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 increased made available to the consumer, such tinue to emerge depending on where the distribution unit costs. as vacation packages and fly/drive deals. airline operates. In North America and However, the downside to using Europe, airlines tend to favor consumer- Online Agencies this distribution channel is that, like other direct models for both published fares Another distribution model that has consumer-direct sites, they draw a num- and distressed or “opaque” inventory. emerged is the online travel agency. The ber of hits without resulting in actual Some have attempted to engage travel online agencies have taken mainly two bookings. Depending on an airline’s agents with their Web sites as well. While forms: published and net-fare retailers connectivity to the Web site or its spon- this model has lowered distribution costs, it such as Travelocity and distressed soring GDS, this could have a profound

october 2003 5 industry

impact on its host reservations system. If the currency devalues to 4 to 1 Most of the larger online agencies against the Euro — as was the case are attempting to minimize the impact in late 2002 — the impact is dramatic. by reducing the number of hits to the Because much of the airline’s costs are airline’s host system. in the local currency, the airline leaves the round trip cost at R$600 or € 150. Internet to Agency The travel agency commission remains For many areas of the world, Internet the same at 7 percent, dropping to penetration remains moderately low, and € 10.25. The GDS fee remains constant thus consumer-direct models are not as in Euros, and now the € 8 fee is equal effective. In these markets, some airlines to 5.3 percent of the fare. are creating new models that use the The benefit is magnified with con- Internet to connect travel agencies directly firmed, passive, waitlisted or duplicate to an airline-sponsored Web site. Why bookings for which a GDS often charges would an airline choose this route? a fee. If a traveler has to waitlist for an The development of the Internet has created more opportunities for airlines to distribute their product more widely and with less effort. The answer to this question lies in earlier flight in the desired fare class, However, new channels can result in product dilution and increased distribution costs. Despite the potential pitfalls, there are ways for understanding what airlines perceive to but is unable to get the fare, and the airlines to control distribution costs and maximize the benefits of these new channels. be their largest costs of distribution. In travel agency does not cancel the wait- Brazil, for example, the Real is nearly 3 listed segments in the GDS, then the to 1 against the Euro. If the fare between GDS costs will now be about € 16 or some airlines do not exclude travel based distribution, require special care they use, their business relationships How to Control Distribution Costs São Paulo and Rio de Janeiro is R$600 10.6 percent of the new fare. agencies but encourage them to book in order to avoid fraud. For this reason, and overall marketing strategies. Host Record Maintenance or about € 200 round trip, the agency In this case, the electronic cost of directly on the airline’s Web site, leaving it is often in the best interest of the Airlines can control costs in direct An airline should make use of data mining commission is about 7 percent, or € 14, distribution could be more costly than the commission intact. In addition, credit airline to continue to have the travel channels by focusing on: tools or robotics to eliminate unproductive and the GDS fee is € 8, or 4 percent. the travel agent commission. Therefore, card transactions, the mainstay of Web- agency handle the transaction, thus Corporate incentives, records, such as unticketed bookings, relieving the airline of the liability. Call center and sales office efficiency, duplicate bookings and waitlists that the Whether this model will work Waitlist control, airline knows will not be cleared. Many depends on a host of factors such as Waivers and favors control, airlines only focus on critical flights, those THE HIGH LEVEL Internet speeds and links throughout Group management. at least 85 percent full, but any flight the country, and cost and availability For indirect channels, areas for could contain a substantial number of News Briefs from Around the Globe of security features. cost containment include: these records. These records should be vıew Airlines located where cash payment Travel agency commissions cancelled far enough in advance in order is the norm are experimenting with spe- and overrides, to ensure only accurate records on the Who Why cial bank accounts for individuals and Waivers and favors control, day of departure, saving unnecessary corporate clients that will allow the airline Fraudulent booking and ticketing GDS fees. Cathay Pacific Airways The smartsourcing contract provides ware and expertise in a range of areas to deduct funds from the account for practices, Cathay Pacific access to new product including planning and flight schedul- the purchase of a Web-based ticket. GDS costs, Inventory Control What releases and participation in Sabre ing, pricing and revenue management, Communication costs — Airlines’ desire for flexible product Airline Solutions’ extensive solutions flight operations and crew scheduling, Controlling Distribution Costs SITA, Arinc, distribution led to the implementation Renewed its “smartsourcing” con- user groups. Through the agreement, and automated check-in. Regardless of Channel Online agency costs. of advanced, robust systems to control tract with Sabre Airline Solutions. The first signed in 1997, Cathay Pacific has “The smartsourcing contract Regardless of the channel, airlines Many airlines focus on the costs inventory. With this flexibility comes three-year, multi-million dollar contract accessed and implemented 19 Sabre also assures we have significant must control distribution costs, which of indirect distribution, most notably responsibility on the part of the provides Cathay Pacific the full range of Airline Solutions software applications. input in further product portfolio can range from 2 percent to in excess electronic distribution via GDSs. airline to make the most of each Sabre Airline Solutions' integrated port- “The strategic alliance developed development and enhancement from of 30 percent depending on several However, if an airline’s reservations system through which it distributes folio, including consulting services. with Sabre Airline Solutions will help Sabre Airline Solutions, ensuring factors, including markets where they and inventory control are “hosted” its product. us keep ahead of the competition," products that meet our objectives operate, how they manage currency by a service provider, then many of Within the GDS distribution frame- said Anthony Yeung, general manager and technology that helps us remain exchange rates, whether they treat the same techniques used to control work, airlines can control distribution information management for Cathay. at the forefront of the industry,” incentives as diminution of revenue or GDS costs can be applied in the costs by conducting a monthly review “This partnership includes both soft- he added. as a cost, which distribution channels hosted environment. of the GDS invoice detail, known as

October 2003 7 industry

by either SITA or Arinc, for which the the airline should consider options such agency. Where ticketless or electronic airline is charged a per-message fee. In as caching availability for the most ticketing is common, this practice can an attempt to achieve “last seat avail- requested city pairs or limiting the be eliminated. Where paper tickets are ability,” airlines often set their inventory number and types of transactions that widely used, the practice can lead to open/close thresholds too low and send can be performed from the site. These higher distribution costs as the agency large volumes of messages without options must be implemented with care may have to make a “passive booking” realizing the potential costs involved. in order to avoid the perception that the in order to ticket the airline-originated Of course, for many airlines that airline is not providing the best options booking. GDSs offer remedies for this participate at the highest levels of avail- to its customers. with tools that allow the agency to ability in the GDSs, AVS messaging is “claim” the airline-originated booking largely unnecessary and is only used Commissions and Incentives from the carrier’s host system. Using as a back-up mechanism. Unfortunately, Carriers with a presence in the this technology, the airline avoids the airlines often forget to change their United States have mostly eliminated cost of the passive booking. agreements when they move to higher, travel agency commissions, resulting As new channels of distribution

Online agencies continue to emerge as a more prominent distribution channel. In North America, the top six online agencies represent more reliable levels of participation in in lower overall distribution costs via emerge, it is paramount that an airline about 25 percent of all travel agency bookings in the region, and they are also gaining influence in Europe and Asia/Pacific. the GDSs. One U.S.-based carrier recently this channel. However, in lieu of com- understands the costs and revenue modified all of its AVS agreements, yield- missions, some carriers pay volume- or ramifications associated with them. ing millions of dollars worth of savings. revenue-based incentives to agencies. Only by understanding these issues billing information data tapes. Using Many of these same principles apply reduce distribution costs is availability The structure of the incentive program can an airline successfully control its tools that are available to analyze this in a hosted environment. An airline status messages, or AVS messages. These Web Transactions must be tightly controlled and inte- distribution costs. Through the Sabre ® data, airlines can focus on “unproduc- may be charged for either message messages are transmitted to the GDSs Studies have demonstrated that Web grated across all segments of the Global Distribution System, Travelocity tive bookings” such as: traffic, reservations made or passengers and other airline host systems to indicate site traffic creates substantially escalated airline’s indirect suppliers, such as and GetThere, a corporate online booking Bookings that have not been cancelled boarded. In the case of reservations whether a particular booking class of numbers of transactions to the airline consolidators, tour operators and tool, Sabre Holdings provides an inte- by a travel agency even after the airline made, an airline should cancel as many service is open or closed. An airline must host system. Although Web-based travel corporate accounts. grated offering for distributing through has sent a message for the agency to unproductive bookings as possible prior establish an agreement with each system agencies are working to rectify this issue, every channel and can assist airlines do so, to a flight. The 24-hour rule does not to which it wants to send AVS messages. an airline should speak with the agency Sales Office and with managing the costs of distributing Bookings that are used for ticketing usually apply here, as is the case with Several types of agreements are available to adjust the volume of hits, based on Call Center Efficiency their product. purposes only and do not affect airline GDS bookings. to avoid sending unnecessary messages. technology available to the online agency. To serve customers better, airlines inventory but still result in paying a Unless the airline has direct connections For the airline’s own Web site, which allow callers to book with its call center Stan Boyer is a director with Sabre fee to the GDS, Availability Status Messages to another system, the messages usually more than likely links directly to its host, and receive their tickets via a travel Airline Solutions Consulting. Waitlist bookings that have not been Another area where airlines can pass through a “clearing house” hosted cancelled by the airline or the travel agency. These bookings must be cancelled by the travel agency at least 24 hours THE HIGH LEVEL prior to the flight to avoid charges. Each GDS has procedures to work with partic- News Briefs from Around the Globe ipating airlines to remedy situations vıew where agencies make fraudulent or improper use of the system. Two recent Who Why reputation as being very supplier Sabre Airline Solutions clients actually friendly, and we are looking forward turned off waitlist functionality, resulting US Airways Hotel inventory provided by to a mutually beneficial relationship in more than US$1 million annual savings Travelocity to usairways.com will with this industry veteran moving for- each. Such action is justified because What feature the entire complement of ward,” said Steven Tracas, US Airways booking curves are very short, and if Travelocity's offerings, including vice president of sales and marketing.

the revenue management teams are In North America today, 40 percent of all bookings are made directly with airlines. Selected Travelocity to be the guaranteed low-priced "Good Buy" “I'm confident our passengers will performing their responsibilities, the Of the remaining 60 percent of trips booked through travel agents, a fourth are made exclusive distributor of hotels, car rates. The same is true for car notice the added savings and conven- need for waitlists is greatly diminished. through online agencies. rentals and last-minute deals on its rentals and last-minute deals. ience of booking their entire trip on Web site, www.usairways.com. “Travelocity has forged a usairways.com immediately.” 8 ascend industry industry

costs. Traditional catering leaders such Offering programs such as In-flight and buy-on-board operations as well as LSG Sky Chefs and Gate Gourmet Café in lieu of, or in combination with, as multiple parties’ schedule policy are also establishing themselves as the traditional services can prove to be a creation and schedule maintenance. leaders in developing buy-on-board very beneficial decision for airlines, In addition, these same specifications Preparing for the Changing programs for airlines. LSG Sky Chefs but it also comes with its fair share of and scheduling functionality should launched its In-flight Café concept earlier complexity and, in certain cases, may be able to be used as a content man- World of In-Flight Services in the year, teaming with recognized, not vastly decrease the effort needed agement system to inform passengers respected restaurant brands such as to manage such operations. of what will be for sale on their flights, T.G.I. Friday’s ® and Wolfgang Puck. For such programs, both airlines complete with pricing information as New “buy-on-board” programs enable airlines to provide quality Since launching In-flight Café, LSG Sky and caterers need technology to help well as a digital image. Chefs has run tests with five major them market the buy-on-board programs, A meal-ordering system that can customer service while boosting revenues and controlling costs. U.S. airlines and continues to run full- operate them efficiently, and drive the automatically segment an airline scale programs for two carriers totaling largest and most profitable response schedule by class of service and nearly 400 flights per day. from passengers. To facilitate such pro- provide forecasts for the appropriate By Jamie Patel and Erin Bouck | Ascend Contributors “The successful adoption of the grams, airlines need a comprehensive, class for both traditional and buy- In-flight Café program thus far by airline integrated system to accomplish pre- on-board services. For buy-on-board aced with seeking ways to cut costs, in some of the low-cost carrier models. customers indicates the growing accept- flight, in-flight and post-flight activities. flights, the system should provide F yet still provide a high level of service In addition, the industry has seen more ance of the buy-on-board concept as The ideal system provides a single meal “sales” forecasts based on real- to customers, many airlines — particularly and more service strategy volatility the new model for in-flight dining in tool to manage all planning, operational, time information from reservations in the United States — have begun mainly due to the need to help drive the United States, as more U.S. airlines financial and decision-support functions and departure control systems as experimenting with selling meals to profits in tough economic times. seek ways to offer cost-effective meal associated with successful buy-on-board well as past historical sales data. This passengers on board their aircraft. Carriers such as America West service in coach class,” said Rex Roe, programs. Some key points of function- system’s meal-ordering functionality The “buy-on-board” programs — Airlines, Midwest Airlines, US Airways vice president of design development ality to support buy-on-board include: should ensure that the right quantity enabling passengers to purchase and United Airlines have already looked for LSG Sky Chefs. Environments to support both traditional of meals are boarded, minimizing high-quality meals on flights where into buy-on-board programs. “The concept earned America West public accolades for its innovativeness,” The concept earned America said W. Douglas Parker, chairman, “West public accolades for its president and chief executive officer THE HIGH LEVEL innovativeness. Most importantly, of America West Holdings Corp. “Most customer feedback has been importantly, customer feedback has News Briefs from Around the Globe overwhelmingly positive …. been overwhelmingly positive, and we vıew ” hope to be able to expand the product.” The new, and increasingly popular, no other meal service would typically buy-on-board trend represents a radical Who a regional Center of Excellence to perspective, allocate capacity be offered — helps offset the cost of divergence from previous service models. advise Asia/Pacific-based carriers on according to demand, quickly and meal service while maintaining, or The program provides an alternative to Qantas Airways fleet scheduling issues. The Sydney- efficiently develop regional, short-haul even potentially increasing, customer simply reducing services offered to pas- based COE will initially aid Qantas in and long-haul schedules, and plan satisfaction. sengers. The buy-on-board programs What evaluating the profitability of routes and assess the profitability of proposed In-flight services — traditionally provide airlines another opportunity to from an entire network and fleet changes to both the existing network representing an average of 2 percent to outsource a piece of their operations. Selected the Sabre ® AirFlite™ suite perspective and aims to work closely and proposed new routes. 3 percent of total expenses — have long Many carriers are looking to their of planning and scheduling solutions with other APAC-based carriers. “The installation of the AirFlite been a key differentiator for carriers. catering partners to run all aspects of to develop the airline’s flight schedules suite will enable us to quickly allocate During the past few years, the variety these programs for whatever portion and improve its profitability across all Why appropriate capacity according to

of business models and strategies asso- of their schedule/class-of-service combi- Enhancing the traveler experience, the carrier's regional, short-haul and consumer demand or during any ciated with in-flight service has grown nation they deem applicable. Such many airlines offer brand-name food long-haul routes. The AirFlite suite will enable short-term disruptions,” said Alan dramatically to include everything from outsourcing activities may even provide items — such as T.G.I. Friday's ® and As part of the agreement, Sabre Qantas to make flight scheduling Joyce, Qantas group general premium service to virtually no service further efficiencies and help control Wolfgang Puck — through buy-on- Airline Solutions will also establish decisions from a network-wide manager network. board initiatives.

10 ascend industry industry

waste and maximizing revenue. pricing decisions, menu decisions, process. It should also manage the The Sabre ® AirServ ® aircraft provi- Distribution System will further expand more and more vital. Buy-on-board Extended data warehouse capabilities market-segment adoption rates and revenue-share process across the vari- sioning system, which traditionally awareness of such programs by allowing programs represent a dynamic new that enable storing and reporting on competitive impacts of other carriers; ous parties supporting the buy-on- enabled an airline to tightly manage direct marketing to another key player, trend that offers airlines the ability to retail-based information for a buy-on- and automatic cataloging of sales board program as well as flight atten- all aspects of its “above the wingtip the travel agent. Targeted messaging control costs while providing a desired board or gate-boarded environment; information captured in any handheld dant incentive programs and tracking provisioning,” is being adapted to to agents about the programs offered service. Utilizing the AirServ system in provide decision support to drive technology utilized in the selling of overall performance of the crew. help carriers manage buy-on-board by carriers as well as any incentives conjunction with other tools available programs or hybrid environments that might be available can be easily through the Sabre Holdings family will including both buy-on-board and sent through the existing technology. ensure that airlines and caterers alike traditional components. Marketing buy-on-board programs can support any environment from both hightech The AirServ system will News on New and Improved Products integrate with many marketing and Services from Sabre Airline Solutions engines to help promote buy-on- product Enhanced flight check-in functionality Easy-to-read graphical output — Most board programs — Increases agent productivity by system responses are displayed to the to passengers, Reservations and expanding the functionality available agent as dynamic graphical output travel agents Departure Control on the check-in screen to include the rather than native green screen host and potential Interface version 2.0.0 cabin map, current flight information responses. The trip summary window consumers. and passenger counts. also provides the ability to display Using the mes- description Consistent, easy-to-use navigation — large amounts of information in an saging delivery A new graphical user interface for airline In 80 percent of the cases, agent func- easy-to-read format. platform avail- agents to manage reservations and tions are performed within one click Integrated customer relationship able through check-in functions from a single, easy- from the homepage. The functions are management functionality — Agents the Sabre ® to-use tool. mapped to the natural dialog with the are able to quickly identify their fre- VirtuallyThere ® traveler and are equally accessible quent travelers and capture additional Web site, airlines benefits with or without a mouse. information about the traveler. can send direct The combined GUI has been designed marketing to follow natural, intuitive workflows, messages to streamlining agent processes and upcoming increasing productivity. By eliminating passengers complex system formats, the GUI enables in a variety of agents to offer customers more attentive formats and can service. The easy-to-use design reduces include specific training time, and the consistent naviga- information The graphical user interface for the automated meal ordering service, also known as AMOS, helps airlines easily tion between reservations and airport about, and even manage, streamline and improve their catering operations. functions significantly reduces the time photos of, the for crosstraining. Adopting this com- meals available bined interface will also ease the on their upcoming flights. Such messages will be crucial to their overall success, an operational and marketing stand- process to upload enhancements and can also easily be expanded to allow and having a single technology provider point. Such flexibility will help manage new versions as they are released. pre-purchasing of meals prior to boarding across all avenues ensures a concrete costs in any environment, without the flight. On a broader scope, integration and standard message is being deliv- having to disappoint passengers. features with booking engines such as Travelocity ered regardless of the communication Graphical seat maps — Allows agents add further touch points for consumers channel. Jamie Patel is director of dining and to view a dynamic cabin map and as well as opportunities to drive pre- As the market for in-flight services cabin services at Sabre Airline quickly identify and assign available departure sales. Utilization of existing continues to change, the ability for an Solutions. Erin Bouck is the product seats to customers. functionality in the Sabre ® Global airline to adapt will continue to become manager for the AirServ system.

october 2003 13 industry Expecting the Unexpected A conversation with Alan Wong, Cathay Pacific Airways

hile the global airline industry syndrome in Asia, Cathay Pacific suddenly methodology instead of the more com- Wstruggled with an economic saw travel to and from its home base monly used scenario-driven method. downturn, the events of Sept. 11, 2001, plunge. The World Health Organization This response-driven planning in the United States, and the outbreak issued a travel warning for Hong Kong, methodology enables us to avoid having of conflicts in Afghanistan and Iraq, and bookings in its home market to write and maintain a library full of Cathay Pacific Airways managed to decreased 80 percent. In May, the carrier specific plans for specific crisis scenarios. weather the storm. In March, the carrier averaged 5,500 passengers a day — announced record profits even in the a dramatic decrease from the 33,000 Our corporate decision is that we face of such challenging conditions. a day it carried during the same month “use a response-driven contingency Weeks later, however, another blow to the previous year. the industry dramatically affected the The drop in passenger traffic forced planning methodology instead of Hong Kong-based airline. With the Cathay to issue its first-ever profit warn- the more commonly used scenario- outbreak of severe acute respiratory ing and to take other dramatic steps to driven method. address the crisis and maintain its posi- ” tion as one of the world’s preeminent carriers. In the months following the There are too many potential crises out outbreak, the carrier reported a rise in there for a modern airline. It also allows passenger numbers and plans to return us to clarify our thinking throughout to a full schedule. every level of the company on our core Alan Wong, a general manager at business functions as well as their deliv- Photo courtesy of Cathay Pacific Airways Cathay, discussed how the airline ery processes — what may be affected, reacted to the crisis and some of the les- what needs to be protected. Photo courtesy of Cathay Pacific Airways sons it learned. This method ensures systematic Question: Although it’s impossible business continuity planning through- to anticipate an event such as the out- out all departments and outports, such break of SARS, you have a plan in place as overseas offices, by making use to deal with crises. Can you outline of a corporate standard planning your crisis management process? template. And it maximizes cost Alan Wong, a general manager at Answer: As an airline, we always savings in pooling resources and Cathay Pacific, said the airline’s crisis management process helped it cope have plans to handle flight disruptions. manpower by making use of an with the severe downturn in traffic Our corporate decision is that we use a integrated, holistic corporate response earlier this year. response-driven contingency planning infrastructure.

