IT Strategy in Airlines Industry

Presented by:
Branden Birmingham
Christopher Furton
Gregory Hinner
Stacey Orfeo
Clifton Russ
MULTI-COUNTRY ANALYSIS OF STRATEGIC
INFORMATION MANAGEMENT IN THE AIRLINES
INDUSTRY
Syracuse University
IST 755 – Spring 2015

OVERVIEW
• Part 1 – Airline Industry Analysis
• Airline Industry Demographics
• Strategic Analysis
• Strategic Information System Analysis
• Part 2 – National Environments
• National and Industry Environments
• United States
• South Africa
• China
• Strategic Analysis
• Strategic Information Systems Analysis
• Part 3 – Synthesis

PART 1.1: AIRLINE INDUSTRY ANALYSIS
Overview and Future Growth Projections
• Demand is tied to economy affecting
business and leisure travel.
• Profitability of individual companies tied to
efficient operations, fuel costs, and labor
costs.
• Economies of scale benefit large companies
with ability to provide more extensive
services.
• The US Industry is highly concentrated where
65% of industry revenue comes from the four
largest companies.
• Small companies can compete at local and
regional levels. (FirstResearch, 2015, p.2)
• Companies in this industry offer scheduled
air transportation of passengers (90% of
revenue) and cargo (approximately 10% of
revenue)
• Increasing demand for services: Air travel
likely to double over next 20 years. (Pearce,
2014)
• Demand for passenger travel has accelerated
beyond demand for cargo (Pearce, 2013)

Global Company Comparisons
• Global Leader in Number of Employees: USA’s United Airlines (left chart)
• Global Leader in Revenue for 2013: USA’s United Airlines (right chart)
0
100
200
300
400
Leading Airlines in 2013 by
Revenue Passenger Kilometers
(in millions)
(http://www.statista.com/statistics/269617/top-10-airlines-worldwide-by-number-of-
passengers/)
Rank Airline
Total
Employees
(Full-Time)
1 United 78,835
2 Delta 75,737
3 American 60,714
4 Southwest 46,278
5 US Airways 31,763
6 JetBlue 13,665
7 Envoy** 10,841
8 Alaska 10,202
9 SkyWest 9,642
10 ExpressJet 8,671
(http://www.rita.dot.gov/bts/press_releases/bts009_15/)

Financial Statistics: Profitability and Industry Revenue
(http://www.statista.com/statistics/278372/revenue-of-commercial-airlines-worldwide/)
0
200
400
600
800
1000
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
$USBillions
Year
Revenue of Commercial Airlines (Global)
• Profitability: Net Income is 1.4% or $5.65 USD per departing passenger (left chart)
(FirstResearch, 2015, p. 13)
• In 2014, global industry revenue was 751 Billion US Dollars (right chart)
(http://www.iata.org/publications/economic-
briefings/profitability-and-the-air-transport-
value%20chain.pdf)

• S&P 500 Airlines (Industry) outperformed S&P 500 Index starting in 1stQtr 2014
• Airlines Industry trailed Index between 4thQtr 2010 until 1stQtr 2014
• Airline shares increased 40% in 2014 in part due to falling energy prices.
Financial Analysis: Industry Share Prices and S&P 500 Index
(http://markets.ft.com/research/Markets/Tearsheets/Summary?s=SP500-203020:IOM)

Global Industry Information Technology Spending
• Industry is experiencing a slow but sustained recover of IT investment aligned with industry’s
economic performance (SITA Insight, 2014, p.4).
• As of 2014, overall IT spending was 2.2% of revenue as a result of higher capital investment in
new generation systems and infrastructure (SITA Insight, 2014, p.4).
(http://skift.com/wp-content/uploads/2014/07/2014-Airline-IT-Trends-Survey_0.pdf)

• Airline industry is highly concentrated in the world.
This is due to competition and trying to bring air
travel to many areas.
• World wide there are approximately 250 or more
airlines in existence today. These rang e from small
airlines to large airlines
• The implications to having so many airlines is the
competitiveness, some airlines make money while
others lose it, or get bought out.
• Example of this is the American Airlines and US
Airways merger, which allowed for them to become
biggest airline worldwide.
• Due to this buyout profits are booming,
improvements to aircraft are happening, and
customer loyalty programs are improving.
Strategic Analysis

