“The early focus for the industry was on operations and now it’s clearly set on the customer,” says Patrick Naef, Senior VP IT and Head of MERCATOR - the IT division of the Emirates Group that operates Emirates Airlines.

For the airline customers, this means fewer delays, better safety and overall just less hassle with air travel. "The cost of aircraft downtime is exceptionally high, for a wide body it can be up to U$100,000 per day. The cost to operate is very substantial for airlines," says Kevin Michaels, principal and cofounder of industry research firm Aero Strategy Management Consulting.

A growing market

Passenger numbers are growing and in the Middle East, they are growing faster than in any other region of the world. According to a report from SITA, a leading technology services provider for the aviation industry, the number of passengers travelling in the Middle East in 2005 grew by 13.1% compared to the previous year. It is estimated that globally this year, more than two billion passengers will be travelling by air.

In this context, players in this sector face three main challenges: they must satisfy customer needs with increased services and efficiency, increase revenues while reducing costs and enhance security measures without affecting the passengers’ comfort and Airport’s normal operation. Technology investments in this segment therefore trace these three requirements.

This is why systems and processes that effectively simplify passenger travel are becoming more and more critical and this involves simplify passenger travel by striking a balance between security, on one side, and facilitation, on the other.

“This industry needs to accommodate new technology in order to survive the highly competitive environment and therefore will have to look towards using IP, investing in open platforms and enabling transparency in operations. The right technology can enhance the passenger’s journey, enable airports to be run and managed better and make operations seamless,” says Hani El-Assaad, SITA Regional Vice-President, Middle East & Turkey.

Services go electronic

Reducing manual transactions and workflows is a major route to service efficiency and aviation majors have been working on enabling electric transactions both on the passenger side as well as staff management and internal workflow/communication.

“Even a project like going paperless can help save a company hundreds of dollars. According to research, reducing the amount of paper usage can reduce costs by $3 per passenger and that is significant savings when you consider the overall scale of operations,” El-Assaad adds.

Historically, aircrafts have about 40 pounds worth of paper on them at all times, which includes history, manuals and maintenance logs. By making that information electronic and relating to it in real-time can help prevent slowdowns or failures.

Boeing for instance was one of the early adopters when it started making aircraft -- and data associated with them -- manageable as part of a larger network some years ago in an effort to reduce maintenance costs. The company’s executives maintain that updated services continue to reflect the industry demand for better fleet management.

Boeing's Maintenance Performance Toolbox for example is a suite of is a suite of applications that gives airlines access to all the data collected and integrates it with the airline's back-office IT systems, such as ERP suites. The applications take all the aircraft documentation and regulations and make them available in electronic format to enable easier and timelier access to up-to-date data.

Automation of flight information and operations is another technology driven segment. RAK Airways, the UAE's fourth national carrier has recently invested in an automated flight operations system from Avient Solutions as it gets set to go on air in Q1 2007.

“The early focus for the industry was on operations and now it’s clearly set on the customer.”

Avient Solutions, an IBS Group company based in the United Kingdom, signed an agreement with RAK Airways to deploy TopAir, an integrated flight operations system that automates airline operations including flight scheduling, fleet planning, crew management, flight operations, fuel management, catering management, aircraft checks planning and finance control activities. The system provides real-time information across various departments in the airline, and makes operations easier for scheduled, charter, low-cost and cargo airlines.

Taking costs out of the business

The airline industry has traditionally been characterised by steep fluctuations in demand, despite a steady long term growth in passenger numbers. The last few years, however, have been particularly tough for the industry with several events conspiring together to result in huge losses and bankruptcies of several established airlines.

Carriers have been forced to respond and find ways to retain their profit margins.

This is not made easy by the fact that airlines also face a unique challenge in that they have to find ways to service internal customers as much as they do with external ones. Finding ways to reduce costs, yet offer efficient service levels therefore if of critical importance.

“The airline business is always a low margin one, and by nature of operators it’s not always easy to be economical. The emergence of budget airlines has also forced the bigger players to re-look at costs and the way their business is run,” says Naef.

The availability of standardised technology similar to what the other industry sectors have access is another issue. “There is no SAP or Oracle for the airline industry as there is for say the manufacturing sector. And the fluctuations in the business cause companies operating in this space to destroy the value of their business to cover for any operational losses,” he adds.

This overriding business concern also explains why the IT usage to streamline staff travel management has emerged as a significant cost saving tool for airlines that support employees with travel benefits.

“Emirates is only looking to use new generation products, but what we want to do is to do things differently and we are looking at both ground/airport handling systems and also introducing a paradigm shift on the passenger side systems including distribution, reservations and ground processes,” he adds. Mercator has also developed its own new generation cargo reservation systems – Skychain – which has also been adopted by a number of other major global airlines for cargo operations.

South African Airways is among the airlines that has taken this route having implemented a web-based staff travel solution that will allow its airline staff to directly and independently manage their travel and airline concessions and also reduce the workload on internal staff travel management processes at the same time. Called iFly, the solution facilitates a self-service environment for staff to use concessions and make bookings directly on the Amadeus reservation system through its comprehensive booking module.

