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David Siegel, CEO, US Airways A MAGAZINE FOR AIRLINE EXECUTIVES OCTOBER 2003 T aking your airline to new heights EXTREME AIRLINE MANAGEMENT A conversation with … David Siegel, CEO, US Airways INSIDE Traditional carriers launch low-fare subsidiaries How airlines weathered "the perfect storm" Cathay Pacific Airways’ crisis management process Optimal performance for airlines and airports Taking your airline to new heights OCTOBER 2003 Publisher James Filsinger Sabre Airline Solutions 1 E. Kirkwood Blvd. Southlake, Texas 76092 www.sabreairlinesolutions.com Editors Stephani Hawkins B. Scott Hunt Designer James Frisbie Print Manager Shari Stiborek Contributors Pam Ashley, Nejib Ben-Khedher, Holly Burkholder, Jack Burkholder, Al Comeaux, Cameron Curtis, Melissa Deaton, Karen Dielman, Rick Dietert, Walter Di Luca, Vinay Dube, Tim Finholt, Greg Gilchrist, Sam Gilliland, Gretchen Greene, Vicki Hummel, Brad Laser, Craig Lindsey, Gianni Marostica, Apurva Mathur, Michael McCurdy, Heather Parham, Marcus Pearson, Russ Perkins, Michelle real Porter, Gary Potter, Jim Quilty, George Schenck, Cathy Smith, Thomas Sondey, Anchawan Sukrachun, James Sun, Chris Vasiliou, Elayne Vick, Carla Warren and Gabriel Young. Reader Inquiries If you have questions about this publication or suggested topics for future articles, please send an e-mail to [email protected]. Address Corrections Please send address corrections via Why do more than 200 airlines around the world choose Sabre Airline Solutions as their technology e-mail to [email protected]. partner? Because they rely on us to deliver integrated solutions to real-world problems such as operations, Sabre Airline Solutions, the Sabre Airline crew scheduling and fleet planning. Solutions logo and products noted in italics in this publication are trademarks and/or service marks of an affiliate of Sabre Holdings Corp. Times like these demand fresh thinking. Proven, ROI-based solutions. And a technology partner that All other trademarks, service marks and trade names are the property of their respective can not only see the future, but can help you reach it. Times like these demand Sabre Airline Solutions. owners. ©2003 Sabre Inc. All rights www.sabreairlinesolutions.com reserved. Printed in the USA. contents 56 62 75 regional industry products company New Distribution An Inside Improving Interline Web-Enabling Asia/Pacific Carriers From Russia, Getting Back The Winning 4 30 54 60 62 67 72 75 Paradigms: Controlling Job Electronic Ticketing Revenue Management Open a Portal With Success on Track Combination Costs in the Internet Age Many carriers are looking at New solutions enable Remote connectivity offers Sixteen carriers have Russian carriers continue Recently emerging technology United Airlines takes Airlines must take specific creating a low-cost “carrier airlines to use interline access to advanced technology launched the first region-wide to realize substantial growth offers hope to help airlines aggressive steps to steps to maximize the benefits within a carrier” to more effec- electronic ticketing. with a low cost of ownership. online travel portal. despite an industry-wide efficiently recover from off- maximize revenue and of online distribution. tively compete. Through a remote connection, downturn. schedule operations caused control distribution costs Just Right: Aerolineas Argentinas utilizes Capitalizing on by inclement weather, by leveraging winning Preparing for the 56 key functionality at a lower cost. 65 mechanicals and labor actions, technology. 10 Song Reaches The Resource Consolidation Looking Through the Changing World of 30 70 saving money and increasing Top of the Charts Management Systems The consolidation of the “Contact” Lens In-Flight Services customer satisfaction. As Delta’s low-cost start-up, An integrated resource Chinese aviation market A new state-of-the-art call Many airlines are embracing Song is helping keep a key management suite can has positioned China Eastern center improves customers’ “buy-on-board” programs to market profitable. help airlines save up to to become a key player. ability to contact Gulf Air. better serve their customers. 