He Power of Partnering Under the Proper Circumstances, the Airbus A380

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A Magazine for Airline Executives 2007 Issue No. 2

t a k i n g y o u r a i r l i n e t o new heights TThehe PowerPower ofof PartneringPartnering A Conversation with Abdul Wahab Teffaha, Secretary General Arab Air Carriers Organization.

Special Section i nsiDe Airline Mergers and Consolidation Carriers can quickly recover 21 from irregular operations

Singapore Airlines makes 46 aviation history

High-speed trains impact Eu- 74 rope’s airlines The eMergo Solutions Several products in the Sabre Airline Solutions® portfolio are available through the Sabre® eMergo® Web access distribution method:

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54 profile industry special section

8 54 One Size Fits all 42 recipe for a Merger Airlines are making preparations for The Power of Partnering Under the proper circumstances, the Airbus A380. AACO has helped unite Arab airline mergers can be carriers so they can leverage their successful. 12 Dreamliner set strengths. for Takeoff 59 The Boeing 777 Dreamliner is 46 singapore Airlines: to the Core perhaps the aircraft manufacturer’s A True Pioneer Some airlines are selling parts of most innovative creation. Singapore Airlines makes aviation their organizations and getting history by introducing the Airbus back to their core competency. 16 A380. Sport Tourism Soars 61 Sporting events can drive 49 it’s not Business Class, Boom and Bust significant revenue. it’s Eos Class Private-equity companies are taking Eos offers an extraordinary an interest in airline ownership. 18 end-to-end travel experience. Analyze This 63 Airlines must use three vital 46 A Bold GOL components for effective decision GOL Airlines assumes ownership making. of Brazilian rival Varig.

21 Bouncing Back Carriers can quickly recover from irregular operations. perspective 23 the Big Three Airlines can concurrently cut costs, generate revenue and retain customers.

27 Low Cost for the Long Haul Can low-cost carriers really make a profit on long-haul flights?

30 Who’s Cheating You? The right technology can help 32 airlines fight fraud.

32 Passenger Bill of Rights s consolidation good for the airline industry? It’s a ques- Laws regarding flight delays need tion that seems to be filling more and more of our conver- to be clear and fair to all parties. I sations, yet doesn’t seem to lend itself to an easy answer. Although we’re talking about consolidation, we haven’t 36 reached a consensus on how it could impact air transport. Opinions Growing Like Wildfire on the subject are certainly mixed — both inside and outside Emerging countries are the industry — about the benefits of reducing the overall num- experiencing rapid growth. ber of airlines. Opponents of airline mergers point to the difficulty of combining fleets, employees (and associated labor contracts) 39 and cultures of two airlines. Proponents emphasize the synergies In Sync derived from eliminating duplicate functions, such as maintenance Integration can lower costs, increase or corporate functions, while instantly creating a stronger network. revenue and boost customer loyalty.

ascend contents regional products company 74

90 Disaster Recovery 66 70 74 ® Maximizing Manpower Conquering Chaos Fast Track The Sabre Holdings company The right resources and tools Robust decision-support tools can High-speed trains have a substantial enhances its disaster recovery help airlines smoothly introduce help airlines quickly recover from impact on Europe’s airlines. program. new aircraft types. schedule disruptions. 79 91 68 73 Musical Chairs Going Private The Focal Point virtually There U.S. regional carriers have After being purchased, Sabre Using an ASP gives carriers the Airlines should ensure customers become prominent forces. Holdings can more closely focus technological backing necessary receive up-to-date, real-time flight on providing state-of-the-art to optimally run their airline. information. 82 technology. Countdown to Beijing Beijing’s travel industry is gearing 68 up for the 2008 Olympic Games.

86 Opening the Skies Open skies between Europe and the United States give carriers more trans-Atlantic flying freedom. 91 with Tom Klein Group President, Sabre Airline Solutions/Sabre Travel Network

U.S.-based industry analyst Ray Neidl has said he’s “not a fan to expand even further when it acquires a 75.1 percent share of airline mergers” because of the various challenges they present. of Condor from Thomas Cook. The remaining 24.9 percent share “They’re very costly and very messy,” he said. But Terry Trippler, another in the Germany-based no-frills airline will be purchased in 2010. industry analyst, said “a merger can streamline an entire operation. With the goal of dramatically expanding the market for low-cost, “So even though you have fewer seats that you’re offering, you long-haul travel, AirAsia X recently announced a 20 percent investment by can lower your prices because your seat cost per mile has dropped,” he said. Virgin Group. Icelandair Group signed a letter of intent to acquire Czech A number of other arguments for and Republic’s largest private airline, Travel Service. Northwest Airlines will against consolidation focus on the effect on travelers. invest US$213.3 million in its part of TPG Capital’s buyout of Midwest “It’s economics 101,” said Jerome Chandler, a con- Air Group, which was previously sought after by AirTran Airways. And tributing editor to Frequent Flyer magazine. “If you have fewer Brazil’s GOL made a bold move when it purchased top competitor Varig. players in the industry, you are going to have higher fares. It’s The list of current and prospective mergers and acquisitions goes almost inevitable. Mergers are about what’s good for the air- on and on, and it changes frequently, but it’s not just about who’s saying “I do.” lines — not necessarily what’s good for the consumers.” In the right circumstances, mergers can result in a stron- On the other side, Clyde Prestowitz, president of the ger, healthier industry. And our consulting practice can help airlines Economic Strategy Institute, has said because of the “unique dynam- determine when it makes sense as well as identify potential partners. ics of airlines’ networks,” consolidation would lead to “an increase In our special section, we take a look at sev- in competition and more choices for consumers, which is hardly the eral issues airlines should consider when choosing a part- doom-and-gloom scenario that some people propose would take place.” ner — different fleet types, cultures, labor agreements, etc. So, what is the answer? In some cases, it depends on And we also examine different types of money-making activity. who you’re talking to. Ask someone like Doug Parker or Jean- We hope you enjoy this issue, and we look forward to visiting Cyril Spinetta, both of whom have overseen successful merg- with you again in the coming months. ers, and you’d likely hear that consolidation is a good thing. Talk to some airline executives who’ve struggled to integrate pieces Wishing you smooth skies … into a coherent whole, and you might get a different answer. Regardless, it’s an issue that will not go away any time soon as evidenced by the amount of activity in the industry. In recent months, Berlin, Germany-based budget carrier Air Berlin purchased Duesseldorf-based charter operator LTU, making it Europe’s fourth-largest carrier in terms of traffic. It has also acquired 49 percent of Switzerland’s Belair, and in early 2009, the airline plans

ascend by the numbers

Intra-Versus Inter-Asia Service Changes

Year-Over-Year Change in Asia Departing Seats Changes in Inter-Asia available seats have declined from 14 percent in 2004 to 6 percent in 2006, while Intra-Asia service has slowly risen. }

Intra-Versus Inter-North American Service Changes

The pace of growth in available seats for inter-North American markets slid from 6.5 percent in 2004 to 2.3 percent in 2006. Intra-North American ser- {vice declined to -2.5 percent in 2006.

- - -

Intra- Versus Inter-Europe Service Changes

Increases in available seats to destinations outside of Europe (inter- Europe) have consistently outpaced service changes within Europe (intra-Europe) during the past three years. }

ascend by the numbers

2006 Intra-Continental Low-Cost Carrier Profile

Network carriers in Asia still dominate the top Intra-Asia markets. As in North America and Europe, Asia’s aviation environment is rapidly changing. Last year, more than 130 carriers served Intra-Asia. Of those, 35 percent were LCCs serving 12 percent of the available seats. }

Network Versus Low-Cost Carriers Intra-North American Seat Changes

Inter-North America Capacity Trend

- Intra-North American service increases were dominated by low-cost - carriers. Network carrier service changes steadily declined to -5 percent in 2006. - {

Intra-Europe Service Changes Network Versus Low-Cost Carriers Intra-Europe service increases are Intra-Europe Capacity Trend dominated by low-cost carrier service changes. All carriers’ pace of growth has steadily declined during the past three years. }

ascend One Size Fits all By John Popolizio, Edward Mandell, Rahul Srivastava and Giles O’Keeffe | Ascend Contributors

Whether it’s configured to seat 490 passengers or more than 800, the new Airbus A380 has arrived and airlines that plan to operate it are making preparations to work it into their fleet mix.

All photos courtesy of Airbus 8 ascend industry

tarting with the early stages of development in 1994 and through numer- Sous delivery delays, the Airbus A380 “super jumbo” has made its worldwide promotional tour and route-proving runs, and its launch customer, Singapore Airlines, has recently taken the extra-large bird into flight (see related article on page 46). Because of its enormous size — carrying between 490 and 550 passengers in a three-class configuration — the A380 has been in the spotlight more prominently than the introduction of any other new aircraft in history. And future models of the super jumbo jet are planned to serve more than 800 travelers in a single-class configuration. The sheer size of this aircraft calls for changes across the entire aviation industry, and while some of these changes present challenges for many of the world’s airlines, they can be overcome, and those operating the new aircraft can do so successfully.

Crew Optimization Los Angeles, California, Mayor Antonio Villaraigosa welcomes the A380 on its first visit to How many professionals does it take the U.S. West Coast following the aircraft’s landing at Los Angeles International Airport on to fly and serve up to 550 passengers for March 19. flight times of up to 16 hours? The A380 does not fly greater distances than the Airbus A340-600 or the Boeing 747-400 an average addition of eight cabin crew One solution involves programming changes — approximately 7,500 to 8,000 nauti- per flight. that take into account new requirements and cal miles. Because of these range limita- While increased cabin attendants pres- can focus on improving the overall utilization tions, the current planned utilization for the ents challenges, the primary issues for many of crews. Some carriers have looked for A380 is on established routes where extra of these start-up A380 carriers has been completely new optimization solutions that capacity is needed or on long-range “flag- two-fold: can be integrated with their other crewing ship” routes. Keeping in mind how carriers 1. The technical limitations of current sys- modules. Yet others took advantage of this intend to utilize the aircraft, most current tems, opportunity created by adding the A380 to regulations related to crew flight/duty fit 2. Limited frequencies due to the initial deliv- entirely replace their crewing tools across the requirements for carriers operating the ery stages of the A380’s implementation the board. Either way, a large financial and A380 to fly with no major additional restric- into the carriers. manpower investment has taken place to tions. Flight and cabin crews already fly on Both these issues put a strain on achiev- prepare for the new aircraft. the same non-stop routes as the A380 is ing significant or true optimization. intended. Limited Frequencies So what is the issue, and why is Technical Limitations It’s a simple equation — the smaller crew optimization a concern? There are Current technical solutions cannot the fleet size plus less amount of frequen- no major issues for flight deck headcount. account for headcount increases per flight cy equals less optimization opportunity. The true concern is with cabin crew, which and/or additional aircraft types. When most Because Airbus is only capable of produc- stems from the increased seating capacity carriers implemented their current optimiza- ing 12 to 15 aircraft a year in the initial of the super jumbo. The new aircraft will tion systems, they included the maximum stages — there are more than 150 orders likely replace the A340-600 (with maximum amount of crewmembers the system could to date, and the delivery schedule in many capacity of 380 seats with three classes of accommodate based on the airline’s spe- cases is staggered — airlines will not have service or 419 seats with two classes) and cific operation. In most cases, this was all their fleet orders in at once to provide the Boeing 747-400 (operating a maximum based on the largest or longest-range air- greater opportunity for optimization, mean- of 416 seats and three classes of service craft, whichever required the most crew ing A380s will be scattered across the or 480 seats with a single class). At 550 and most stringent restrictions. This created entire flight schedule, mixed in with the seats, the A380 offers an increased capac- technical issues with the systems’ capabil- other heavy, long-range fleet. This problem ity of 33 percent. Based on most federal ity to produce solutions that incorporate all is unfortunately unavoidable, causing most regulations, minimum cabin crew require- aircraft types and allow for true optimization. airlines to manage as best they can until ments are based on one cabin attendant In many cases, solutions can identify an they have added a number of the new for every 50 passenger seats (occupied or increase in underutilized cabin attendants aircraft. not). The A340-600 and Boeing 747-400 without consistent schedules. This increase There have been many other chal- utilize an average of 12 to 17 cabin atten- is in large part due to the increased hiring on lenges on the crewing side, including train- dants. Given the increased seat capacity the cabin side because of the increased crew ing issues such as upgrading and backfill- and extra amenities planned by many car- demands for the super jumbo. ing while keeping the airline operationally riers that will operate the A380, 22 to 27 The solutions vary according to the sound through the process. And there is cabin attendants will be required. This is carrier and its existing optimization tools. always the issue of safety.