• Low cost airlines may not be worth much on the books but are making more money in profit
than their large airline competitors, due to lower prices and other factors.
• It was stated that Allegiant Airlines will be one of the most profitable airlines in the world for
2015, this is due to the fact that they “strategically” expanded by studying their market.
• Allegiant is unique as they are said to have no competition on about 220 of 250 non stop
routes, Allegiant stated that they also purchase used jets to save money, and have a few
mergers that are also adding jets.
• Even though on paper a larger airline may be worth more money, profit dictates how the airline
is doing in the economy today.
• Lower cost airlines such as Allegiant airlines also have fewer costs which help create a surplus
that can be used in the following years budget.
Strategic Analysis

Strategic Analysis

Factors related to strategy: Factors will effect how an airline is operating and its costs

• Airlines must adapt to issues that will effect
and hurt them the most:
• Pollution
• Fuel Costs
• Personnel turnover
• Weather related expenses
• How these factors play into strategy:
• Employee Morale
• Consumer Preferences
• Organizational Environment
• A strategic plan must be created to keep
customers content especially in the airline
industry.
• Consumer preference is the most important
thing by not following what your customers
want then Airlines will not be successful.
• Many individuals tend to use low price
airlines such as: Frontier, Spirit and Atlantic
as they tend to be cost effective, and “no
frills”
• These airlines sometimes tend to have
bad customer service experiences as
they have the “no frills” (services).
• Customers tend to be dissatisfied with
employee morale and late/missed flights
Strategy

• As a part of the strategic plan of most airlines
many charge for incidentals such as drinks and
checked baggage.
• The graph on the left shows 2011 data relating
to how much money airlines in the US made on
Baggage alone.
• Today many travelers try to find deals on
checked baggage and other fees as a checked
bag can cost as much as 40-50 dollars per bag.
Strategy

• Information Strategy is being implemented constantly to try
to bring the Airline industry into the 21st century. The
implementation of IS helps to solve issues related to:
Security, Terrorism, Accidents, Flight Delays, and
Sicknesses.
• These programs and implementations were added after 9/11
to make individuals feel safer while traveling.
• Biggest issue seen is related to Privacy especially with Full
Body Scanners.
• Some of the programs created provide convenience where
travelers deemed to be “low risk” are able to bypass some
parts of the security process.
• “The International Air Transport Association, whose
members include British Airways, Virgin Atlantic and more
than 200 global airlines, said main airports were struggling
to cope with mounting layers of safety regulations that now
cost the financially troubled industry $7.4bn (£4.6bn) a year
to implement”(Guardian).
IS Strategy

• Believe it or not Airlines use Social
Media to help give travelers a better
experience.
• Airlines use Twitter and Facebook to
notify travelers of delayed flights,
security issues, and other major
events/issues.
• Allows for travelers to have
complaints/compliments looked at in
“real time”.
IS Strategy

• Even with Social Media Campaigns there
are threats made that are taken
extremely seriously.
• Recently, most threats are sent over
Twitter and Facebook
• Airlines have canceled or grounded
flights to asses credibility of the threats.
• An example of a more recent threat: A
Twitter user calling herself Sarah stated
that a terrorist organization would “do
something big on June 1st”
• This was immediately forwarded to
security and the FBI for investigation.
IS Strategy

Transportation
• Number of Airports (2013): 13,513
• Airports with paved runways 5,054
• Airports with unpaved runways: 8,459
• Number of Heliports (2013): 5,287
• Total Railways: 224,792 km
• Total Roadways: 6,586,610 km
(https://www.cia.gov/library/publications/the-
world-factbook/geos/us.html)
• Paved roadways: 4,304,715 km (includes 76,334
km of expressways)
• Unpaved roadways: 2,281,895 km (2012)
• Total Waterways: 41,009 km (2012)
• Total Merchant Marine: 393
(https://www.cia.gov/library/publications/the-world-
factbook/geos/us.html)
PART 2.1: NATIONAL AND INDUSTRY ENVIRONMENT - USA
Gross Domestic Product