25 percent on labor costs. You’ve Come a Expecting the 31 14 Long Way, bmibaby! Unexpected bmi’s low-cost subsidiary is Cathay Pacific executive helping the group defend its with Tom Klein Group President, Sabre Airline Solutions Alan Wong discusses how the home turf. perspective airline benefits from its crisis management process. Extremely Prepared 38 here’s little doubt that the past decade in the dous challenge bringing US Airways through Chapter 11 for the Future Riding the T airline industry has been one of extremes. bankruptcy proceedings. And he completed the process 19 US Airways CEO David Siegel Storm Out discusses the radical steps his From the lows of the early ’90s to the highs at the end more quickly than any other major corporate restructuring Airlines have weathered the airline has taken to restructure. of the decade and back to the lows of the past few years, the in recent memory. so-called “perfect storm” – airline industry has been on a roller coaster ride of ups and Dave also drove an incredibly rapid set of strategic initia- are the skies now clearing? The New Revenue 41 downs that have forced executives to look for radical ways tives including a key codeshare agreement, joining the Star Reality to adjust to the changing environment. Alliance and placing a record order for regional jets. Fast? Lufthansa “D-Check”s 26 Multiple factors are driving its Organization It reminds me of the new X-treme sports, or X-games, You bet. Dangerous? Maybe, but I'd call it brilliant despite airfares downward. and Processes that have become popular during the past several years. the risks. Done before? Not like this. US Airways is setting a A thorough process of examin- Young athletes have created new games, new rules and are new standard. From the ing the airline has helped 46 Ground Up taking new risks. More and more, airline executives are practic- All throughout the industry, we see extreme ideas being Lufthansa stay competitive. By building its own airports, ing “extreme” management. They are challenged to compete tested — be it Lufthansa with its all-business-class trans-Atlantic Bangkok Airways opens in new arenas, to try things never done before and to take service, America West with a new pricing structure or jetBlue new markets. greater risks. changing the rules in the low-cost segment. We dedicate this A willingness to try new ideas and learn, either “failing issue to the leaders in the industry who are rapidly driving Turnaround First, 48 fast” or finding success, is a valuable attribute for all of us innovation and taking risks — those “extreme” leaders who Then Privatize in and close to the industry. Airline managers are using aren’t afraid to fail in an effort to drive a healthy air trans- By first improving operations, extreme plans and radical decisions to create new realities portation industry. flag carriers can better prepare themselves for privatization. in the industry. Our cover story features Dave Seigel, president and chief executive officer of US Airways. Dave faced a tremen- 26 industry New Distribution Paradigms: Controlling Costs in the Internet Age The growth of the Internet offers airlines more channels to distribute their product. As airlines increase use of these channels, they can take specific steps to control costs and maximize the benefits of online distribution. By Stan Boyer | Ascend Contributor he advent of the Internet provides has also had a severe impact on revenue. inventory agencies such as Hotwire. T airlines with the opportunity to make The consequences of consumer-direct The most recent statistics indicate substantial changes to the way they distribution include: that the top six online agencies in North distribute their product. Not surprisingly, Passengers use the increased price America now account for about 25 percent some airlines have recently placed more visibility of the direct distribution of all travel agency bookings in the region. focus on direct distribution, interacting channel to find lower fares, reducing What does this mean for airlines? directly with travelers and bypassing ticket yields, If they plan to conduct business in the intermediaries, such as global distribution Travel agencies react to airline direct- North American market, they should systems and travel agents. Although air- sell competition, obtaining lower fares include these agencies. For carriers lines have always possessed this capability for their passengers in order to maintain based outside of North America, these in their reservations centers, Internet- viability, again reducing ticket yields, agencies provide an opportunity to based distribution has taken the call Airlines incur increased costs to main- distribute their product much more center concept further by allowing more tain Web sites and other direct-distri- widely and with less effort than setting customers to interact with their schedules bution channel centers, often displacing up sales teams in individual cities. and fares than previously possible. any savings gained by decreased travel The advantages of online agencies agency commissions. include their widespread use for instant Airline Consumer Direct The bottom line — Web-based, purchase, resulting in quick inventory Web-based distribution has taken consumer-direct models often result turnover, and the breadth of products several forms, and different models con- in both product dilution and
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