better retention and service Agile Business Process and Demand Mgmt.

Slide 16: Airline system Components Inventory and Content Distribution Compliance and Network Security Emergency Response & Business Continuity Pricing The use of Real-Time Dynamic Pricing Engine positions airlines And Revenue Management to System 3. Adapt inventory controls to the very dynamic market conditions including influx of low-fare competition, alternate pricing models, and distribution channel differences. 4. It allows integrated controls for selling over e-commerce channels along with traditional distribution channels and provides the infrastructure for customer-centric revenue optimization 5. Revenue Management System Revenue Management System (RMS) enhances airline revenues by optimizing traffic and yield mix with the help of past data, current trends, and demand forecast for different flights, segments and fares. Agile Business Process and Demand Mgmt.

Slide 17: Airline system Components Inventory and Content Distribution Compliance and Network Security Emergency Response & Business Continuity System to provide the easy/configurable view of how airline is performing. Finance System The system should at the minimum provide for • Automating extracting data from revenue accounting and other sources • Allow upload of manual data such as budget and target • Should integrate with Forecasting and Procurement system • Provide KPI as • Load factor • By period , sector, route, origin and destination • By market-By point of sale/agent wise, product • Allow user to create reports on demand • Should integrate with DW, Audit controls Agile Business Process and Demand Mgmt.

Slide 18: Airline system Components Inventory and Content Distribution Compliance and Network Security Emergency Response & Business Continuity System to Manage sales and marketing. The system should at the minimum Sales and Marketing System provide for • Managing sales record and integration with Financial and revenue system • Alerts based on defined competitors events • Daily KPI monitoring • Campaign management • Target and actual achieved reporting by • Reason • Route, flight, slot and carrier type • Configurable parameter • Alerts integrated with CRM system Agile Business Process and Demand Mgmt.

Slide 19: Airline system Components Inventory and Content Distribution Compliance and Network Security Emergency Response & Business Continuity The use of System to define new business scenario and processes including 2. New fares in response to campaign . Business Processing System 3. Security and baggage handling process 4. Baggage tracking 5. Procurement policy • IT • Material 6. Easy to use reporting and data analysis 7. Defining new distribution channel 8. Check In process 9. Catering and dining forecasting process The Crux is to use system to define process and track and improve the business process Agile Business Process and Demand Mgmt.

Slide 20: Airline system Components Inventory and Content Distribution Compliance and Network Security Emergency Response & Business Continuity Maintenance And Engineering System to Cover aircraft maintenance and engineering operation System 2. To ensures real-time, total control of the maintenance environment 3. To optimizes daily operations and complement managerial decisions, resulting in significant cost savings and improvement in overall performance. 4. Should integrate with with flight operation systems and different finance and human resource management applications. Agile Business Process and Demand Mgmt.

Slide 21: Airline system Components Inventory and Content Distribution Compliance and Network Security Emergency Response & Business Continuity HR Management System System to manage Most Important Resource ( Employee) Managing employee lifecycle in organization including • Recruitment requisition, Interview and reference check • Employee Induction and training • Leave Management • Performance Management • Security Checks • Retention and Motivation scheme • Productivity Improvement Agile Business Process and Demand Mgmt.

Slide 22: Airline system Components Inventory and Content Distribution Compliance and Network Security Emergency Response & Business Continuity Flight Operation System System to manage Flight daily operations from a compact interface and report operational results 2. Movement Management 3. Graph of Schedule with status 4. Aircraft Availability 5. Produce Delay Report 6. Handle Incoming SITA, GDS message 7. Update Schedule Agile Business Process and Demand Mgmt.

Slide 23: Airline system Components Inventory and Content Distribution Compliance and Network Security Emergency Response & Business Continuity System to provide Tracking and Managing Cargo. The system should at the Air Cargo System minimum provide for • Use of RFID tags to determine cargo location in Bay area • Tracking Cargo till it reaches it’s end destination • Suggesting bay area for cargo depending on other cargo in line • Pricing based on weight/ Location and type • Reporting capability and integration with procurement system Agile Business Process and Demand Mgmt.

Slide 24: Airline system Components Inventory and Content Distribution Compliance and Network Security Emergency Response & Business Continuity System to schedule crew staff. The system should at the minimum provide Crew Management System for • Scheduling of cabin crew • Compliance to labor laws • Crew teaming alert ( to alert if 2 people on same flight/ team has tendency to fight) • Crew hour logging The crux is to have a motivated and energized crew either on Board/ Front Desk or ground operations Agile Business Process and Demand Mgmt.