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4. ERO alignment with best practices; 5. The airline’s ability to manage the emergency as well as ongoing operations. A systemic analysis of the ERO includes the review of various elements such as structure, human support plans, training, live exercise review, available facilities and the technology available to support the airline while it is in crisis mode. The airline’s ability to respond to the emergency and support ongoing operations during the first hour (golden hour) after the emergency has been declared is another key aspect. Typically, airlines that have well-executed starts during the golden hour can minimize the effect of the emergency on the total operation as well as reduce overall recovery time from the emergency. Plans can be developed to help bridge the gap between the current state and the ideal state of readiness for the ERO. Once these identified areas have been addressed, the ERO should again test its procedures and validate the results. It should In March, the A380 visited Hong Kong during its second technical route proving trip to become a continuous cycle for the airline. demonstrate its ability to operate on a continuous schedule representative of standard EROs should adopt standardized prac- commercial service. tices that help cut costs and achieve balanced responses to emergencies quickly. Special attention should be given to codeshare relationships. Recent articles suggest the A380 No one can deny that travel by air is gers plus crew were able to safely evacuate will be perfect for capacity consolidation on the safest mode of transportation. However, the aircraft in 78 seconds during certification, high-density routes. Operators must also accidents and safety-related incidents can a sobering result when considering an emer- prepare for excess capacity, which can be and will happen. The A380 will be delivered gency and the need to activate an airline’s handled on preferential routes through code- with many built-in safety features that are emergency response organization. share agreements. Airlines involved in code- designed to protect the occupants of the Statistics identify that an airline can expect shares must consider several factors: aircraft in the event of an emergency. One up to 75 calls per passenger after the airline has Which airline has the overall responsibility feature is aircraft fire protection. notified the public that it has encountered an for the customer? Airbus has taken the lead to assure emergency event that may affect the safety of Which brand is at stake? the A380 has the best available fire pro- passengers on a specific flight. An airline’s ERO Whose values and professional response tection. The new state-of-the-art material may need to handle more than 65,000 enquiries will count? called Glare is now being used by Airbus regarding passengers potentially affected by an It is a daunting task when considering as a fire protection feature on the upper emergency situation in a multi-cultural environ- all of the elements of an ERO and the need fuselage external panels on the A380. The ment. In the case of multiple emergencies, the for an airline to be at its best when it is U.S. General Accounting Office reports that airline must be able to effectively manage the affected by an emergency situation. normal aircraft aluminum skin can withstand situation while still being able to operate its One thing will always remain clear in the penetration of a fire caused after an air- scheduled service. the case of an emergency; the final result craft accident for up to one minute. Testing History has validated the notion of a solid will depend on how well the airline is pre- has determined that Glare can withstand link between properly managed responses to pared to handle these serious and potentially the same fire for up to 15 minutes before an emergency and the protection of assets life-altering events. penetration occurs, thus providing for more and business reputation. The A380 requires occupant fire protection. Studies have been operators to consider new and improved ERO Enroute Separation conducted by government agencies regard- capabilities using a variety of technological solu- There have been concerns that the jet ing the need to review airport rescue and tions and practices. blast from the A380 engines could be dan- fire fighting equipment and the techniques Solutions for any airline to handle such gerous to ground vehicles and airport termi- capable of assisting passengers and crew of emergencies began with the analysis of the nal buildings. The A380 produces more wake an A380 in trouble. Despite all of the latest current state and capabilities of its ERO. The turbulence during take off and landing than safety features and techniques available, the overall analysis should consider five key points: existing aircraft types, requiring increased nature of probability suggests the Airbus 1. The airline’s commitment to provide the approach and departure spacing. In 2005, A380 will not be immune to accidents and highest level of professional response; the International Civil Aviation Organization other safety-related incidents that affect the 2. The airline’s ERO structure, ability and over- recommended separation criteria for the health and well being of passengers. all knowledge to minimize the impact and A380 should be greater than the Boeing The European Aviation and Safety consequences of an emergency; 747-400. A working group concluded that Agency along with the U.S. Federal Aviation 3. Effective executive controls that are in an aircraft trailing an A380 during approach Administration certified the A380 for up to place and have been operationally tested needs to maintain a separation of six nautical 853 passengers plus crew. All 853 passen- prior to an emergency; miles, eight nautical miles and 10 nautical

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During this year’s Airbus A380 World Tour 2007, the new super jumbo visited Taipei, China, after stops in Tokyo, Japan, and Sydney, Australia.

miles respectively for ICAO “heavy, medium long time. That gives the A380 two choices: divert from Memphis to Dallas, a quick bus and light” aircraft categories instead of the a routine termination at Memphis or a diver- trip for 550 people is not likely. traditional spacing of four nautical miles, five sion to some other airport. The A380 is well equipped to land in nautical miles and six nautical miles. Not every airport can accept the very low visibility. It will handle such things Air traffic congestion is rising to an A380. An aircraft of this size simply cannot as slippery runways as well as other trans- alarming level. The percentage of delayed land at any airport; the runway has to be port category aircraft. But when the unusual flights is increasing every year, making air approved for that aircraft type, and the entire happens and the only legal runway at the travel more frustrating and time consuming. airport surface has to be analyzed for clear- destination is suddenly unavailable, tactical Congestion and delays not only discourage ances, obstacles, load-bearing, etc. There decision making may result in large num- air travel but also reduce productivity and are several places the A380 will not be able bers of unhappy passengers. This will be a damage the health of national and world to taxi without having a possible wing clip rare occurrence, of course, perhaps slightly economies. The critics of the A380 may of another aircraft on the nearby runway, less rare at airports that experience disrup- argue that the increased separation distance for example. The air carrier has to have the tive winter storms that cause 30- to 60-min- will lead to reduced capacity of air traffic, diversion airport in its operations specifica- ute runway closures for snow removal, with which is already struggling due to capacity tions, which presumes that such things as little advance notice. In those scenarios, it constraints and worsened by the air naviga- ground handling and support equipment, will be crucial for the airline dispatcher to tion system’s inability to modernize and parking spot or gate, tug, fueling, and cater- negotiate in advance with air traffic control move toward a satellite-based navigation ing have been arranged in advance. facilities and airport operators to ensure system. Even if all that has been addressed, that the one piece of concrete that the A380 there is still the issue of what to do with is capable of using for landing is in a suit- Diversions 550 passengers who are dumped into an able condition when the aircraft arrives. a Airlines are often challenged by diver- airport and a crew that is out of duty sions, and in the instance of the A380, some time for the day. An airline will not have a situations call for unique planning and action. reserve crew at that alternate airport, so For example, an A380 inbound to Memphis, passengers are going to have to be put on Tennessee, is advised that there is another other flights, if available, or hotel rooms aircraft inbound with a possible gear problem. will have to be arranged on short notice. The troubled aircraft will be allowed to land And, if the aircraft diverts from Memphis, it John Popolizio, Edward Mandell, on runway 18C Memphis, which happens could very well end up in Dallas, Texas, or Rahul Srivastava and Giles O’Keeffe to be the only piece of concrete the A380 St. Louis, Missouri, or perhaps as far away are senior management consultants can use. The A380 crew discusses the issue as Los Angeles, California. When a Boeing for Sabre Airline Solutions®. They with the airline’s dispatcher, and two options 737 flight diverts from Chicago, Illinois, can be contacted at john.popolizio@ are suggested: the aircraft with the problem to Milwaukee, Wisconsin, the airline can sabre.com, edward.mandell@sabre. lands on runway 18C without incident or it arrange for busses to take passengers and com, [email protected] lands on runway 18C and parks there for a luggage back to Chicago. If an A380 has to and giles.o’[email protected].

ascend 11 industry Dreamliner SET FOR TAKEOFF

Some people may have thought Boeing’s best years as an aircraft trendsetter were long gone — but those people may have to think again.

By Phil Johnson | Ascend Staff

12 ascend Dreamliner

All photos courtesy of Boeing

uring the past several years, various aerospace analysts hinted that Boeing DCo.’s most prolific era as an innovator and trailblazer in commercial aircraft may have been behind it — that the halcyon days of creativity and imagination that brought the world’s airlines the Boeing 707, 747, 777 and other popular models were long past. But if that were ever really the case, it’s now time to make way for a throwback to the days of yore — because Boeing’s latest and perhaps most innovative commercial aircraft creation is arriving in the form of the Boeing 787 Dreamliner. And even though Boeing won’t make its first production 787 delivery until late 2008, it is taking orders for the new and unique aircraft at a pace that outdistances any sales achievements the venerable air-industry manufacturer has ever accrued (and that’s saying a lot). How did Boeing manage to gain this success when it had essentially appeared to lose most of the battles to its mega-European-consortium competitor Airbus in recent years? And is there really a collection of Boeing 787 features that are, at bottom line, all that special? The answer to the second question is clearly yes. And the answer to the first question might be appropriately summed up in a hypothesis revolving around the fact that Boeing refused to take its second-place status lying down — even amid a succession of sudden changes at the top as well as a corporate headquarters shift to Chicago, Illinois, from the company’s long-time operational base in Seattle, Washington, where, incidentally, most of Boeing’s manufacturing and many of its marketing operations remain. What the 787 is in the process of doing for Boeing may be akin to the mythical phoenix rising from its charred remains — although it may be effectively argued that Boeing as a company never actually sank quite that far. The Boeing 787 will be the first commercial airliner to comprise as much as 50 percent

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composite materials, the significance of which than building the plane piece by piece from are intended to help passengers more easily may be starting to sink in for the world’s the ground up. cope with the flying experience. airlines, including the many carriers that have Among the advantages Boeing will gain Further in-flight passenger comfort is already placed orders for the 787 in addition in this “modular” manufacturing approach enhanced through installation of a sophisticated to many more airlines that are still seriously will be the capability to build each 787 in software/hardware-control system Boeing calls considering the aircraft. just three days’ worth of final assembly in “vertical gust suppression” that will automati- One of the key things that composites contrast to the 10 to 14 days or more that cally adjust outside aircraft surfaces to better achieve — as opposed to their primary ante- are normally required for commercial aircraft counteract the effects of any turbulence that cedent, aluminum — is to save potentially of comparable size. may be encountered during a flight. gargantuan percentages of weight. The less With the advent of the Boeing 787, Environmentally speaking, the Boeing 787 an aircraft weighs, the farther it can fly on passengers figure to be in for the air-travel is designed to be by far the quietest aircraft of a given quantity of fuel, which affords the ride of their lives. They will be treated to its size (or even considerably smaller). From the Boeing 787 another couple of advantages: comforts and amenities they’ve never previ- quiet-operational efficiencies of its dual engines to its highly fuel-efficient aerodynamic and other design characteristics, the 787 is intended to be the most advanced commercial aircraft ever to take to the air. Along with lower fuel usage, the 787 is designed specifically for lower carbon-dioxide and other potentially harmful emissions, with a lessened drag coefficient and lighter components featured throughout the aircraft. Boeing states that crew-training procedures to achieve full competency in operating the 787 will encompass just five days beyond the normal training time for pilots and copilots to fully qualify to fly and navigate the Boeing 777. And 787 maintenance — particularly due to the aircraft’s larger composite parts, as opposed to many smaller metallic parts — promises to be simplified and streamlined and therefore less expensive. Depending on its specific configuration, the Boeing 787 is designed to quietly and efficiently fly routes as long as 8,500 nautical miles — a distance that is expected to open up a number of new nonstop-flight possibilities among the world’s most-desired destinations for mid-size On July 8, nearly 15,000 Boeing employees, airline customers, supplier partners and govern- commercial aircraft. ment officials attended a one-hour ceremony in Everett, Washington, to celebrate the unveil- And that brings up another important ing of the Boeing 787 Dreamliner. quesion: Exactly where does the 787 fit among Boeing’s current coterie of aircraft models? The 787 will basically be a replacement for the comparably sized 767, which remains in much greater range and the promise of ously dreamed of (but that shouldn’t come production but is likely to fade from the Boeing potentially huge savings on fuel costs. as a total surprise — after all, this is the manufacturing dossier once 787 assembly ramps And make no mistake: The unprec- “Dreamliner”). up to full production. edented use of composites in the 787 does From the largest overhead-storage In other words, the 787 is to be Boeing’s not come at the expense of strength, and bins ever designed — big enough to fit four new entry in the “mid-size,” dual-aisle class meticulous engineering calculations along roller-type carry-on bags in each bin — to the of aircraft that carry about 210 to as many as with direct measurements indicate to Boeing largest windows on a commercial aircraft, to 330 passengers, depending on precise aircraft designers that the composite components “mood” lighting in the passenger cabin that configuration (the 787 will be offered in at least are in many ways stronger than their metal- will help ease the passage of time aboard three and probably four or more distinctly differ- lic-component predecessors. flights to intercontinental destinations, the ent configurations). Furthermore, manufacturing opera- aircraft is set up to help each airline that flies Carrying a greater number of passengers tions in assembling the Boeing 787 will be the 787 utterly delight its passengers. than the 787 is the Boeing 747, which has much more “modular” in nature than for any A window-seat passenger will be able achieved distinguished decades of service as the previous commercial aircraft. to selectively dim or completely close the first globally successful “jumbo” jetliner, defined For example, the 787’s final-assem- window by pressing a button located directly as capable of carrying 400-plus passengers. bly process that will occur in Everett, beneath the window to “feather” the amount Also larger than the 787 is the wide-body Washington, will primarily involve putting of light the passenger desires to be stream- Boeing 777, which is designed to carry between together modules (in other words, entire ing in from the outside. about 300 and 370 passengers, particularly on chunks of the aircraft) that themselves have Also, finely filtered interior air and long-haul routes. been manufactured and assembled in a pressurization at an altitude equivalent of And smaller than the 787 is Boeing’s number of locations around the world, rather 6,000 feet instead of the common 8,000 feet workhorse 737, the narrow-body, single-aisle