Change in Consumer Prices - Bureau of Labor Statistics
(FirstResearch)
PART 2.2: STRATEGIC ANALYSIS - USA
Industry Growth Rating & Forecast

Industry Growth Rating
Industry Forecast – “US personal consumption expenditures for US airlines are forecast to grow at
an annual compounded rate of 4 percent between 2014 and 2018.”
(FirstResearch)

(FirstResearch)
Industry Drivers

• “Profitability Depends on Business, Consumer Travel - Both business and tourist travel are reduced
when the economy slows. Global aviation traffic typically rises and falls at twice the pace of economic
output, so a change in the economy can double the impact for airlines. Because of relatively high fixed costs
of airplanes, airport facilities, and labor, airlines can't easily adjust to reduced passenger traffic.”
• “Fuel Costs Can Vary Highly - Aviation fuel accounts for 30 to 40 percent of industry operating costs,
relatively more for airlines with low labor costs. Fuel costs can change rapidly, making it difficult for airlines
to adjust ticket prices. Some airlines use futures contracts to protect against cost increases. Newer planes
have better fuel consumption.”
• “Capital-Intensive Industry - Airplanes are expensive to acquire and maintain. Passenger airliners
typically cost between $70 and $400 million (with seating capacity ranging from for 100 to 500 passengers).
Newer planes are usually more fuel-efficient, but the high prices deter many airlines from buying them.”
• “Industry Widely Regulated - The FAA, DOT, and TSA impose various fees on the industry, and can
interfere with airline operations. To expand operations, airlines need to get route permission from DOT and
gates from local airports.”
• “Airlines Depend on Skilled Employees - Airlines can't fly without FAA-certified pilots and mechanics,
whose training takes years. The unions that represent these employees at most airlines have an
exceptionally important voice in labor issues.”
(FirstResearch)
Critical Issues & Business Challenges

• “Consolidation - The US airline industry has experienced substantial consolidation after a
string of blockbuster mergers and acquisitions: Delta Air and Northwest (2008), United Airlines
and Continental Airlines (2010), Southwest Airlines and AirTran (2010), and US Airways and
American Airlines (2013). Such combinations are designed to improve the efficiency and
financial stability of major carriers. However, reduced competition has raised concerns among
some consumer advocates about higher fares and reduced flights and services”
• “Growth of Low-Cost Carriers - The higher cost structures of traditional airlines, like American
and Delta, coupled with tighter business travel budgets, has provided expansion opportunities
for low-cost airlines. Low-cost national carrier Southwest ranked third in domestic market share
in 2012-2013, based on revenue passenger miles; low-cost carrier JetBlue ranked sixth. Many
new airlines have attempted to emulate aspects of the low-cost business model.”
• “Code-Sharing, Marketing Alliances - Airlines that serve a limited number of airports can
expand their network through code-sharing agreements with airlines that serve other airports.
With code-sharing, connecting flights can be booked on the other airline's planes. Marketing
alliances typically include code-sharing as well as frequent-flier programs and common use of
airport lounges. Revenue from code-shared tickets is split between the partners. Because of
potential antitrust problems, code-sharing and marketing alliances have to be approved by the
US Department of Justice.”
(FirstResearch)
Business Trends