october 2003 15 industry industry Quick decisions and actions are “crucial in handling a crisis. … SARS Q: What are the steps involved in it, structure was adequate in ensuring 12 months ago. Everyone must be period in our 57-year history. normal by the end of September. The and what input and types of informa- business continuity and dealing with trained according to the plan — it's no first became an issue for us on March The measures mentioned were outbreak of SARS has reinforced our tion do you seek? issues such as impact on personnel. good if the staff doesn’t know how to 16 … On March 18, we formed our all necessary to conserve cash and belief that the aviation industry is very A: Basically the crisis management Q: Have you identified any changes use the plan. We also conduct drills and SARS committee …. preserve jobs. The fact that we survived dependent on the global economic cycle process involves all departments and that you would make to the crisis man- exercises to ensure efficient execution ” and are now able to work toward our and is very vulnerable to exogenous staff at all levels. When a crisis is called, agement process so that it would work of the plan including all levels of staff most effective steps to take? Were there recovery is due to our prompt business events like 9/11 and SARS. One item a crisis team composed of representa- even better in future crisis situations? from frontline staff to company directors. other options that were not pursued? decisions, the admirable teamwork that we can consciously control is cost, tives from various departments will be A: The spread of SARS and its impact Q: During the height of the outbreak, A: Dealing with something unknown of our staff and management, and our and we will continue to keep a close formed and meet on a regular basis. on us was so quick that it deepened you took some dramatic steps — cutting like SARS, other than protecting the shareholders' continued confidence watch on it. The team is chaired by a Cathay director. our belief in ongoing preparation. Every more than 40 percent of daily flights, health of our passengers and staff, our in the company. Q: Under normal circumstances, key Its job is to monitor the situation and group must maintain and update its parking 22 aircraft, cutting dividend first priority has to be the preservation Q: Were any of the changes you made decisions are made after thorough devise, communicate, implement and plans on a regular and periodic schedule payments, placing staff on unpaid leave of the business and jobs. The outbreak permanent? discussion and debate. Did the need evaluate our response from an opera- — it's no good if the plan was updated — how did you identify specifically the of SARS posted the most challenging A: Operation wise, we were back to to react quickly to a crisis situation alter the decision-making process? Even though there was no specific Once the World Health Organization lifted its travel advisory for Hong Kong, partners to launch the “We Love Hong Kong” campaign. Such steps have helped the A: Quick decisions and actions are cru- Cathay Pacific Airways moved to allay fear of travel to the city through its airline rebound. In August, Cathay Pacific carried 23.9 percent more passengers than cial in handling a crisis. Our established “plan on SARS, the generic corporate “Flying without Fear” campaign. Cathay Pacific also worked with other tourism the previous month. plans have enabled us to do so. SARS response structure was adequate in first became an issue for us on March ensuring business continuity and 16 when we were told that a passenger dealing with issues such as impact that had flown with us to Canada 10 on personnel. days previously had taken ill. It was ” immediately apparent to us that SARS could have commercial implications tional and communication point of view. for the airline. Our first concern was to Any information related to the crisis protect the health of our passengers will be needed. For the SARS outbreak, and staff. At the time, there were very we worked closely with the International limited recommendations for airlines Air Transport Association, the Association to deal with the situation, so we devised of Asia Pacific Airlines, the World Health our own. Organization, Hong Kong Department of On March 18, we formed our SARS Health, et cetera, to gather the latest SARS committee chaired by the director of information. We needed them for decision service delivery and brought together making and message development for representatives from all departments. both internal and external audiences. Its job was to monitor the situation and Q: How well did your crisis manage- devise, communicate, implement and ment process address the SARS out- evaluate our response from an opera- break? Was it robust enough to handle tional and communication point of view. such unprecedented changes, or did Q: How long do you believe it will take you have to adjust it to manage the you to fully recover from the affects of magnitude of the situation? the SARS outbreak? Do you believe the A: SARS is so new that it’s probably recovery process was hastened by hav- not included in any contingency plan. ing a crisis management plan? Nevertheless, our established plans A: Passenger numbers are picking up are response-driven rather than sce- across the network. However, yield is nario-driven. We were able to meet the low as a result of all the promotional challenges of the SARS event. Even offers to encourage people to travel though there was no specific plan on and help to rebuild the tourism industry SARS, the generic corporate response in Hong Kong. Full recovery will take

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some time. Having a crisis management back to full operation by the end of acted to contain them, the outcome plan has definitely helped the company September. For destinations such as to the company, its staff and sharehold- to manage the crisis in a more structured London, Melbourne and Auckland, ers could have been much worse. Riding the Storm Out way. Very soon, it became clear that the the frequencies will be even higher than Very important was our ability to the pre-SARS level. act quickly in the face of crisis, both to In times of crisis, people need Notwithstanding current difficulties, protect the health of passengers and For nearly three years, various elements have converged to form we will continue with plans to grow our staff and to make swift decisions in “to be briefed. Unity among staff fleet, develop our network and strengthen order to safeguard the business in the a “perfect storm” for the airline industry. Addressing some of the and confidence in the company Hong Kong's position as Asia's leading short term and maintain confidence in causes and effects of the storm will result in changes that will are essential …. aviation and logistics hub. the company in the long term. reshape the industry. ” Q: Since Cathay has successfully In times of crisis, people need to be crisis would break down into three broad survived the SARS crisis, do you think briefed. Unity among staff and confidence phases with specific focus in each phase. you are better prepared to handle future in the company are essential to ensure By B. Scott Hunt | Ascend Editor After taking the necessary measures to situations that may arise? that everyone puts in their best and protect our passengers and staff and A: We are coming through an extremely moves in the same direction. ike many spectacular tempests, the airline industry analyst for Blaylock cutting costs, we moved quickly from difficult period with our company, staff Communicating promptly and transpar- L so-called “perfect storm” that hit the & Partners in New York City. Nothing the response phase to the reassurance and product intact. The experience has ently to external audiences also helps to airline industry was preceded by decep- too alarming — the booming North phase in order to allay the fear of given us very good lessons on how to retain people’s confidence in the company. tively beautiful weather. American economy began to cool. travel because of SARS. We launched manage the company during an extremely From our point of view, it was Although it may seem like an Following that, though, the storm clouds a "Flying without Fear" campaign in difficult business environment. While important that we did not just wait for eternity has passed, the airline industry thickened as fuel prices rose and high- April. Faced with the rapidly declining we remain vigilant, we believe the expe- help. We provided leadership and took once found itself flying through the margin business travel slackened, Neidl local economy, we had to do something rience we had will help us handle future action to rebuild our own business as clear skies of relative prosperity as said. Meanwhile, he added, airlines to build confidence and stability among situations that may arise. well as support government and industry recently as three years ago. According continued to add capacity, and labor Hong Kong residents and to get life Q: What key lessons did you learn initiatives, both to maintain confidence to Steve Hendrickson, a partner with costs in the United States jumped, back to normal. Together with other from the SARS outbreak and its in air travel and restore vigor to the Sabre Airline Solutions Consulting,“ sparked in part by an industry-leading tourism partners in Hong Kong, we affects on your airline? tourism industry of Hong Kong. things were calm and sunny” as contract United Airlines gave pilots to launched the "We Love Hong Kong" A: Although SARS created a very recently as 2000. campaign. Once the World Health different crisis to one an airline might The steps taken by Cathay Pacific The “perfect storm” that impacted the “The economy was riding high in It was just like a perfect storm. Organization removed Hong Kong from normally be prepared for, it nevertheless to address the issue have helped it airline industry had a dramatic effect ’99 and 2000,” he said. “You had your “It was a whole bunch of different the SARS-infected area list, we rolled highlighted some very fundamental make a strong recovery. In August, on the financial performance of carriers ‘dot.com’ venture capitalists throwing out an aggressive plan to rebuild the lessons. Cathay Pacific carried 1,083,011 pas- around the world. In 2001 and 2002, the (around) money, and people were saying, things that were coming into play world’s airlines combined to lose nearly tourism industry in Hong Kong. The key lesson is the need to be sengers, a 23.9 percent increase over ‘Don’t worry about being profitable, just at the same time … none of US$25 billion. Q: As you emerge from the impact of prepared. We are always sensitive to the previous month. Its passenger generate more eyeballs.’ Of course, we them good. SARS, have you readjusted your opera- possible threats and a strong sense of load factor climbed 3.2 percent year- had Y2K grabbing a lot of activity. Even ” tions and/or your overall strategy? crisis is in our corporate culture. If on-year to 85.3 percent, and it carried into 2000, they were still wrapping up A: We are progressively reinstating we had not identified the possible 70,452 tons of freight, up from 67,340 Y2K projects. Then a lot of those projects win support for its ill-fated merger more flight frequencies. We were implications of SARS early on and tons in July. were used as justifications for other attempt with US Airways. modernization efforts: ‘As long as we’re And then came the lightning bolt — going to clean up the code on the two- the events of Sept. 11, 2001, when four digit year, let’s also put a data warehouse commercial aircraft in the United States +count it up behind this thing.’ So there were a lot were commandeered and crashed into the of things helping the economy peak and two World Trade Center towers in New Less than 2 — Number 4 — Number of doctorate 7.1 — Percentage of decline even bubble, and we were enjoying the York City, the Pentagon in Washington, of minutes for the world’s shortest degrees held by members of the for overall passenger traffic year excesses of that period.” D.C., and a field in Pennsylvania. scheduled flight, from Westray to Sabre Airline Solutions consulting on year for the first half of 2003, Dramatic and damaging as it was, Papa Westray. team. Team members also hold according to the International Air Signs of Trouble that lightning strike only marked the 15 master’s of business administra- Transport Association. But in March 2001, a few clouds storm’s flashpoint. It was followed by tion degrees. started to gather, said Ray Neidl, an conflicts in Afghanistan and Iraq and

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the outbreak of the deadly severe acute “In my view, it’s the confluence cent for the year. Kilometers flown, which were good, was profitless growth. Yes, try, “Driving Airline Business Strategies respiratory syndrome in Asia — all of of several factors aligning in time and had increased by at least 5 percent from it was growth, but we were giving the Through Emerging Technology” and which combined to keep an already then triggered by some pretty severe 1998 to 2000, dropped 0.5 percent in 2001 product away. “Airline Survival Kit: Breaking Out of the skittish traveling public at home. catalysts such as 9/11 that has probably and an additional 1.1 percent in 2002. “It’s not that these things were not Zero Profit Game” — said the availability “It was just like a perfect storm,” brought the industry to its knees like it The financial impact, naturally, was detected before; it is just that our focus of low-cost carriers on more routes has Neidl said. “It was a whole bunch has,” Hendrickson said. “You can meas- almost incomprehensible. In 2001-02, was not on them,” he continued. “We’re given travelers a viable alternative to of different things that were coming ure the storm by the damage it’s caused, according to IATA, the world’s airlines now more focused on them. We’ve the traditional carriers, and they were into play at the same time … none of and the damage is showing up on the combined to lose US$24.7 billion — always known that we have carried well-positioned to draw traffic during them good.” bottom line and the top line. It’s not just more than the gross domestic product some traffic at below cost. We’ve always an economic slowdown. Indeed, some The constant piling on of adverse the bottom line. The revenue line has of Nicaragua for the same period. known that we added complexity to our low-cost carriers have continued to earn circumstances seemed to some in the fallen apart.” Nearly three years into the industry’s business, and the complexity that we profits despite the raging storm. Another pre-existing factor also helped magnify the effects of the storm, Taneja said. “The development of the Internet (as a distribution channel) completely 80 changed the industry,” he said. “It made fares transparent, that there is a lower fare available to the business traveler.” The Internet also revealed the con- 70 ditions required for a business traveler to take advantage of lower fares. They might have to travel to an alternate air- port where a low-cost carrier is based, 60 or make a connection as opposed to a non-stop. But, with the volumes of fare information available on the Internet, Taneja said travelers could now make “a choice based on knowledge they had The profitability of airlines during the last 10 years has swung dramatically, ranging Data from IATA shows that historically, passenger load factors have followed a from losses following the first Gulf war to healthy levels in the late ’90s and back to consistent pattern that was disrupted by events such as Sept. 11, 2001, and the gotten” rather than relying on an inter- losses with the start of the “perfect storm.” outbreak of SARS in early 2003. mediary who had a vested interest in steering customers to a higher fare. With the growth of the Internet as industry to parallel the ancient story of The Storm’s Effects perfect storm, analysts have examined added raised the cost. The only difference a distribution channel, practices travelers the plagues that once afflicted Egypt. The damage report, according to the its origins and have found that perhaps is that before we were able to get away developed while shopping online for “I hope we don’t have a wave of International Air Transport Association, the underlying “meteorological” condi- with charging higher fares to a certain the family vacation soon spilled over locusts,” Northwest Airlines Chief indeed paints a stark picture. tions that set the stage for the turbu- segment of the traffic.” to planning corporate travel. Executive Officer Richard Anderson In 2001, seemingly every performance lence go back well before the first drops Other pre-existing conditions also “People flocking to the Internet remarked to a reporter during the SARS measure kept by IATA fell: kilometers of rain. magnified the effects of the storm. learned how to do their comparison outbreak. “We've had war, and we've flown, aircraft departures, hours flown, “The proliferation of low-cost carri- shopping,” Hendrickson said. “I believe had plague, I guess, and we seem to passengers carried, freight tons carried, The Early Factors ers is one of the aspects, and that goes we’re seeing the consumer paradigm have sort of one event after another.” passenger kilometers flown, available Even during the boom times, there back quite a bit,” Taneja said. “I would change. I used to accept the US$1,600 Individually, the elements in the storm seat kilometers and passenger load fac- were underlying problems in the indus- say that by the early ’90s, they really got fare if I was booking two or three days would have each had an impact. Working tors. The picture didn’t improve much try, said long-time industry analyst going and really started becoming more in advance of my trip. Today, I find The flashpoint of the perfect storm — the in combination, however, they drenched in 2002. The total number of passengers Nawal Taneja. prominent. That’s my definition of the that unacceptable.” events of Sept. 11, 2001 — compounded the industry, flooding it with financial carried by IATA members fell another 2.1 “Prior to ’97-’98, the industry was first event (of the storm).” Of all the elements of the storm, the conditions already facing the aviation setbacks during what many call the worst percent in 2002, and, on top of that, they industry, forcing it into perhaps the most making gobs of money,” he said. “But Taneja — who has recently the development of online distribution period in commercial aviation history. paid less to fly: yields shrank by 0.3 per- challenging period in its history. some of the growth, even when times authored two books on the airline indus- packed the most powerful punch,

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Taneja said, because “the Internet above the rising water, some could not Airplanes are technology (as well as) A Changed Environment have lasting effects. simply changed travel distribution and escape the storm. The fallout included information technology and technology While the worst may have passed, “The industry has changed,” Neidl passengers’ behavior.” the failure of weaker airlines and bank- such as mobile communications. the storm lingers. According to IATA, said. “The Internet makes it easier to ruptcy court protection for others seeking “I think the most fundamental overall passenger traffic for the first shop. The low-cost carriers are really Seeking Cover to restructure their businesses. part of all of this is information — half of 2003 was 7.1 percent below 2002 gaining significant market hold, and the The response by a thunderstruck Those who have survived have having access to information in almost levels. And capacity remained signifi- big carriers are never going to be able industry to the deluge was swift and made needed changes, Taneja said. real-time in a very pervasive manner,” cantly down, led by the Asia/Pacific to get the revenue premium they drastic. Thousands of employees were “The general direction is correct,” he said. “There should be one unified region (a decrease of 27.2 percent) had before.” furloughed, hundreds of aircraft were he said. “My only question would be view of this information available and North America (12.5 percent). Some of the changes have had parked and marginal routes were cut. the speed with which they are moving across the board.” Yet, the end of the storm may be immediate impacts. Following the events Around the world, governments and the depth to which they are moving. The cost of investing in technol- in sight. of 9/11, increased security — and its ogy, he said, will pay off for airlines. “Now, I see a rainbow,” Neidl said. “In the long run, (the cost) is minute “I’m looking for an improved economy. Technology, I believe, is not being compared to the benefits it can provide, I’m looking for cost cutting to really take “utilized to the fullest to help them assuming you are willing to capitalize effect later on this year or early next year. on that benefit. You do not just need I’m looking maybe for even some con- restructure. I think that it could a new system, but you need a new tinued reduced capacity by the major not only be an enabler of some culture.” carriers. All those things combined, of these changes, but perhaps a By investing in technology and I’m looking for the industry to return to driver. There is no question in making necessary changes, airlines can profitability maybe in the third quarter my mind that technology has position themselves to stand on solid of next year.” become much more of a tool that ground when the sunny skies return, But, even after it subsides, the they can use. Taneja said. severity and duration of the storm will ”

THE HIGH LEVEL According to IATA, the main traffic and capacity trends — revenue per kilometer, freight ton kilometers and available ton kilometers — dropped significantly following News Briefs from Around the Globe the events of Sept. 11, 2001, and again earlier this year after the outbreak of SARS. vıew

Who the need for costly and complicated in- Hj Mohd Daud, director of marketing at attempted to provide some shelter Only a few carriers are moving pretty house data center infrastructure and Royal Brunei. for airlines. In the United States, the rapidly and going pretty deeply. Most Royal Brunei Airlines and Regional support. Regional Express — “With the government put together a package of are not doing it as quickly or as deeply.” Express Airlines addition of the Traverse system, we will US$5 billion in cash and US$10 billion He also said airlines have not been Why be able to provide our Regional Express in loan guarantees to compensate quick enough to adopt technology to What Flyer members with greater customer for the effects of 9/11. Both U.S. and assist with making changes. Royal Brunei — “We want to service than we could previously," said European governments helped under- “Technology, I believe, is not being Successfully implemented the reward our Royal Skies members with a Hans Van Pelt, chief information officer write terrorism insurance for airlines. utilized to the fullest to help them Sabre ® Traverse™ loyalty management full range of features and benefits at Regional Express, a domestic After the outbreak of SARS had restructure,” he said. “I think that it system to automate their frequent flyer through new partnerships and multi- regional carrier in Australia with 1,500 subsided, and travel advisories for could not only be an enabler of some programs, Royal Skies and Regional faceted promotions and awards. The flights per week. “The ASP interface affected Asian countries were lifted, of these changes, but perhaps a driver. Express Flyer, respectively. The airlines Traverse system has enabled us to do also enables us to eliminate the burden Heightened airport security has put another area governments began aggressive There is no question in my mind that access the Traverse system via the all this and more, and we are extremely of maintaining a costly infrastructure to burden on airlines as they have struggled ® ® campaigns to bring back tourists. technology has become much more of to cope during the perfect storm. According Sabre eMergo Web-enabled and dedi- pleased with the positive feedback from support our loyalty program; now we Even though the airlines themselves a tool that they can use. And I’m using to IATA, new security regulations cost cated network solutions, an applications our customers from the date Royal have an effective customer self-man- took radical steps to keep their heads technology in the broader sense. airlines US$5 billion in 2002. service provider model that eliminates Skies was launched,” said Hj Omar Ali aged program completely online.”

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accompanying costs — have directly we’ve got some real problems.” what your scope is going to be and would be able to charge for it. But type of system airlines had worked impacted airlines. Taneja agreed the look of the indus- the type of network and the type of even when you do, the price has to long and hard to perfect, but it won’t “The extra security that is needed try has been irreversibly changed. The fleet and the type of customer service reflect, to some extent, the perceived work anymore. at airports now has done two things,” severity of the storm revealed underlying and onboard products and so on,” value that a person is willing to pay “What the low-cost carriers are Taneja said. “One, it has raised costs. conditions in the industry that could no he said. for the feature. The feature has to be doing is coming into markets, and they The other one is simply having to show longer be ignored, he said. For low-cost carriers, increasing something the customer wants to buy. are not using those restrictions,” up at the airport a lot earlier to make a “I don’t think we’re ever going back competition among themselves — Second, it has to have a reasonable Hendrickson said. “So, carriers’ ability flight. Short-haul travel is going to be to the way we were,” he said. “I’m not and from revamped traditional carriers value for that customer.” to fence off the business segment is (particularly) impacted. If you are only saying that airlines will continue to lose — will force them to change as well, The low-cost carriers, which today gone, plus passengers have the expecta- traveling from Cleveland to Chicago, money at the rate they are forever and he said. are better capitalized and better man- tion that they shouldn’t have to pay the and you have to show up an hour and ever and ever. They will turn around. “Their competitive advantage is aged than ever, will continue to drive higher fares anymore.” a half early on each end, that’s going to add a lot more time.” But there are other long-lasting results as well. According to Hendrickson, the industry “might be looking at climate change here.” “Take fare transparency,” he said. “Initially the airline industry thought it was a great idea; bypass the global distribution system, give customers the ability to use online bookings, avoid commissions, lower distribution costs. But at the same time, they introduced the start of a revolution, which brought comparison shopping and completely emphasized price. That genie has come out of the bottle and A drop in available ton kilometers across the Asia/Pacific, North American and European A downturn in the airline industry began in early 2001 with a decline in revenue will not go back in. There’s no way marketplaces reflected the events that had a dramatic impact on the industry, according passenger kilometers, according to statistics from IATA. The declining performance you’re going to reverse that trend, to IATA. plummeted in late 2001 and again in early 2003. so that’s here to stay.” Hendrickson also noted that, historically, there was a strong rela- But in order for them to turn around, low cost,” Taneja said. “If the legacy change in the industry, particularly Despite the pressures of the past few tionship between GDP and industry they are going to have to change their carriers reduce their costs and approach in pricing. years, airlines can take solace in that revenues. During the past few years, business models significantly. the low-cost carrier, then the latter may “A lot of us find it a little counter having survived the worst, they’ll be however, that relationship seems to “If you are a traditional legacy have to go even lower. And, second, intuitive to fly on a ticket one day with better equipped to succeed in the future. have been broken. carrier, the change will be more drastic they are going to have to differentiate a briefcase in our hand and pay some “I think that airlines that survive “That strikes me as something that and dramatic,” he said. “But even the among themselves. AirTran, for exam- astronomical price and fly on the week- the storm are going to be stronger may not be cyclical,” Hendrickson said. new paradigm airlines are going to ple, offers two classes of service and end and get it for a fraction of that,” and profitable and are going to do “That might be a fundamental change have to change.” flies into more conventional airports.” Hendrickson said. “Imagine if you went very well,” Taneja said. “It’s not like in the way this economy looks at the Traditional carriers will “have to Differentiation will also be the to buy a notebook, and the store looked demand for air transportation and value of air travel. It’s a pretty startling reduce their costs and not just labor key to regaining pricing power, at whether or not you were in a business services has disappeared. Those that change. That’s what I think is most costs,” he said, but also will have “to Taneja said. suit. ‘This is a businessman, let’s make survive are going to find the optimal Although the effects of the perfect alarming. We can always fight over pick very carefully the customers that “One way you get to a commodity the price $2.’ But you come in with your mix to provide a reasonable return to storm continue to linger, there are share, but if the economy is switching they want to serve.” business is if you don’t set up differenti- positive signs on the horizon, analysts kids at back-to-school time, and you shareholders, reasonable wages to its view of travel as a facilitator of “If you decide you are going after ated products and services,” he said. say. Analysts predict that some airlines get the same notebook for 99 cents. employees and reasonable fares to commerce to something else, then a kind of customer, that will determine “But, if there is a difference, then you will return to profitability in 2004. You’d be furious. That’s essentially the customers.”