Slide 25: Airline system Components Inventory and Content Distribution Compliance and Network Security Emergency Response & Business Continuity System to make sure that compliance and integration with Airport scheduling Airport Management system, security measures, circulars, are taken care of. System 2. Should integrate with airport scheduling system 3. Should integrate with airport security system, for checking passenger 4. Departure control system integration Agile Business Process and Demand Mgmt.

Slide 26: Challenges facing Airline Industry Key Goals Key Challenges & Trends Maximize assets' utilization Achieve demand- driven supply Limited Growing chain Capacity Demand efficiencies and Innovation real-time visibility Rising Multi-modal Costs Distribution` Market Attain ‘sense & Liberalization respond' capabilities to improve customer experience

Slide 27: Challenges facing Airline Industry 1. Attaining Sustained profitability 2. Managing Customer demand of various touch point 3. Turning inflexible operative chains into responsive and adaptive service networks 4. Enabling new business models for long-term business transformation 5. Smooth real-time synchronization of information both internally and across the value network – not only to allow faster deployment of new strategic customer-facing services, – but also to improve supply chain efficiencies — as a transition is taking place from a sequential supply chain mode of operation to a meshed workflow, – where multiple supply networks must be automatically managed and synchronized in real-time. 6. Economic and competitive pressure – Yields / fares are falling – Costs not falling proportionately (esp. fuel) – Emergence of low cost carrier and distribution model – GDS’s continue to increase charges – Increased competition from LCCs and reinvigorated airlines 7. IT costs associated with legacy hosting / reservation architecture are high 8. Current systems do not provide modern interfaces that customers demand and employees expect – Inflexible systems – hard to maintain / improve – Transaction oriented systems do not easily support product-based or customer-centric views – Systems were not built to meet current user demands – web sites, screen scrapers and more 9. Legacy systems do not exploit low-cost, scaleable technology or modern web-based economics 10. Need for Accurate real-time business performance management capabilities 11. Need for Fully automated, paper-less, and process-oriented collaborative workflows – that conform to the regulatory environment.

Slide 28: Challenges facing Airline Industry 1. Empowering employees to be more productive 2. Demand for any time access to business application through secured layers 3. How to accelerate competitive advantage and differentiate airline through improved employee, aircraft and alliance leveraging? 4. Compliance with Industry standards 5. Automating customer touch points with transformational technologies, such as e-ticketing and self-service kiosks, remains the focal point for investment. 6. Decreased customer loyality 7. Tracking customer luggage/ cargo by use of RFID 8. Need for same day revenue reporting 9. Integration with ever emerging payment mode and Desired security from Internet fraudulent transaction 10. Merger and acquisition 11. Entering the wireless arena

Slide 29: IT trends in Airline Industry

Slide 30: IT trends in Airline Industry

Slide 31: IT trends in Airline Industry

Slide 32: IT trends in Airline Industry

Slide 33: IT trends in Airline Industry

Slide 34: IT trends in Airline Industry Some Finding From SITA & Airline Business Survey No. Of Participating airlines:- 100 Region:- Asia Pacific 5. Asia-Pacific airlines spend an average of 2.0% of revenues on telecommunications and IT 6. 50% of airlines have seen their IT budgets increase 7. over 2004 8. 46% of airlines expect their IT budget to increase in 2006 9. Short-term projects with proven paybacks were rated the highest IT priority by the most airlines – 46% 10. At least 73% of airlines expect to offer some form of inflight data connectivity by 2007 45% of airlines plan to offer voice mobile telephony by 2007 11. 36% of airlines have deployed self-service kiosks for check-in 12. 23% of airlines use bar coded boarding passes 13. 86% of airlines sell some tickets online 14. 9.7%, or 1 in ten, of all tickets are sold online. Of these, 70% are sold on the airline’s own website 22% of all tickets are fulfilled as e-tickets

Slide 35: IT trends in Airline Industry Some Finding From SITA & Airline Business Survey No. Of Participating airlines:- 100 Region:- Europe 5. European airlines spend an average of 1.9% of revenueson telecommunications and IT 6. 40% of airlines have seen their IT budgets increase over 2004 7. 29% of airlines expect their IT budget to increase in 2006 8. Short-term projects with proven paybacks were rated the highest IT priority by the most airlines – 54%. Customer service projects were ranked highest by only 20% 9. At least 31% of airlines expect to offer some form of inflight data connectivity by 2007 10. 31% of airlines have deployed self-service kiosks for check-in 11. 17% of airlines currently use bar coded boarding passes 12. 83% of airlines sell some tickets online 13. 24%, or nearly 1 in four, of all tickets are sold online Of these, 85% are sold on the airline’s own website 14. 35% of all tickets are fulfilled as e-tickets 15. 20% of airlines plan to offer voice mobile telephony by 2007