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aircraft that is an old reliable fixture at a very large percentage of the world’s airlines, and is vari- ously configured to carry anywhere from about 100 to perhaps 160 or more passengers. Among all of these aircraft models, the Boeing 787 is expected to stand out prominently as an environmentally efficient, passenger-pleasing, highly comfortable, mid-size long-haul aircraft that will connect numerous attractive worldwide destinations and become familiar to a multitude of people around the globe — perhaps more so than any previous commercial aircraft. Airlines that have committed to orders for the Boeing 787 — and total orders have already

Highlight

With the advent of the Boeing 787, passengers figure to be in for the air-travel Broadcast live via satellite worldwide and webcast, the event introducing the Boeing 787 ride of their lives. Dreamliner potentially reached more than 100 million or more viewers. They will be treated to comforts and amenities they’ve never previously dreamed of ...

reached more than 700 aircraft, even though first production delivery is still close to a year away — include All Nippon Airways, Qantas Airways, Virgin Atlantic, Singapore Airlines, Korean Air, Northwest Airlines, Continental Airlines, Air New Zealand and Air Canada, among a large and continually growing number of others. Boeing, in short, expects the 787 to set a standard of excellence in all comparative aspects against which other aircraft models — its own as well as competitors’ aircraft — will be mea- sured for years to come. a

The Boeing 787 is an all-new, technologically advanced and environmentally progressive airplane, scheduled to enter passenger service in 2008 with Japan’s All Nippon Airways. Phil Johnson can be contacted at [email protected].

ascend 15 Photo by shutterstock.com or airlines, airports, rail systems, hotels the tournament, according Mainz University, part to of the US$5.18 billion a study by F industry Millions of sports enthusiasts travel to all corners of the world each year to play spectatorthe role in a variety of sporting events. and a variety of other travel-related companies, the rush in traffic may require a lotpreparation, but of they may result in sizeable pay offs. mittee, confirmed the event was a financial success. Fans spent US$3.82 billion during

One year following the soccer tourna- The hotel and catering industry antici- Throughout preparations, German Preparing for the month-long interna-

Lynne Ascend Clark | Staff Lynne ast year, an estimated 3 million foreign and national visitors traveled between June 3 and July 9 on Germany’s high- By

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L ment’s opening game, Franz Beckenbauer, president of the World Cup organizing com- pated additional earnings of million. An estimated 60,000 jobs were creat- about US$650 ed nationwide, with 20,000 of those remaining after the tournament ended. authorities were upbeat about the economic benefits of the tournament. After five of stagnation, the country expected a 1.6 per- years cent increase in its gross domestic product in 2006, with analysts saying a half-percent of that would be because of the World Cup. tional sporting event cost of took US$7.7 trillion. Counted six in that cost yearswere expanded at and a new and roadways between around match US$900 cities, million multi-level central train station as well in Berlin. as a ways, railways and airways to in watch their at quest least Cup tournament matches. one Most experienced of the food plentiful and hotels, clean travel, smooth 2006 World and drinks.

travel and tourism industries. travel and tourism significant revenue for the significant revenue tournaments can drive tournaments can Olympic Games and World Cup Cup and World Olympic Games Sporting events such as the Sporting events

Soars Sport Tourism Tourism Sport Photo by shutterstock.com 17 ascend Olympic a [email protected]. Lynne Clark Lynne can be contacted at Barcelona, Spain, is the best example Experts studying the economics of “Any benefits must be seen in the around US$27 billionGames. for the 2010 Asian explo- the and renewal urban the illustrate to siveincrease in number of tourists since the Olympic Games in 1992: 1,727,610 touristsin 1991; 2,455,249 in 1993 and 3,149,002 in 2000. however, out, point to quick are tourism sport these and — costs offset must benefits that are not limited to financial costs,to “Economicaccording and Tourism Olympic Games,” which was published Aspects in a of the 2005 issue of Tourism Review and written by Limburgs Universitair Centrum, Belgium, professor Patrick De Groote. context of socio-cultural and environmental impacts involved,” Dr. De Groote said. “If sport tourism is gain developed without regard to for its there economic is other a very real impacts, danger that its true costs will greatly exceed its economic value. But well-planned and organized sport tourism, such as Olympic and World Cup events, can be a roaring success.”

US$40 million in preparation for the 2008 industry Opportunities China, expects to invest nearly Most Games tend to involve major Beyond the Olympics, Shanghai, The hefty sponsorship fee covered GE is just one of a pack of global Games. A good portion of the investment will go toward supporting travel and transportation needs such as building a new airport terminal and subway system. Beijing, Infrastructure infrastructure investments. For China example, is expected to spend at least US$400 roads, airports, building 2010 through billion water systems and projects other for public-works its expects 1.3 to spend billion almost US$40 billion people. stadiums, new by on Games Summer 2008 the Beijing subways and a new airport terminal. That is more than three times Athens’ estimated US$12 billion infrastructure tab for the 2004 Olympics. China, is expected to billion to prepare spendfor the 2010 World aboutExpo. US$41 And China’s Guangzhou plans to spend four Olympic Games GE through was particularly 2012, interested in playing but a role in Beijing. The Fairfield, conglomerate Connecticut, sees the Games as an opportunity to showcase its technology and products — from water filtration securityto lighting systems and — in growing economy. China’s big, rapidly giants — some Olympic sponsors and some not — hoping tobuilding boom to bolster business in tapChina. an Olympics-relatedSiemens AG and United Technologies Corp. to chance great a as Olympics the view also forge new relationships with key Chinese business and government figures. Growth ponsorships Promote S Tourism Relationships Significant to the international travel When General Electric Co. paid near- Like game participants, corporations In the 2000 Sydney Olympics, Qantas Opportunities exist for governments Sport tourism is a multi-billion dollar There is much academic debate on how how on debate academic much is There orporate industry, 1.3 million foreign World visitors Cup spent more than US$1.3 billion. to the the World Cup is estimated to pump into the country’s economy through 2008. That generate will US$1.69 billion in taxes, the concluded. study C Business Sport and ly US$200 million in Olympic 2003 sponsor to for the first become time, an it hadeven bigger angoal in mind: the 2008 Summer Games in Beijing. must prepare for years to take advantage of their multi-million dollar sponsorships. planners organization with closely work must They developing a partnership that beneficial. is mutually Airways became the “official airline” Gamesof the and built brand slogan awareness “The withSpirit of its Australia.” fused The slogan seamlessly with the games’ “Share slogan, the Spirit.” and the private sector to seize the extraordinary opportunity afforded by “mega events” occurring throughout the world. Onecorpo- through is opportunities obvious most of the rate sponsorships. business, one of the fastest-growing of areas the US$4.5 trillion global travel and ism tour- industries. A study conducted by Sports Business Group, LTD indicates and that tourism travel is expected 10 to percent be of more product than the by 2011. global The economies grossregions and of even countries around the cities, world domestic are increasingly reliant on the visiting golfer and skier or the traveling football, rugby cricket or supporter. In some countries, sport can account for as much as 25 percent of all sport The reveals. study the receipts, tourism tourist is at the heart of strategies that spend tens of millions of spent Australia Cup. World or Games Olympic dollars on attracting an US$1.7 billion of government money on 2000 the Olympics and reaped a 10-year of legacy sport tourism that makes US$4.3 up billion part in of added the currency the Games. bought These flagship events by help build new transport systems, improve airports and clean up cities — all because the sport tourist is coming to town. well host cities fare following completion of a hallmark sporting event. But even academics agree tourism is a big winner, no matter where the event takes place. industry

Analyze This

Competitive intelligence, robust tools and knowledgeable analysts are three necessary components successful airlines should use in effective decision making.

By Khaled Al-Eisawi | Ascend Contributor

uring the last two decades, competitive tions and civil aviation authorities collect schedule- party providers developed tools to help airlines data has become a key component of based statistics such as available seat kilometers understand and track competitive fares. These Dthe decision-making process in the airline and make them available to their subscribers or tools, such as the Sabre® AirPrice™ fares man- industry. Many airlines developed sophisticated constituents. agement system, enable analysts to understand processes to make both tactical and strategic deci- Another component of the competitive their own airline’s position with respect to the sions based on objective assessments of the product offering is fares. Many airlines that competition and take appropriate proactive and competitive landscape. With the rise of low-cost distribute their products through global distribu- reactive actions. carriers and alternative distribution channels, vis- tion systems file their fares with the Airline Tariff On the demand side, marketing information ibility into the competitive landscape has changed Publishing Company, or ATPCO. Participating data tapes, or MIDT, stood out as one of the most significantly, and the traditional competitive data airlines can subscribe to receive competitive fare comprehensive and valuable airline data sources and tools are no longer sufficient. What are these information. Airline fares tend to be quite com- for competitive intelligence. MIDT contains booking traditional competitive data and tools? And what are plicated as a result of the volume of fares that transactions made by travel agencies connected to airlines doing to overcome the new challenges? can be filed by an airline for a particular market the major GDSs. It has been marketed since 1987 Airline competitive data can be catego- and the numerous fare rules. As a result, third- and has gained tremendous popularity since then. rized into two categories: supply and demand. Competitive supply data informs airlines about the products their competitors offer and at what price. Hub Analysis Based on Schedule Information One common example is schedule data, which includes information such as destinations, flight frequencies and timings, and equipment types. 8 This information is relatively easy to acquire and is available from several suppliers. Airlines and third- 6 party providers have developed tools to analyze and report on competitive schedule information. 4 Analyses that prove important from a competitive perspective include: Competitors’ schedule strengths and weak- 2 nesses, Network and hub structure, 0 Block times, Passenger misconnections, -2

Codeshares. + Arrivals - Departures In addition to airlines, several aviation entities such as airports, civil aviation authorities and -4 tourism agencies, have developed an increased -6 interest in airline schedule data and the tools available to analyze these schedules.

Another way to look at competitive data is 0500 0530 0600 0630 0700 0730 0800 0830 0900 0930 1000 1030 1100 1130 1200 1230 1300 1330 1400 1430 1500 1530 1600 1630 1700 1730 1800 1830 1900 1930 2000 2030 2100 2130 2200 2230 2300 2330 whether it is historical or forward looking. Schedule South North information is primarily forward looking. Historical schedule information tends to be reported by Airline schedule information can be used to analyze the hub structure of a carrier and depict carriers at a high level along with their traffic and directional banks and how well they connect. financial statistics. In addition, some airline associa-

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Different flavors of the data are available including historical and forward-looking data as well as daily, Airline Fare Management Process weekly and monthly data. Forward-looking data includes bookings made in a historical month for travel later in that month or subsequent months. It can be invaluable in understanding booking curves and the impact of schedule and fare changes on bookings made for future travel. Post-departure data includes bookings flown in a particular month. As with many other airline data sources, several third-party providers developed tools to cleanse MIDT and provide easy-to-understand, customizable reports. The raw booking data provided by GDSs is not quite useable since it contains the entire booking history. Typically, raw bookings are cleansed from duplicates and cancellations. Auxiliary data, such as schedule information, is merged in, the segment streams are put together and trip-break rules are applied to create origin- and-destination data. Trip-break rules can vary by provider, but some of the more common ones include: Breaking the itinerary at any station with a layover greater than a particular threshold (The threshold can be different between domestic and international connections.), Breaking round-trip itineraries or itineraries with revisited stations, Breaking circuitous routes. MIDT does not contain fares or personal information. Reporting tools, such as the Sabre® WiseVision™ Data Analysis Suite, enable analysts to dissect the data and generate reports to facili- Many airlines that distribute their products through global distribution systems file their fares tate decision making. with the Airline Tariff Publishing Company, or ATPCO. Participating airlines can subscribe to MIDT has traditionally been used by two receive competitive fare information. functional areas in an airline: 1. Sales and marketing. The primary value of MIDT in this area is its ability to provide detailed insight into the performance of travel agencies. In particular, an airline can see how much sales a Estimating true O&D market sizes, to be an effective method used to collect schedule travel agency is producing for them versus their Decomposing traffic on flight legs into the and fare data for carriers that are invisible in other data competition. The airline’s share gap can also be O&Ds it belongs to. sources. Such data is collected on a forward-looking contrasted against the quality of its product and Some of the limitations of MIDT data include: basis; however, if collected continuously, a historical that of its competitors. All of this information is Mostly, but not totally, global, MIDT data database can be built easily. Algorithms have also extremely useful for setting sales targets and captures bookings made by travel agents con- been developed to analyze the Web-scraped data refining incentives and overrides. The sales force nected to the major GDSs. The penetration and assist with pricing and revenue management. in the field can also use this information to focus of major GDSs in some areas of the world is For example, an airline can use current data scraped its effort on underperforming agencies and build- not very high; therefore, MIDT data is missing from its competitors’ Web sites to decide whether to ing new relationships with key agencies. significant booking volumes from these coun- make inventory modifications based on competitors’ 2. Network planning. The value of MIDT for net- tries. available fares. Specifically, business rules can be work planning stems from the fact that it is Carrier penetration rates are different depend- defined to determine conditions for matching fares a global O&D source of demand data. MIDT ing on the carrier distribution strategy. for a number of seats, undercut the competition for contains a lot of details including departure and Many low-cost carriers are missing. a number of seats, or do nothing. The Sabre Airline arrival times and dates, flight numbers, con- With carriers promoting direct distribution Solutions® consulting practice pioneered the applica- necting points, connecting times, and segment channels, there has been a downward drift in tion of such techniques with some of its customers carriers. Some of the applications of MIDT in this the percentage of traffic booked by agencies and drove up to 30 percent improvement in revenue field include: and hence visible in MIDT. per available seat kilometer in the target markets. Understanding time-of-day and day-of-week Regional representation varies widely depend- On the other hand, demand poses two chal- preferences, ing on the market penetration by GDSs. lenges: one with traffic and the other with average Analyzing passenger preference for type of The airline industry has been creative in fares. Total traffic, including direct and GDS book- service (nonstop versus connecting service, overcoming the new challenges in the availability ings, can be estimated by reconciling GDS bookings equipment type), and comprehensiveness of competitive data. Gaining against industry data sources. This reconciliation can Analyzing service patterns and schedule con- visibility into the supply side of low-cost carriers and be used to estimate MIDT penetration rates and sub- nectivity in an O&D by carrier, online distribution is relatively easier than the demand sequently apply those penetration rates at the O&D Estimating market share by carrier, side. On the supply side, Web scraping has proven level to estimate O&D traffic.