24 ascend october 2003 25 industry Photo by Gerd Rebenich/Lufthansa

Lufthansa “D-Check”s its Organization and Processes

Through a program designed to thoroughly examine its operations, the Lufthansa Group is positioning itself for the long haul.

By Hanjo Krause | Ascend Contributor

he term “D-check” is nothing new better position than most competitors,” T to the airline industry. At every said Juergen Weber, the group’s former airline, each aircraft must eventually chief executive officer who launched the undergo this extensive maintenance program. “The D-check program will procedure in which it is completely ensure that it remains that way.” overhauled — systematically disassem- Through the enterprise-wide pro- bled and scrutinized piece by piece. gram, the processes and procedures of

Photo by Rolf Bewersdorf/Lufthansa But the Lufthansa Group has taken all business divisions are meticulously the “D-check” concept and applied it examined to measure performance throughout the organization, a radical and seek ways to improve quality, cut approach to ensure the airline maintains costs and identify potential procedural its leadership position in the industry. improvements. The objective of the Launched in early 2001, the “D-check program is to increase the efficiency — Maintaining Leadership” program Lufthansa finds itself in a much helped the company avoid an operational Saving is important now, but loss following the events of Sept. 11, “better position than most com- “saving alone is not the future. Under the direction of Wolfgang 2001, and helped the Lufthansa Group Mayrhuber, chief executive officer of petitors. The D-check program post a € 718 million (US$814 million) We must at the same time invest Lufthansa, the airline has embarked will ensure that it remains operating profit in 2002. When the in our products for tomorrow to upon a program to thoroughly that way. analyze its operations. program was launched, prior to the maintain our lead. ” extreme turbulence in the industry, ” company officials projected that the and effectiveness of the airline by program would generate € 1 billion in making it lean, nimble and first rate. benefits by the end of 2003. “Saving is important now, but saving Company officials said this program alone is not the future,” Weber said. “We will help the airline secure its position must at the same time invest in our prod- for the future. ucts for tomorrow to maintain our lead.” “Lufthansa finds itself in a much Under the direction of the new chief

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executive, Wolfgang Mayrhuber, the airline is doing just that. It has pursued Pioneering spirit and innovative high technology to differentiate itself “strength are important pillars in from its competition. From the begin- our success. Investments in ning of 2004 on, Lufthansa will become product quality, therefore, are the world’s first airline to provide in- flight broadband Internet connectivity investments for our passengers on its long-haul fleet. The airline will Photo by Stefan Wildhirt/Lufthansa and in the future of Lufthansa.” equip 80 aircraft — including Boeing 747-400s, and Airbus A340s and A330s — with the Internet service, provided by Connexion by Boeing. “The Internet is being given wings and will enable the mobile business traveler to make better use of his or her flying time,” said Mayrhuber in announcing the new service. Through this service, called FlyNet, the airline provides carrier information, Krüger/Lufthansa Photo by Werner Lufthansa Cargo, which uses the CargoMax Revenue Manager, carries cargo to nearly news, weather, stock market data and 500 destinations around the world. In addition to its 14 MD-11s and eight Boeing 747- destination information through a free 200s, Lufthansa Cargo has access to the freight capacities of more than 300 Lufthansa portal. And passengers can also pay a passenger aircraft. fee to use the service to surf the Internet or connect with their offices’ secure intranet or e-mail server via a virtual private network. In June, the airline equipped its strategic course of the airline during the costs by automating and integrating to optimize varying capacity needs seven lounges at its Frankfurt hub with past decade helped Lufthansa successfully their in-flight catering process. Last year, across the network. Combined, these wireless Internet access, and it plans to master the challenges of the industry eLSG.SkyChefs introduced its automated tools help Lufthansa effectively respond expand the service to its 55 lounges at during the past few years. meal ordering service, called AMOS. The to unexpected events, protect yields and 30 locations worldwide. “Pioneering spirit and innovative service enables airlines to automate, adjust to fluctuating demand.

“Reliable communications have Photo by Gerd Rebenich/Lufthansa strength are important pillars in our manage, streamline and improve their More than ever, a global network become an important competitive edge success,” Mayrhuber said. “Investments catering operations, potentially reducing carrier such as Lufthansa must focus on in the age of global economic relations, in product quality, therefore, are invest- annual meal overages by 5 percent. competition, quality, cost management, particularly for business travelers,” ments for our passengers and in the Lufthansa Cargo implemented its creative innovation, customer service Mayrhuber said. future of Lufthansa.” eBooking tool to allow airfreight cus- and changing market conditions. But, as He said through the wireless connec- Lufthansa’s innovation spans across tomers to submit bookings electronically Weber noted when passing the baton, tions, Lufthansa is offering its passengers its various subsidiaries, including LSG 24 hours a day. The cargo division also success relies on a committed, forward- “a service that makes the lounges Sky Chefs, the world’s largest in-flight implemented a revenue management thinking team and the right tools. worldwide into mobile offices.” services company, and Lufthansa Cargo. tool, the Sabre ® CargoMax™ Revenue “Under (Mayrhuber’s) leadership, Lufthansa said the Internet connectiv- In October 2001, the catering group Manager, to prepare the division for the Lufthansa will remain ready for change ity adds a communication dimension to its launched eLSG.SkyChefs, the first total next phase of growth in the cargo busi- and will develop its strength such as lounges, which already provide options e-business solution provider to the airline ness. Lufthansa’s passenger airline uses vigilance, speed and choice of the right for entertainment and relaxation. catering industry. The service, which utilizes the Sabre ® AirFlite™ Fleet Manager tools,” Weber said. Through its organizational “D-Check” program, Lufthansa German Airlines, which These innovations build on Lufthansa’s the Sabre ® AirServ ® aircraft provisioning to support its more refined schedule uses the AirFlite Fleet Manager to support its more refined schedule planning and history of pioneering dynamic methods system to optimize the provisioning process, planning and tactical short-term capacity Hanjo Krause is Sabre Airline Solutions’ tactical short-term capacity adjustment processes, is gaining altitude in a of doing business to keep itself at the competitive marketplace. helps airlines realize up to a 10 percent adjustment processes. The tool allows Germany-based account forefront of the industry. The constant reduction in their operational catering Lufthansa to re-assign aircraft in order director for Lufthansa.

28 ascend october 2003 29 industry industry

– and a growing percentage in Europe carriers that have started their own five destinations with a fleet of four they also have key differences in the way An and Asia/Pacific as well – traditional car- low-cost airline. Airbus A320 aircraft. And Delta, with they operate. While both have a single riers have been forced to take extreme Despite a checkered history of such Song, and bmi, with bmibaby, have fleet type, Song uses larger 757s com- measures to deal with the growing offshoots, in the past couple of years, sev- used their low-cost subsidiaries pared to bmibaby’s 737s. Song also has Inside threat. The low-cost carriers have put eral airlines have launched, or announced to aggressively compete in their maintained the pay scale of the parent tremendous pressure on traditional plans for, low-cost subsidiaries. Air Canada dominant markets. airline while bmibaby forged complete By B. Scott Hunt and Job network carriers to cut costs in order has launched Tango and Zip. Qantas is Although some consider such new labor agreements. Each also offers Stephani Hawkins | Ascend Editors to compete with the LCCs and match now examining the possibility of launch- endeavors risky, early returns have been different amenities to its customers. their discount fares. ing a domestic low-cost carrier. United positive for Delta and bmi, who show While their approaches to their t may not be a case of “if you can’t beat assets, incorporating elements of the Traditional airlines have fought Airlines recently announced it will that, perhaps, such a new venture is low-cost carrier startup differ somewhat, I’em, join ’em.” But several traditional low-cost model in their own “carrier- back by reducing labor costs, develop- launch a new low-cost operation from not quite the flight of fancy many peo- both Delta and bmi are committed airlines, faced with increasing competi- within-a-carrier” startups. ing “rolling” hubs and simplifying its Denver hub beginning in February. ple once believed. Although they share to using their new subsidiaries to tion from low-cost carriers, have begun With low-cost carriers now control- their fleets. But none of those steps The low-cost operation, currently code- similarities – including drawing upon compete strongly against the low-cost looking at ways to re-deploy their ling nearly a quarter of the U.S. market match the radical approach of those named Starfish, will begin by serving the resources of the parent airline – competition.

Song Reaches You’ve Come a Top of the Charts Long Way, bmibaby!

By Stephani Hawkins | Ascend Editor By Stephani Hawkins and B. Scott Hunt | Ascend Editors

ith 30 percent of its traffic coming own backyard. direct service from the northeast to key ack in 2001, officials with bmi, the low-cost carrier would identify as being Go, announced that December it would Wfrom Florida, Delta Air Lines defi- The carrier looked at several Florida leisure destinations, also Bsecond largest carrier in the United attractive. Really, the decision for us was begin operations at East Midlands. nitely wanted to protect its market share options. It could follow the lead of other recently added service between Atlanta Kingdom, predicted someone would if we as a company had to start setting “Because we had laid a lot of the in a vital area. airlines and pull out of Florida. It could and Las Vegas, Nevada. eventually bring a low-cost carrier to the up our own low-cost carrier mindful of groundwork, we were actually able to Long the state’s dominant carrier, maintain the status quo, continuing to When the concept of a new, low- airline’s East Midlands Airport home base. some of the pitfalls that people like British announce our own low-cost airline within Delta faced the growing presence in lose money and hoping to make it up in cost airline was introduced to Delta So, they thought, why not do it Airways with Go and some of the U.S. three days of Go announcing it was Florida of low-cost carriers such as stronger markets. Or, ideally, it could employees, it was welcomed with themselves? carriers had with their own ‘light brand.’ coming here,” Davis said. “The immedi- Southwest, AirTran and jetBlue. Fending find a way to rejuvenate its Florida tremendous support and cooperation, “It became fairly clear to us that our Could we set up a low-cost airline and ate reaction to Go’s announcement was off the upstarts, however, posed a chal- routes and make money. said John Selvaggio, president of Song. home base here in the Midlands was ripe learn from some of the mistakes before that we would stand and fight.” lenge. Historically, yields in Florida were The third option led to the concept for a low-cost airline,” said Tony Davis, someone actually came into our home Although a radical move by a full- low and, with low-cost carriers entering of Song, Delta’s low-cost “carrier within managing director of bmibaby. “It had base airport and attempted to do that?” service carrier, Davis said the decision the market, were actually spiraling even a carrier.” all the attributes for an airport that a In the summer of 2001, bmi began for bmi to start a low-cost operation further downward. The Atlanta, Georgia- On April 15, Song took to the skies planning its new low-cost operation, but made perfect sense. based carrier knew it had a lot at stake if with its maiden voyage from New York those plans were put on hold after the it didn’t find a radical way to meet the City, New York, to West Palm Beach, events of Sept. 11 of that year. As demands of the changing market in its Florida. The airline, which provides continued on page 32 expected, however, a low-cost airline, continued on page 35

30 ascend october 2003 31 industry continued from page 30

Every department assisted in setting up Because it is an offshoot of a well- resource, and at the same time, you’re “If you feel you can make the rev- said. “Our passengers have access to the new operation. established brand, the carrier wasn’t getting better utilization of your people enue side of the equation work, you’ll live, all-digital satellite television pro- “I think people were in the mood to burdened with a large capital outlay or and your airports. come out ahead,” said Selvaggio. “True, gramming, digitally streamed MP3 do something different and build a win- the need to purchase or lease several “It doesn’t cost more to lease the you’re going to have about a 30 percent audio programming, pay-per-view pro- ner, and everybody wanted to be part of new aircraft and bid on new airport aircraft or the gates,” he added. “And higher operating cost, but you’ve got gramming and an array of video games. the team,” Selvaggio said. “So while it in most cases, you don’t need additional an opportunity to make 70 percent And to top it off, we offer buy-on-board was a challenge in that we were always staff. It’s just that they have less down- more revenue.” snacks and meals.” up against the media and Wall Street time in between flights. So we found we The structural savings allowed Song Passengers can purchase meals saying it couldn’t be done, we found could do this at very low marginal costs to maintain the same employee pay scales onboard, including freshly made sand- that there were more optimists in the while putting more seats into the market as its parent company, from where it wiches, salads and wraps; healthy

world, and fortunately, a lot of them Photo courtesy of Song place, and that’s how we drove our cost drew the majority of its employees. snacks such as yogurt, breakfast bars work for Delta.” structure down — we simply optimize “Many of our flight attendants and juices; old standards such as chips In creating a new low-cost carrier, the use of our assets. make more money now than they did and candy; and top-shelf cocktails — Delta learned from its experience with “We knew that to get the utilization when they flew for the mother airline, Cosmopolitans, Martinis and Mimosas. its earlier carrier within a carrier, Delta we needed, we had to turn them (air- but they’re working more flights and “People hate airline food, but they Express, which started in the late ’90s planes) faster, which meant we wouldn’t more hours,” Selvaggio said. “We’ve still love to eat,” Selvaggio said. “And connecting airports in the northeast be able to offer some of the amenities, changed the methodology in the struc- people will eat no matter what the airline United States to Florida. such as pre-departure cocktails or special ture of how people get paid, but it “We had a pretty strong position in boarding privileges, that Delta’s frequent encourages them to fly more. And the We have a motto, ‘Song was Florida, and we weren’t making money flyers were getting,” Selvaggio said. “We same thing with our ground employees “founded by optimists and built the way it was being served, so we needed to be different from our mother — they’re paid the same, but they’re by believers.’ And the people decided to find a way to lower costs,” company. That was very important since working more flights in their eight-hour Under the leadership of President John said Selvaggio. we were going to offer an all-coach shift, so there’s potential to earn more on my staff are definitely the Selvaggio, Song has helped Delta Air “Our costs kept going up,” he product on a bigger airplane.” money. Our pilots are on the same pay optimists, and we created a Lines reassert its dominance in the added. “Delta Express had been serving Florida market. As a member of the Delta family, scale as Delta pilots as well, but the pay nation of believers. our Florida markets since 1996, well the new airline had to maintain a certain rates are just a byproduct of the way we ” before low-cost carriers moved in there. level of service to keep the overall com- schedule the airplanes; they’ll (pilots) Over time, the cost structure had really slots. Those were all advantages the pany’s reputation intact. Initially, many have more productive flying.” offers them. So we said, ‘Suppose we increased. Cabin crew and ground labor parent airline passed down. people thought Song would be a “less-than- In addition to its fleet and pay struc- offered food our passengers would costs increased and maintenance costs “That’s why we are flying 36 aircraft Delta” product, which, Selvaggio said, is ture, Song has incorporated other changes actually enjoy.’ With that, we decided to

on its 737-200s rose dramatically.” rather than a handful or less,” Selvaggio what most offshoot carriers have been. Illustration courtesy of Song to the traditional low-cost model. stock brands people recognize and like, said. “We’ve moved very quickly. We “It’s always been less than the Unlike many independent low-cost and we give our customers the option We had to create an entirely new have airport facilities. We have trained mother brand,” Selvaggio said. “And Song employees sport stylish uniforms airlines, Song offers its passengers to buy on board if they so desire. and accessories created by designers “ staff. We have all those things available to we decided that our new operation was SkyMiles from its parent company’s Selling brand-name food products airline with a brand of its own. Kate and Andy Spade. Female flight ” us. We didn’t have to start from scratch, going to be different from, but not less frequent flyer program. on its flights meets the needs of Song’s attendants take to the skies in Kate Spade get a certificate and try to launch this than, our parent operation.” uniforms while male employees “That’s a big advantage over our core customers — females between the Forming Song, therefore, “wasn’t airline without all the necessities.” In starting the new airline, Delta wear “Jack Spade” created by Andy. competition,” Selvaggio said. “We’ll ages of 34 and 56 — who typically want a matter of swapping a few aircraft and Yet, Song also needed to become a replaced the 737-200s on many of its meet the competitive fares of anybody, a better quality of food, especially for calling it Delta Express version 2.0,” completely different product than its Florida routes with Song’s 757s, which and on top of that, we offer rewards for their kids. Selvaggio said. “We had to create an parent company, Selvaggio said. have a lower unit cost but also have only work on a bigger plane if we were flying with us.” “We realize that women are a very entirely new airline with a brand of its “You get the lower cost structure more seats to fill. able to fill the seats.” Song also offers other amenities fast growing component of all travel,” own.” by reducing ground time and getting “Changing out aircraft types was Although the 757s cost about 30 to differentiate itself from its low-cost Selvaggio said. “In terms of leisure Starting a carrier within a carrier full utilization out of your fleet by sched- part of a strategy to create a low-cost percent more to operate than the 737- competitors. travel, they book about 75 percent, and was much simpler in many ways than uling more flights per day on the same airline,” Selvaggio said. “And we knew 200s, they have nearly 70 percent more “We have a minimum pitch of 33 they book about 90 percent of Internet it would have been for an independent, airplane,” said Selvaggio. “If you can if we were going to do this, we better seats. If Song could fill the extra seats, inches between our all-leather seats that and family vacation travel as well. Selvaggio said, in large part due to the get four flights a day rather than three have a pretty good brand because we it would more than offset the additional are equipped with personal video moni- Having a strong presence in Florida — resources available from the parent out of a single aircraft, you’re generat- were going to have to drive a lot more operating costs, and Song would come tors incorporating touch-screen technology a high vacation destination — we chose company. ing additional revenue with that revenue, and the low-cost model would out on top. and credit card ‘swipe’ capability,” he to target females in that age group.”

32 ascend october 2003 33 industry continued from page 31

All of the amenities designed to options that were musical in nature, and environment,” Selvaggio said. “It keeps “The U.K. was at the forefront of benefit passengers make flying enjoy- after sifting through some 600 options, things a little lighter for our employees, the low-cost airline development in able again, Selvaggio said. Song stood out. who we call our talent, by the way, and Europe,” he said. “It became clear to us “The airline business used to be “Everyone has a favorite song,” that transfers to our passengers.” that it was going to become increasingly exciting and romantic,” he said. “We Selvaggio said. “And when you think of With capacity up about 50 percent difficult to compete against low-cost air- have made our planes safe, clean, on your favorite song, you get a smile on year over year in its Florida markets and lines if they started expanding outside Photo courtesy of bmibaby time and affordable, but we’ve kind of your face. That’s how we want our pas- load factors on the rise — between 70 their London hubs. lost the romance along the way. So sengers to come to us and that’s how percent and 77 percent — Song has cer- “If we didn’t adjust our model, we we’ve strived to get that back by intro- we want them to leave … with a smile.” tainly achieved the goal of returning this would effectively end up in a position ducing an airline with a more unique According to Selvaggio, music is a part of Delta’s network to profitability. In where the bmi business at East Midlands universal language that can “calm a lot September, the airline announced it had Airport was unsustainable,” he said. of beasts,” so the carrier plays music carried its one-millionth passenger in In setting up the low-cost carrier, The airline business used to be on its jetways, Web site and airplanes. less than six months of operations. Davis said bmi transferred several 737s “exciting and romantic. We have In keeping with its motif, the carrier asks “We’re taking back our territory, but from its fleet and incorporated traditional made our planes safe, clean, on employees to use musical metaphors we’re not giving (our product) away,” low-cost philosophies, such as a point- time and affordable, but we’ve whenever possible, and even at its Selvaggio said. “Our ticket values are to-point route network, a single cabin, a headquarters, conference rooms are improving every month, and I think it’s single fleet type, half-hour turnarounds, kind of lost the romance along referred to as studios. remarkable that we’ve been able to add distribution nearly exclusively through the way. So we’ve strived to get “In fact, in staying within a musical that much capacity without sacrificing the Internet and foregoing interline that back by introducing an airline lexicon, we ‘auditioned’ our employees,” load factors or ticket value. agreements. with a more unique flavor than he said. “We hired people for attitude — “We have a motto, ‘Song was “We took a very, very, very strict view Tony Davis, the managing director of bmibaby, has seen the airline grow tremendously the ‘traditional’ types. they had to be willing to use their person- founded by optimists and built by believ- of either it was low cost or it wasn’t,” he since it began service in 2002. The airline anticipates carrying 3 million passengers this year. ” ality, have a little fun, make someone’s ers,’” he added. “And the people on my said. “And we resisted the temptation day and simply be there. staff are definitely the optimists, and we to end up with a hybrid. I think some of flavor than the ‘traditional’ types. “We try to keep the spirit of a musical created a nation of believers.” the companies that have struggled are “To some extent Go helped us in growth at a time when the industry is “If we can give our passengers the ones where the hybrid solution is this because Go came into our backyard contracting. choices of things to do while on our preferred because it is perhaps not as and said, ‘We are going to take you “So, it’s really a case of saying, ‘Do