Slide 36: IT trends in Airline Industry Some Finding From SITA & Airline Business Survey No. Of Participating airlines:- 100 Region:- North America 5. North American airlines spend an average of 1.4% of revenues on telecommunications and IT 6. 63%, or more than 3 in every five, of all tickets are sold online. Of these, 55% are sold on the airline’s own website Customer service or marketing advantage projects were rated the highest IT priority by the most airlines – 56%. Short-term projects with proven payback were ranked highest by 44% 7. At least 11% of airlines expect to offer some form of inflight data connectivity by 2007 8. 11% of airlines plan to offer voice mobile telephony by 2007 9. 56% of airlines have deployed self-service kiosks for check-in 10. 67% of airlines currently use bar coded boarding passes 11. 85% of airlines sell some tickets online 12. 67% of airlines expect their IT budget to increase in 2006 13. 56% of airlines have seen their IT budgets increase over 2004

Slide 37: Business Transformation to Support Innovation Top Business Initiatives in the CEO Agenda Airlines, Railways, Public Transport 1. Customer Service enhancement 2. Supply chain efficiency improvement 3. IT organization responsiveness and efficiency improvement 4. Regulatory Compliance 5. Efficient Sourcing & Procurement 6. Mobile Workforce (Ranked in order of Importance) Continuous Demand-Driven Innovation Growing demand, limited capacity & profit pressure are requiring new dynamic & responsive IT systems Source: IDC European Vertical Market LOB Survey, October 2006 – N. of respondents: 18

Slide 38: IT trends in Airline Industry Summary The writing on wall is clear. More and more companies are planning to spend on IT in areas of 3. IP enabling 4. Outsourcing for advantage Airlines are 5. E-ticketing Looking to Outsource and adopt/ develop 6. Migration of legacy customer centric 7. RFID solutions best of breed solution 8. VOIP 9. Call Center 10. Data and Voice connectivity 11. Infrastructure upgrade

Slide 39: Developing IT Roadmap for Airline Study Of Airline Understanding IT System Long Term Plan Evaluating IT readiness Launching Basic FFP/CLP Pain Point Prioritization & Deciding IT Application Launch Schedule Infrastructure Airline Website Launch Launching Basic Building Framework Intranet Portal For Internal Portal

Slide 40: Developing IT Roadmap for Airline Customer Focused Application Integrated Backend System` Inventory Revenue Management Transitioning Website Application Application Into Shopping Portal Introducing Online FFP/CLP Cargo Management Airline maintenance System Central System Dynamic Packaging Integrated Database Back End System Web Check in, SMS check in Application Introducing E-ticketing/ Web Booking Crew/ Aircraft Other Back end Scheduling Application Introducing Application Wireless Network System

Slide 41: Developing IT Roadmap for Airline Demand Data Warehouse Forecasting Alert Systems CRM System &BI System Central Database Integrated Back End System Robust Delivery Network Planning IT system for EmpoweredFront Office/Cal Center Airline Wireless Network Internet Network Mobile Network (Wi-Fi)

Slide 42: ROI-IT Empowered Enterprise Time Period Benefit 1. Reduced Distribution cost 0-1 Year 2. Increased distribution channel Do you Know? Delta Airlines uses special RFID 3. Increased customer delight technologies to monitor the performance of aircraft engines to 4. Improved top-line compare latest data with historical 5. Better informed employee data to anticipate potential problems. Maintenance costs have been 6. Reduced Employee Administration cost half. reduced by 7. Profile based application access through Portal 1. Move toward ticket less travel 1-3 year 2. Faster sales closure, lesser load on call center 3. Use of RFIP for better cargo tracking 4. Revenue Management system, improves identifies yield improvement areas. More Profitability 5. Better scheduling and lesser flight delays 6. Improved customer retention 7. Reduced time in booking and size of queue 8. Flight schedule change sent to customer:- happy customer 9. Revenue through shopping at Airline Portal 10. Better fare management and Dynamic packaging of inventory

Slide 43: ROI-IT Empowered Enterprise Time Period Benefit 1. Event driven responsive organization with focus on customer 3+ Year 2. Integrated and loosely coupled system for business agility 3. Customer retention and partition 4. Improved customer buying behavior forecasting 5. Mobile work force, improved productivity 6. Airline portal starts to suggest customer on flight and promotion based on his/her past behavior 7. Web 2.0, greater involvement and social networking, more clout to airline 8. Ticket less airline 9. Improvement exception management in Airline Operation and supply chain, through alert systems 10. Stabilized, yet flexible IT environment for growth Overall, company will witness improved Top line, growth and customer satisfaction, with each successful IT initiative.