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Industry data sources are numerous Competitive average fares are even “rational and steady-state” conditions. While and come at different aggregation levels. more challenging than traffic estimates but such conditions are hard to define, many agree Very few of these data sources are at the are as valuable for market and network that the airline environment is so complex O&D level. The main premise in reconciling studies. Similar to MIDT, several GDSs offer and dynamic and, hence, presents significant MIDT data with industry data sources to aggregate airline ticket data with itinerary challenges to the accuracy of such models. estimate penetration rates is to build a hier- details and ticket value information. The data The interactions and potential confounding archy where the most detailed data sources can be processed into O&D itineraries and effects between demand, fares and capacities are used first. For example, segment statis- can be a valuable source for competitive aver- in addition to the demographic, economic and tics are more detailed than airport statistics age fares by market and carrier. However, geopolitical factors make it quite challenging to and should be used first when available. A ticket coupon number, or TCN, data has estimate intrinsic demand. measurement mechanism has to be used the same limitations as MIDT in terms of With all of these challenges, the airline to compare aggregate statistics based on market penetration and may have additional industry continues to be creative and analyti- the estimated data to the reported industry challenges with the invisibility of private fares. cal. Data, tools and knowledgeable analysts data at multiple levels. For instance, carrier Nonetheless, carriers that are well represented are the three ingredients to successful deci- revenue passenger miles statistics based in MIDT data will have good sample sizes in sion making. Competitive data adds a lot of on estimated data can be compared to car- TCN data that allow for robust estimates of value, and the decision makers and analysts rier-reported statistics. Similarly, estimated average fares. Yield curves (average yield ver- who capitalize on such intelligence will always airport enplanements can be compared to sus distance) can be constructed at different be ahead. Airlines will continue to find new airport enplanements reported by airports levels to fill in the gaps. ways to collect competitive information and or civil aviation authorities. These compari- Several attempts have been made to develop techniques to best utilize such infor- sons provide measures of accuracy of the take a totally different approach for global mation. a estimated data and can be used to refine the demand estimation. One of these approaches adjustment process. Keeping in mind that uses gravity models to link passenger demand Khaled Al-Eisawi is director of the ultimate estimate is at the O&D level and to demographic and economic statistics. Such consulting operations for Sabre with very little actual O&D data, it is hard models can be relatively accurate at estimat- Airline Solutions. He can be contacted to have a direct measure of accuracy of the ing propensity to travel under theoretically at [email protected]. O&D demand estimates. The adjustment methodology described pertains to a logical and systematic way of “truing up” MIDT data. The question that Example of Industry Data Sources presents itself is what do airlines do for low- cost carriers that are completely (or almost completely) absent from MIDT? The key to estimating their traffic is to know their O&D US DOT DB1B schedules — specifically the markets they serve and the capacities they offer in these markets. Forecasting models can be used to Segment, Carrier US DOT T100 IATA ODS construct an O&D network for these carriers. Australia While most LCCs operate simple point-to- BTRE QA Segment UK CCA point networks, some carry a significant Schedules amount of connecting traffic, albeit almost Brazil DAC entirely on their metal. Aggregate traffic data Airport, Carrier ACI for these carriers can be collected and rec- onciled with other aggregate industry traffic data to estimate traffic flow on the carrier’s Airport Web Scraping built itineraries. A quality of service index- scoring methodology can be used to allocate Carrier Financial the traffic in a way that puts more traffic on Reports nonstops compared to the connecting itineraries. The QSI factors driving this allocation Country can be calibrated and tweaked to achieve the highest possible accuracy. Some airlines are also collaborating on Regional Industry Organizations their data needs and establishing community Publications models for sharing data. One of these models is to pool internal O&D demand data of Global the member carriers (after removing all sensitive information) and share the combined Free Purchased data among those carriers. Airlines’ internal data is generally quite accurate and, if combined with other industry data, can contribute Airline industry data comes at different levels of aggregation. For example, the U.S. Department of Transportation DB1 is at the origin-and-destination level while the significantly to the improved accuracy of Australia BTRE data is at the segment level. Some industry data sources are available demand estimates. Sabre Airline Solutions free of charge, while others must be purchased. has established such data bureaus with several carriers in the Middle East.

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Bouncing Back

While airlines can’t control most delays caused by irregular operations, they can certainly recover with minimized impact using the right people, processes and technology.

By Rich Coskey | Ascend Contributor

irlines in the United States are finan- cially squeezed on both sides of Athe profit and loss statement. Unit Types of Flight Delays revenue is difficult to increase given competition and the addition of capacity, and controllable costs — such as wages, rents and what remains of passenger amenities On time 73.90% — have been attacked and reduced. And yet, with just a few quarters of sporadic industry Air carrier delay 6.79% profitability, pressure to increase wages after several rounds of cuts is mounting. Weather delay 0.99% As a result, the cost of airline irregular operations, or IROPs, has come under National aviation system greater scrutiny recently because of con- delay 7.98% tinued pressure on carrier profitability (on both the revenue and cost sides), and it is Security delay 0.08% one of the last operational areas airlines can directly or indirectly influence. Aircraft arriving late 7.90% A Look at Irregular Operations Cancelled 2.14% One of the remaining areas where airlines can achieve further cost savings is in the management and mitigation of IROPs, Diverted 0.22% which comprise any flight that doesn’t operate according to the schedule, resulting in delays, cancellations and/or diversions. The U.S. Bureau of Transportation Statistics compiles monthly figures, which are reported by U.S. major carriers, about There are several causes for delays to an airlines’s schedule; however, only a quarter the on-time performance of their domestic of irregular operations are within its control. operations. BTS defines a delay as a flight arriving more than 15 minutes late. Cancellations National aviation system — Non-extreme A fraction less than 6.8 percent of all and diversions are considered a type of weather, airport operations, heavy traffic vol- domestic flights were delayed for circum- delay. The BTS assigns delayed flights into ume, air traffic control; stances under the carriers’ control, equating seven categories that airlines can use to Security — Terminal evacuations, aircraft to about a quarter of all delayed flights. classify their delays: deplaning/reboarding, and instances where Airlines also have some influence over delays Air carrier — Delays and cancellations due to security lines exceed 29 minutes; caused by the national aviation system (e.g., circumstances within the airline’s control (e.g. Aircraft arriving late — The follow-on effect of a traffic volumes and flight timing). Of the 8 maintenance or crew problems, aircraft clean- late-arriving aircraft; percent in this category, approximately two- ing, baggage loading, fueling, etc.); Cancellations — Flights cancelled for other thirds were due to weather, so non-weather- Weather — Extreme weather conditions, such reasons; delayed flights constituted 2.9 percent of as blizzards and tornadoes, for which corrective Diversions — Flights diverted for other rea- all flights. As a result, during the past year, action cannot be taken; sons. U.S. carriers have had direct or indirect influ-

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detailed to address the unforeseeable. Lines of authority and decision making must be clearly Flight Volumes Versus On-Time Arrivals defined and followed. IROPs planning and recovery is the ultimate time-sensitive undertaking — the right people must understand and implement the process. One broad finding that Sabre Airline Solutions has made with its clients is that delegating IROPs handling to SOC managers results in faster and smoother recovery. Policy — During IROPs, airlines can reconstitute their schedules for different parameters, for example, to minimize revenue loss, minimize passenger misconnects or maximize completion factor. Each airline’s IROPs recovery objective must be clearly defined and planned around. Not every airline has the same objective. 2002 2003 2004 2005 2006 2007 People — Two major constituencies are affected during IROPs: passengers and employees. On time Getting passengers to the hub is ineffectual if a blizzard keeps employees from getting to the airport. Further, knowing where each employee is, As flight volumes have increased, the number of on-time arrivals has fallen and especially eligible flight crew, is critical to recover continues to fall. the operation. Rapid and accurate communications — to passengers to ease their disruption ence on a little more than a third of delayed airline’s operations. But given the estimated financial and to employees to position them for returning flights. magnitude of the problem, it is clear that nearly every to full operations — are essential. Further, the trend is not encouraging. airline can find thousands, or millions, of dollars in Technology — It’s merely a tool to run an Since 2002, as flight volumes have increased, annual savings with investment in people, processes airline’s operations, but in the hands of dedi- on-time performance has declined by 11 per- and technology to mitigate IROPs. Every airline can cated and well-trained staff, it is the tool that centage points. accommodate a certain level of schedule deviation. helps run operations smoothly on a blue-sky day Airline managers, staff and crew deal with myriad and becomes fundamental to recovery during The Cost of Delays unplanned or unexpected events on any given day IROPs. IROPs recovery comprises three dimen- Delays are obviously not just operation- of operation. The smooth operation of a carrier antici- sions: aircraft, crew and passenger reaccommo- al issues. There are impacts to passengers pates certain levels of weather/ATC, maintenance, dation. Even for a small carrier, the mathematical and employees. The overall impact of IROPs, crew or technology events that can be managed complexity of solving these three dimensions however, is to the bottom line. In 2004, Sabre without major disruption to the overall schedule. simultaneously and quasi-optimally often calls Airline Solutions® estimated that the weighted IROPs vary in breadth, severity and duration for a technological solution. Factor in crew and average direct operating cost of 1 minute of — from a thunderstorm cell passing over a hub or passenger notification, maintenance scheduling, delay was US$40. Factoring in the doubling focus city to an extreme weather event such as an effective use of ACARS to send and receive of the cost of jet fuel since 2004 and adding airport-closing blizzard or even suddenly implemented data, and an integrated suite of applications indirect costs, the total cost of a minute delay and ever more rigorous and comprehensive secu- makes sense for many carriers. can be estimated at approximately US$100. rity procedures. Airlines are generally well equipped IROPs recovery is the extreme and most In addition to tracking the number and to manage IROPs up to a certain threshold. But challenging form of airline operational manage- causes of delayed flights, the BTS tracks total because not every event can be anticipated, let alone ment. The same people, plans, procedures, policies delay minutes. The minutes of “air carrier” adequately planned for, there is a point at which and technologies that facilitate a “typical” day of plus the proportion of non-weather-related, standard operating procedures begin to break down. flying become critical during IROPs. In addition, or national aviation system, delays totaled However, given the operational and financial impact given the potential for saving millions of dollars 36.5 million from May 2006 to April 2007. of IROPs, airlines have strong incentives to push that annually, every airline should examine, and continu- Using the round figure of US$100 per minute threshold out as far as possible. ally re-examine, its methods for anticipating, endur- of delay, domestic IROPs under the direct Some areas where Sabre Airline Solutions ing and recovering from IROPs. The savings from or indirect influence of U.S. carriers totaled has assisted clients in mitigating the operational and redeveloping the United States’ aviation infrastruc- approximately US$3.65 billion of cost/lost financial impact of IROPs include: ture may be a decade or more away and can be revenue for the industry during the last year. Planning — Tighter turn times lead to more air- only partially motivated by airlines, but there are Many delays cause extra down-line delays. craft flying time but reduce the buffer for IROPs. many actions carriers can take beginning immedi- According to the BTS, flights delayed by up- Schedules are planned to maximize revenue but ately to ensure the impact and cost of their next line causes comprise 7.9 percent of all delays, need to be robust enough to allow for IROPs IROPs is minimized. a accounting for another 35.7 million minutes. recovery. Planning encompasses other dimen- So each delay prevented up line may elimi- sions, such as adopting a fleet with common-rating nate further delays and costs, with industry flight decks and electronic flight bags to maximize total potential savings in the hundreds of flexibility. millions or billions of dollars. Procedures — The design and proper functioning of an airline’s system operations control cen- Rich Coskey is senior management Dealing with Irregular Operations ter is critical to IROPs management and recov- consultant for Sabre Airline Obviously, not every minute of directly or ery. Multiple contingency plans must be created Solutions. He can be contacted indirectly controllable delay can be eliminated from an for anticipated events, and processes must be at [email protected].