flights, it will make their experience For its single-fleet type, Song chose the Boeing 757, a larger aircraft than the challenging to set up.” on in your home base and effectively you want to be involved in something that much better,” he said. Boeing 737 used by many low-cost carriers. The larger aircraft have a lower unit To further maintain cost controls, all destroy the business you’ve built up that’s growing and has the potential to That mindset is also what led to the new cost because they have 70 percent more seats. employees of bmibaby work under sep- over 35 years at this airport,’” he said. be successful or do you want to take carrier’s identity, a name that “embraced “It was easy for us on that basis, going your chances with the old model, which lots of choices,” Selvaggio said. We’ve tried to adopt the philosophy to our staff (with the idea) that unless in these particular airports is not looking The airline wanted an identity com- “of under-promising and over- we approached this with a radical solu- as strong as it had been historically.’” pletely different from that of any other tion the alternative would be that we The new model has proved to be delivering where historically airline – a light-hearted name with flair could not compete. a success. In June, bmibaby carried a

that was easy to remember yet had Photo courtesy of Song airlines have often over-promised “I think people understood that we record 266,035 passengers, a 153 per- meaning behind it. and under-delivered. as an industry have to change the way cent increase year on year. It broke that “Just about every airline has a name ” we were going to operate in order to record again in July, and in August, the that pretty much ties to geography, such arate contracts with terms and conditions continue to grow our business,” he said. airline broke the 300,000 mark. The carrier as American, United, Continental, more in line with a low-cost operation. “We’re creating jobs because we’re car- also helped the performance of the Eastern, Western, Delta and so on,” The airline also provides different bene- rying a lot more passengers now than group. In July, the bmi group, which Selvaggio said. “We decided that if fits, such as its own profit-sharing plan, we did when the assets were deployed also includes bmi regional, set a record we could get out of that space and not separate from the parent. differently. What we’re trying to do with by carrying 905,000 passengers — be like every other airline, we could go Davis said the current condition of our employee group is manage growth 285,000 of which was carried by anywhere we wanted.” the industry helped convince employees and not manage decline, which would bmibaby — the first time the group While in search for the perfect to “modify the way we work to replicate have been the scenario potentially if exceeded the 900,000 mark. name, the carrier came across many the operating properties of a low-cost we hadn’t created a low-cost carrier. After only 18 months, bmibaby airline.” bmibaby is experiencing significant became the largest airline in the

october 2003 35 industry industry

Midlands, surpassing British Airways, I think for a long time airlines tried to an extra allowance to bring a laptop from three airplanes in March of 2002 to “Our expectation would have been that which has since slipped to third behind convince themselves that we were a computer on board. 13 today. I don’t believe we could have it would have been quite difficult for us British European. With the phenomenal special case, a special kind of business. “The fares are still low, much lower done that as a complete startup. I don’t as a new company to hold our own. But growth at East Midlands, 300 percent But in reality, when you get back to it, than they historically have been on some know that as a startup in this country we because we’ve got the history and sup- year on year, bmibaby now carries more successful airlines are the ones that come routes,” he said. “But the level of service would have been able to fly 13 aircraft port, and we believe we’re offering a passengers than the parent carrier ever through to the core product. We’re selling you get is perhaps a little bit better than in 18 months.” much better product, we’re finding that Photo courtesy of bmibaby did when it served the airport. a commodity. We no longer view our you are expecting. We’ve tried to adopt Building off the bmi brand has the people who might have migrated “The growth of bmibaby is very business as the ‘Come fly with me’ 1960s the philosophy of under-promising also helped create awareness for the are actually sticking with us.” encouraging,” said Sir Michael Bishop, glamour jet travel. It’s mass transportation.” and over-delivering where historically new airline. Because of the benefits of its asso- chairman of bmi. “We anticipate carry- In setting up a carrier within a car- airlines have often over-promised and “We’ve gone from zero to 3 million ciation with bmi, the low-cost offshoot ing up to 3 million passengers in the rier, bmi officials worked to make sure under-delivered.” passengers a year in an 18-month time incorporated the parent company’s current year, firmly establishing the new low-cost operation would not Davis said there are other benefits scale. And to have penetrated the mar- name into its own to give customers siphon traffic from the full-service or of having ties to a large international the “security and knowledge” that the “We are experiencing 400 percent regional airlines. The three airlines in carrier. The carrier inherited aircraft airline was not a fly-by-night operation the group have been able to differentiate without having to purchase them. It while building a separate identity that “growth year on year because we their product to serve different segments leverages the expertise of the group’s people “felt an affinity to and an under- are part of a group. We’ve gone of the traveling market, Davis said. management, pilots and engineers. It standing of,” he said. from three airplanes in March of Although bmi began at East works with the parent company in areas “I think initially there was quite a lot 2002 to 13 today. I don’t believe Midlands Airport, the parent no longer such as training and safety. It uses the Photo courtesy of bmibaby of surprise within the industry that we’d we could have done that as a com- offers flights there. The parent airline economies of scale from making pur- go with a name like bmibaby,” Davis plete startup. has concentrated on London’s Heathrow chases in conjunction with the parent said. “It was a bold step, which airlines ” Airport, where it is the second largest airline. It also benefits from ties to a are not particularly good at doing — carrier with about 14 percent of the take- strong, well-established brand such as taking a marketing idea, not just trading bmibaby as an important operation in off and landing slots. And bmibaby, bmi, which has received more than 50 on nationality or geographic location, the ‘no-frills’ market and the third which doesn’t even fly to London, has industry awards since 1990, including and trying to come up with something largest operator in the sector.” concentrated on its bases at East repeated recognition as the best domes- that, if nothing else, is memorable.” The key to setting up a successful Midlands, Cardiff and Manchester. tic airline in the United Kingdom. No matter how memorable the low-cost carrier within a carrier, Davis “bmibaby is competing against the bmibaby employees have separate labor Most importantly, Davis said being name, Davis said he knows that contin- contracts from the parent organization, said, was convincing everyone through- traditional charter airlines and the low- part of a larger airline group gives ued success will depend on how well with terms and conditions more in line From its initial three Boeing 737s, out the organization that “this has to be cost airlines, so we go to Spain, Prague, bmibaby the ability to grow at a much the carrier sticks to its low-cost model. with a low-cost carrier. The separate bmibaby in 18 months has expanded a different company.” Belfast — high-volume, leisure markets,” contracts represent one of the methods faster rate than it would have as an to 13 aircraft serving more than 25 “Really, it’s a lean, compact business “You cannot just paint the airplanes he said. “Whereas bmi is focusing on the carrier utilizes to manage costs. independent. With access to trained destinations throughout Europe. model, which is all about volume, high and hope that this will function as a sep- Heathrow, and our regional business is pilots and crew, aircraft, financial occupancy, high utilization and making arate operating model,” he said. “We had developing key business routes from resources and know-how, bmibaby sure every flight is as full as you can to get buy in from the very top that said Scotland, Manchester and Leeds/Bradford. “We are looking to offer a slightly has significant advantages over a pure ket sufficiently against some fairly big possibly make it,” he said. “People talk this is a different airline. It can benefit “The three airlines within bmi each higher level of service than that of some start-up, he said. competitors like easyJet and Ryanair about target load factors. You should from a lot of the history, experience and have a particular cost base, market pres- of our competitors,” Davis said, “partly “We are experiencing 400 percent without at least some awareness of our be aiming to fill every flight, every seat. financial stability of the parent company, ence and a consumer proposition,” he because we are part of a group and growth year on year because we are parent company would have cost a lot There’s no, ‘We’ll accept 65 percent load but it has to conduct itself on a like-to- continued. “Really, we have the best have other companies that use the same part of a group,” he said. “We’ve gone more in advertising spend,” Davis said. factors’ anymore.” like basis with its primary competitor.” opportunity now to make sure we put name. As part of a family, you have to Another key, Davis said, involves the right vehicle into the right market, at least uphold a level of presentation changing the way airlines view them- ensuring we can compete effectively that’s acceptable to the whole family.” selves and their product. against whoever else is incumbent in While offering low fares, Davis said “The biggest thing we have learned those markets.” bmibaby’s enhanced level of service is to stop thinking of ourselves as being Although incorporating many low- includes extras such as assigned seating a special type of business,” Davis said. cost principles, bmibaby’s ties to a rather than asking passengers to “make +count it up 10 — Number of languages spoken 300 — Number of contracts “We’re in the retail business. We sell larger group have caused it to modify a fairly desperate dash toward the airplane by members of the Sabre Airline signed with Sabre Airline Solutions seats. Other people sell books or groceries. some aspects of the low-fare model. to secure a seat” and giving passengers Solutions consulting team. during 2002.

36 ascend industry

ExtremelyA conversation with David Siegel, president and chief Prepared for the Future executive officer of US Airways

t is probably a large understatement bankruptcy process, the airline was able Ito say that the 19 months that David to successfully restructure itself — “we Siegel has led US Airways have been looked at our strengths and weaknesses eventful. In March 2002, when he and devised a way to leverage our assumed the helm of the airline after strengths and turn our weaknesses into Photo by Derek Pedley leaving his post as chief executive offi- assets,” Siegel said. A US$240 million cer of Avis Rent A Car System, Siegel equity investment from the Retirement faced a daunting task — reinvigorating Systems of Alabama Holdings LLC, and an airline seeking to reposition itself a US$1 billion loan, US$900 million of to better compete in a radically trans- which was guaranteed by the U.S. Air formed industry. Transportation Stabilization Board, gave Facing continued losses in the after- US Airways the liquidity it needed. math of the events of Sept. 11, 2001, US Modified labor agreements with the airline’s unionized employees helped significantly reduce costs. Through Photo courtesy of US Airways In March, as scheduled, US Airways bankruptcy, the airline also was able US Airways has seen its operations take “completed its ‘fast track’ emergence to address other key issues, such as off after rapidly completing a corporate from bankruptcy. ” achieving the distress termination of the restructuring. defined benefit pension plan for its pilots, Airways, the seventh largest airline in which was underfunded by US$2.5 billion, Under Siegel, the airline announced the United States, began seeking ways and replace it with a defined contribution the ambitious purchase of 170 regional to improve liquidity, increase revenues plan to supplement the Pension Benefit jets from Bombardier and Embraer. US and reduce its costs, which, at the time, Guaranty Corp. payout. Airways signed codesharing agreements were among the industry’s highest. As In March, as scheduled, US Airways with Lufthansa German Airlines and the pressure to restructure mounted, the completed its “fast track” emergence United Airlines and was approved to airline in August 2002 filed for Chapter from bankruptcy. Now, the rejuvenated join the Star Alliance. These measures 11 bankruptcy protection, which airline, which earlier this year was significantly impacted the airline’s bottom shielded the airline from creditors, giv- ranked first in the annual Airline Quality line. In the second quarter, the airline ing it time to reorganize. Through the Rating, is aggressively competing. reported a net income of US$13 million,

october 2003 39 industry industry

compared to a net loss of US$248 million Alliance. We also needed regional jets already phasing out turboprops. for the year-previous period. to improve our service to the dozens However, we believe there will continue Siegel, who also previously served of smaller cities that we serve. We to be limited uses for turboprops in our The New Revenue Reality as an executive with Continental Airlines, secured financing earlier this year and system, especially to very small markets. including president of the Continental Q: The current conditions of the Express subsidiary, recently discussed industry have led many airlines to Multiple factors, including the rise of low-cost carriers, fare US Airways’ successes in preparing for “think outside the box.” Is this just the future. a reaction to extreme circumstances, transparency and diminished passenger segmentation, have Question: It appears US Airways or do you believe this will become a put an irreversible downward pressure on airfares. was able to successfully use the bank- vital part of the culture of the industry ruptcy process to restructure the airline. in the future? Photo courtesy of US Airways Would you consider bankruptcy suc- A: We have been thinking outside the By Steve Hendrickson | Ascend Contributor cessful for your airline? What were the box for the last 19 months since I got benefits? Were there any drawbacks? here, completing a fast-track reorganiza- ately, most airlines have focused reactions to an unprecedented shift in pearance of premium-fare levels histori- Answer: When I made the decision tion under Chapter 11 protection. It has L their attention on cutting operating the industry’s passenger revenue equa- cally paid by most business travelers. to join US Airways, I realized that the made US Airways a more competitive costs, in many cases as a survival strat- tion. This “new revenue reality” is driving The two-tiered revenue model of old company needed to permanently reduce airline with US$1.9 billion lower annual egy. Indeed, several carriers have found nearly all of the industry’s current efforts is rapidly deteriorating, bringing fare its costs and restructure, ideally outside Under the leadership of Siegel, US costs, reduced debt and a well-regarded significant internal opportunities to to effect dramatic change. levels toward a new, less stratified mix of bankruptcy. However, the responsible Airways has formed alliances with business plan. Undoubtedly, the take- reduce expenses, improve efficiencies In the U.S. domestic market, total of price points. path to take was one that prepared us Lufthansa and United, been accepted away is that any business initiative and lower overall unit costs. For others, demand as a percentage of nominal gross into the Star Alliance and announced for the option of reorganization under requires consensual participation by cost pressures from external factors domestic product fell by more than 26 The Big Fall the purchase of 170 regional jets from the protection of Chapter 11. Our plan Bombardier and Embraer. all stakeholders and total commitment such as oil prices, airport security pro- percent from 2000 to 2002. Historically, To understand how revenues and was well thought-out, and we were by every employee in the organization. grams and various forms of government the industry’s revenues maintained a average fares fell so far so quickly is to committed to a fast-track emergence. announced an order for almost 200 With the recent plane orders and expan- taxation have proven more difficult, if fairly tight correlation with the broader understand the basic remixing of ticket As I’ve said many times before, when planes that have started arriving and sion plans announced by Southwest, not impossible, to manage or influence. economy, but clearly, something has prices being sold to travelers. The mar- we came to the conclusion that we had will continue through 2006. AirTran and jetBlue, it is abundantly But the sudden focus on belt tight- changed in that relationship. Contributing ket for trips between the east and west to execute our plan with a Chapter 11 Q: Speaking of your purchase of clear that low-cost competition will ening is merely one of the most visible to this historic drop is the near disap- coasts of the United States provides a filing, we jumped into the pool to swim regional jets from Bombardier and only grow. So now, every mature startling example of this phenomenon. some laps, get in shape and then get Embraer, what led to this decision? carrier including US Airways, needs This corridor is characterized by a large out. And while we had some difficult A: One of the key elements of our reor- to deal with this new reality. set of long-haul origin and destination challenges along the way, we remained ganization plan was to generate additional Q: With all the changes you’ve made, markets, which use numerous competing on track. Bankruptcy reorganization is revenue through a substantial increase are there more to come? How different mid-continent hubs. For example, the effective for reducing costs, but there in regional jet flying. We couldn’t afford will the US Airways of 2005 be from Boston, Massachusetts, to Portland, are many gut-wrenching decisions that not to take that step. the airline of today? Oregon, market has no nonstop flights, are part of the process. Q: What role will these new aircraft A: We have a history as a strong busi- but there are more than 50 daily con- Q: If “necessity is the mother of inven- play in strengthening your airline? ness carrier during the week, and we are necting choices possible in each direc- tion,” what innovative new thinking has What kind of impacts will adding so now exploring new ways to deploy our tion via 18 hub operations offered by emerged at your airline to overcome many new aircraft have on your airline? fleet for the different kinds of demand seven operating carriers (and even more perhaps the most challenging conditions A: The new RJs will serve three main we’re seeing on weekends. We’ve nearly if codeshare offerings are included). in the history of the airline industry? purposes. They will allow us to replace doubled our weekend service to the This type of journey, through A: We are focused on proven strategies turboprop aircraft that customers prefer Caribbean, from 40 weekday flights to 75 any of the largely undistinguishable and tactics. We said we needed marketing less than jet aircraft; initiate service to on Saturdays. Clearly, a reinvigorated connecting points, has come to typify alliances, and we have done that. Our new “thin” demand markets that even- economy will ultimately determine when the commodity nature of such routes. alliance with United Airlines is already tually could grow to warrant mainline corporate and individual customers Up to 2000, significant portions of very successful, and we’ve begun our new aircraft; and re-deploy current mainline change their current buying behavior the market paid vastly differing fares, international agreement with Lufthansa. flying that does not need larger aircraft and, by extension, some of the moves which reflected strong market segmen- The average fare among coast-to-coast journeys fell more than 25 percent from the Early in 2004, we will join the world’s to other markets that do require more we make. We just need to stay focused third quarter of 2000 to the third quarter 2002 leading to a drop in revenues of about tation. However, in the past two years, leading airline partnership, the Star capacity, such as the Caribbean. We are and execute our plan. 29 percent even though the market overall experienced only a 4 percent traffic decline. the price spreads have begun to disap-

40 ascend october 2003 41 industry industry

pear, moving the industry further toward much hope of reversing its impact. before the tragic events of Sept. 11 deals. Back then, it was almost consid- premium-priced walk-up tickets. The duced another major dynamic to the a commodity market price structure. The others may well be here to stay. gave the industry another push in the ered shameful for a dot.com company economy encouraged travelers not market’s revenue picture. These airlines The average fare among coast-to- wrong direction. to show a profit. Venture capital urged to worry about saving a few hundred have brought low fares into the market- coast journeys fell more than 25 percent General Economic Deceleration Today’s environment contrasts the rapid development of alliances and dollars on airfare by driving to a smaller place in aggressive ways much like from the third quarter of 2000 to the third While economists on Wall Street dramatically with that of the 1999-2000 other cyberspace deals to build “eyeball airport or taking a connecting flight for early LCCs. However, unlike some of quarter of 2002. Most strikingly, the debate how to describe recent economic “economic bubble.” During the bubble, share,” earnings be damned. High less than the nonstop. the failed upstarts in prior decades, volume of passengers at the discount conditions, employers and consumers on a combination of Y2K initiatives and demand Web programmers jumped the newest genre of LCCs have largely end of the market (US$350 or below Main Street largely agree that the good speculative Internet ventures drove a from contract to contract at higher and Increased Presence of avoided many of the pitfalls that ren- each way) actually increased slightly, times came to a rather abrupt halt about technology-based boom that pushed higher rates, and technocrats every- Lower-Cost Suppliers dered their predecessors unable to stay while premium-fare passengers (above three years ago. And, that downturn was many business travelers onto airplanes where jetted around to strike the next The coming of age of low-cost carri- the course. US$350 each way) decreased by nearly really felt in early 2001, many months in pursuit of high value, mission critical deal — a perfect environment for selling ers during the past few years has intro- Thin capital structures have been half. Without those relatively small volumes of premium tickets, revenues plunged by about 29 percent even though the market overall experienced hightech only a 4 percent traffic decline. Although the third quarter of this year saw unit News on New and Improved Products revenues start to improve, those trends were primarily driven by historically and Services from Sabre Airline Solutions high load factors made possible by the cumulative effect of widespread capacity product reductions. Unfortunately, there are few, features if any, signs of a fundamental reversal in Control Center version 2.0 Web-based — Authorized administra- up their partition with increased accu- the disappearance of premium fares in — for reservations and tors are able to access this tool via racy. This not only enables adminis- the industry. departure control the Web with no proprietary client trators to be quickly trained, but it software required and will, therefore, also frees them to utilize system func- A Confluence of Factors description always have the latest version of the tionality that was previously too cum- It is difficult to blame a single cause The Control Center is a new graphical product at their fingertips. bersome to set up and maintain. for the collapse of the traditional revenue user interface enabling system adminis- Direct model. Rather, the drop appears to reflect trators to easily configure and manage control — a unique combination of factors all the Sabre ® Passenger Reservation Administrators coming into the equation at roughly System, the Sabre ACS™ airport are less reliant the same time — what some have called check-in system and the Sabre ACSI™ on Sabre Airline a “perfect storm” hitting the industry. international airport check-in system Solutions person- At a high level, these factors include: from a single Web-based tool. The first nel for set-up General economic deceleration, phase of this interface was released in tasks, giving them Increased presence of lower-cost January, and functionality will continue the ability to suppliers, to be added in phases. quickly adjust to Fare transparency and Internet-based changes in the consumerism, benefits marketplace. Diminished passenger segmentation The Control Center enables airlines to Single tool — in pricing. focus on managing their operations Administrators As it turns out, each of these issues rather than the systems they are using. will be able to has serious negative implications for Control Center creates significant effi- Graphical navigation — configure both the reservations and TOP: Historically, the airline industry’s revenues maintained a fairly tight correlation total industry revenues on its own, but ciencies for system administrators by Administrators utilize graphical navi- departure control systems from a with the broader economy, but in the past few years this relationship has changed. these issues have proven especially providing easy-to-use tools for system gation such as form-based screens for single tool increasing consistency harmful when interacting together. BOTTOM: In the U.S. domestic market, total demand as a percentage of nominal configuration, table maintenance and all entries, drop-down lists and buttons, between systems and in turn Only one of these, the economy, has gross domestic product fell by more than 26 percent from 2000 to 2002. management reporting. and on-screen help, to efficiently set improving customer service.