• “Emerging Market Growth - Air traffic in emerging economies is growing rapidly and providing new revenue opportunities for airlines. Markets in
Asia, the Middle East, Africa, and Latin America have experienced much higher growth rates than established economies in North America and
Europe in recent years. Due to air service agreements and government regulations that limit foreign airlines from carrying passengers beyond
international gateway cities, carriers typically form international joint ventures and alliances to facilitate the exchange of passengers between route
networks.”
• “Ancillary Fees - Airlines are generating an increasing amount of revenue from ancillary fees, including baggage fees, onboard food and beverage
sales, premium seat assignments, and commissions earned on the sales of hotel accommodations, car rentals, and other travel services. Baggage
fee revenues in the US more than quadrupled between 2007 and 2013, and reservation cancellation/change fees more than doubled over the same
period. Globally, airlines generated about $40 billion annually in ancillary fees, according to consulting firm IdeaWorks. Carriers continue to find new
products and services, such as extra leg room and better food options, for which they can charge fees.”
• “Fuel-Efficient Aircraft - Because of high fuel costs, newer planes and engines are designed to be as efficient as possible. Airlines are eager to
replace older gas-guzzlers with new fuel-efficient planes, and aircraft companies are competing to manufacture the most fuel-efficient models. Airbus
is developing the A320neo, which is expected to be 15 percent more efficient than its predecessors, while planes from Boeing' s upcoming 737MAX
series are said Industry Opportunities to be 13 percent more efficient than the best single-aisle aircraft available.”
• “Internet Ticket Sales - Buying airplane tickets over the Internet appeals to many passengers and results in lower costs for airlines. Internet sites
allow customers to easily compare airline schedules and fares, buy tickets, reserve flights, choose seats, and generate their own boarding passes.
Southwest's website handles about 85 percent of the company's passenger revenue.”
• “Frequent Flier Sales to Businesses - Some airlines sell frequent flier miles or points, as if they were a product, to companies unrelated to the
loyalty program. This practice is a way to further commercialize the frequent flier asset beyond the traditional airline, hot el, and credit card partners.
Businesses that buy the miles or points use them in their own incentive programs for customers or employees.”
• “Efficiencies with Electronic Documents - Computer technology allows customers to board flights without paper tickets and to generate their own
boarding passes. Bar coded baggage tags improve handling and identification for ticketless and self-serve travelers. As many as 90 percent of some
airlines' customers now receive their tickets online.”
(FirstResearch)
Industry Opportunities

Transportation
• Number of Airports (2013): 507
• Airports with paved runways 483
• Airports with unpaved runways: 44
• Number of Heliports (2013): 47
(http://www.tradingeconomics.com/china/
gdp-growth)
• Total Roadways: 4,106,387 km
• Paved roadways: 3,453,890 km (includes 84,946
km of expressways)
• Unpaved roadways: 652,497 km (2011)
• Total Waterways: 110,000 km (2011)
• Total Merchant Marine: 2,030 (2010)
factbook/geos/ch.html)
PART 2.1: NATIONAL AND INDUSTRY ENVIRONMENT - CHINA

(http://www.boeingblogs.com/randy/archives/2010/1
1/nothing_stays_the_same.html)
(http://www.businessinsider.com/chart-shows-
chinas-insane-aviation-boom-2013-8
PART 2.2: STRATEGIC ANALYSIS - CHINA

“A rise in traffic was the primary driver in the passenger
revenue growth for China Eastern Airlines. The
airline’s passenger traffic increased at a three-year
CAGR of ~9% to 120,461 million revenue passenger
kilometers from 93,152 million revenue passenger
kilometers in FY10. Its share of domestic traffic
decreased from ~70% in FY11 to ~69% in FY13, while
international traffic increased to ~28% from 26% in
FY11. Around 3% comprises regional traffic from Hong
Kong, Macau, and Taiwan.
China Eastern’s competitor, China Southern Airlines
(ZNH), has the highest share in the domestic market
among the three state-owned Chinese airlines. It derives
78% of its revenue from the domestic market and only
20% from international markets.”
(
(http://marketrealist.com/2014/12/china-easterns-passenger-
traffic-rises-yield-remains-weak/)