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The Big Three: Saving Money, Making Money and Keeping Customers

Strategic marketing, advanced technology, superior processes and world-class service enable airlines to concurrently cut costs, generate revenue and retain customers.

By Sara Garrison and Gordon Locke | Ascend Contributors

hich is most important to an air- banks and other financial services institu- natural gas utility company makes this line: reducing costs, increasing tions is correcting a transaction — an “as- point. Six customer service systems in W revenues or enhancing the cus- of adjustment” when checks are wrongly six states in six regulatory environments tomer experience? The answer, of course, encoded or returned or a “charge back” were prohibitively expensive to maintain, is all three — and all at the same time. when credit card purchases are reversed. and their complexity and age prevented That’s the conundrum most airlines con- Financial institutions in the United States enhancements from being applied quickly sider today as they evaluate their brand, have invested significantly in automated and uniformly across the customer base. business model, competitive landscape systems during the past decade to speed The utility company spent two-and-a-half and critical path forward. There’s subtlety these operations. They have streamlined years and US$30 million to fix this prob- and complexity to the answer because and re-engineered the business processes lem. And, as a result, it realized a two-year underlying the reduced costs, increased through regulatory and procedural chang- payback in lower customer service costs, revenues and enhanced customer experi- es, and they have touted enhanced capa- which far exceeded business-case projec- ence are new marketing strategies, infor- bilities, such as increased customer self tions. Not only that, but switching to a mation technologies and business process service and faster transaction speed to customer self-service model, previously engineering. resolution, to their corporate and retail a high-risk project estimated at multiple Earlier this year, Sabre Airline customers. They’ve realized huge cost millions of dollars, is now estimated at Solutions® surveyed airline executives savings, and those savings, as well as the under a million dollars because of the fully from around the world. When asked to intangible benefits of increased customer rationalized new technology environment. rate the top issues for their airline — those satisfaction, have accrued year after year. As more is known about customers having the greatest impact from a cost, In fact, automation of the as-of adjust- and their individual patterns of activity, a revenue or operational standpoint — they ments and charge-back processes has customer-centric user experience can be responded that fuel costs, government been the source of many millions — some crafted. For example, the number of flight regulations and customer loyalty were claim more than a billion — dollars in options shown to a particular frequent trav- their chief concerns. The same executives industry savings. eler on a Web page can be reduced based were asked to rate the top three signifi- Extending the analogy to airlines, on past travel preferences. In addition, cant impediments to new revenue growth, re-accommodation for missing a flight, special discounts can be offered as incen- and most responded that costs associated rebooking a cancelled flight or changing an tives, reducing the “noise” of information with fuel, labor, airport and distribution itinerary is similar to “correcting a trans- overload to the customer, increasing the were their main stumbling blocks. action.” How can the re-accommodation likelihood of purchase and improving the Not surprisingly, these results con- process be further automated? Possibly look-to-book ratio for the airline’s Web firm that controlling costs in general is the taking advantage of ubiquitous mobile site. This also presents interesting up-sell- overriding concern for airlines. In recent telephone platforms to contact customers ing and cross-selling opportunities beyond years, many other industries — such as and driving down costs while driving up seat upgrades and other airline products, banking, consumer electronics, insurance, customer loyalty is the answer. In some such as selling swimwear and beach telecommunications and utilities — like- areas, notably Scandinavian countries, towels to summer vacationers heading to wise have faced high cost pressures, mobile devices are used for effecting pay- Florida. This is the worldwide Amazon.com and the most successful companies have ments, suggesting that the “mobile play” model many people know and enjoy, with pursued cost reduction, revenue genera- could be more fully integrated into the careful recordkeeping of browsing and tion and customer loyalty programs con- complete ticketing process. buying activities, and predictive statistics currently. Examples from other industries In addition to automating labor- and rules engines to suggest additional provide insight into opportunities for such intensive processes, rationalizing the related or similar products. simultaneous action. automation environment may have both Returning to financial institutions, One of the most costly operations cost savings and customer satisfaction they’ve learned that mining customer data for check and credit card processing in benefits. A recent example from a regional yields revenue generating “gold” as, for

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example, analytics provide cash manage- through strategic marketing, advanced tech- cant investment but return that investment ment for corporations, and monitoring nology and applied business processes. quickly and completely. Airlines can emu- intra-day activity is offered as a value- In looking to other industries that late these other industries and can expect added service. In this way, recomposing have faced the same challenges as airlines similar results. a data becomes value generating. As the — controlling costs, raising revenues and data is already available as part of the building customer loyalty — there are sev- Sara Garrison is senior vice president of business process, it is considered a low- eral successful approaches, such as sophis- product and solutions development and cost/no-cost revenue opportunity. And ticated customer analysis, technology ratio- Gordon Locke is vice president of airline given their enormous data repositories, nalization and modernization, and back-office solutions and distribution marketing airlines have similar opportunities. process automation. Some of these for Sabre Airline Solutions®. They can Airlines can take several steps to cut approaches can be pursued without signifi- be contacted at sara.garrison@sabre. costs, realize revenue and delight customers cant investment, and others require signifi- com and [email protected].

MARKETING TECHNOLOGY BUSINESS PROCESSES Employ enhanced insights into cus- Invest in CRM toolkits and enable Statistical analysis and flexible, exter- tomer attributes and behaviors at all streamlined access to detailed cus- nalized business rules ensure the right touch points. tomer data. offers at the right time.

Individualize offers to customers and Present a “basket of business Rationalizing the automation environ- customer segments. services” with the opportunity to ment to a common set of processes personalize and customize services that implement business services and dynamically. drives cost savings.

Reduce costs and increase agility in Utility services within a service-ori- Shared technical service across airline responding to market opportunities. ented architecture provide “build-one- processes enable staff to focus on time, reuse-many-times” cost savings key differentiators rather than generic that are startling. Integrate disparate functions. data sources through an enterprise services bus, and stop writing specialized interfaces.

Offer mobile solutions for sales and Extend reach through mobile plat - It isn’t just about sending information service. forms that automatically adapt presen- via text messages, but using mobile tation to devices. devices to reach customers wherever they are and whenever you want. Con- sider generating advertising revenue from compatible partners.

Increase customer self service. Integrate with portal platforms to pro- Costs of the service desk are huge (Customers like self-service capabili- vide robust capabilities. Design goal- and are reduced by self service as ties, especially if they can get bonus oriented, task-driven user experiences. customers maintain their own data features.) and answer their own questions. “Tai- lored” self service is a loyalty touch point.

Realize that customers are talking … Use community-of-interest technolo- Understand how to listen and not to each other, not to the airline. gies to create networks of experts. intrude in the conversation. Become a part of the “Travel 2.0” process.

Promote reliability and trust … Without the tried-and-true “’ilities,” Business process is front and center, customer loyalty means revenues. (availability, stability, reliability, exten- and much of the process is tedious, al- sibility, scalability and others), no one though eventually rewarding. Business cares. Plan for “five nines” and miti- resumption planning is essential. gate system failures. Use specialized algorithms and accelerators to speed response.

24 ascend industry

Executive Minds

Results of a recent survey conducted by Sabre Airline Solutions® identify top challenges facing airline executives.

hat’s on the minds of the world’s top airline executives? A survey conducted recently by Sabre Airline Solutions set out to determine just that — the main issues facing the industry’s leaders. Nearly 200 surveys were completed by airline executives W at more than 100 leading airlines around the globe. The survey focused on a variety of industry-facing issues, including:

Industry Impact

Fuel costs 94% Government regulations 79% Industry Impact Airline management rated several Customer loyalty 75% areas as having the greatest cost, revenue or operational impact. In addition to Security concerns 58% fuel costs, government regulations and Labor contracts 55% customer loyalty, at least half of airline executives also believe security concerns Alliances 50% (58 percent), labor contracts (55 percent) 42% and alliances (50 percent) will have a New entrants significant impact. Airline mergers 34% Airline bankruptcies 34% 0% 20% 40% 60% 80% 100%

Industry Challenges

Fuel costs 91% Industry Challenges 55% Customer loyalty Airline executives were asked to Government mandates 40% identify the three biggest challenges facing their airline this year. While fuel Security 34% costs were almost universally cited (91 Environmental impact 25% percent), other top issues included customer loyalty (55 percent), government Safety 19% mandates (40 percent) and security (34 percent). Mergers 18% 0% 20% 40% 60% 80% 100%

ascend 25 industry

Effectiveness of New Revenue Sources

Seat selection Effectiveness of new Revenue 35% 24% 41% Sources On average, four out of 10 airline managers consider new revenue streams, In-flight entertainment (movies, earphones, DVD players) 34% 26% 40% such as charging for seat selection, in- flight entertainment, meals and comfort items, to be ineffective. The new revenue Meals 24% 22% 54% streams scoring the highest for potential effectiveness include seat selection (35 percent) and in-flight entertainment (34 In-flight comfort items 17% 28% 55% (pillows, blankets, etc.) percent). 0% 20% 40% 60% 80% 100%

Effective (top 2 boxes) Netural Not effective (bottom 2 boxes)

Industry Revenue Impediments

Fuel costs 91% Labor costs 44% Industry Revenue Impediments Airline executives also were able Airport costs 43% to list the top three biggest revenue impediments to their airline this year. 39% Distribution costs Again, fuel costs were seen as the great- Government regulations 29% est impediment (91 percent) followed by labor costs (44 percent) and airport costs Inability to secure new 25% routes (43 percent). Management costs 20%

0% 20% 40% 60% 80% 100%

Change in Carrier Types Number of low-cost carriers Change in Carrier Types While many airline executives Will increase 68% believe there will be an increase in low- Will decrease 9% cost, regional and long-haul operations by January 2008, others predict a decrease No change 23% for these types. More than two-thirds of airline executives believe the number Number of regional carriers of low-cost carriers will increase and almost half believe the number of long- Will increase 37% haul international carriers will increase. Fewer — just more than a third of execu- Will decrease 26% tives — believe the number of regional No change 38% carriers will increase. Number of international long-haul carriers Will increase 41% Will decrease 13% No change 46%

26 ascend industry

Low Cost for the Long Haul

Low-cost carriers have transformed the original model by adding ancillary sales and full-service amenities, but can they really make a profit on long-haul flights?

By David Li | Ascend Contributor

here’s no question the low-cost car- caught the attention of industry professionals lines could only compete through product dif- rier business model has left a sizeable and airline passengers, it’s the way the model ferentiation: safety, comfort and schedules. Timprint on the world’s air transport has evolved over the years. From ancillary Southwest Airlines was the exception industry. More than three decades ago, U.S.- sales to long-haul flights, low-cost carriers are when in 1971, the small Texas-based car- based Southwest Airlines started the low- consistently pushing the envelope and chal- rier was bound to fly within the confines of fares phenomenon with a basic desire to get lenging the norm. the state. However, because of this inhibi- passengers to their destinations on time and Two or three decades ago, the experi- tion, it was free to set its own pricing. at the lowest possible prices. Since then, the ence of flying on an airplane was part of Hence, the company became very disciplined LCC pioneer and largest airline in the United the vacation itself. Much like cruise ships, and creative at managing costs, generat- States (based on passengers carried) has passengers expected quality service from ing ancillary revenue and increasing traffic. paved the way for others to follow suit. But airlines. The U.S. regulatory environment prior The low-cost carrier’s perspective was that it’s not just the LCC business model that has to 1978 standardized airline pricing. Thus, air- airline travel was a highly elastic commodity, sold with minimal product differentiation. For Southwest Airlines, its competition was not The Southwest Way with other airlines, but with ground transportation in Texas. Simple Product As a result, Southwest Airlines became efficient in an area that network airlines had • No meals difficulty with — making money on routes • Narrow seating (greater capacity) that had short stage lengths. Network car- • No seat reservations, one cabin-class configuration, free choice of seats (fewer passenger delays) riers operated short-haul routes at a loss • No lounges to feed traffic into their networks and used oversized fleets in doing so. Their network Market Positioning structures meant that many short-haul pas- • Private passengers, holiday travelers, price-sensitive business passengers sengers had to fly an additional four to five hours versus if they were to fly point to point. • Short-distance point-to-point connections with high frequency Southwest Airlines flew passengers nonstop • Aggressive marketing (”flying for fun!”) between their origin and destination at fares • Secondary airports significantly lower than traditional carriers. It • Competition with all transportation modes (air, rail, automobile) used smaller capacity and homogenous fleet, thereby driving efficiency and cost savings. Low Operating Costs In recent years, LCCs such as Ryanair • Low airport fees and less congestion by flying into secondary airports have been innovative in driving ancillary • Low costs for maintenance, cockpit training and standby crews owing to homogenous fleet revenue by eliminating the standard airline • High resource productivity: Short waits on ground due to simple boarding processes, short amenities such as food, beverages, blankets and in-flight entertainment and selling them cleaning periods, versatile and motivated staff to customers during the flight. Traditionally, • Lean sales (higher percentage of direct sales: Internet, call centers) these onboard amenities caused wastage • E-ticketing and check in and presented an operation burden for cabin crew. By charging for these items, LCCs were Southwest Airlines’ three-pronged business model is relatively straight forward, not only able to recover the inherent costs with a simple product that is reasonably priced, a strategic marketing plan and minimal but also create an additional revenue stream. operating costs. And while Southwest Airlines doesn’t allow advanced seat reservations, encouraging pas-