42 ascend industry industry

replaced with well-financed business their cost structures can survive or even With the Internet, passengers have a more conscious of potential travel budget in the United States, LCCs (and match- the desired impact on the economy. plans. Fleet plans have focused on newer, thrive, but higher-cost traditional carriers new sense of empowerment to find the savings, in turn fueling more bargain ing traditional carriers) are offering Time will tell, but eventually the U.S. more efficient models rather than will be faced with unsustainable losses. bargain they believe they deserve. hunting and lower price expectations. unrestricted walk-up fares from coast economy can be expected to recover low-priced used equipment. Management As profits accrue for these LCCs, they Easy, side-by-side comparisons have to coast that are far lower than they and help lead the global economy teams are still lean but are often popu- will become increasingly prominent, led to a “shop-till-you-drop” mentality Diminished Passenger were formerly, in many cases never back toward a healthier trajectory. lated by more experienced managers creating unavoidable competitive impli- among travelers — “if the fare isn’t low, Segmentation in Pricing exceeding US$299 each way. New As for other dynamics, there is than in years past. Software systems and cations for fare structures. you don’t have to go.” All of this new- The bi-modal distribution of fares passenger behavior is emerging as ample reason to believe that the world decision-support tools, once practical only found fare transparency has, of course, previously seen in a given market was passengers are increasingly weaned has changed forever. The competitive for major airlines with large in-house Fare Transparency and Internet- only magnified the impact of LCC fare made possible by using fare restrictions away from advance purchase habits advantages of low operating costs information technology departments, Based Consumerism offerings during this period. Likewise, it as “fences” to segregate buyers of seats amid new confidence that affordable will ensure that a new tier of carriers are now available to LCCs, giving them Travelers’ rapid acceptance of self- has helped business passengers under- based on their respective economic utility. fares can be found closer to their travel with lower breakeven price levels will leading-edge technology at cost-effective service booking engines and fare searches stand how much premium they were Through a mixture of requirements such dates. For many carriers, the booking remain a marketplace reality. The new prices. And LCC strategies have evolved has unleashed a new set of expectations previously paying for that prime-time as advance purchases, roundtrip travel, curve is now shifting closer in and air travel consumerism stimulated by to the realization that, if they stick to into the market. The fundamental interface nonstop or other preferred service Saturday-night stays and non-refund- having a dilutive effect on yields for Internet bookings and fare transparency their strengths and avoid the temptation between a passenger and an airline’s seat attribute. Now, travelers are armed with ability, the basic fare structure across close-in ticket sales. The result has been is a trend that will only grow stronger to be all things to all travelers or grow inventory has been radically changed. information to evaluate the relative the industry allowed for price discrimi- to radically redefine the revenue value over time. And market segmentation too fast, they can maintain their success Gone is the 20-question interview cost/benefit tradeoffs represented in their nation by passenger market segment. of the business passenger market seg- through the widespread use of restric- story. All of this has allowed LCCs to conducted over the phone with a travel array of ticket options. And the softer To the extent that competitors were ment and to reduce overall revenues tive “fare fences” will not likely regain drive price levels down to a point where agent or airline reservations agent. economy has made their companies well-behaved within a price leadership available to the industry. its earlier popularity among suppliers model, this structure allowed the indus- and may not find tolerance among a try to become increasingly reliant on A New Revenue Reality? traveling public that has a new set of a revenue mix that pushed business It’s reasonable to expect the econ- purchase price expectations. A new THE HIGH LEVEL travelers to higher and higher fares omy to regain strength at some point revenue reality has arrived, and it will while leisure fare levels remained in the future. There are already nascent greatly challenge those airlines that News Briefs from Around the Globe largely unchanged. signs of a rebound, and many believe do not aggressively rethink their strate- vıew The widening gap became a prime that the extremely low-interest-rate gies and techniques for managing opportunity for LCCs to break from environment will induce economic within it. Who control capability” as well as electronic and regional travel agents. the fare rules model and create a new expansion. However, the Japanese ticketing services, said Ping na Thalang, “Our migration will enhance our value proposition for those passengers economy has had such an interest-rate Steve Hendrickson is a partner with Bangkok Airways, Siem Reap Bangkok Airways vice president of position as a leader in Mexican regional previously paying premium fares. Now, environment for some time without Sabre Airline Solutions Consulting. Airways International, Transportes information systems. The conversion, aviation by delivering a consistent Aeromar, Aero Continente which also involved its Siem Reap executive world-class product,” said commuter carrier, will also help the Ami Lindenberg, executive vice presi- What airline’s domestic and international dent and chief financial officer for +count it up expansion program. Transportes Aeromar. In June, the four airlines cut over “We believe that Sabre Airline Aero Continente — The conversion 280 — approximate number 1910 — Year of the first major 10 — Number of people who to the Sabre ® Passenger Reservation Solutions offers an excellent product offers more comprehensive functionality, of airlines that are members of international conference on interna- have held the title of Secretary System. All four cutovers were accom- and overall value and a range of tech- lower cost of ownership of its technol- the International Air Transport tional air law code. The meeting, in General of the International Civil plished in less than one hour with less nology interfaces that enables Bangkok ogy systems, access to new sources of Association. The IATA members com- Paris, was attended by delegates from Aviation Organization. Taïeb Chérif than a 1 percent error conversion rate Airways to continue building its own revenue and better management of its bine for more than 95 percent of all 18 European nations and established of Algeria became the 10th leader and without disruption to the carriers’ applications around the host system,” sales channels and partnerships. international scheduled air traffic. several of the governing principles in the ICAO’s 59-year history when operations. Ping na Thalang said. “The agreement with Sabre Airline of aviation. he assumed leadership of the Transportes Aeromar — The conver- Solutions satisfies a demand among 2.9 trillion — Number of organization on Aug. 1. Why sion equips the airline with a comprehen- regional operators who wanted a more passenger kilometers flown in 2002, 7.3 — Percent of growth for sive solution for customer processing efficient connection with the airline according to the International Civil freight traffic during the first half of Bangkok Airways — The carrier and service from initial contact to post- systems of Aero Continente,” said Aviation Organization. The number is 2003, according to the International gained immediate access to “market- travel support. It also upgrades visibility Milagros Zevallos, commercial director expected to rise to 3.1 trillion in 2004. Air Transport Association. leading reservations and departure for the carrier's offerings among local for the airline. industry The (airport) project was conceived gardens, has also been honored for kilometer), 700 million baht (US$17 its architectural design and environ- million) airport in Trat, the easternmost “with a view of complementing the mental awareness. province of Thailand between the government’s regional economic At the Sukothai airport, Bangkok Cambodian border and the Gulf of From the Ground Up development policies while offering Airways is already expanding the length Thailand. The airport is conveniently tourists another choice destination of the runway, from 2,100 meters to located near the tropical island of Koh to tempt them to Thailand and the 2,400 meters, to better accommodate its Chang, previously reachable from Bangkok Airways’ unique business model, combining airline and region, and on both counts, we have fleet of 717 jets. Since gaining customs Bangkok only after a five-hour drive airport ownership, delivers growth for itself and its home regions. every expectation of success. status, the 800-acre (3.2 square kilome- and a ferry trip to the island. With the ” ter) airport has become Bangkok airport, the journey from Bangkok has Airways’ northern hub, providing easy been cut to 45 minutes. As with its By Hans Belle | Ascend Contributor success,” said Prasarttong-Osoth, the access to the northern Thai capital of other two airports, Bangkok Airways driving force behind the decision to Chiang Mai as well as Luang Prabang, constructed the Trat airport to reflect ack in the 1980s, Bangkok Airways build the airports. Laos; Pagan, Myanmar; Siem Reap, the local people, their culture and the Bidentified an untapped opportunity By several standards, the airports Cambodia; and Kunming, China. The air- environment. to bring visitors to the beautiful, though have proven successful. Bangkok port, built for 500 million baht (US$12 Bangkok Airways’ unique combi- still largely undiscovered, Thai island Airways now operates 40 flights a day million), incorporates the latest air traffic nation of airline and airport ownership of Ko Samui. But there was one small from Samui to five destinations. The control, weather monitoring and safety has not only distinguished itself from problem. nearly 200-acre (.8 square kilometer) technology. And it, too, has an award- other airlines, but has also helped the The island, located off the south- airport has also substantially cut travel winning design, featuring traditional regions where its airports are located eastern coast of the country in the time to the island. Before it was built, Thai architecture. Its soaring roofs and improve business links and boost Photos courtesy of Bangkok Airways Gulf of Thailand, lacked an adequate travelers from Bangkok spent 14 hours tropical gardens earned the airport the tourism, providing an economic stimu- commercial airport. traveling by rail, bus and ferry to reach nation’s “Outstanding Architect Award.” lus to these areas. Rather than wait for local officials to Ko Samui. The airport, with its low-rise The airline, which is hosted in the remedy the situation, Bangkok Airways palm-thatched roofs and tropical Sabre ® Passenger Reservation System, Hans Belle is vice president of marketing, took a radical approach — it built the also just opened a 435-acre (1.74 square Asia/Pacific for Sabre Airline Solutions. airport itself. Instead of waiting for the opportunity to open a new market and help build the area into a popular tourist destination, the airline in 1989 opened its 800 million baht (US$19 million) air- port on the northern end of the island. That was the first of three airports By building airports in unserved areas, such as Samui, above, and Sukhothai, right, the airline, which serves 13 destinations Bangkok Airways has been able to grow as well as provide an economic engine for the in five countries with its fleet of 13 regions it serves. Boeing 717 and ATR72-200 aircraft, built to expand its operations to underserved areas throughout the country. The Samui attempts to serve cities with rich cultures another choice destination to tempt them airport venture proved so successful, and historically significant sites that are to Thailand and the region, and on both the airline opened its second airport, at not easily accessible to the everyday counts, we have every expectation of Sukhothai in central Thailand, in 1996, traveler. Building the three airports rein- and a third, Trat in eastern Thailand, in forces the airline’s commitment to not March. The airline has since added new only build the local tourism industry customs, immigration and passenger but also promote local heritage, said terminal facilities at Samui and Sukothai Dr. Prasert Prasarttong-Osoth, president to gain customs status, opening the and chief executive of Bangkok Airways. doors to direct international flights. “The (airport) project was conceived Bangkok Airways, which traces with a view of complementing the its roots back to 1968 when it began as government’s regional economic devel- an air taxi service called Sahakol Air, opment policies while offering tourists

46 ascend industry

Turnaround First, Then Privatize

There are plenty of pitfalls for a state-owned airline preparing for privatization. But a comprehensive turnaround program can minimize the risk and prepare the carrier for the private sector.

By Shane Batt | Ascend Contributor

any countries that still own their The Strategic Investor received the expected benefits from Mnational airlines are examining Many of these countries, however, this model: Air Lanka under the partial privatization. Most of these countries rush into privatization without consider- ownership of Emirates Airlines and the are considering such an extreme step ing the best option. The quickest model “Lan” carriers, including LanEcuador, because they are struggling economi- for privatization is through a “strategic LanPeru and LanDominicana, under cally, and a bloated national carrier investor” where a country sells a major- LanChile. makes a politically charged privatization ity portion of its national carrier to a Unfortunately, few airlines as suc- target. Because national carriers are “white knight” private carrier with a cessful as Emirates and LanChile are usually among a country’s most promi- good reputation. The idea is that the actively acquiring interests in national nent companies and often the only ones government will receive a large payoff, carriers. Most strategic investors with an international presence, they are today are interested only in acquiring perceived to have a substantial value Many countries must make a national carrier’s assets at very low that can be leveraged by the govern- rates and without substantial conditions. “the difficult decision to ments to generate capital. The strategic investor model offers While airlines generate significant re-capitalize an ailing national some unanticipated pitfalls. The white carrier or to build hospitals, cash, they operate on very small mar- knights can be corporate raiders – airlines A carrier with US$500 Million in annual revenues can reap more than US$164 Million in revenue benefits within two-and-a-half years by gins and therefore frequently require schools and roads. wishing to expand in a cost-effective employing the turnaround model. capital injections from their owners to ” manner by acquiring less stable com- update assets and cover losses, which petitors to strip them of their primary only serves to make them more attrac- and the private carrier’s culture will rub assets and routes, relegating them to the “hub” point for the two carriers which means that routes protected from This model, on the surface, appears to tive for privatization. Many countries off on the national carrier, improving the colonial feeder status. When a strategic will be in the strategic investor’s home fare increases may become much more resolve many of the issues associated must make the difficult decision to re- country’s transportation infrastructure. investor talks about “schedule and prod- country. At the very least, the strategic expensive for passengers. with a strategic investor. Through widely capitalize an ailing national carrier or The country loses a national carrier but uct alignment,” it often plans to relegate investor will insist that the national car- A likely result of strategic investor held ownership, the government main- to build hospitals, schools and roads. gains much needed capital and obtains the national carrier to second-tier status. rier use competitive business practices, privatization is making air travel more tains the controlling stake in the carrier Therefore, many countries, particularly a better airline for its citizens. One of the primary benefits of own- eliminating the various “socio-economic elite and reducing the transportation and can ensure that it maintains control developing ones, are actively moving Both Belgium and Portugal used ing an airline is that it generates a sub- routes” and “foreign policy routes” the infrastructure, which can cause severe over finances, flight scheduling, employ- to privatize their national carriers. this model when they sold their national stantial amount of cash – often foreign national carrier operates. political problems in developing countries. ment and fares. Many governments Governments in Latin America carriers to a strategic partner, Swissair. currency. Countries should consider the Another pitfall comes from the deci- have passed legislation to limit foreign and the Far East have led the way Similarly, Air Afrique sold a portion of effect on their own economies when the mation of the former national carrier’s Widely Held Ownership ownership. But the widely held owner- in privatizing their national carriers. its airline to Air France to raise capital. bulk of the foreign currency generated large employee base to reduce costs, In a second privatization method – ship model also has pitfalls. For the remainder of the developing The strategic investor theory sounds by their national carrier is channeled thus reducing tax revenues and increas- the “widely held ownership” model – The main problem with widely world, the government continues good on paper, but the reality often is through the country of the strategic ing the need for social services. Finally, the government offers shares of the held ownership is that governments to own all or most of the national much different. The list of failures using investor. The loss of foreign exchange protective fares and scheduling practices national airline on the open market sell their stake in their national carriers carriers and are actively examining this approach is much greater than the can result from schedule and product will be eliminated. The strategic investor while restricting individual ownership to for well under their true market value. privatization. list of successes. Some carriers have alignment because, almost invariably, will insist that fares obey market forces, ensure government control is maintained. Governments often give away the

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national carrier to a wide base of investors making it profitable and competitive. enough to operate without governmental cial position of the national carrier turnaround is cut short before the assets, process should concentrate first on without gaining substantial returns for Carriers that have sustainable profitability assistance, the transportation infrastruc- improves, two pressures arise. First, services and personnel have been revenue production. the remainder of their citizens who are can fund their own capital requirements, ture of the country is maintained and government sources pressure the upgraded, the carrier’s long-term viability Revenue is much easier to increase not shareholders. Governments don’t enabling them to use widely held own- assured, and the benefits of nationalized national carrier to take actions that are will still be in question. For the turnaround than costs are to decrease. Because an privatize their national carriers because ership or a strategic investor without ownership, such as socio-economic counter-productive to its future success. model to succeed, the national govern- airline’s five highest costs are labor, fuel, they are well-run, highly profitable entities. governments giving away ownership at routes, lower fares and currency bene- The national carrier, for example, will ment must show enough patience to maintenance, aircraft ownership/lease Except in regions such as the European bargain prices. The turnaround model fits, remain intact. be instructed to increase employment, allow the carrier to proceed through and customer service, these areas would Union, where legislation requires priva- improves the national carrier at all levels increase services on socio-economic financial improvement; asset upgrade, have to be targeted to achieve substan- tizing national carriers, most countries to ensure it is competitive and profitable Implementing the routes or give employees raises, which service improvement and personnel tial and quick cost savings. National privatize because their national carriers before privatization occurs. By demon- Turnaround Model will make the government popular upgrade. Once the turnaround has carriers, however, cannot easily reduce are bloated and inefficient. Since these car- strating sustainable profitability, the In principle, it is not difficult to use but will seriously impact the long-term been accomplished, the government any of these areas. riers are generally unprofitable, the share carrier ensures that there is no urgency the turnaround model. The national viability of the national carrier. Second, will have a strong and valuable asset Reducing labor costs adversely price of stock will be lower than its associated with privatization, and therefore carrier, with the help of its government, factions will argue whether the govern- to privatize. impacts employees. Because they potential market value. The minority are typically government employees, investor buys shares for income or for By making improvements throughout its operations, a US$1 billion airline with 70 Throughout the developing world, nearly half of the airline equity is government national governments are hesitant to growth, neither of which are high with aircraft serving domestic and international routes can achieve cumulative financial benefits owned, and in some regions, such as Africa, the Caribbean and the Middle East, reduce their pay. Reducing fuel by more national carriers. So, demand for shares in excess of US$164 million by the end of the two-and-a-half year turnaround process. there’s tremendous opportunity for privatization. than a few percent usually requires stays low, the price stays low and decreased flying, which results in lower majority ownership shifts from the gov- revenues. Maintenance costs generally ernment to investors at very low prices. cannot be reduced by double-digit levels Of course, using widely held ownership without fleet renewal, and national reduces the government’s responsibili- carriers generally do not have sufficient ties for future equity injections, but the funds or capital to renew their fleets former national carrier still has the same quickly. Aircraft ownership/leases can problems it did prior to privatization. In only be reduced by paying off loans a few years (or even a few months) fol- or renegotiating leases. Most national

lowing privatization, the new owners airlines lack resources to pay off loans,

start looking to raise much-needed capi- and leasers are becoming less receptive tal and soon turn to a strategic investor to negotiating reduced lease rates. or ask for a government investment. And customer service reductions tend By using the widely held ownership to reduce revenues, which should model, the government can inadvertently be protected if the airline is to turn- promote the excesses of a strategic around properly. investor without reaping the significant Airlines, therefore, should focus capital advantages. on containing the growth of costs while It may appear that privatization is increasing revenues. Most carriers can doomed; however, it’s an important step it can take place in a controlled manner. proceeds through a steady process of ment should immediately liquidate the Improving Financial Position contain costs if they concentrate on their needed for most of today’s national car- A strategic investor is kept in line rapid improvement to position itself national carrier or end privatization On the surface, improving a carrier’s indirect fixed costs and lower the growth riers to survive in the highly competitive because the rising share price of the for a strong privatization push. The discussions. When the financial position finances appears to be the hardest task. of their direct operating costs. international marketplace. Privatization profitable national carrier discourages turnaround begins by improving the of the carrier has improved, the govern- In practice, however, the true challenge Revenue production can be increased must protect the national interests of the its dismantling. Similarly, widely held national carrier’s financial position. Once ment must demonstrate its support for is staying on course after the carrier’s for most national carriers by focusing country as well as develop strong com- ownership is strengthened because the financial position of the national car- continuing the turnaround process by financial position has improved. Improving on all factors that influence revenues. petitors. The best way to privatize is minority investors are attracted to the rier has improved, its surplus funds are providing the national carrier with suffi- the financial position of the national Frequently, carriers assign revenue- through the “turnaround” model. growth of the national carrier’s share invested in three primary areas: operating cient breathing room to ensure its own carrier first requires concentration on influencing factors to a variety of different price, which will continue to grow: a assets, provision of service and personnel. long-term survival. revenue production. Any financial prob- middle managers who do not cooperate Turnaround form of self-fulfilling prophecy. Most Once the financial position has The “hands-off” approach, however, lem can be solved by increasing revenues, extensively. The lack of cooperation The turnaround model prepares importantly, as a result of the turn- improved, governmental support is often proves impossible for the national as long as revenue production outpaces impacts the carrier’s competitiveness the national carrier for privatization by around, the national carrier is strong required. In most cases, when the finan- government to implement. If the carrier’s cost increases. Therefore, the turnaround in hidden but significant ways. The

50 ascend october 2003 51 industry industry

primary factors influencing revenue with the corporate strategy, chest of capital for the airline’s long-term just as important as the core foundation in higher customer satisfaction and management training should be pro- include pricing, inventory control, flight 4. Training — Instructing staff on improvement. The complete turnaround systems, and the national carrier should ultimately higher revenues. But realizing vided at all levels to ensure a smooth scheduling, sales, distribution, branding new, improved business processes process, however, involves improve- ensure that it has a reasonable strength returns on investment in service takes management migration from a govern- and loyalty, advertising and promotion, and practices, ment of assets, service and personnel. in decision-support systems including significant time. A lack of investment ment-owned to a free-market carrier. and public relations. By using the 5. Consolidation — Implementation Improving the assets of the carrier revenue management, flight scheduling in service upgrades, though, will be In addition to training, merit-based latest marketing techniques to tie these and consolidation of new business involves renewing some or all of its and crew planning. Asset renewal is detrimental to the long-term viability promotion and placement should revenue-influencing factors together, processes within the airline environment primary operating resources including expensive, but it will ensure that the of a national carrier contemplating be implemented even if the carrier’s the national carrier will undoubtedly and culture, aircraft, facilities and technology. By carrier has a sound infrastructure for privatization. government ownership rules must be increase revenue, more than offsetting 6. Tracking and enhancing — operating newer aircraft, the national privatization. While upgrading other infrastruc- changed. Merit-based promotion and the slightly increased costs. Monitoring airline and process perform- carrier can reduce its operating costs, Along with asset renewal, the ture, the carrier should ensure that its placement ensures that the most quali- Without impacting the operational ance and enhancing as necessary. improve its image and marketability, national carrier must improve its cus- staff – which often expects the worst fied staff rise quickly thus invigorating integrity of the carrier, cost containment The largest value derives from the and provide a higher level of service tomer service to meet international from privatization because of its perceived the management of the carrier. Finally, should begin in key areas such as crew process improvement phase, but the to its passengers. Renewal doesn’t standards. Many national carriers offer impact on job security and pay – is prop- along with the other personnel initia- planning and scheduling, fuel purchas- tives should be a complete examination ing and consumption, flight planning, The turnaround process involves six main steps that flow seamlessly from one to another. Improving an airline’s financial status involves a three-pronged attack, which will and restructuring of staff compensation. budget control, capital expenditure The largest value derives from the process improvement phase, but the financial benefits help prepare the airline to set the stage for successful privatization. The new pay scale should be consistent control, and maintenance. Cost contain- begin during the quick hits phase. with market conditions in the country ment should be geared toward reducing and with international standards. As the expenditures where possible as long as staff becomes more effectively skilled, dependability and service standards are its value in the international marketplace not lowered. Throughout this period, increases, and the national carrier will it will be important to watch cash man- need to adjust compensation to ensure agement. Carriers with limited financial the staff will remain throughout the resources must ensure that their cash privatization process. reserves are sufficient to cover the The complete turnaround process increased operating costs that result requires less than two-and-a-half years – from growing revenues. By containing one for financial improvements and 12 costs and increasing revenues, however, to 18 months for infrastructure improve- the financial position of the carrier should ments. During the final six months improve noticeably within a period of of the turnaround, the government less than six months. financial benefits begin during the quick require purchasing aircraft. Operating excellent service, but frequently, these erly prepared for future privatization. can proceed with steps necessary to hits phase. Revenue increases drive and financial leasing are viable options carriers fall behind more aggressive Properly preparing staff members for privatize the carrier. Typical Approach to Financial the most benefits during the quick hits for the national carrier turning around competitors in areas such as in-flight the changes that will impact their jobs While the turnaround model Improvement period, but cost containment is impor- its operations. Facilities – particularly entertainment, interior appointments, is necessary so that labor actions don’t requires more time to implement than Implementing a turnaround involves tant because it allows profits to increase customer service areas, but also offices, lounge facilities and catering quality. become the inevitable byproduct of the strategic investor or widely held six main steps: at a faster rate. maintenance and outstation facilities – Passengers have come to expect a high privatization. Investment in training is ownership models, the outcome of 1. Initial assessment — A commer- must also be kept up-to-date so that no level of service at a very low price. The the first major step. Professional train- privatization should be much more cial, financial and operational evaluation Applying Improvements substantial capital resources are needed move toward upgraded first and busi- ing provides staff with viable skills that stable. The consulting group at Sabre of the airline identifies major issues and Using the turnaround model, the for at least five years following privatization. ness classes on world-class carriers translate to job security. Operational Airline Solutions specializes in helping assesses and evaluates the corresponding national carrier can generate substantial Finally, technology must be kept such as Singapore Airlines, Cathay and service-related staff require frequent airlines turn around their operations impact and potential for improvement, improvements in its financial position current because airlines today require the Pacific Airways and British Airways training to ensure that their skills are to prepare for privatization, helping 2. Quick hits — Identification of within one financial year. Taking short- assistance of computerized systems. Core show that international carriers must maintained to appropriate international produce viable carriers that become issues that are relatively easy and quick term gains, however, should be resisted systems such as reservations, departure concentrate on passenger service and levels. In addition, professional training sources of national pride – even if to resolve and have a substantial impact until the turnaround process is complete. control, flight operations, and mainte- comfort. For those national carriers for business staff in analysis, sales, they are not owned by their national on an airline’s performance, During the first 30 months of a turnaround nance and engineering systems must that offer less than competitive service marketing, revenue management, flight governments. 3. Process improvement — Aligning implementation, the airline should be modernized and deployed properly today, money will also have to be spent scheduling and similar industry skills is business processes, performance meas- increase annual revenues by at least to allow for significant expansion as the on service training and staff renewal. a good investment in the carrier’s future Shane Batt is a partner with Sabre urements and decision-support tools 8 percent, producing a substantial war carrier prospers. Business systems are Service upgrades, however, often result and its employees. Most importantly, Airline Solutions Consulting.