• “Proposed launch of new airlines in China - In China, competition from new players continues to increase as regulation on
the entry of new airlines has recently relaxed. This was done with a view toward stimulating growth, promoting efficiency, an d
improving profitability of the airline industry, now dominated by the three state-owned airlines. According to Centre for
Aviation (or CAPA), six of the 19 new proposed Chinese airlines launched within the last year, and the rest plan to launch by
the end of 2014.”
• “Promoting development of low-cost carriers - China Eastern is the first state carrier to launch a low-cost carrier, China
United Airlines. The Civil Aviation Administration of China (or CAAC) set up the policies for the development of low-cost
airlines. CAAC plans to provide private capital and encourage full-service airlines to set up wholly owned low-cost carriers.
CAAC also loosened control over pricing by removing the limit for decreasing air fares. A portion of the new flight schedules
in major airports will be reserved for the new entrants. The entry of low-cost airlines and changes in regulations and policies
will have a major impact on traditional carriers in China, especially China’s Big Three carriers: China Southern (ZNH), China
Eastern (CEA), and Air China (AIRYY).”
• “Competition from high-speed rail - Increased competition from new players, air fare pricing policy reforms, and the
expansion of China’s domestic high-speed rail network has put a downward pressure on yields. This is evidenced by the
falling yield experienced by all the major airlines in China. The high-speed rail network provides train services at a speed of
up to 350 kilometers per hour. The network connects all major cities in China, including Beijing, Shanghai, Wuhan, Qingdao,
Guangzhou, Dalian, and Hong Kong. China Eastern market share in some of the key routes between 500 km to 800 km has
been impacted by the launch of the high-speed railway. China Eastern is taking measures to overcome competition by
adjusting air fares and decreasing short-haul routes that overlap with the high-speed train routes.”
• “Operating cost breakdown - China Eastern Airline's (CEA) cost of operations, like all airlines, is dominated by high fuel
and employee costs. These costs account for 50% of the company’s total costs. Other major expenses include takeoff and
landing charges, which account for 10%, and D&A (depreciation and amortization), which accounts for ~9%. Expenses
related to aircraft maintenance, lease rentals, selling expenses, and ground services each accounted for 5% of the total
expense in FY13.”
(http://marketrealist.com/2014/12/china-easterns-passenger-traffic-rises-yield-remains-weak/)

• “CAAC’s new regulations encourage private investment in key aviation infrastructure, including
domestic airlines, airports, and cargo facilities, as well as in services such as fuel supply and
storage, maintenance and repair, operations, catering, and distribution systems, the report said.
The rules also allow for the use of private capital in the construction of airports in western China
and grant foreign carriers unlimited access to the area’s six provinces and regions (Chongqing
Municipality, Sichuan, Yunnan and Guizhou provinces, Guangxi Autonomous Region, and Tibet
Autonomous Region).” (http://www.worldwatch.org/china-opens-aviation-market-bringing-
potential-environmental-challenges)
• “The plan of the Ministry of Commerce is to have 97 new regional airports to be built until 2020
to ease congestion and provide more regions with airports. In addition to Beijing, Shanghai, and
Guangzhou there will be 13 airports by 2020, with passenger service capacity for over 30
million. The objective is that 82 per cent of the country’s population will have access to the next
airport within no more than 100 km, up from 61 per cent at present” (Heicks)
• “Ownership restrictions - A crucial point for foreign market entrants is that they are not allowed
to have fully owned companies in the Chinese aviation industry. The only way foreigners can
gain access is through joint ventures with local Chinese partners.” (Heicks)
Business Trends & Industry Opportunities

Transportation
• Number of Airports (2013): 566
• Airports with paved runways 144
• Airports with unpaved runways: 442
• Number of Heliports (2013): 1
(http://www.tradingeconomics.com/south-
africa/gdp-growth)
• Total Roadways: 364,131 km
• Paved roadways: 62,995 km (includes 254 km of
expressways)
• Unpaved roadways: 301,136 km (2002)
• Total Merchant Marine: 3
factbook/geos/us.html)
PART 2.1: NATIONAL AND INDUSTRY ENVIRONMENT –
SOUTH AFRICA

Change in Consumer Prices
(www.tradingeconomics.com)
PART 2.2: STRATEGIC ANALYSIS – SOUTH AFRICA

• Industry Growth Rating: Africa will be the third fastest growing region for international travel during the
period of 2010 through 2015 with an average growth rate of 6.1%.
• Industry Forecast – “South African personal consumption expenditures for South African airlines are
forecast to grow at an annual compounded rate of 5 percent for 2015.”
Industry Drivers
• Robust economic growth
• Increasing urbanization
• Demographic boom
• Emergence of the middle class
(http://www.bus-ex.com/article/comair-0)
(http://www.afdb.org/en/blogs/afdb-championing-inclusive-growth-across-africa/post/africas-aviation-industry-challenges-and-opportunities-
10025/)
PART 2.2: STRATEGIC ANALYSIS - SOUTH AFRICA
DEC 14 NOV 14 OCT 14 SEP 14 AUG 14 JUL 14
Flight
Inflation
5.3 % 5.8 % 5.9 % 5.9% 6.4 % 6.5 %