ascend 27 industry

sengers to arrive early at the gate to mitigate on-time departure delays, some LCCs have Revenue and Costs: LCC Versus Network Carrier offered advanced seat reservations for a fee. In addition to onboard sales, LCCs have been bold about selling their “in-flight Operating Costs: real estate” to advertising agencies. Large 2006, U.S. cents per seat mile advertisements can be seen on the fuselage of their airplanes, on the headrests of seats 11.69 and on tray rests. There are other revenue streams that +31% LCCs have found that cater to their exist- Revenue: ing customer base such as tour sales and 5.15 Labor phone cards. Regardless, ancillary revenue 2006, U.S. cents per seat mile 8.92 has increased in its importance and, in some cases, has accounted for up to 20 percent 3.29 0.85 Landing of certain LCCs’ annual turnover. As historic +6% Maintenance yields and profit margins continue to depreci- 0.93 0.53 ate, it’s likely that the industry will become 12.49 0.10 A/C Rental 11.80 Advertising dependent and more innovative in developing 0.51 0.32 0.12 Onboard sales ancillary products and services. In fact, some 0.17 0.05 2.40 Fuel carriers may opt to provide free airline seats 2.17 2.31 as incentives to gain the opportunity for a 10.76 Ticket sales sales pitch, much like the hotel and resort 0.84 0.74 Depreciation industries. 0.3 0.68 Cargo 0.44 1.52 Others Long-Haul, Low-Cost Flights 1.3 0.43 Others 1.43 Conventional thought was that the LCC LCC Network LCC Network model was applicable only on short-haul sec- Source: IBM analysis tors because medium- and long-haul segments, with the use of wide-body aircraft, had Though revenue from ticket sales for low-cost carriers is lower than higher available seat miles that drove down that of network carriers, other revenue channels such as advertising or ancillary unit costs. Although Southwest Airlines found sales enables LCCs to have an overall unit revenue to be at least 6 percent higher a solution to a profitless operation (short-haul than network carriers. routes), network airlines had long been operat-

Unit Costs Versus Stage Lengths for U.S. Network ing longer hauls and, therefore, dominated the niche. Furthermore, frequencies on long-haul and Low-Cost Carriers sectors were constricted by bilateral agreements, and the routes were reserved for large CASM vs. Stage Length 2005 flag carriers. Hence, the barriers to entry into 0.160 those international markets were much higher NW and more difficult for LCCs to penetrate. US However, many regions across the 0.140 globe have now adapted an open-skies policy, DL CO which has increased competition tenfold. Now UA 0.120 AA there’s an emergence of LCCs encroaching HP into new sectors by leveraging their low-cost TZ bases to international destinations. 0.100 F9 Low-cost carriers have also acknowl- FL NK edged that while customers may be willing 0.080 WN to put up with a barebones product for one to three hours, anything beyond might require B6 a higher level of comfort. Thus, carriers have 0.060 now started to appeal to the “value-focused”

C A S M ($ per available seat mile) customer, an individual who would seek a 0.040 product at a level between barebones and 400 600 800 1,000 1,200 1,400 full service. This new push to appeal to value-focused customers is evident at several Stage length (miles) Source: Massachusetts Institute of Technology carriers, including jetBlue, which offers free snacks and live television to its passengers; At nearly all stage lengths, low-cost carriers have a cost advantage over traditional Eos and MAXjet’s all-business class, low-fare network airlines. trans-Atlantic flights; and Oasis Hong Kong Airlines’ London, England, and soon to be, Vancouver, Canada, flights with both busi-

28 ascend industry ness and economy cabins that offer a product AirAsia Flies Long-Haul Routes slightly lower than that of its key competitors, but at almost half the fare. However, it is difficult to quantify how the marketplace perceives the new value- Short haul (1-6 hours) Ryanair Kingfisher United focused carrier business model. While jetBlue has shown success on the short-haul sector, others have yet to prove profitable on long- AirAsia jetBlue haul sectors. Additionally, some low-cost carriers have experienced difficulties generating profits on medium- and long-haul routes Medium haul (6-10 hours) Jetstar Eos because: These routes require a much larger catch- Cathay Pacific ment area. In some cases, carriers had not Airways made a concentrated effort to generate interline agreements and, instead, relied on local traffic. Value-focused carriers offer limited fre- Long haul Oasis Hong Kong Emirates quency on their routes. For example, Oasis (10+ hours) Hong Kong Airlines offers a single daily Non-quality conscious Price sensitive and Price insensitive and flight into London Gatwick while British quality conscious quality conscious Airways and Cathay Pacific Airways offer three to four daily flights. From a revenue The marketplace has been apprehensive to showcase a long-haul carrier that specializes in management standpoint, British Airways non-quality-conscious passengers. But with AirAsia’s new long-haul airline, the scenario may and Cathay Pacific Airways can match the change. low fares from Oasis on one of these daily flights and generate higher yield on the others. In addition, Oasis faces stiff competition from Virgin Atlantic, Air New Zealand and Qantas Airways, which also operate the They face competition from American Airlines, flights through European hubs such as London-Hong Kong route. United Airlines and British Airways, which Amsterdam, Netherlands, and Frankfurt, A similar scenario can be drawn with have higher route frequencies. In addition, Germany. MAXjet, Eos and Silverjet on their Washington European carriers such as Lufthansa German Nonetheless, the market has room D.C., and New York trans-Atlantic routes. Airlines can offer high frequency stopover for a strict non-quality conscious long-haul carrier. Emirates has mentioned that it could create an offshoot low-cost airline, similar to Qantas Airways’ Jetstar Airways, with its new fleet of Airbus A380s flying Beyond Point-to-Point Traffic long-haul routes. Likewise, AirAsia has discussed acquiring a fleet of Airbus A350s New York-London Washington D.C.-London to create a long-haul, low-cost carrier that would have a two-cabin class configura- Local tion. The product level would be lower than 29% Local that of Oasis Hong Kong Airlines, but with 39% much greater emphasis for onboard sales. Transiting While the concept of flying long dis- 61% tances at lower prices is possibly quite appealing to air travelers; whether or not it can be done successfully and long term Transiting remains to be seen. a 71% Local 32%

Transiting Hong Kong-London 68%

Long-haul travel is dominated by transiting traffic. All markets served by value-focused,

long-haul carriers have a majority of passengers with origins outside of their hubs.

Long–haul, low-cost carriers will need to focus beyond point-to-point traffic and ensure David Li is a senior management transiting traffic in their networks. consultant for Sabre Airline Solutions®. He can be contacted at [email protected].

ascend 29 An increase in fraud, especially through credit card use, is costing airlines millions of dollars each year, but the right technology can help control fraudulent activity.

By Tim Maher | Ascend Contributor

dvanced technology has played a significant being how it has increased the amount of fraud World Airline Report published by Air Transport role in helping airlines throughout the world carriers incur. World, the total amount of fraud incurred by the Areduce operating costs. Self-service check- According to the March 2007 issue of the airline industry would exceed US$217 million. That’s in kiosks, Internet booking tools, and interactive Nilson Report, a leading payment systems publica- certainly a figure that should garner a significant voice response solutions not only assist carriers in tion, fraud losses in the United States last year amount of attention within the executive offices their pursuit to achieve greater cost efficiencies, incurred by issuers of American Express, Discover, of each airline, but according to a 2006 study by but also improve customer service and market MasterCard and Visa increased to US6.69 cents per Deloitte and the International Association of Airline differentiation. While most everyone will agree that US$100 in purchase volume. When extrapolating Internal Auditors, that’s not necessarily the case. technology has overall benefited the airline industry, this figure to the US$325 billion in global passenger The Deloitte study reported that fraud losses there are some areas of concern — one in particular airline revenue in 2005, as noted in the July 2006 for carriers has increased fivefold over the previous

30 ascend industry

five-year period and that while fraud comes customer matches the address on sale is completed. Merchants have the from two sources — internal and external — it file with the card issuer. This func- capability to adjust the scoring thresh- is the external fraud, particularly credit card, tionality was originally implemented olds based on the unique characteristics that is more problematic and growing more in the era of mail order/telephone of their business model. While there is rapidly, and accounted for 60 percent of all order sales and has been available in a cost associated with these services, external fraud-related losses. The biggest cul- North America for many years, but is they have touted their ability to reduce prit related to the growth of credit card fraud not necessarily a reliable or effective fraud to less than 0.5 percent, which comes from Web-based transactions. While tool in today’s virtual world. for some airlines could mean hundreds virtually every carrier is using the Internet as ii. Card security code is another tool of thousands or even millions of dollars an efficient and effective way to market and provided by credit card associations in annual cost savings. Sabre Airline sell their services directly to customers across that enables merchants to verify that Solutions is analyzing the value its cus- the globe, it is also exposing them to greater the cardholder is in possession of a tomers would receive if it partnered amounts of fraud. According to the study, card by validating with the card issuer with a third-party fraud management airlines suffer an average loss of greater than the three- or four-digit numbers that company. US$1 million annually; however, the alarming are separate from the card number. c. Just as an airline engaged the appropri- part shows that 65 percent of carriers that par- This functionality was implemented ate constituents across its organization ticipated in the study have no fraud program in in the late ’90s as e-commerce was to understand its cost of fraud, it should place to detect or report fraudulent transaction becoming more mainstream. CSC also engage them in development of the activity. has proven to be much more effec- plan. IT security will identify the techni- Given that Web-based transactions are tive in identifying potentially fraudu- cal aspects; internal audits will assist expected to grow, one can assume the level of lent sales than AVS. with controls and measures; and finance fraud will also escalate. So what measures can iii. 3D-Secure is the latest tool provided will develop the cost/benefit analysis. airlines take to better manage fraud, particu- by certain credit card associations Ensuring that effective project manage- larly as it relates to their Web site? If an airline as a way to provide greater security ment processes and personnel are in has not implemented a fraud solution, there for online shopping. While the pro- place is also a critical aspect of the plan. are three steps that are a good place to start: grams are commercially known as The plan should clearly depict the goals 1. Understand how much fraud is costing. An “Verified by Visa” and “MasterCard and objectives of the project. airline should engage constituents through- Secure Code,” they work essentially 3. Monitor progress. One of the biggest faux out its organization (information technol- the same way. When a consumer pas organizations make regarding a fraud ogy, security, finance, internal audits, sales/ pays with a Visa or MasterCard at management plan is that after implemen- marketing, etc.) and determine where the a 3D-Secure-enabled merchant, the tation, they do not effectively monitor the fraud exists, and more specifically, what consumer goes through a process progress to understand whether they are it is costing. For example, how does fraud known as a “trust chain” throughout achieving effective results. All entities that breakdown per credit card type? What are the transaction, whereby the identity were part of the planning process should the characteristics of the itinerary? Several of the consumer is authenticated also be involved in monitoring the progress. items should be reviewed, including: via a passcode that is known only IT security should keep up with new tech- a. What are the origins and destinations? to the consumer that is on file with nologies and their implications for fraud, b. What are the classes of service? the issuer. One of the most sig- internal audits should review the internal c. What is the time between booking and nificant benefits associated with 3D- controls, finance should analyze the costs the first leg of the itinerary? Secure is that the liability for fraud and financial benefits, and sales and market- d. What are the credit card numbers? is shifted from the merchant to the ing should assess the impact to sales and e. What e-mail addresses are used? issuer (under a range of conditions). usability. A periodic review by all parties Ancillary costs such as personnel, bank fees Earlier this year, Sabre Holdings® must result in the team adjusting strategies and other expenses that may not be directly partnered with Eurocommerce, a and/or processes to increase effectiveness, associated with the fraudulent transaction Dublin, Ireland-based payment ser- which will ultimately result in reducing the activity should also be considered. These vices provider, to jointly offer the volume of fraud across a greater volume of costs should be analyzed regularly, just as optional functionality of 3D-Secure to sales. all other expenses are monitored. By under- Sabre Airline Solutions® customers. While an in-depth action plan will cer- standing the total cost of fraud, an airline India’s Kingfisher Airlines recently tainly assist any business, not just airlines, in can proceed to the second step, which is to implemented 3D-Secure within developing a strategy to combat fraud, it is develop a specific plan of action. SabreSonic® Web as a way to reduce important to recognize that there is no panacea 2. Develop a fraud plan. Formulating a plan of its exposure to fraud while extend- for eliminating it. Fraudsters progressively get action is the most difficult part of implementing its sales reach into new markets more and more sophisticated in their approach ing a fraud program. Airlines should consider throughout the world. and use technology to increase their effective- engaging a fraud management consultant to b. Investigate the use of a third-party ness. However, by taking action, airlines can assist with developing the plan. Regardless fraud management solution to screen effectively manage fraud while simultaneously of whether or not a consultant is involved, all Internet sales. CyberSource, eFunds, increasing sales. a several items should be considered as part Fair Isaac, Retail Decisions and VeriSign of the plan: are just a few examples of companies a. Identify fraud tools that are easily acces- that offer such a solution, which scores sible: a transaction for fraud potential based i. Address verification service is a tool on dozens of different variables associ- Tim Maher is an account director for provided by credit card associations ated with the sale. Transactions that the Sabre Airline Solutions sales and that enables merchants to validate score above a certain level are escalated account management team. He can be that the address provided by the for alternative processing before the contacted at [email protected].

