“IT to the rescue” – SITA urges airlines to fight oil price rise with e-commerce to generate new revenues, save costs and equip workforce

SITA, the specialist provider of IT business solutions and communication services to the air transport industry, today announced the 10th SITA and Airline Business Airline IT Trends Survey results[1] with a call to the industry to reap the full benefits of the internet for cost reductions and ancillary revenues in order to compensate for the soaring cost of fuel.

Paul Coby, SITA Chairman, said: “Airlines were the first industry to fully automate all parts of their business. The Air Transport Industry has now become the world’s first truly web-enabled industry. IT enabled airlines to make both major savings and improve customer service after 9/11. But in these challenging times with oil at over $130 a barrel, there is now an even more urgent need to deploy technology to serve airline customers, save costs and to equip airline staff with effective technology to do their jobs better.”

“Among the record 121 airlines responding to this year’s survey, the online sales average is only 24% with their own website. This varies from 43% in North America to just under 10% in Africa and the Middle East. A very important source of revenues is clearly being lost to those airlines not using web selling at a time when everyone in the industry needs to maximize returns on their IT spend. Selling online has already massively helped to drive down distribution costs, saving airlines in the region of $2 billion.”

Coby added “the adoption of the new generation Web 2.0 technology can deliver greater sales and greater savings across the industry, and better returns from the $11bn invested annually.”

Francesco Violante, SITA CEO, said: “The price of fuel is providing the economic incentive for the airlines to tap further into ancillary revenues by acting not as traditional airlines but e-commerce companies offering every type of service to their global consumer market of 2.3 billion passengers using state of the art technologies such as Web 2.0 and Travel 2.0 applications. This can greatly help to withstand predicted airline losses of $2.3 billion this year[2].”

He pointed to the example of Ryanair which now sells 98% of its tickets online and gains over 17% of its revenues online from ancillary sources while for many established airlines the figure is less than 5%.

Since the first Airline IT Trends survey in 1999, airlines have invested around $100 billion in IT and communications. As a percentage of revenues the average airline IT spend is now 2.2%. At the industry level, this equates to around $11 billion this year which represents an increase of 5% on last year. This increase is seen as recognition that IT plays a strategic role, generating revenue as well as helping deliver cost reductions and customer service improvements through self-service and smoother passenger management.

Other key highlights from the survey include:

MANAGEMENT AND STRATEGIC ISSUES

The main drivers for IT investment cited by survey respondents were reducing costs, 62%; improving customer service, 54%; enabling new market offerings and revenue opportunities, 45%; and improving workforce productivity, 40%.

Top investment areas included passenger processing and services, 63%; aircraft management /operations, 44%; passenger security, 34%; and employee security, 21%.

SELF-SERVICE ADOPTION

Airlines are forecasting that while only 1% of passengers use mobile phones for check-in today, this will rise to 6% next year by which time more than half of airlines will offer the service. This forecast suggests an evolution of self-service to mobile devices.

The following airline self-service initiatives are already in place: web check-in, 56%; mobile phone check-in, 21%; self-boarding kiosks, 21%; online trip-change service, 25%; and lost baggage self-service, 12%.

PASSENGER SECURITY

85% of the airlines responding to this year’s survey now provide passenger data to the world’s governments, up 4% from last year. Of those providing data, 73% provide to less than five governments and the remaining 26% to six governments or more.

ONBOARD TECHNOLOGY

The majority of airlines expect to have deployed at least one of these services onboard aircraft within a three to four year time frame: SMS via mobile phone; GPRS for Blackberry; Voice calls via mobile phone; Internet access via laptop; email access via laptop; and IM via laptop. More than half of respondents indicate they are planning to charge for these services or to finance them through advertising.


[1] The Airline IT Trends Survey included responses from 121 airlines around the world and almost half of the survey respondents are in the Airline Business Top 100 revenue rankings.

[2] IATA Press release No. 27, 02 June 2008 Fuel Crisis a Catalyst for Change