• “Disproportional increase of inflation” - Airline costs have risen over 150% against the CPI of 98% for South Africa, while
the increase of airfare has only risen 38%.
• “Reduction in passengers”- This is accredited to the recession and the increase of other forms of technology that allows
people to communicate without traveling.
• “Escalating fuel prices” – The price of fuel affects airfare prices which also plays a factor in the reduction of passengers.
• “Government” – The government heavily subsidizes South African Airlines (SAA) which is great for SAA, but not for other
airlines.
• “Safety and Security”- The lack of internationally accepted safety practices have resulted in accidents 9 times higher than
the global average.
• “Inadequate Infrastructure”- The poor infrastructure is coupled with a lack of human and physical resources and a lack of
transit facilities.
Business Trends
• “The business approach via diversification” – Airlines are diversifying their services with rental car services, hotel
booking, airline lounges along with other desired services.
• “Third Party Training Programs”- Airlines are able to provide third party training programs at reasonable costs for
additional revenue.
Industry Opportunities
• “Aviation Promotion”- Promoting the industry is seen as one of the primary driving variables for better integration of the
continent.
• “Country Integration – Intra-African trade, business, cultural exchange and tourism can all be enhanced with integrated
countries by better air mobility.
(http://www.bus-ex.com/article/comair-0)
(http://www.afdb.org/en/blogs/afdb-championing-inclusive-growth-across-africa/post/africas-aviation-industry-challenges-and-opportunities-10025/)
PART 2.2: STRATEGIC ANALYSIS – SOUTH AFRICA

PART 2.3: NATIONAL ENVIRONMENTS
IS STRATEGIC ENVIRONMENT
• This section will review the IS strategies of the largest firms from each of the three
countries discussed earlier.
• Untied Airlines is the USA’s leading airlines in total
number of employees and revenue with $38,279 US
million in revenue.1
• South African Airways (SAA) is the national flag carrier
and South Africa’s largest airline with $3,251 US million
in revenue.2
• China Airlines is the national flag carrier for the Republic
of China with $4,763 US million in revenue.3

IS STRATEGIC ENVIRONMENT

IS STRATEGIC ENVIRONMENT: General Analysis
• Fairly consistent services across the industry regardless of location. There appears to be a
minimal expected level of IS for security, online ticketing, and seat selection.
• It appears that innovation plays a role in value creation. South African Airways has successfully
implemented self-tagging for luggage and implemented “Social Check-in” with Facebook
integration allowing customers with similar interests to sit near each other.
• The larger airlines, like United, seem to have added flexibility when implementing IS strategy
innovations. Inflight Internet is growing in popularity but has not been implemented in the less-
revenue generating China Airlines or South African Airways. This is also seen with self-service
Kiosks.
• Mobile device integration is an example of an innovation that quickly became the industry norm.
All three airlines have mobile apps although there is a notable quality difference. Regardless,
all three companies have about the same customer rating from GooglePlay.
• Competitive Advantage gained by IS Strategy is very short lived as other airlines in the industry
quickly roll out similar services.