The applications to all related staff services can now be accesses either through the internet, office terminals or through staff kiosks. For SAA, this investment in the solution is part of the company’s overall corporate restructuring and IT driven roadmap. “We found that iFly was a perfect functional and technical fit for our requirements and the implementation of this new system has generated a steady increase in the number of staff bookings with a much more simplified and manageable solution now being available for use,” says Mike Re, CIO, SAA.

Finding new ways to improve operating margins is also top of mind. British Airways for one has led the way with its new approach to procurement management.

Launched as part of its initiative called 'Future Size and Shape' in 2001, the company called for a £650 million cost savings over the period 2002 to 2004, an additional £450 million cost reduction from 2003 to 2005 and a £300 million employee cost reduction from 2004-6.

“This industry needs to accommodate new technology in order to survive the highly competitive environment. The right technology can enhance the passenger’s journey, enable airports to be run and managed better and make operations seamless.”

To help achieve its ambitious savings targets, BA decided to re-examine its procurement function. By the end of the 1990s, BA was spending more than £4 billion annually with suppliers, processing more than 350,000 orders per annum, and paying more than half a million invoices. In addition, its top 150 suppliers accounted for more than 80% of its spend.

Senior managers recognised that this situation was far from ideal and launched a transformation programme in 1999 to find cost savings in procurement, increase control over spending and encourage more informed purchasing.

Last but not least, the uptake of eTicketing is expected to be a major cost saving opportunity for airlines across the global, and also help them expand alliances. In an announcement in 2004, IATA (The International Air Transport Association of which most of the World’s airlines are members) issued an edict for 100% eTicket usage by the end of 2007, a move that is estimated to save the global industry over $9 billion per annum.

One challenge to eTicketing has been in interlining. This is where a passenger journey takes in more that one airline and until recently paper tickets were the only solution.But solution providers like SITA are now offering solutions like its Smart Ticket aimed to take away that constraint and allows both travel agents and other airlines to issue interline eTickets using SITA’s hub.

The use of eTickets is now well advanced in the USA and Europe and Middle Eastern carriersare now opening up to the adoption of eTicket standards in order to operate in these markets and to improve customer service.

The benefits from this move are many. For starters, airlines are able to reduce ticketing cost associated to ticket stock and ticket by mail activity. Alliance partners are able to participate easily in interline electronic ticketing requirements, while enhanced passenger handling with automation such as Self service kiosks also works well in this environment.

On the agent side, carriers are able to maximise agent productivity by turning call centres into revenue centres, eliminate lost and stolen tickets, promote lower cost distribution channels, such as airline websites and lessen fraud opportunities.

Overall eTicketing is being seen by the industry as a major move to save costs and drive up customer service.

Security takes flight

Of the expected two billion passengers who will travel this year, only a small percentage are likely to arrive at their destination with proper documentation. Others will try to bring in illicit materials; and just a few will be deemed higher risk, requiring additional screening, and possible intervention, by immigration, customs, security and/or law enforcement officers.

Having accurate information about passengers arriving is therefore initiating the need for better airport and border control management. The Gulf states in particular, according to a report from SITA are leading in adopting and seriously considering implementing effective solutions that simplify the whole travel experience for passengers.

Biometrics specifically is a key area for investments, thereby enabling passengers to identify themselves at check-in, at the security checkpoint, at the border and even at the gate to the aircraft – thus freeing up valuable time and resources, while actually strengthening the process of passenger identification.

Implementing integrated security systems at Airports is another area, particularly with IP-based surveillance and facial recognition technology. Another aspect is the integration is between the X-Ray screening machines and the CCTV system allowing the control room to monitor the activities on each of the checking points including the review of the X-Ray image of the suspected item.

Several Middle Eastern governments have shown extensive willingness to embrace technology as a means of enhancing transportation security and making border management more efficient and effective. Dubai’s e-Gate programme for example is now being deployed across the entire country and in other locations across the Gulf. In Bahrain, SITA’s eBorders and eVisa technologies are being implemented to be followed by the Kuwait government for a $37 million implementation of its Advance Passenger Processing (APP) solution.

In summary, this fast growing sector’s main objective in using technology is to help simplify travel and transportation, removing complexity and improving customers’ operational performance, based on lowering costs, optimising and improving the passenger experience.

What’s driving the aviation business? • Finding ways to move more passengers and freight through facilities efficiently while providing simpler, more secure, stress-free and enjoyable travel experience. • Optimising the use of existing facilities by operating them more cost effectively. • Lowering the cost of regulated operations while generating new sources of revenue that is outside of the traditional airport financial models. • Managing increasingly complex environments and co-ordinating the activities of multiple stakeholders. • Implementing an intelligent security system, working in total synchronisation with the flow of passengers.

Technology makes its mark by… ? Driving innovation through the use of technology to add value to customers ? Driving efficiency through automation ? Lowering operational costs ? Enabling a strong on-line business model both on the B2B and B2C operations ? Driving supply chain efficiency by integrating partners into the ecosystem ? Enabling passenger information integration for better security