ascend 31 industry

Passenger Bill of Rights

While regulatory bodies call for strict laws to protect passengers impacted by flight delays, the laws need to be clear, concise and fair to both airlines and their customers. Photo by shutterstock.com by Photo

By Michael Clarke | Ascend Contributor

he global airline industry is driven in has resulted in the deterioration of passenger part by the economic and geopolitical services and the anticipated level of comfort in Tconditions across the world’s markets. some markets. From many perspectives, it’s considered a During the economic boom associated highly cyclical industry varying from record with the Internet revolution, U.S. domestic periods of profitability to times of very poor passenger traffic exploded in the late 1990s financial conditions. This is associated with with average passenger load factors exceeding The number of cancelled and delayed wide variations in capital expenditure (such 80 percent on a regular basis. The number of flights in the United States has reached a as aircraft acquisitions) and challenging labor passenger complaints to the U.S. Department record high this year due to U.S. carriers relationships between management and rank of Transportation skyrocketed, and the U.S. reporting average load factors that often and file trade unions. Congress started to pay closer attention to the surpass 85 percent. During the last two decades, market airline industry, which had been deregulated liberalization has been the key focus of many two decades prior. Around the same time, governing bodies around the world with an deregulation had taken hold in Europe, and emphasis on relaxing market access restric- there was a rapid growth in passenger traffic challenge of sustaining profitability, containing tions and control over what airlines can do on as a result of new value-based carriers such as costs and maintaining viable operations. With a daily basis. As passenger traffic has soared Ryanair, easyJet and Air Berlin. the sudden decrease in passenger levels, as a by-product of liberalization, the necessary In the aftermath of the industry down- airlines had some breathing room to support infrastructure to support such growth in pas- turn in the early 2000s, world passenger traffic their remaining passengers, and the legislative senger levels has often been lacking, and this plunged, and airlines were faced with the “interest” in the airline industry subsided. As passenger traffic levels have returned, if not surpassed, the record level of the late ’90s, Photo by shutterstock.com by Photo concerns about the supporting infrastructure (airports, air traffic control systems) have resur- faced as well as the number of consumer complaints to regulatory bodies. In the European Union, legislation became law in 2004 that establishes common rules on compensation and assistance to passengers in the event of denied boarding and cancellation or prolonged delays of flights. This law covers not only regularly scheduled passenger flights, but it also includes charters and all flights operated by E.U.-registered airlines. This year, a similar bill of law was introduced in the U.S. Congress — heavily influenced by the prevailing market conditions in the U.S. domestic market. Carriers are reporting average load factors in excess of 85 percent, and the number of cancelled and When passenger traffic shot up during the late ’90s with passenger load factors averaging delayed flights are the highest ever recorded. more than 80 percent, customer complaints to the U.S. Department of Transportation were In parallel, the number of passengers invol- also on the rise, causing the U.S. Congress to focus more closely on the airline industry. untarily bumped and denied boarding has increased significantly and is the highest since

32 ascend industry Photos by shutterstock.com by Photos Preliminary numbers for 2006 show that on average 23 percent of all scheduled U.S. domestic flights were delayed in excess of 15 minutes of their scheduled departure and/or arrival times. In addition, 2 percent, or one in 50 flights, were cancelled, and one out of every 450 scheduled flights was diverted as a result of schedule disruption. A similar situation exists in Europe where one out of three flights is delayed and one out of 70 is cancelled. A study produced for the Eurocontrol estimated that airborne and/or ground delays cost European airlines up to €5 billion (US$6.9 billion) in 2002. In June, it is estimated that U.S. domestic airlines cancelled nearly 100,000 scheduled flights, more than double the number reported last year. This record number is not unique for the early summer period, as flight cancellations are up 50 percent for the first half of the calendar year. Some constituencies within the Three years ago, the European Union passed a law through legislation that requires airlines industry, particularly pilot unions, argue that to compensate and assist passengers if boarding is denied, a flight is cancelled or a long this increased number of cancellations is being delay occurs. driven by a shortage in crews as a result of the severe cost cutting during the last five years. At one major network airline, there were 2,100 flights cancelled in June alone, representing almost six percent of its scheduled operations. This corresponded to seven times the number of cancellations experienced by the carrier in June 2006. Whatever the case may be, U.S. carriers have been hit hard by major disruptions during the first half of the year, ranging from complete airport closures spanning multiple days as a result of severe snowstorms to spontaneous afternoon thunderstorm activities that result in large numbers of diversions to alternate airports. In many situations, the alternate airports are overwhelmed by the additional aircraft movement and, in some cases, are also impacted by the same weather system that causes the diversions from the major hub airports. In some cases, passengers were forced to wait onboard stranded aircraft in excess The reduction of “unnecessary slack” in some airlines’ operations in an effort to cut costs of seven hours as airlines tried feverishly to and increase productivity can leave very little room for effective recovery when there’s an recover their operations while observing the unexpected schedule disruption. prevailing safety guidelines. As active crewmembers became illegal from duty limitations, airlines had no choice but to cancel flights and 1997. Airline operations are susceptible to a weather pattern develops, air traffic control attempt to rebook the disrupted passengers. unexpected weather patterns and other types authorities introduce a traffic management The current state of the U.S. domestic of irregularities. In their drive to reduce costs program depending on the severity of the dis- airline industry has led to the introduction of and improve productivity, many carriers have ruption. This includes, for example, a ground the Airline Passenger Bill of Rights Act of 2007 reduced what was considered unnecessary delay program where all scheduled flights are in the U.S. Congress. Unlike previous attempts slack in their operations, and when something metered into an impacted airport and given a in the late 1990s, there is a growing level of goes awry, there is very little room for effective specified arrival time to reduce the demand on support within the legislative body to pass the recovery. As a result, passengers disrupted by the airport. Alternately, ATC authorities would bill and put it into law. Earlier attempts to pass a major afternoon thunderstorm or an exten- prohibit any flights from departing to a given such a law were derailed by the Air Transport sive snowstorm may end up waiting hours, if airport until a prescribed time and/or restrict a Association — the primary Washington, D.C.- not days, to get to their final destination. flight from departing until a required airspace based lobbying group for U.S. airlines. The ATA The majority of flight delays in the sector is available. and its member airlines established voluntary United States result from network effects In 2005, an estimated 94 million minutes guidelines for handling passengers in the after- across the system driven by problems in the of system delays drove more than US$5.9 bil- math of schedule disruptions. These guidelines national airspace and aircraft routings. When lion in direct operating costs for U.S. airlines. were clear and concise and, at the time, were

ascend 33 industry Photos by shutterstock.com by Photos satisfactory to regulatory agencies. However, in light of how airline passengers were treated in some high-profile incidents in December 2006, and again in February, the U.S. Congress decided to revisit the legislation of passenger rights in the domestic airline industry. One of the airlines severely impacted by a schedule disruption decided on its own accord to introduce its own passenger bill of rights, and the carrier now compensates passengers for flight delays, cancellations and other disruptions that can be attributed to it. To date, no other airline has taken this approach, and they still point to their pre-existing customer service plans established in the late ’90s. The language of the recently introduced bill draws on the established European legislation and calls for airlines to better handle passengers and address their needs in the wake of a schedule disruption. The bill mandates that all American air carriers shall abide by several standards to ensure the safety, security and comfort of their passengers, including: Establish procedures to respond to all passenger complaints within 24 hours and with appropriate resolution within two weeks; Notify passengers within 10 minutes of known diversions, delays and cancellations via overhead announcements in the airport and on aircraft as well as posting on airport television monitors; Establish procedures for returning passengers to the terminal gate when delays occur so no plane sits on the tarmac for more than three hours without connecting to a gate; Provide for the essential needs of passengers during air- or ground-based delays of longer than three hours, including food, water, sanitary facilities and access to medical attention; Provide for the needs of disabled, elderly and special-needs passengers by establishing procedures for assisting with retrieving baggage and moving passengers from one area of the airport to another; Publish and update a list of seriously delayed flights — those delayed 30 minutes or more at least 40 percent of the time during a single month — on the carrier’s Web site; Compensate bumped passengers or those delayed due to flight cancellations or post- ponements of more than 12 hours by a refund of 150 percent of the ticket price; Implement a passenger review committee made up of passengers and consumers who would have the formal ability to review and investigate complaints; The number of passengers who have been involuntarily bumped and denied boarding Make lowest fare information, schedules due to unexpected irregularities has increased substantially and is at the highest in 10 and itineraries, cancellation policies, and years. Some passengers have been stranded for hours, sometimes days, as a result of frequent flyer program requirements avail- irregular operations.

34 ascend industry Photo by shutterstock.com by Photo able in an easily accessed location and updated in real time; Ensure that baggage is handled without delay or injury; if baggage is lost or mis- placed, the airline shall notify the customer of baggage status within 12 hours and provide compensation equal to current market value of the baggage and its contents; Require that these rights apply equally to all airline codeshare partners including international partners. The potential impact of the proposed legislation is unclear in the United States, but take a look across the pond in the European Union. Since its introduction in 2004, the E.U. passenger rights law has been challenged by both established network While irregular operations are responsible for delays and missed flights, numerous pas- carriers and value-based carriers in several courts sengers miss their scheduled flights because they check in with incorrect documentation or and multiple countries. While the bill has survived experience delays waiting in long security lines. all challenges to date, the effectiveness of the legislation is still unclear. On the surface, the E.U. legislation calls for airlines to look after their dis- unable to provide the required assistance because stranded in a remote location away from home. Since rupted passengers and arrange alternate means of of limited resources and/or available accommodation the regulation has been introduced, there has been transportation for them, and if the airline is at fault, options, especially at smaller regional or secondary better and more effective passenger assistance and they may be required by law to pay compensation to airports. In a few instances, the required assis- services within the European Union, but substantial affected passengers. These rules apply to all airlines tance is not spontaneous or not given at all by the improvement is required for more consistent applica- — scheduled, charter, full-service or low-cost — and impacted airline. Airlines often try to invoke force tion of the rules by airlines as well as more consistent to all flights departing from airports in the European majeure although the regulation does not provide enforcement of the rules by the various national Union as well as those arriving within the E.U. and for such exemptions for flight delays. Under the E.U. enforcement bodies in the member states. operated by airlines registered in the E.U. regulation, there is no definition of delay, and there Based on external audits sponsored by the Passengers who find their flight has been is no differentiation between the various causes of E.U. commission, the limited effectiveness of the delayed by more than a few hours, cancelled com- disruptions (meteorological conditions, labor unrest/ E.U. regulation can be attributed to two main factors: pletely without prior notice or who have been strike, reduced airport and/or auxiliary services, etc.). The text of the regulation is unclear in many areas, denied boarding because the airline has too many There is, however, some ambiguity in the which has enabled carriers to find loopholes in the passengers for the seats available must be given law concerning airlines’ obligations for passengers requirements and interpret the rules in a way that immediate assistance by the airline. during prolonged flight delays (beyond 24 hours), minimized their obligation. Since the passing of the law, the num- and this has been a major source of consumer Enforcement of the regulation has been ineffective ber of involuntary denied passenger boardings has complaints and confusion over the regulation. Since in many member states as airlines challenge com- decreased in the European Union. As part of the the level of compensation for prolonged delays is pensation allotments and regulatory bodies are legislation, airlines were required to solicit volunteers less than that for a cancelled flight, airlines often try overwhelmed by the large volume of passenger from overbooked flights, similar to the established to designate a cancelled flight as a prolonged delay complaints. procedures in the United States. It is likely that the so as to reduce the amount of compensation. The The effectiveness of the proposed passenger decrease in overbooking has resulted from carriers substantially high level of compensation for cancel- bill of rights in the U.S. Congress will depend on the being more conservative in their overbooking levels. lations has also motivated carriers to often attempt final bill’s composition. As seen from the European At the same time, there’s an increase in to invoke extraordinary circumstances in an effort to experience, it is essential for the necessary definitions the number of passengers missing their scheduled be waived from their obligations. Within the regula- to be clearly outlined in the document. These include flights. With the enhanced level of security at tory framework, such circumstances include political but are not limited to the definition and scope of a airports, passengers sometimes arrive for check in instability, meteorological conditions incompatible flight delay, flight cancellation, flight misconnection, with inappropriate travel documents or experience with the safe operation of the flight, security threats, extraordinary circumstances, rerouting alternatives, delays waiting in long security lines. In addition, unexpected flight safety considerations, labor unrest and the corresponding levels of compensation and with the increased levels of delays, connecting pas- and the downstream impact of prevailing flight passenger notification for each situation. Another sengers often miss their scheduled flight connection delays resulting from air traffic management restric- aspect that is equally important is the establishment due to a late inbound arrival. If a passenger misses tions earlier in the day. of an enforcement body responsible for administering his connecting flight, the carrier is not required to pay By late 2005, the regulatory body cited this and championing the enacted legislation. Without compensation to the customer but is mandated to observed abuse of the law and openly warned such an entity, the passenger bill of rights may simply provide the next available online flight to his destina- airlines not to abuse this component of the legisla- end up being yet another law that does not live up to tion. The airline is not required to offer passengers tion and self regulate the number of times they cite its high expectations. a reroute options via other carriers and/or by surface exceptional circumstances as the cause of the flight transportation if there are no alternate flights avail- cancellation. able on its own aircraft. But with prevailing high In the event of denied boarding and cancel- load factors, passengers often end up waiting an lations, the regulation obliges airlines to offer pas- extended period of time for their connecting flights. sengers a choice between a refund and alternate When a flight is delayed in excess of two rerouting. In practice, when airlines are unable to hours, European airlines are required to compensate re-accommodate disrupted passengers on their Michael Clarke is principal research the affected passengers and provide the appropri- own and/or partner aircraft, they simply offer the pas- scientist for Sabre Holdings® . He can be ate level of assistance. In some cases, carriers are senger a refund and sometimes leave the passenger contacted at [email protected].

ascend 35 GROWINGGROWING likelike WILDFIREWILDFIRE By Phil Johnson | Ascend Staff

Many of the world’s countries, such as China, India, Indonesia and Russia, are experiencing rapid growth that is boosting the economy in these emerging markets.