IS STRATEGIC ENVIRONMENT: Analysis – Social Media and National Policy
• One IS Strategic area with significant variance among the sample airlines studied is usage of
Social Media.
• The Chart below shows an almost non-existent social media following for China Airlines.
• This is likely due to China’s Internet policy prohibiting usage of social media by Chinese citizens
(Osborne, 2015).
Number of
“Tweets”
Number of
Twitter
Followers
Number of
Facebook
“Likes”
China Airlines 242 61 53,811
South African
Airways
4,712 66,200 168,823
United Airlines 401,000 624,000 791,992

PART 3: SYNTHESIS
National Environment Comparison
• Similarities between countries:
• Due to the nature of the airlines industry, operations across different companies in
different countries are fairly similar.
• China, USA, and South Africa all have similar projected growth rates between 4 and 6
percent.
• All countries are impacted by fluctuations in fuel costs requiring strategies like hedging
to decrease risk exposure.
• Differences between countries:
• Within the USA and China, there are variations in business strategy between low-cost
operators and traditional operators. South Africa does not have that differentiation.
• Although airlines in all countries are affected by economic conditions, South Africa is
experiencing a high rate of inflation adversely affecting profit margins.
• China’s business strategy is being negatively impacted by other forms of transportation,
namely high-speed rail, whereas South Africa’s business strategy is negatively impacted
by electronic communication reducing need to travel.
• Government subsidizing South African Airlines creates a substantial barrier to entry.
Conversely, China implemented policy changes reducing barriers to entry.

PART 3: SYNTHESIS
Information System Strategy Comparison
• IS Strategy similarities between countries:
• All studied countries employ mobile device strategies with similar quality ratings from
consumers.
• E-Commerce has penetrated all studied markets providing both direct-to-consumer ticket
sales as well as third party (i.e., Expedia) sales.
• IS strategy is migrating towards consumer self-service as seen with usage of check-in
kiosks, self bag tagging, and seat selection.
• IS Strategy differences between countries:
• Despite all countries using mobile device strategies, the lesser-developed South Africa
Airways has limited functionality. Based on GooglePlay consumer ratings, consumers
have less expectations for mobile applications in lesser-developed countries than in
developed countries.
• South Africa lacks internationally accepted safety practices which often require certain
Information Systems. This resulted in accidents 9 times greater than the global average.
• National policy in China prevents widespread acceptance of social media platforms
which affects IS strategy.

PART 3: SYNTHESIS
Country-level factors that shape IS strategy
• National policy can have both positive and negative effects on IS strategy. For example:
• China’s policy on social media hurts Chinese airlines.
• USA government regulation (FAA, DOT, TSA) can interfere with operations and increase
information system requirements.
• Consumer preferences vary depending on industrialization of each country. For example:
• Mobile device service expectations are high in the USA where the leading airline
received a rating of 3.9 out of 5. South African Airways consumers rated their app at 3.3
out of 5 despite significantly less functionality.
• Communication Infrastructures are critical in the airlines industry for both commerce and
security reasons. For example:
• Since e-commerce for ticket sales makes up 37% of sales (SITA Insight, 2014),
countries with lesser-developed Internet service must use alternate sales techniques.
• Information Systems are critical for security which relies heavily on established national
infrastructure.
• Culture has an influence on the airlines industry. For example:
• USA culture post-9/11 allows for more intrusive security practices to protect citizens that
may be viewed as unacceptable in other cultures.

PART 3: SYNTHESIS
Comparative analysis - Insights and Perspectives
• Global IS Management is Key. The airlines industry is global in nature so nearly all
stakeholders operate in a multinational environment. Therefore, global IS strategy plays a
significant role in operating a successful business. For example, large companies like USA’s
United Airlines can take advantage of economies of scale for IS infrastructure and
applications, but those may be constrained when operating outside the USA in countries that
are less-developed. Also, information (flight data, delays, cancellations) must be shared in
real time throughout the entire company in all geographic locations.
• IS Solves Crucial Global Industry Issues. The implementation of IS within the airline industry
can solve crucial industry-wide global issues related to security, terrorism, accidents, flight
delays, and the spread of illnesses.
• IS Improves Customer Experience. The use of social media, such as the use of Twitter and
Facebook improve the customer experience by allowing a venue for real-time individual
attention with industry representatives, relevant notification of delays, cancellations, gate
changes, weather alerts, and other flight related events/incidents.
• Strategic Use of IS to Maintain Competitive Advantage. Like other industries the airline
industry is susceptible and must consider the strategic use of information resources in order to
maintain competitive advantages against the five competitive forces: potential threat of new
entrants, bargaining power of buyers, bargaining power of suppliers, threat of substitute
products, and industry competitors.