52 ascend october 2003 53 product product

All unique carrier requirements can Aloha Airlines, only delivers electronic ticketing capability Improving Interline Electronic Ticketing be supported with the initial connection America West Airlines, but also the increasingly valuable option to the hub. Once a carrier is connected, American Airlines, of interline electronic ticketing connectivity. ATA Airlines, The electronic ticketing solution Two new solutions enhance airlines’ ability to better develop and The benefits of moving to electronic Continental Airlines, provides airlines the most cost-effective Delta Air Lines, and efficient solution for issuing, refund- “ticketing are two-fold — first, utilize electronic interline agreements. Finnair, ing, exchanging and settling all transac- we’ll be able to reduce the costs Hawaiian Airlines, tion types. Additionally, the product pro- incurred by processing paper LanChile, vides functionality to expand electronic By Darren Henley | Ascend Contributor tickets, and second, we’ll be able Midwest Airlines, ticketing for the host carrier as well as to improve efficiency and customer Northwest Airlines, its interline partners. This solution deliv- lectronic ticketing solutions enable ciliation and reducing the process of line electronic ticketing system. service levels. United Airlines, ers substantial cost savings to the airline Eairlines to improve business scanning paper documents. During The hub verifies agreements ” US Airways. while simultaneously enhancing cus- processes and reduce ticketing costs. As irregular operations, IET facilitates the between an inbound carrier and the The Interline Electronic Ticketing tomer service and increasing relation- more airlines mandate the use of paper- transfer of coupons to alternative flights receiving carrier and transforms this access is available to all other linked Hub also enables IET connectivity ships with its global interline partners. less processes, interline capabilities on other airlines. ticket into a neutral message using the carriers through selective or universal between two carriers not hosted within “The benefits of moving to elec- become critical. Implementing interline In the past, each IET implementa- receiving carrier’s maps and rules. activation. the Passenger Reservation System. Until tronic ticketing are two-fold — first, we’ll electronic ticketing increases the market tion has been a unique and customized The hub is not just a routing mech- A vast array of diagnostic tools in now, at least one of the carriers was be able to reduce the costs incurred by opportunity by enabling multi-carrier project requiring a dedicated link con- anism; it supports and translates, if nec- the hub gives carriers the ability to more required to be hosted in the system. processing paper tickets, and second, itineraries. Responding to this need, necting each bilateral airline. The project essary, all EDIFACT releases and ver- closely monitor interline traffic. These Another key tool that helps airlines we’ll be able to improve efficiency and Sabre Airline Solutions has developed can be complex; implementing all carri- sions. If carriers implementing an IET tools enable carriers to set notification adapt to electronic commerce, the Sabre customer service levels,” said Kevin the Interline Electronic Ticketing Hub to ers can be a lengthy process. connection utilize different EDIFACT ver- thresholds through a graphical user Airlines Solutions Electronic Ticket Hartigan-Go, vice president information streamline interline implementations. The Interline Electronic Ticketing sions, the hub will translate those mes- interface. For example, if a link goes Hosting product enables a carrier to stay systems of Philippine Airlines. “With Interline electronic ticketing gives a Hub is a multilateral product that virtu- sages into a format the receiving carrier down and error messages are gener- hosted on its existing system while this implementation, we are well placed carrier the ability to seamlessly transfer ally eliminates the necessity for individ- can process. This translation process ated, an e-mail notification is sent noti- acquiring the ability to issue electronic to facilitate electronic document coupons to its interline partners and to ual bilateral carrier implementations. eliminates extensive development that fying the carrier. Before the inception of tickets and retain those records within exchange with other airlines with whom streamline revenue accounting With this new product, all participating was once required for carriers to estab- these tools, someone physically had to the electronic ticketing database. we have interline relationships, fulfilling processes by expediting revenue recon- airlines are linked to a reciprocal inter- lish the interline connection. discover such incidents. This solution eliminates both the the requirements of some U.S. carriers A number of airlines have carrier-to- need for carriers to build a costly system to support e-ticketing by 2005.” carrier interline connectivity through the to distribute tickets electronically and the Sabre ® Passenger Reservation System: activities related to maintaining the elec- Darren Henley is a senior product Many airlines, such as the fictional airline ZZ, currently build individual bilateral connections with each of their interline partners. However, with the new Interline Electronic Ticketing Hub, all participating airlines are linked to a reciprocal system that routes and Alaska Airlines, tronic ticketing database. The product not manager for Sabre Airline Solutions. translates ticketing messages. +count it up

53.33 — Seconds required 22,370,000 — Number 2,646 —Number of minutes by a team from the Metropolitan of kilometers flown by Fred Finn required to circumnavigate the world Police to pull a British Airways 747 as of June, the most air kilometers using scheduled flights, by David a distance of 100 meters at Heathrow flown by an individual, according to Springbett in 1980, to set a world Airport in London: a world record, the Guinness Book of World Records. record. During that time, he covered according to the Guinness Book of The U.K. resident also holds 37,124 kilometers (23,068 miles). World Records. the record for most number of supersonic flights as a passenger with 718.

54 ascend product product

optimal shifts/rosters to ensure lysts to perform “what-if” analysis to In addition, using the StaffAdmin system adequate coverage to perform the evaluate multiple operational scenarios helps airport resource administrators required work, yielding labor savings and determine the impacts to the busi- more efficiently handle schedule prepa- of up to 25 percent. ness prior to the implementation of any ration, vacation and overtime planning, Just Right: The Resource Once the system has determined the new staffing strategies. Some of the key and shift coverage. It also reduces the optimal coverage level to perform the benefits of the StaffPlan system include: time spent on attendance tracking and Management Systems required work, the final step is to allo- Improved ability to achieve consistent administering training updates, freeing cate tasks to those schedules/rosters. staffing levels, administrators to perform other addi- This is performed by the Task Ability to identify and explain seasonal tional job functions and improving their Through the use of Sabre Airline Solutions’ integrated Assignment module, which takes variations in staffing levels, overall utilization. The entire employee into consideration the drive and Reduced time required to identify and administrative process is streamlined, resource management tools, airlines can yield labor savings walk times between job functions. plan staffing, providing decision support for workforce up to 25 percent by ensuring that the right people are in Through the use of liner program- Ability to set proper staffing levels. planning and scheduling in a paperless the right place at the right time. ming, integer programming and environment. It is designed to ensure constraint-theory mathematics, the Administration that airlines optimally manage adminis- StaffPlan system develops the best During the administrative phase, trative tasks for their employees. Airlines By Kamal J. Qatato | Ascend Contributor possible solution — one that cannot be usually six months up to the day of commonly achieve up to a 20 percent

ate agents are in place right on time is not impossible. Gto handle check-in for a flight. An By breaking down airplane is refueled, serviced and ready the process into to push back for an on-time departure. phases, and Baggage has been transferred from automating each the terminal to the airplane and loaded phase, airlines can without delay. A fresh flight crew is in make the best possi- position ready for takeoff. ble use of their For an airline, the optimal use of resources. employees is not only essential to The three improving performance and customer main phases of service, but it also saves money. the resource man- Having the right people in the right agement process place, however, is not always as easy as are planning, it sounds. The effective management of administration The StaffPlan system, left, and the StaffAdmin system, center, help takes real-time flight movement data and maximizes the deployment of resources, yielding up to 15 percent improvement in overtime ground handling and passenger services and day-of- airline schedulers build work requirements and assign adequate labor costs. The three systems are integrated to provide airlines optimal resource management capabilities. staff is a complex, yet critical, aspect of operations. personnel at airport locations. The StaffManager system, right, an airline’s operations. Flight delays, cancelled services, holidays, labor actions Planning and absenteeism — to name a few — arise During the planning phase, usually levels using the StaffPlan system includes matched by an analyst alone. Without operations when planning occurs for improvement in administrative staff on a daily basis and can have a tremen- six months to one year out, airlines three steps: such optimization, it is difficult, if not the next season, an airline takes the utilization through paperwork reduction dous impact if not managed optimally. determine the work requirements gener- The system uses industry-leading impossible, to measure how close a forecasted staff plan and determines and increased employee involvement in In addition to the unpredictable ated from their planned flight schedule. algorithms to determine the work proposed staff schedule is to the ideal daily staffing needs based on resource data entry. Cost reductions of up to 15 per- nature of the industry, airlines also now Using the Sabre ® StaffPlan™ staff demand required for a flight schedule, solution. The StaffPlan system also availability. cent associated with errors in the recon- must address heightened security provi- forecasting and planning system, airlines work parameters, engagement stan- enables an airline to make intelligent The Sabre ® StaffAdmin™ employee ciliation process related to payroll and sions and increased competition, all of can employ automated decision support dards, historical and forecast loads, trade-offs between conflicting objectives tracking and assignment system creates time and attendance can also be realized. which are forcing changes in how to produce optimized forecasts and plans and quality targets. such as determining whether to use and stores work and attendance rules. It The Internet has provided a powerful resources are planned, administered for staffing levels required by a given Once the work demand is produced, part-time employees versus full-timers helps administrators assign the appropri- means for employees to proactively and managed in real time. flight schedule. the system’s patent-pending shift in terms of cost and shift coverage. ate personnel to the work-level require- manage their own schedules and work Although complex, efficient staffing Determining the optimal staffing scheduler algorithm determines The StaffPlan system enables ana- ments established in the StaffPlan system. assignments. The StaffAdmin system

56 ascend october 2003 57 product

incorporates an employee self-service spending precious time identifying windows is configurable to the business kiosk, enabling employees to complete where those operational exceptions unit or workgroup for which the analyst During this time, many airlines — tant to quickly determine the correct paperless transactions related to shift are. Airlines using the StaffManager is responsible, ensuring complete focus including Northwest Airlines, America staffing levels for ground operations trades and schedule checks as well as over- system have yielded up to 15 percent on that business area. West Airlines and Continental Airlines — to support the new flight schedule. time and vacation requests over the Web improvement in overtime labor costs by The key benefits of the StaffManager relied on their resource management Additionally, we faced unknown load from home or another remote location. being able to identify areas in which system include: tools from Sabre Airline Solutions to factors and the requirement to do new Benefits of implementing the resources can be more effectively utilized Maximized productivity, help determine the best course of action, shift bids to make sure we had the StaffAdmin system include: prior to aircraft arrival and departure. Early problem identification, identify the areas to cut and to make the appropriate staff on each shift to meet Producing rosters and daily staffing The StaffManager system is seam- Measured and tracked employee optimum use of the remaining personnel. our performance requirements. sheets, lessly integrated with both the StaffAdmin performance, Continental Airlines used the “The StaffPlan system was the right Vacation planning and administration, and StaffPlan systems. It takes daily 72-hour moving window of flights Sabre ® SaffPlan™ staff forecasting tool,” he added. “We were able to pull Tracking employee accrual accounts, staffing employee schedules from the and tasks, and planning system to help adjust its in a new flight schedule, run it with Providing employee access via a StaffAdmin system on a real-time basis, Views for flight, task and alert staffing levels to match the dramatic multiple load factor assumptions and self-service kiosk, including any anomalies to the planned information, THE reduction in the demand for travel. get a shift bid output that would assist Tracking employee training and quali- rosters, eliminating the need for face-to- Secured access through various Using the system, Continental’s our operational managers to efficiently fication information, face employee roll call. Most importantly, security levels, resource planning team quickly evalu- re-allocate a smaller staff to reduced Importing and exporting data to human to complete the resource management Link to time and attendance ated its manpower needs, matching flight activity. We presented this analysis resources systems, business process cycle, airlines are now badge-in data. changes to its flight schedule at little to our executive team within the aggres- Open report writing, able to use real-time historical data Right cost to the airline. sive timeframe committed, and they Incorporating a time and attendance as an input to the planning process, It’s All About Efficiencies Patrick O’Neill, senior manager, were able to make informed decisions interface. namely the StaffPlan system, to identify With modern decision-support resource planning and field engineering regarding staffing risks associated with trends against the previous operational tools, airlines no longer must rely on for Continental, said the StaffPlan system: a variety of load factor assumptions. Day-of-Operations using past staffing plans as a IN Enabled Continental to analyze the The StaffPlan system allowed us to The day-of-operations basis for future schedules. Tool financial impact of modifying staffing turn this analysis around in a few days, phase considers real-time Relying on past plans can without compromising clean, safe and which would have been impossible operational requirements result in a repeat of previous TOUGH reliable service. The program param- otherwise.” and resource availability for shortcomings. Having the eters allowed the airline to cross-uti- Kevin Bauerle, manager of customer

deployment in the field. right people, in the right lize workgroups and adjust targeted service finance at America West, said the The Sabre ® place, at the right time is key service goals. benefits of using the decision-support StaffManager™ automated to successful resource man- Performed financial analysis of multi- tools from Sabre Airline Solutions came TIMES

staff allocation system helps agement. Scheduling several ple staffing scenarios, allowing the in two stages. an airline respond in real different functional areas to executive management team to make “Immediately after 9/11, we were time to events that may service aircraft while on the accurate and timely decisions. able to electronically receive the new disrupt the schedule. Even ground is a complex business “We continue to utilize the StaffPlan schedule with the new level of operations on a seemingly ideal day, process that undoubtedly system to efficiently manage more than and quickly run the StaffPlan system there will likely be changes challenges airlines to develop 85 percent of our domestic agents in our to determine the appropriate full-time to flight schedules and times that require Integrated resource management cost-effective ways to manage their istory has proven the truth airport services division,” O’Neill said. employees,” he said. “In conjunction tools help airlines coordinate staffing staffing adjustments. The StaffManager resources. Without a suite of tools to of the axiom that “extreme Northwest Airlines also benefited with receiving the schedule, our capac- needs through the long-term planning, system takes real-time flight movement guide the planning, administrative and times call for extreme from the StaffPlan system in the after- ity planning group provided us with new in-season planning and day-of-opera- data and maximizes the deployment of tion phases, reducing costs and real-time business processes in resource Hmeasures.” math of 9/11. forecasted load factors to account for resources based on their availability, improving staff utilization. management, airlines will never achieve During the most extreme time in “We knew our customers would additional reductions in flying. location in the airport and qualifications. operational efficiencies that will yield the history of the aviation industry, the be very slow to come back to flying “In the months after 9/11, we ran a The StaffManager system dramatically plan to improve future plans. tremendous cost savings yet maximize weeks and months following the events after the terrorist attacks, and we had number of scenarios using adjusted improves the fluidity and movement of The StaffManager system has customer service. of Sept. 11, 2001, airlines were forced to to reduce our flight schedule and arrival curves and contact ratios to attempt resources during an operation by giving a simple-to-navigate graphical user take drastic action to stay afloat. One of resources accordingly,” said Jeff to model the impact of the security direc- an analyst specific areas to concentrate interface that provides detailed flight, Kamal Qatato is director of the resource those measures involved making painful Benjamin, manager of staffing and tives implemented by the Transportation on — proactively managing the excep- resource and operational alert informa- management and passenger processing staffing cuts and furloughing employees. planning for Northwest. “It was impor- Security Administration.” tions in the operations rather than tion. All data in each of three viewable product suites at Sabre Airline Solutions.

58 ascend product product

solutions, an ASP delivery method. revenue management tools, to achieve higher service levels in a more “The eMergo solutions team provided The ability to migrate from a manu- cost-effective manner as compared to Web-Enabling Revenue Management us with a total-cost-of-ownership analysis ally intensive to a more automated operating the entire IT infrastructure that showed the financial benefits that inventory control framework, itself. A lower total cost of ownership, could result if Sabre Airline Solutions A migration from virtual nesting however, was not the only benefit of By migrating its revenue management software to an application owned and managed the information revenue management controls to using the eMergo solution for its revenue technology infrastructure required to true origin and destination controls management software. Through the service provider model, Aerolineas Argentinas has access to operate the Revenue Manager,” said using a bid-price-based continuous eMergo environment, for example, increased functionality at a lower total cost of ownership. Alberto Chehebar, chief information offi- nesting framework. Aerolineas Argentinas receives automatic cer for Aerolineas Argentinas. “Once all The functionality of the new system product upgrades, which are installed the costs are considered, it is clear that helps Aerolineas Argentinas maximize on the host systems and automatically By David Endicott | Ascend Contributor Sabre Airline Solutions can operate the its revenues by selectively accepting made available for customer access. environment much more efficiently. On and rejecting reservations requests by “The migration to the eMergo ince operating an airline today top of that, the solution provided simpli- O&D based on the value of the customer. environment, as well as the application Srequires focus on where and how to fied, predictable pricing. To ensure the airline received the upgrade, involved very little effort from spend resources — financial and physical “With the eMergo solution, we maximum benefits from the new version our IT department,” Chehebar said. assets as well as personnel — Aerolineas The Simple Solutions simply pay a flat monthly fee without of the system, the consulting team at By selecting the eMergo remote Argentinas sought to find a cost-effective having to make any further investment Sabre Airline Solutions helped train the access option, Aerolineas Argentinas’ and efficient way to upgrade its revenue More than 40 airlines worldwide utilize one or more of the following decisions,” Chehebar said. airline’s revenue management depart- personnel can focus on the key element management system. applications via the Sabre® eMergo® Web-enabled and dedicated As part of the upgrade to version ment and presented the group with of their jobs, ensuring they meet the goal Aerolineas Argentinas found a way network solutions: 5.3 of the Revenue Manager, the airline ways to maximize revenue and the best of managing the airline’s growth. to do so by moving to an application receives several key benefits, including: processes to support the system. service provider model, which gives the Quasar™ passenger revenue Sabre ® CargoMax™ Accounting An origin-and-destination process Aerolineas Argentinas recognized David Endicott is vice president airline access to the most up-to-date accounting system, Manager, mode that provides industry-leading the value of a hosted solution as a way for the eMergo solutions. software without incurring the additional Sabre ® Aerodynamic Traveler™ Sabre ® LiteVision ® personalized costs of obtaining and maintaining new Gate Reader, MIDT system, hardware and software. Sabre ® Aerodynamic Traveler™ Sabre ® Planet ® profitability For more than five years, the airline Roving Agent Check-in, forecasting system, THE HIGH LEVEL used the Sabre ® AirMax™ Revenue Sabre ® AirCrews™ crew Sabre ® StaffAdmin™ employee Manager to help it maximize yields and management system, tracking and assignment system, News Briefs from Around the Globe efficiently control its inventory across Sabre ® AirMax™ Revenue Sabre ® StaffManager™ automat- vıew its route network, which includes 34 Manager, ed staff allocation system, domestic and 19 international destina- Sabre ® AirOps™ Load Manager, Sabre ® StaffPlan™ staff forecast- Who Under the agreement, Vinci Airport their passengers. Implementing Sabre tions. To effectively run the system, the Sabre ® AirOps™ Movement ing and planning system, Services, the world's leading independ- Airline Solutions’ suite of resource airline purchased the required sophisti- Manager, Sabre ® TransVision ® traffic flow Vinci Airport Services ent provider of aviation services for management tools will allow us to cated hardware. As the airline evaluated Sabre ® AirOps™ Dispatch analyzer, the aviation industry, will implement further separate ourselves from our the new, feature-enhanced Revenue Manager, Sabre ® Travelcard Pro™ billing What the resource management tools for competitors by delivering that same Manager, it realized that its hardware Sabre ® AirPrice™ fares and marketing information its global airport operations at approxi- high level of service at even lower had become outdated. To upgrade to management system, access system, Selected Sabre Airline Solutions’ mately 100 locations worldwide. costs,” said Jean-Francois Gouedard, the desired functionality would have Sabre ® AirServ ® aircraft Sabre ® Traverse™ loyalty resource management systems — Vinci Airport Services operates as president and chief executive officer also required a further investment in provisioning system, management system, the Sabre ® StaffPlan™ staff forecasting Worldwide Flight Services in the North of Vinci Airport Services and Worldwide equipment unless the airline could find Sabre ® CargoMax™ Revenue Sabre ® WiseVision™ sales and planning system, the Sabre ® American market. Flight Services. “From our largest an alternative. Manager, expansion system. StaffAdmin™ employee tracking and stations with over 3,000 personnel to Faced with investing in additional assignment system, and the Sabre ® Why many of our smallest operations, we hardware to support the new software, StaffManager™ automated staff alloca- expect to improve our personnel utiliza- the airline began considering other options For more information about the eMergo solutions, contact Jim Quilty, tion system — to improve the manage- “At Worldwide, we have long dif- tion through Sabre Airline Solutions’ and evaluated the Sabre ® eMergo ® director of marketing for the eMergo solutions, at 817 264 2906, or send ment of personnel across its worldwide ferentiated ourselves with the service tools, servicing more customers with Web-enabled and dedicated network an e-mail message to [email protected]. operations. we provide to our airline customers and the lowest personnel cost possible.”