Slide 44: Most Urgent IT Improvements IDC Recommendations Remove Improve Improve Advanced Improve Legacy Networks Mobile Demand Security Silos-based Workers Mgmt. & platforms Efficiencies Safety SOA IP, Optical IT Security, Wireless Advanced Sensor Networks Planning, Networks, Scheduling Surveillance

Slide 45: Airline Networks Need to Rely on Advanced Communication Networks Wireless Network Internet Wireless Devices backbone Back-end Sensor Key Goals: Networks 1. Real-time monitoring of mobile assets and cargo 2. Increased operational accuracy •RFID 3. Higher transport efficiencies •Biometrics 4. VoIP, IP-based video surveillance to improve safety while reducing communication costs •Explosive 5. Enabling flexible deployments of new workforce applications detection and customer services •Etc… Optimized Mobile Workforce efficiencies are instrumental to enhance mobile assets utilization & improve the customer service

Slide 46: Using IT to Improve Operations Intelligent continuous schedule light schedule and resources allocation can be optimized up to hours before actual operation Ground-Delay Weather forecast Flight schedule Happy Customer Flight Proactively System Fleet assignment Can Re-schedule Activities Delay Based on Expected situtaion reduced/ Avoided Crew planning Other Factor Air-Delay

Slide 47: Using IT to Improve Operations Dynamic management: Intelligent queuing Passenger information is available to airline (amount of luggage, nationality, number of children, visa status etc separate passenger into fast/medium/slow based on their demand service rate queue Fast Queue Server Server (check in- (check in- Medium Slow Counter) counter) Queue Slow Before Using Intelligent After Using Intelligent System to Bifurcate Passenger System

Slide 48: JetBlue: A Success Story • Gained competitive advantage where others failed • Proper technology and management methods • Reducing costs resulting in reduced pricing • Improving service • Massive Automation – Automation of services with software • Combination reservation system and accounting system • Supports customer services and sales tracking – Electronic tickets • No paper handling or expense • Encourages online ticket purchases • Avoids travel agents • Significant savings in cost – Maintenance information system • Logs all airplane parts and time cycles • Reduces manual tracking costs – Flight planning software • Maximize seats occupied on a flight • Reduced planning costs

Slide 49: JetBlue: A Success Story (Cont.) Massive Automation – In-house software for tracking operational data • Updated on a flight by flight basis • Accessible by airline’s 2,800 employees • Managers are able to respond immediately to problems – Wireless devices for employees • Report and respond to irregular events • Quick response • Events recorded for future analysis – Training records stored electronically • Easy to update • Efficient retrieval – Away from Tradition • Decision to not use the hub and spoke routing method • Paperless Cockpits • Laptops for Pilots • Harnessing IT to maintain a strategic gap

Slide 50: See What E-Distribution can do Continental Airlines' Web Site Generates Record Sales; Hitting $2 Billion Annual Rate HOUSTON, Aug. 11 -- Continental Airlines today announced that its continental.com web site is generating record sales volume for the airline, recently setting a single-day sales record and achieving record sales volume of $2 billion for the most recent 12-month period, ending July 31. “We’ve made a significant investment in our web site’s features and functionality to make it a full-service travel site,” said Jim Compton, executive vice president- marketing. “Seeing this dramatic growth in the site’s usage is rewarding because this is such an efficient method for ticket sales.” On one day in July, continental.com racked up $8.5 million in sales, setting an all-time single-day record. This record volume is equal to 34% of the worldwide passenger sales volume that Continental achieves from all sources in an average day. Continental Airlines Press Release, Aug 11 2005

Slide 51: 1. Innovation in Technology key to sustained profitability for airlines 2. Identifying, improving and Integrating business process using IT can create a true “Dynamic Business Platform” to fuel the growth of Airlines 3. Airlines will continue to outsource non-critical operation for improve profitability 4. GDS may come under threat from GNE 5. Increasing distribution channel for ticket delivery, improved customer experience, customer involvement is the key to success in Airline Business 6. Bigger Airlines are more at threat because of changing environment, then newly emerged LCC’s. 7. Airlines will Use RFID, Wireless network, hand held devices, Intelligent systems to maintain service differentiation and gain customer loyalty. 8. Airlines are in a stage where they are evolving from transaction centric enterprises to customer focused enterprise. 9. Collaborative application, bio-metric sensors and workflow automation tools will continue to gain more acceptance with Airlines.

Slide 52: Thank You! Questions? Please email me at: siddhartha@bsil.com Siddhartha Tripathi Manager Marketing BSIL www.bsil.com