• [1] http://calec.china-airlines.com/smsvc/us/phone_e.htm
• [2] https://calec.china-airlines.com/echeckin/mBPNote_eng.html
• [3] https://play.google.com/store/apps/. Ratings based off User Reviews
• [4] http://www.flysaa.com/za/en/manageMyTrip/onlineCheckin/checkInOptions.html
• [5] http://www.united.com/web/en-US/content/travel/inflight/wifi/default.aspx
• [6] http://www.united.com/web/en-US/apps/travel/flightStatus/reminders.aspx
• [7] http://www.united.com/web/en-US/content/travel/wireless/default.aspx
• [8] https://caleb.china-airlines.com/olbn/travel.aspx
• [9] http://www.china-airlines.com/en/dfpen/dfpbook_en.pdf
• [10] http://www.expedia.com
• [11] http://www.united.com
• [12] http://www.flysaa.com
• [13] http://www.twitter.com – Based off number of tweets and number of followers
• [14] http://www.china-airlines.com/en/check/check_ba.htm
• [15] http://www.flysaa.com/za/en/manageMyTrip/onlineCheckin/checkInOptions.html
• [16] http://www.united.com/web/en-US/content/travel/airport/kiosks/default.aspx
• [17] http://www.united.com/web/en-US/content/Contact/reservations/usandcanada.aspx
• [18] http://www.fool.com/investing/general/2014/09/01/how-united-airlines-just-made-it-a-lot-easier-to-c.aspx
• [19] https://www.flysaa.com/na/en/manageMyTrip/manageinfo/ManageMyBookingInfo.html
REFERENCES

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• Boeing: Nothing stays the same (Nov 15, 2010). Retrieved March 12, 2015, from
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http://www.businessinsider.com/chart-shows-chinas-insane-aviation-boom-2013-8
• Comair- Flying Through Turbulence Retrieved 11 March 2015 from http://www.bus-ex.com/article/comair-0
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publications/China.html
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http://epubs.surrey.ac.uk/1120/1/fulltext.pdf
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from http://search.proquest.com/docview/1652798464?accountid=14214
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http://www.iata.org/publications/economic-briefings/airline_profitability_us_rest.pdf
REFERENCES

• Market Realist: An operational summary of China Eastern Airlines Company Ltd. (Dec 22, 2014). Retrieved March 12, 2015, from
http://marketrealist.com/2014/12/china-easterns-passenger-traffic-rises-yield-remains-weak/
• Osborne, C. (2015, 01 30). China revamps Great Firewall, cracks down on social media. ZDNet. Retrieved from
http://www.zdnet.com/article/china-revamps-great-firewall-cracks-down-on-social-media/
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http://www.iata.org/whatwedo/Documents/economics/IATA-outlook-for-the-airline-industry-December-2013.pdf
• Pearce, B. (2014). The shape of air travel markets over the next 20 years. IATA. Retrieved from
http://www.iata.org/whatwedo/Documents/economics/20yearsForecast-GAD2014-Athens-Nov2014-BP.pdf
• SITA Insight. (2014). The Airlines IT Trends Survey. Retrieved from http://skift.com/wp- content/uploads/2014/07/2014-Airline-IT-
Trends-Survey_0.pdf
• South Africa Maps- Retrieved 10 March 2015, from www.lib.utexas.edu
• South African Consumer Price Index (CPI) Retrieved 10 March 2015, from www.tradingeconomics.com
• South Africa – Minerals and Industries Map Retrieved 10 March 2015 from http://www.planetware.com/map/south-africa-south-africa-
minerals-and-industries-map-saf-afs4.htm
• TRADING ECONOMICS: South Africa GDP Growth Rate (n.d.). Retrieved March 01, 2015, from
http://www.tradingeconomics.com/south-africa/gdp-growth
• TRADING ECONOMICS: United Sates GDP Growth Rate (n.d.). Retrieved February 28, 2015, from
http://www.tradingeconomics.com/united-states/gdp-growth
• Tyler, T. (2014). IATA Annual Review 2014. International Air Transportation Association. Retrieved from
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REFERENCES

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