60 ascend regional Asia/Pacific Asia/Pacific Carriers Open a Portal

Leading Asia/Pacific carriers team with Travelocity to launch the “We expect that by the end of 2004, first region-wide online travel portal — ZUJI. almost 10 percent of travel bookings will be made online in Asia/Pacific, and we intend to be the leading By Frank Fotea and Hans Belle | Ascend Contributors portal in this space in our part of the world. ixteen of the leading Asia/Pacific ZUJI, which offers the region’s Australia, Singapore, Taiwan and Hong ” Scarriers are putting their footprint most sophisticated online airfare search Kong — allowing us access to over 30 on e-commerce in the region. engine, aims to become a world-class million Internet users — with more sites With travelers in Asia/Pacific Web site by providing its customers to come. following the U.S. trend of booking with an efficient, user-friendly environ- “We have taken world-leading tech- travel online, the carriers have collec- ment to plan and purchase travel online. nology and customized the offerings to tively launched an online portal called ZUJI draws upon Travelocity’s tech- local markets,” he said. “This gives us Photo courtesy of ZUJI “ZUJI,” a Mandarin Chinese word that nology and experience in the U.S. market considerable benefits in terms of cost loosely translates as “footprint.” The and shares its resources across a large of development and the ability to drive site, which is a joint venture between geographic region. Chief Executive revenue from that development across the Asia/Pacific carriers and Travelocity, Officer Scott Blume is focused on one multiple countries in the region. We a Sabre Holdings company, is the only goal — making ZUJI the preeminent expect that by the end of 2004, almost one-stop site dedicated to Asia/Pacific online travel site in Asia/Pacific. 10 percent of travel bookings will be travelers. The site — which offers “Ours is the only online travel made online in Asia/Pacific, and we inventory from thousands of airlines, portal with a regional network in intend to be the leading portal in this hotels and rental car companies — Asia/Pacific whose core business is space in our part of the world.” enables travelers to easily search and travel bookings in real time,” he said. One of ZUJI’s unique strengths is book the best values on flights, hotels “To date, the ZUJI network comprises its ability to quickly bring special deals and rental cars. customized, local language sites in and content to market. Scott Blume, chief executive officer for ZUJI, is positioning the Asia/Pacific travel portal, powered by Travelocity, to take advantage of a growing trend in the region toward online booking.

“We offer an extremely compelling we can access between 20 to 25 million in Australia and its home country in proposition for our suppliers,” Blume Internet users throughout Asia/Pacific 2002. A full marketing push began in said. “We e-mail our members travel each month. It’s a very fast and effective August to build awareness and increase deals that are tailored to match specific method of bringing deals to market.” the membership base. Even before the interests, and we can mine our member Sam Gilliland, president and chief push, however, the portal added sites database to reach travelers who have executive officer of Travelocity, agreed searched for specific destinations and speed to market is a key benefit to the contact them directly with customized airlines that provide content for the site. and personalized e-mails. We can also “It is exciting to see how the airlines offer site real-estate promotional space are embracing ZUJI as a competitive — all within a 24-hour timeline. It’s a tool with its ability to bring fares to A user-friendly graphical user interface makes it easy for travelers One of the many exciting features of the portal is the Flight short, sharp way of moving product. market quickly,” he said. to access the content of the ZUJI Web site, which includes Guru, which provides a host of search options for flights, Additionally, through our distribution ZUJI, headquartered in Singapore, thousands of airlines, hotels and car rental companies. including alerting passengers of free stopovers and enabling alliances with Yahoo! and ninemsn, conducted a soft launch with Web sites passengers to pre-select seats on certain flights.

october 2003 63 regional regional Asia/Pacific

in late 2002 in Taiwan and Hong Kong, ture that allows members to select five The unequaled ZUJI sites built by and it is looking to add sites in Korea, preferred destinations and to be notified Travelocity have met the unique needs of Malaysia, Brunei and New Zealand in via an automated e-mail message or on- the Asia/Pacific marketplace. Travelocity Capitalizing on Consolidation the next several months. ZUJI officials site updates when a flight to a specific quickly realized it could not merely destination meets a pre-set price criteria. We are not only actively building This gives ZUJI members the advantage After its merger with two smaller airlines, a larger, more competitive of being the first to know about inven- “a regional network, but a strong tory-controlled promotional deals. China Eastern Airlines looks to draw on its new strengths to become and compelling brand …. Sweet Sixteen ” “The outcome is ‘win-win,’” Blume a more dynamic factor in the world airline industry. said. “Our members learn of deals to Sixteen leading Asia/Pacific airlines have said the response to the soft launch places they are interested in traveling joined with Travelocity to form ZUJI, a indicated that Asian markets are ready to, and suppliers have access to a one-stop travel portal for the region: By Hans Belle and to embrace online travel. Once the targeted audience.” Peter Wu | Ascend Contributors effects of the conflict in Iraq and the Combining the expertise of the All Nippon Airways outbreak of severe acute respiratory region’s leading airlines and Travelocity Cathay Pacific Airways s the worldwide airline industry syndrome diminished, the portal’s book- enabled ZUJI to overcome a number China Airlines A continues to undergo dramatic ing levels quickly increased, exceeding of challenges, including the region’s EVA Airways changes, many experts and analysts pre-SARS levels. multiple languages, currencies and local Garuda Indonesia have spoken of a need for carriers to “We’re seeing more and more trav- laws. ZUJI worked with Travelocity’s Dragonair consolidate their operations to increase elers choosing to book and buy flight, Sydney-based development center to Japan Airlines competitiveness. hotel and car rental content from ZUJI, create country-specific sites in native Japan Air System While airline consolidation remains and we anticipate that this trend will languages using local currency with Malaysia Airlines largely an abstraction for much of the continue,” Blume said. “We’ll soon secure transactions through VeriSign Northwest Airlines world, in China it is already a reality. reveal a new hotel booking path, which Payflow. To date, ZUJI offers sites in Philippine Airlines Three years ago, the Civil Aviation has been designed and developed in three languages (including two varia- Qantas Airways Administration of China announced conjunction with Abacus. We have a tions of Chinese) utilizing four Asian Royal Brunei Airlines that it would merge 10 of the nation’s dedicated commitment to constantly currencies. ZUJI also has adapted to SilkAir airlines into three roughly equal groups improving the site and ensuring our the local markets, which have different Singapore Airlines in order to strengthen the domestic Executives from China Eastern Airlines and Sabre Airline Solutions announce an customers have the best technology levels of development and infrastructure United Airlines industry. Each group would be centered agreement for the airline to use the technology provider’s flight operations suite and travel tools in Asia/Pacific. to support e-commerce, such as the on one of the nation’s three main carri- to help integrate its airline operations center. “We are not only actively building penetration levels of credit cards and ers: Air China, China Eastern Airlines a regional network, but a strong and costs of Internet access. transplant technology and business and China Southern Airlines. compelling brand, which features our The state-of-the-art net fare booking systems from the United States without Now, with its consolidation largely Shanghai-based China Eastern has the resources to compete more effectively. ‘Travel Guru’ personality,” Blume said. engine, powered by Travelocity, was also finding innovative ways to address the complete, a restructured China Eastern “set off for a new future,” company As a result of the consolidation, China “We’re experiencing consistent growth developed specifically for the region. region’s unique landscape. ZUJI, with Airlines is poised to further raise its officials said. Eastern has approximately 40 percent in all of our markets.” Gilliland said the partnership holds the knowledge and support of the profile on the international aviation Before the consolidation, the “huge of the domestic Chinese aviation mar- great promise for the future. region’s leading airlines and unmatched number, small size and lack of core competi- ket. The combined China Eastern group The outcome is ‘win-win.’ Our “Travelocity pioneered the online technology from Travelocity, is uniquely As a result of the consolidation, tiveness” of the nation’s multiple domestic controls ¥47.3 billion (US$5.7 billion) in travel space, and we have more than positioned to meet the challenges of carriers hampered the growth of China assets, including 142 aircraft. The group “members learn of deals to places “China Eastern has approximately seven years’ experience in the world’s providing online service to the region’s Eastern and other Chinese airlines, the also has a combined 25,000 employees, they are interested in traveling most competitive online travel market — traveling public. 40 percent of the domestic Chinese company said. Consolidation has helped and it serves destinations throughout to, and suppliers have access to the United States,” he said. “We have aviation market. China Eastern “achieve rapid expansion, China as well as Asia, Europe, America a targeted audience. learned that success in this industry Frank Fotea is Travelocity’s ” implement its business diversification and Australia. ” is driven by continuous investment in vice president Asia/Pacific. landscape and also to take advantage strategy and form new mainstay lines By 2005, thanks to consolidation, technology and the customer experience, of events such as China’s entry into the of business, thus becoming the new the airline predicts it will have 180 large- ZUJI’s travel tools are designed to focused marketing and distribution, Hans Belle is vice president of World Trade Organization. starting point for future expansion.” and medium-sized passenger and cargo enhance the customer experience. Its and great value content. ZUJI has marketing, Asia/Pacific Through consolidation with China Consolidating with two smaller aircraft generating ¥24 billion (US$2.9 “Price Guru” tool is a customized fea- these ingredients.” for Sabre Airline Solutions. Northwest Airlines and Yunnan Airlines, carriers has given the combined airline billion) in revenue.

64 ascend october 2003 65 regional regional As Russia continues to emerge into Europe, Middle East and a more open economy, the nation’s Africa airliners are benefiting from the change. For the year, revenues per kilometer in the Russia market are up 7 percent, China Eastern said it sees the president at China Eastern, said the inte- tained several systems, which often passengers boarded are up 6 percent merging of the Chinese aviation indus- grated AOC will streamline operations, resulted in the duplication of tasks to and cargo volume is up 3 percent. try as an opportunity to “build an air enabling the airline to compete more accommodate each individual tool. From Russia, transportation system of core competi- effectively in the consolidated Chinese Integration will also benefit the airline tiveness; realize rapid, sustained and aviation marketplace. during irregular operations, helping With Success healthy growth; improve market com- “Our ultimate aim is to reduce it efficiently return to its published petitiveness quickly; fully participate reporting lines in order to drive cost schedule as quickly and cost-effectively in international competitions; and reduction,” Wu said. “We expect as possible. Despite an industry-wide downturn, establish a world-recognized brand this to be achieved by the continued The operational heart of the airline, in the air transportation industry.” improvement of our operations the AOC includes the airline’s movement a growing market and innovative As part of its growth strategy, China and the reduction in our aircraft control, flight planning, flight tracking, practices have helped Russian carriers Eastern plans to improve the profitability utilization costs.” load planning, meteorological function maintain growth and profitability. of its home Shanghai marketplace. The AOC will integrate the airline’s and data integration departments. The airline also plans to concentrate flight scheduling, flight planning, Announced in April, the contract domestically on Shanghai, Beijing and crew rostering, payload and dispatch with China Eastern Airlines brings to By Inna Kizenkova | Ascend Contributor Guangzhou while further developing the departments, which will work seam- five the number of carriers in the region Xian and Kunming markets. The airline lessly through an integrated suite of utilizing Sabre Airline Solutions for to continue — the country’s Civil Aviation discover its convenience. Yet, the average also plans to strengthen international software provided by Sabre Airline integrated operations centers. Other State Services says the aviation crisis middle-class Russian has similar prefer- routes and develop cargo transport lines Solutions, including Sabre ® AirOps™ carriers include Cathay Pacific Airways, in Russia is over, projecting that the ences for travel as his or her Western in Hong Kong as well as other parts of Movement Manager, Sabre ® AirOps™ China Southern Airlines, Air New industry in 2003 will grow between 5 European counterpart, indicating that Asia, Europe and the United States. Dispatch Manager and Sabre ® AirOps™ Zealand and Virgin Blue. percent and 10 percent, continuing to the growth of this segment will likely The airline group also plans to Load Manager. build on the about 10 percent growth mean an increasing demand for travel, pursue a diversification strategy that By using integrated systems, China Hans Belle is vice president of in 2002. particularly air transportation. incorporates importing/exporting, Eastern will streamline data entry, marketing, Asia/Pacific. So, how have the Russian carriers The move to a free economy financial services, hotels and tourism, data management and data integrity, managed to excel during a time when caused an explosion in the number of and air catering. resulting in superior operational control. Peter Wu is a Beijing-based account the rest of the industry has battled to carriers operating in Russia. However, the As it prepares itself to compete Before integration, China Eastern main- director for Sabre Airline Solutions. keep its head above water? past few years have seen consolidation domestically and internationally, China One of the main advantages Eastern plans to standardize its fleet enjoyed by Russian carriers is the The continued move toward an planning, marketing strategies, services, hile much of the airline industry country’s continuing emergence into “open economy gives Russia an training and maintenance across the W continued struggling in 2002 to a free marketplace. After years of organization. cope with the lingering effects of the stagnation under the Soviet-planned underdeveloped market with In conjunction with its new stan- severe economic downturn, Russian air economy and a decade of adjusting to enormous potential. dardization strategy, the China Eastern transportation bucked the trend thanks a free market, real incomes of Russians ” group has invested in new technology, to an expanding economy that enabled are increasing and the Russian middle including decision-support tools to more travelers to take to the skies. class is growing. within the industry — the number of help integrate its systems operation For the second consecutive year, The continued move toward an airlines declined from a high of 393 in control center. Russian carriers overall reported profits open economy gives Russia an underde- 1994 to 235 in 2002 — as some airlines China Eastern announced in April as well as growth in the numbers of veloped market with enormous potential. acquired smaller carriers, some went that it would integrate its flight opera- passengers boarded. For the year, Analysts estimate the potential Russian bankrupt and some were unable to meet tions into an airline operations center revenues per kilometer in the Russian air travel market at 90 million passengers more stringent licensing requirements in order to improve efficiency, improve market were up 7 percent to US$64.5 boarded, although only 26.5 million, just implemented by the country’s Civil communications among departments billion, passengers boarded increased 29 percent of the total potential market, Aviation State Services. In 2002, the and enhance the airline’s ability to 6 percent to 26.5 million and cargo were boarded in 2002. Because air travel five largest airlines controlled 48 percent respond to irregular operations. As part of a government-ordered consolidation, China Eastern Airlines joined with two volume increased 3 percent. is still seen as somewhat of a luxury of the market and the top 25 carriers other carriers — China Northwest Airlines and Yunnan Airlines — to form one of the Captain Wu, Yu Lin, senior vice The positive trend is also expected in Russia, many people have yet to controlled 80 percent. three largest carriers in China.

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But beyond the natural market States. For example, certain tickets that US$10 for economy class to US$80 simply to maintain an international long-term strategy includes: traveling across Russia and abroad. growth, Russian carriers have are popular among business and sum- for business class. presence. Faced with fierce competition, Reducing aircraft leasing costs, Participants receive a 20 percent to 40 excelled by taking aggressive and mer leisure travelers can be returned The airline has begun experimenting Aeroflot has cut the most unprofitable Adding and enhancing information percent discount for domestic flights innovative approaches to expand their up to three hours prior to departure with no-frills service on its 40-minute routes, even though it resulted in a technology, and up to 30 percent discount on businesses. with only a 15 percent fee rather than Nizhny-Novgorod to Moscow flight, drop of 342,000 passengers. Despite Optimizing its resources, international flights connecting Many of the nation’s leading air- the standard 25 percent. This policy is targeting business travelers who usually that drop, the airline’s profits actually Rebranding the airline, through the airline’s hub at the lines have targeted financially troubled aimed at increasing the loyalty of leisure make the 420-kilometer journey by train. increased from US$8.6 million in 2001 Improving customer service. Pulkovo Airport. but strategically positioned airlines travelers during the highest demand The airline expects to earn US$1million to US$74.2 million in 2002, and the And the airline, which plans to join As the Russian airlines have for takeover, enabling them to grow season. To also appeal to frequent annually from the route. airline projects a US$100 million profit the Sky Team global alliance this year, adapted to the rough and tumble airline through mergers and acquisitions. flyers, the airline launched Sky Seven, Along these same lines, the airline for 2003. is even using its frequent flyer program, industry, they have taken great strides Siberia Airlines, for example, increased an incentive program for loyal repeat is trying to boost its load factors through The airline also projects its load Aeroflot Bonus, to reward travel agents toward becoming globally competitive. its passengers boarded by 41 percent customers offering points that can be innovative programs, including a special factor will increase from 68.8 percent who book flights on the airline. The nation’s carriers are taking the — to 2.69 million — in 2002 in part used for free flights, service upgrades offer of US$5 tickets from Nizhny- in 2002 to 70 percent. Aeroflot Deputy One of the nation’s oldest airlines, industry’s best practices and giving by acquiring Moscow-based Vnukovo and other benefits. Novgorod to Moscow for passengers General Director Lev Koshlyakov has dating back 70 years, Pulkovo Aviation them a Russian flavor, customizing Airlines. The rest of the industry connecting there to one of Siberia’s said the carrier expects passenger Enterprise increased its passengers them to meet their unique needs. increased its passengers boarded international flights. numbers in 2003 to rise about 5 percent, boarded by more than 2 million, 10.2 Their growth during the past two years by only 6 percent. Siberia, founded The airline whose name a total of 250,000 to 260,000. He also percent, in 2002. The airline, 100 per- reflects their experience, knowledge in 1992, also has signed interline was synonymous with air said that in addition to restructuring cent owned by the federal government, and determination to win in the Russian agreements with British Airways travel in Russia during the days the fleet and reducing lease costs, the uses only Russian-built aircraft and is market and be a significant player and Japan Air System. of the Soviet Union, Aeroflot airline’s next step would be to use the largest airline in the northwestern on a worldwide scale. One of the largest domestic Russia Russian Airlines, has also taken steps more economic planes to reduce region of the country. The enterprise, airlines in the Russian Federation, to capitalize on the growing desire for spending on fuel. which also operates Pulkovo Airport Inna Kizenkova is a member of the Siberia has also taken steps to air travel. As a flagship carrier for the In addition to renovating its in St. Petersburg, offers a special Sabre Airline Solutions Marketing improve its customer service, nation, Aeroflot still has the largest fleet and route network, the airline’s “transfer” program for its customers Strategy and Services group. increase aircraft utilization and overall market share at 21 percent. The boost its on-time performance. airline, established in 1994 as the The airline, which in the first half successor to the Soviet airline of 2003 increased its flights by 8 percent formed in 1923, inherited a large and carried 18.4 percent more passen- fleet, customer base, brand equity and THE HIGH LEVEL gers, offers amenities such as free network from its predecessor. But this transportation from the airport to was a mixed blessing. News Briefs from Around the Globe downtown Moscow for passengers The fleet was outdated, with vıew on certain flights. Such efforts helped the majority of aircraft unable to meet the airline become the first Russian International Civil Aviation Organization Who assignments (long trips, short trips or ing and vacations. The introduction of carrier to earn a Flight International Siberia Airlines is experimenting with technical standards, and the airline’s specific layover cities) or daytime con- preferential bidding is part of an overall a low-cost offering on its Nizhny- Aerospace Award for corporate strategy, reputation for safety and customer serv- Chicago Express siderations (no early starts or late plan for automating Chicago Express’ Novgorod to Moscow flights. The which recognizes companies for alliances, ice lagged its western counterparts. returns). systems operations control functions airline expects to earn US$1 million mergers, restructuring programs and annually from the route. Aeroflot, however, recently What using the Flight Control suite. other business strategies that have launched a US$250 million fleet renova- Why “Preferential bidding has been a reshaped or revitalized the industry, tion initiative, including the addition Successfully introduced a system to useful tool in our continuing commit- turned around a company or opened Although the Russian market of several western jets. By December enable online preferential bidding for Using the PC-based preferential ment to improving on crewmembers’ significant new markets. presents several obstacles to the 2005, Aeroflot’s fleet will include 18 more than 200 flight crewmembers. bidding system, a part of the Sabre ® quality of life while enhancing our oper- The airline also modified its ticket standard low-cost carrier model — the Airbus A319/A320s, nine Boeing 767s Crews submit scheduling preferences Flight Control suite for small- , medium- ational efficiency,” said Captain Scott return and change policy to be more lack of fuel-efficient aircraft, secondary and 50 Russian-made aircraft. And the via the Internet each month. These pref- sized and low-cost airlines, Chicago Hall, vice president of operations for customer-focused, introducing a less airports and Internet ticket sales — airline is also revamping its network erences are entered in a proprietary lex- Express ensures that crews are Chicago Express. restrictive policy regarding exchanges Siberia is looking to fill the low-cost to be more efficient. In the days of the icon and can include specific days off, assigned duties to which they are fully and returns of tickets for trips in Russia niche by offering no-frills, short-haul Soviet Union, the government would generic days off (weekends, for exam- qualified and which do not conflict with and the Commonwealth of Independent flights for lower fares ranging from greatly subsidize unprofitable routes ple), specific trip assignments, generic other non-flying activities, such as train-

68 ascend regional As part of its initiative to increase customer service, Gulf Air, the flag carrier of Bahrain, Oman and the United Arab Emirates, has Before the center opened, the Europe, Middle East consolidated its reservations activities into a single call center. and Africa “airline’s reservations operations language in which they wish to con- by the method with which they are most were scattered across more than verse with the reservations staff and comfortable, whether telephone, e-mail, 50 separate locations, many of enable the call to be directed to a Web chat or SMS. The airline anticipates which were too small to justify suitably qualified representative that the bulk of contacts will be made the deployment of sophisticated according to the nature of the call. by telephone during the first few years technology. The mobile services also dynamically of operation, although it anticipates ” monitor all transactions, including other forms will eventually become Photo courtesy of Gulf Air recording of all calls, to facilitate more prominent. call center channel, streamline measurement of service quality. The contact center will support processes and automate manual Computer telephony integration Gulf Air, Gulf Traveler (the all-economy, tasks. The system is the industry’s enables the contact center system to full-service subdivision of Gulf Air), only fully integrated solution designed recognize the customer’s telephone Gulf Air Holidays, the frequent flyer to support every passenger interaction number and populate the reservations program and customer relations from shopping for preferred itineraries agents’ computer screens with cus- with specialists also handling travel to the post-travel experience. tomer-specific data (name, address, agency queries, baggage inquiries The Sabre ® Qik™ business processing service preferences) to speed up and staff travel. solutions dramatically simplify the call processing time and enable per- The new center reflects Gulf Air’s reservations call process and enable sonalized service. business goals and will enable the agents to operate more productively The center’s flexible technology airline to provide the world-class cus- and with less training through the can also be adapted and sized to suit tomer service expected of a modern elimination of lengthy keystrokes and world-class airline. The center is part format memorization. The real-time of Gulf Air’s Project Falcon, a three-year Looking Through the “Contact” Lens graphical user interface provides strategic recovery program designed seamless and simultaneous access to to revitalize the airline and help it build data from computerized reservations on its cultural strengths, history and Gulf Air opens a new US$40 million call center that will help its systems, the Internet, external data- strategic partnerships. bases, telephone and voice recognition “We are on target with our Project customers stay in better contact with the carrier. systems, and facsimile machines. Falcon recovery to meet our year-end Mobile services available from Sabre changing market circumstances with targets,” said James Hogan, president Airline Solutions provide an automated new products and services. and chief executive of Gulf Air. “Focusing By Raida Abumaizar and Tariq Sultan | Ascend Contributors voice response system that generates The IP Contact Center leverages on our objective to be a commercially cost efficiency for the call center. Gulf voice-over IP technology and offers successful, world-class airline, this ulf Air, the premier pan-Persian technological solutions available for were scattered across more than 50 currently uses the mobile services great flexibility in services and in number bold and disciplined process of change GGulf carrier owned by the countries telecommunications and reservations separate locations, many of which were for short messaging service and plans of agents deployed. The solution enables will continue.” of Bahrain, Oman and United Arab service; our staff are enthusiastic and too small to justify the deployment of to use voice-over Internet protocol agents to dynamically connect and work Emirates, last month opened a US$40 raring to go. Our customers will be sophisticated technology. telephony to route calls from around from any location while providing a Raida Abumaizar is the Bahrain-based million World Wide Contact Center, both surprised and delighted.” In developing the center, Gulf Air the world into the contact center. seamless customer experience and account director for Gulf Air. which will consolidate all its reservations By bringing together these opera- has teamed with leading technology Interactive voice response, such as quality of service. activities, including bookings, ticketing tions, the airline will be able to centralize providers, including Public that provided by the mobile services, The center’s design and technology Tariq Sultan is vice president of and customer service. Airline officials the management of its customer rela- Establishment for Industrial Estates — enables customers to pre-select the enable customers to contact the airline information technology for Gulf Air. anticipate that the center will also tionships, helping the carrier reach Oman, Omantel, Cisco, Hewlett-Packard improve sales and customer service. its goal of becoming more customer- and Equant. In addition, the center According to Andrew Dawson, centric. When fully staffed, the new also uses several tools from Sabre head of reservations for Gulf Air, “This center, located in Muscat, Oman, will Airline Solutions: +count it up 1,266 — Elevation, in feet below 14,219 — Elevation, new venture will give us the opportunity employ more than 300 local residents The Sabre ® Passenger Reservation sea level, of the I Bar Yehuda Airport in feet above sea level, of the to offer all of our customers worldwide as well as the latest communications System provides a comprehensive in Israel, one of the world’s lowest alti- airport in Bangda, Tibet, one a consistent, world-class service, around technology. Before the center opened, and easy-to-use product suite that tude airports. of the world’s highest altitude the clock. We are using the very best the airline’s reservations operations will help increase sales through the commercial airports.

70 ascend company company Through an integrated airline schedule recovery system, passengers can be automatically notified when they are addresses schedule recovery both in the hub airports that allow individual airlines affected by delays or cancellations, context of an individual carrier and a to offer passengers alternative itineraries saving them from having to search for global alliance. The airline integrated on their partner carriers. Journey man- Getting Back on Track their new itinerary. recovery concept incorporates aircraft agement is based on concepts from the maintenance routing, crew rescheduling passenger flow model. The output of the Researchers have developed new solutions to help airlines and the impact of schedule changes passenger flow model is used to assign on passenger flow. Integrated recovery alternative itineraries to disrupted passen- recover from off-schedule operations. consists of the schedule recovery model gers based on a priority list determined to suggest necessary flight cancellations by the airline. In practice, airlines may and delays, the aircraft recovery model need to offer a passenger an alternative By Michael D. Clarke | Ascend Contributor to assign new aircraft routings, the crew other than the one that benefits it the recovery model to assign new crew most. When a flight is cancelled, the here is seemingly no end to the US$4.6 million a year. crewmembers and passenger services. pairings and the passenger flow model re-accommodation tool will retrieve Tfactors that can adversely affect an In the aftermath of irregularities, In the past, decision-support systems to evaluate the impact on passengers. passenger name record data from a airline’s schedule: inclement weather, the schedule recovery process at many have been designed to handle one These models have been developed to be reservations system, such as the Sabre ® mechanicals, labor actions, excessive airlines consists primarily of assigning resource, concentrating exclusively on compatible with Sabre Airline Solutions’ Passenger Reservation System, as well passenger volumes, air traffic control spare operational aircraft to scheduled that area without considering auxiliary an integrated approach is not only bene- existing portfolio of flight operations as information on available inventory issues. With so many potential areas for flights in order to reduce or eliminate factors during decision making. Because ficial during tactical planning but also and crew management products. The in replacement flights. The re-accommo- disruption, it’s amazing that only a small disruption with the briefest delay. These they have not been able to consider all during strategic planning. Based on research group, using advanced mathe- dation system prioritizes passengers, portion — 10 percent in some regions operational spares are an expensive factors, such systems have been unable this, airlines have started to explore matics, has formulated airline integrated gives them a revised itinerary, updates — of an airline’s scheduled revenue proposition as their utilization is low to deliver a truly optimum solution, dynamic scheduling concepts that lever- recovery to obtain near real-time perform- their PNRs in the Passenger Reservation flights are affected by irregularities. given their requirement to remain in causing operations control center age revenue management information ance for reasonably sized problems. System or another global distribution When disruptions occur, the meter standby mode at the appropriate hub personnel to shy away from relying for near-term fleet assignment decisions, system, and then electronically notifies starts running as airlines incur costs or predominant airport. When faced on them to help recover from schedule such as demand driven dispatch. Taking Care of the Passenger passengers of their new schedule using for lost revenue, crew overtime and pas- with schedule disruptions, many airlines interruptions. Re-accommodating passengers the notification tools of the reservations senger hospitality, not to mention the still tackle the situation manually or at Researchers believe an integrated Airline Integrated Recovery during schedule irregularities is critical system. The system would actively impact of disgruntled passengers. When best, through a semi-automated process approach that transcends the typical The research group supporting for an individual airline, as well as a monitor the status of each scheduled the financial impact of disruptions on using basic rules devised by the experi- airline’s traditional organizational struc- Sabre Airline Solutions has developed global airline alliance. An alliance’s flight to ensure that passengers were the daily operations of a major U.S. net- enced scheduler. Recent advances in ture provides the most effective way to a decision-support framework that system network consists of multiple not assigned to later flights that were work carrier can exceed US$400 million mathematical programming and com- handle schedule recovery. This is based a year, it is vital that airlines return to puter processing speed now enable users on the premise that optimizing in a the normal schedule as quickly and to deploy decision-support tools to solve holistic fashion yields greater results cost-effectively as possible. Of equal real-time problems that are time sensi- than optimizing smaller subsets and THE HIGH LEVEL importance is the impact on the carrier’s tive such as schedule recovery. subsequently trying to integrate the brand and customer goodwill, both of sub-optimal solutions. In essence, an News Briefs from Around the Globe which are quite difficult to measure. Solutions on the Horizon airline really is a collection of inter-related vıew According to a recent study by the Although progress has been made networks — aircraft, crew, passengers, George Washington University Aviation in the area of schedule recovery, airlines freight — all connected by scheduled Who Why Institute and Flight Safety Technologies, have been slow to embrace optimization- flights that reside at the core. Events in airlines can benefit significantly by based decision-support systems designed one network will impact the others, thus Atlantic Coast Airlines The module helps optimize pilot regional jet aircraft to its fleet. The PC- reducing the impact of disruptions. to assist with real-time planning. The the solution can only be truly optimized training scheduling to maximize utiliza- based CrewClass module, which inte- For an airline with operational costs resistance stems from a variety of fac- by addressing the impact of each indi- What tion of training resources while mini- grates seamlessly with other modules of US$70 per minute with 1,500 flights tors ranging from the complexity of the vidual planning problem on other areas. mizing the time that pilots are unavail- of the Flight Control suite, has greatly per day, cutting one minute of delay per underlying problem to the intricacies During the last 15 years, airlines have Selected the Sabre CrewClass training able for productive flying assignments. streamlined the training scheduling flight per day can save US$38 million necessary to recover from the disrup- identified the need to become more schedule system, a module within the Atlantic Coast, a fast-growing process. a year, the study showed. Further, if an tion. Airlines have traditionally been integrated, sharing information and Sabre ® Flight Control suite for small- , regional airline based at Dulles, airline can avoid one diversion per week, divided into functional groups based decision making across the organization. medium-sized and low-cost airlines, to Virginia, has experienced rapid growth it could save from US$1.1 million to on a particular resource such as aircraft, It has become evident to airlines that meet its pilot training requirements. while at the same time introducing new

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already cancelled. Based on centralized both the AirOps suite and the Flight user-defined, taking into consideration planning and decision making, while Control suite. variables such as booking class (high- leveraging the benefits of local, decen- The Sabre ® AirOps™ versus low-yield), down-line connections, The Winning Combination tralized action, the integrated recovery Reaccommodation Manager optimally passenger profile (unaccompanied method brings together the best of both re-assigns passengers whose flights minors), frequent-flyer-tier level, worlds. In effect, decisions made at the have been disrupted. The system ticketing status, boarding pass status United Airlines successfully utilizes multiple Sabre Travel Network airport would be driven by the central- or others depending on the airline’s ized airline operations control center preference. distribution products to maximize revenue-generating opportunities such that a global approach is taken and manage distribution costs. to re-accommodate passengers. Pushing Technology Forward Most technology solutions in sched- The Tools for the Job ule recovery focus mainly on optimizing By Erin Buth | Ascend Contributor The Sabre Airline Solutions product the disrupted schedule by minimizing development teams in conjunction with operational disruption. Although helpful, t’s no secret that the airline industry United aggressively distributes At the highest connectivity level, United the research group have been working this approach seldom considers the Iis experiencing pressures due to the tickets and targets sales through chan- is provided with a wide range of services closely together to develop the fully commercial variables in formulating difficult economic environment and the nels that produce the highest revenue. to market and sell flight and fare infor- integrated schedule recovery system. the optimized solution. An optimized resulting changes in consumer behavior Participating in the Direct Connect mation to approximately 56,000 Sabre As a precursor to the final integrated solution considers factors such as Availability option enables United to offer Connected SM travel agents around The airline integrated recovery model recovery product, decision-support incorporates various departments passenger mix (high- versus low-yield Lowering distribution costs is a key its customers access to all published the world. functionality has been incorporated into passengers) on re-directed flights, fares, including Web fares, through the United’s use of MIDT is another within an airline to develop a more “component of our strategic plan to several products, including the Sabre ® optimal solution to recover from degree of competition on the route travel agency channel. The Direct Connect effective tool that sharpens its competi- reduce expenses. AirOps™ Control suite, the Sabre ® schedule disruptions. (passengers’ choice of airlines) and ” Availability option also helps United gain tive edge, maximizes market potential, Flight Control suite for small- , medium- route and flight profitability. As these market share in routes where there is develops meaningful sales incentive sized and low-cost airlines and the Sabre ® values each passenger according to new scheduling concepts are embraced and attitude toward travel. Although heavy competition and sensitivity to plans and improves overall operations. AirCrews™ crew management system. user-defined criteria such as frequent by decision-support vendors and sub- airlines around the world are acutely price. This approach increases its sales MIDT provides United with vital sales The AirOps and Flight Control suites flyer status, fare paid or class of travel, sequently airlines, they will improve aware of the need to lower costs and opportunities and reduces the time it intelligence including sales sources and include a real-time flight operations prioritizing the passenger list based on the existing business processes and increase revenue, United Airlines is takes for travel agents and consumers its position in the marketplace relative management and movement control calculated values to create alternative practices. Schedule disruptions cannot particularly focused on improving its to shop for and purchase United’s best to the competition. This tool provides system designed to monitor an airline’s itineraries. The system’s automated be eliminated, but they can be optimally bottom line by using advanced tech- deals. The three-year option also reduces key transaction data enabling United to operations and provide alerts for potential alert process notifies passengers of managed. As researchers continue nology to achieve its goals. maintenance and operating constraint their new itinerary. Because the system to push technology, airlines will have A component of its successful strat- violations. The AirCrews system includes simplifies the process of moving more sophisticated tools to minimize egy has been to utilize a variety of Sabre a day-of-operations module designed to misplaced passengers and minimizes the effects — and costs — associated Travel Network products to effectively assist crew trackers with managing the schedule changes, customer service with irregular operations. The future manage ticket distribution and other impact of schedule changes and disrup- and loyalty is enhanced. And automat- mission of the airline operations operating costs as well as capitalize on

tions on crew scheduling. Sabre Airline ing the re-accommodation process research community will be to deliver revenue-generat- Photos courtesy of United Airlines Solutions has introduced the Sabre ® also reduces costs. At the core of next-generation scheduling and plan- ing opportunities. Through the Direct Connect Availability — Three-Year Option, United Airlines offers AirOps™ Decision Manager — a decision- Sabre Airline Solutions’ suite of pas- ning tools that meet the prevailing Turnkey solutions its customers access to all published fares, including Web fares, through the travel support tool that incorporates the sched- senger re-accommodation tools is the needs of the industry and offer further contributing to agency channel. ule recovery, aircraft recovery and pas- Passenger Reservation System. The opportunities for improved efficiencies, this strategy senger flow models. The system helps system provides the necessary flexibility enhanced productivity and increased include the Sabre ® Direct Connect United’s cost of ticket distribution by analyze booking levels and competitive airlines find new aircraft assignments to accommodate passengers by flight attention to the impact on the airline’s Availability SM —Three-Year Option, mar- providing it with a fixed, discounted market share. that have the least impact on the current leg or origin and destination. This passengers. keting information data tapes from the fee for the next three years. Through Utilizing the latest innovation from schedule and are maintenance feasible. enables airlines to take the passenger’s Sabre ® Global Distribution System and the program, United receives discounted Sabre Travel Network, Aggregate TCN, It is available as a supplemental product entire itinerary into consideration Michael Clarke is a research Sabre ® Aggregate Ticket Control Number. booking fees in exchange for participat- United now has insight to the full spec- for Sabre ® AirOps™ Movement Manager when selecting alternative flights for and development lead in ing at the highest level in the Global trum of fares and the prices consumers as well as the Sabre ® FliteTrac system re-accommodation. The automated the research group supporting Distribution System and providing are willing to pay for any given itinerary. and can be seamlessly integrated with process is entirely table-driven and Sabre Airline Solutions. access to its full fares and content. Aggregate TCN is the only source for

74 ascend october 2003 75 company making competitive fare data allowing United how United’s advance sales compare products to accomplish this while to monitor its own pricing initiatives to that of the competition. The data continuing the highest level of service contact against what its competitors are selling is invaluable for making decisions on to our customers.” in the same markets. The system pro- pricing promotions and viewing how By utilizing multiple tools, United Optimal performance for airlines and airports To suggest a topic for a possible vides airlines with all ticketing activity the market is selling. has been able to maximize revenue- future article, change your address in the Global Distribution System “Lowering distribution costs is a generating opportunities and manage or add someone’s name to the mail- excluding passenger personal data, key component of our strategic plan distribution costs, enabling it to sustain ing list, please send an e-mail mes- corporate, agency and commission- to reduce expenses,” said Greg Taylor, long-term cost benefits. sage to the Ascend staff at related elements. The system is an senior vice president of planning for [email protected]. affordable element of marketing United. “We saw the opportunity to Erin Buth is a sales marketing manager research that provides insight into use a variety of Sabre Travel Network for Sabre Travel Network. For more information about prod- ucts and services featured in this issue of Ascend, please visit our Web site at www.sabreairlinesolu- THE HIGH LEVEL tions.com or contact one of the fol- lowing Sabre Airline Solutions vıew News Briefs from Around the Globe regional representatives: Asia/Pacific Who Why Mike Baldwin Senior Vice President American Airlines, Continental American — “Lower distribution lished and Web-only fares,” said Lee Level 9, Phillips Building Airlines, Delta Air Lines, Northwest costs plus broader availability of our Macenczak, Delta’s senior vice president, 15 Blue Street Airlines, United Airlines fares to the largest subscriber base sales and distribution. “The program North Sydney NSW 2060 means Sabre DCA is a real winner also allows us to further reduce distri- Australia What for American,” said Craig Kreeger, bution costs and reflects our confidence Phone: 61 2 8923 5230 American's vice president-sales. in the value of the Global Distribution E-mail: [email protected] Elected to participate in the Sabre ® “Innovative solutions for today’s System and its operating efficiencies as Direct Connect Availability SM — Three- marketplace make Sabre Travel a high-yield channel.” Europe, Middle East and Africa Year Option, which commits the carriers Network our preferred GDS provider.” Northwest — “Participating in the proven Vinay Dube to a three-year term at the highest level Continental — “Providing travelers Sabre DCA Three-Year Option enables Vice President of participation in the Sabre ® Global the maximum level of customer serv- us to meet the important goal of low- 23-59 Staines Road Distribution System in exchange for a ice is the highest priority for us,” said ering distribution costs while serving Somerville House reduced booking fee rate that is fixed Jim Compton, senior vice president travelers through multiple channels,” Hounslow, Middlesex for three years. As part of the agreement, of marketing for Continental Airlines. said Al Lenza, vice president of distri- TW3 3HE, United Kingdom the airlines will provide all published “This program improves our ability bution and e-commerce with Northwest Phone: 44 20 8814 4540 fares, including fares they sell through to do that by offering customers access Airlines. “This new initiative demon- E-mail: [email protected] their own or third-party Web sites, to to all published fares, including Web strates Northwest’s efforts to make all all users of the Global Distribution fares. It also helps us meet a key our publicly available fares and content The Americas System, including more than 56,000 business objective to further reduce available where it is economically Walter Jacobs Sabre Connected SM online and offline distribution costs. We recognize the viable for us to do so.” These are unprecedented times in the air transport industry. But there’s Vice President travel agencies. The program now effectiveness of the Global Distribution United — “It will provide our cus- one thing you can count on. Sabre Airline Solutions will be here, providing 1 E. Kirkwood Blvd. includes bookings made in the United System, which offers one of the highest tomers with a full range of our fares in innovative technology solutions for your toughest challenges. Just as we Southlake, Texas 76092 have through five decades — in good times and in bad — for more than States, U.S. Virgin Islands, the yielding channels.” a cost-effective manner for all parties, United States 200 airlines worldwide. Caribbean and Europe. Delta — “Through this new partner- while allowing us to significantly reduce Phone: 817 264 7657 ship, we will give our customers added our distribution costs at the same time," E-mail: [email protected] Times like these demand fresh thinking. Proven, ROI-based solutions. And a flexibility, choice and convenience through said Greg Taylor, United Airlines’ senior technology partner that can not only see the future, but can help you reach it. broader multi-channel access to our pub- vice president-planning. Times like these demand Sabre Airline Solutions. www.sabreairlinesolutions.com www.sabreairlinesolutions.com