36 ascend industry Photos by shutterstock.com by Photos ithin the broad scope of 21st-century global economics, it’s certainly no secret Wthat rapid growth trends in both China and India are figuratively setting the commercial world on fire. But what about other “nontraditional” markets that are becoming hot items — in places such as the huge expanse of territory that is Indonesia? Or in the even greater territorial sprawl of Russia, or the awakening market economies of Eastern Europe? The fact is that if commercial enterprises, including airlines, intend to maintain the status of truly serving a “worldwide” clientele, all of these and other expanding but nontraditional economies merit serious consideration. And that represents a sea change in global economics compared to the past few decades. It’s not that the trends haven’t been discern- ible for a few years. It’s more a matter of corporate planners collectively establishing a priority to adjust both their outlooks and their greater imaginations with regard to the world that will evolve in the coming decades. “Clearly, what we describe today as ‘emer- gent’ markets will — in the future — play major roles in the world economy,” said Dr. Garry Bruton of the Neeley School of Business at Texas Christian University. Dr. Bruton is also serving a term as president of the Asia Academy of Management, an ambitious Asian economic-management and education group. “One of the current predictions,” Bruton said, “is that the ‘BRIC’ nations — Brazil, Russia, India and China — will by year 2050 grow to have larger economies than the G-6, meaning the United States, the United Kingdom, Japan, Germany, France and Italy. “Now, that doesn’t mean per-capita annual income will be larger among these BRIC nations as compared to the G-6, but their total economies will be. And this would definitely represent a major shift in purchasing power across the world stage.” Nonetheless, there are various caveats to be considered in thoroughly evaluating the relative likelihood of fulfillment of such sweeping global economic predictions. “Today, these nations — I’m talking about Russia, Brazil — are still relatively poor,” Bruton said. “India and China, despite all of their current flash and sizzle in the world economic framework, still have per-capita annual incomes that amount to an equivalent of less than US$1,000 per person. “But growth in a number of emerging economies around the world can’t help but affect industries such as transportation. A key Countries such as China, India and Indonesia, with their once-volatile economies, are rapidly part of these nations’ economic growth will becoming the world’s fastest-growing markets, providing expansion opportunities for the air most certainly be increased air travel.” transportation industry. This air-travel increase within an emerging economy is already on prominent display in Brazil, where TAM and GOL Airlines have intro- substantively outlasted their Brazilian airline and Prague, as Poland, the Czech Republic, duced thousands of South Americans to the competitors. Hungary, Slovakia and other formerly controlled convenience of modern flight with innovations In Eastern Europe, commercial leader- economies that were stymied under bygone Soviet and economy fares as they have outpaced and ship is surfacing in places such as Warsaw domination are now entering a new era of market

ascend 37 industry Photo by shutterstock.com by Photo also issues involved in locating in China. So, the quandary becomes whether to locate in China, locate in Hong Kong to obtain protection of law but still be in China, or to subcontract.” The opportunity to cash in on the potential of the economic giant that China represents has become too strong a draw for many Western- based companies to resist. “For academics, one of the great debates has become whether the newly dominant Asian economies will just continue to get bigger or whether calcification will set in,” Bruton said. “What I mean by ‘calcification’ is the political forces tend to think they still need to try to control everything. And if that effect does develop, it would occur when these nations privatize. They ultimately end up with some major private firms. But then the question becomes: After these firms win, will their nations be willing for them to fail? “Recall that we heard many of the same things we’re now hearing about India and China back in the 1980s about how Japan Russia is one of several expanding nontraditional markets carriers should consider as they look to maintain their status of a worldwide air transport provider. was going to rule the world and so on,” he said. “And I tend to think we actually overes- timate some nations. “I tend to be in the camp that some possibilities as proud members of the expanded affairs, Hong Kong is able to administer its own nations, such as China, may turn out to be European Union. economy under the stated Chinese principle of today’s ‘Internet boom,’” he said. “China “I tend to be very upbeat on Eastern ‘one nation, two systems.’ as a nation is growing rapidly, offering great Europe,” Bruton said. “I spent some time within “Today, over half of the tourists to Hong long-term opportunities, but at the same the last couple of years in Poland in a Fulbright Kong are mainland Chinese. Without these tour- time, I see many firms making very unrealistic chair for entrepreneurship. These countries are ists, Hong Kong would be in an economic depres- decisions about a market that will take time democracies, which I think is critical to long-term sion — but instead, because of the tourists who to fully expand and will not likely continue its growth. They’re strong economies — and as parts come largely from mainland China, Hong Kong is current 9 percent growth rate over the next of the European Union, the rule of law and other experiencing rapidly expanding growth.” 50 years. vital factors will be clear.” There’s obviously enormous potential for “Taiwan, Korea and Japan all had When looking at other emerging economic airlines to better serve the teeming populations similar levels of growth at a similar level of points on the globe, a country such as Indonesia of India and China, but in many subtle and some development, and they eased off eventually stands out for its uniqueness. This largest Islamic- perhaps-not-so-subtle ways, it won’t be easy. to more typical growth levels,” Bruton said. dominant nation in the world also has perhaps the “In places like India, how individuals book “Additionally, those nations at that time had most challenging logistical picture — with its thou- hotel rooms and reserve flights is much different developed clear world competitors among sands of miles of territory spread across thousands than in mature markets like the United States,” their own companies, which China is largely of islands in the Indian Ocean. Bruton said. “Internet penetration is much lower, yet to do.” The Indonesian economy — like that of and the power of certain business groups much The same could be said of India. But many of the former Soviet republics, as well as greater. none of that eradicates the clear potential of Russia itself — will long be bolstered by immense “How companies such as Sabre Airline many of today’s most prominent emerging reserves of oil and gas that are in many instances Solutions® reach out to those markets — con- economies — economies that will inevitably just now being tapped through modern techno- sidering both the company’s need and desire to be reckoned with in the global commercial logical developments that have made production maintain reasonable cost while also maintaining the and trade picture of the 21st century to some of those reserves economically feasible. firm’s high quality — will be difficult.” significant extent. Still, any current analysis of global economic And China represents an economic conun- Precisely how significant is one of growth potential tends to be drawn like a power- drum, with traditional “control” forces pulling and those vital current economic questions. The ful magnet back to the Indian subcontinent and pushing against much more recently established answers to those questions will be apparent mainland China. “market” forces. within a few very short but economically “China is investing billions in new airports,” “One of the keys is how to reach these cus- exciting decades. a Bruton said, “because the Chinese know that tomers,” Bruton said. “The Chinese government this is a key infrastructure investment that will is much more prevalent than the U.S. government seriously advance economic growth. And a side in the economy — and thus, the Chinese govern- effect of this category of growth is in tourism. The ment has strong controls over data. In China, the number of tourists both in and from China is rapidly powers-that-be want that data, and simple things expanding. like airline flights are controlled. “I was just in Hong Kong,” he continued. “To serve the Chinese market, a lot of “Of course, the city is now a special administrative Western companies have learned that they must Phil Johnson can be contacted at region of China — and largely, outside of foreign have an actual presence in China. But there are [email protected].

38 ascend industry

In Sync

Airlines that leverage integration in the areas of technology, processes and service experience lower operational and technological costs as well as boost revenue and customer loyalty.

By Lauren Lovelady | Ascend Staff

he successful operation of an airline’s achieve this, an airline’s employees and business tion of those systems into its environment. schedule is one of the most logistically processes and the technology supporting them For example, a single crew feasibility check T complex processes. On any given day, must be in sync. They must be integrated. component can be used as the basis for a hundreds of known factors, including crew and Integration is often defined in techno- number of different applications. Necessary aircraft availability and passenger loads, can affect logical terms, but it encompasses even more, design changes or defects found during testing the schedule, and just as many unknown factors including technology foundations, products and can be corrected one time and the “fix” will do, as well. After all, who could have known that solutions, workflow processes, and customer apply to all applications. As a result, the same consecutive days of stormy weather in much services and support. While each area has its component is utilized by a number of different of the United States during June and the first own benefits and merits, the real value comes departments, promoting the integration of busi- two weeks of July would mean one in three in understanding and utilizing all aspects of inte- ness processes across the airline. flights would be delayed and cancellations would gration simultaneously. The result for airlines: An enterprise service bus, or ESB, is increase 121 percent compared with the same better quality decisions, which, in the long run, a useful tool for the integration of disparate time period last year. The result: huge headaches can lead to lower operational and technology technology applications. A scalable and secure for airlines worldwide that serve the United States costs as well as increased revenues and cus- software infrastructure, ESBs enable users to and hundreds of frustrated, displaced passengers. tomer loyalty. integrate new and existing applications and In situations such as this, communicating the An integrated technology backbone pro- disseminate information without disruption to most up-to-date information to the right people vides a flexible foundation for the integration systems currently running. Because solutions within an airline in a timely manner is critical. To of an airline’s systems and the implementa- do not need to be recoded or redesigned to fit

Operate in Harmony

There are several steps airlines can take and tools they can use to enhance revenues, cut costs and keep customers coming back.

By Lauren Lovelady | Ascend Staff

hile some carriers are greatly also feel the pressure of increased competi- airline, at one time or another, must rise to impacted by aging fleets and air- tion and fluctuating fuel costs that often meet. Wport facilities, others find it dif- cut into revenues. Although each carrier How successfully those challenges are ficult to execute profitable schedules that deals daily with a combination of issues met will depend, in great part, on the ability of incorporate ever-tightening government and unique to its own operation, there are some an airline’s functional areas and the systems environmental regulations. Many airlines basic business challenges that almost every supporting them to work together.

ascend 39 industry Photo by shutterstock.com by Photo In an ideal situation, all of an airline’s technology tools would be able to seamlessly share data. However, that day has not yet arrived. Given the constraints of the “real” world, here are some common business challenges and solutions available today that can provide maximum benefit to an airline and its customers. In addition, there are examples of integrated products from Sabre Airline Solutions® to assist with these processes.

Increasing Revenues There are several steps airlines can take to increase revenues: Automate the passing of future average fare data from the fares management system to the revenue management system, enabling better inventory control. Review and reassign aircraft capacity allocations closer to the day of opera- Communicating in a timely fashion to the right people within an airline is critical to the tions. Using current demand forecasts overall success of its operations. To do this effectively, the technology used to support the generated by the revenue management carrier’s employees and processes must be integrated. system, the planning and scheduling system’s capacity optimization tool will identify opportunities to swap aircraft. Incorporate competitor fares data into into ESBs, existing applications and data may be ber of critical tasks including schedule development, the forecasting and optimization pro- successfully reused. revenue management, fare pricing, crew scheduling cess based on the exchange of real- Although flexible technology foundations, and flight operations. And what airline would not time information between the revenue such as ESBs, undoubtedly reduce development want to purchase the best solution it can afford for management and fares management costs for information technology solutions providers, the task at hand? But while a best-of-breed system systems. the result for airlines is just as beneficial — lower may provide a marginally better solution for a par- Develop pricing strategies based on the total cost of ownership, quicker and easier product ticular area or task, what happens when another schedule’s strength as dictated by mar- implementations, and the ability to react quickly and area needs access to the data to make accurate ket share data and passenger booking effectively to the volatile environments in which they decisions? What if the systems are not easily able to patterns, in addition to competitor price operate. share data? Although flexible technology backbones comparisons. The goal should be to Rarely is a decision made during the planning may provide some help, in almost every case, air- provide passengers with the most con- process or even up to the day of operations in one lines underestimate the amount of time, money and venient routes at the most convenient area of an airline that somehow does not impact effort they will need to spend to integrate various times priced in a competitive manner. areas down the line. For airlines to communicate applications. Track booking activity within the res- critical information from one department to another, Once the systems have been pieced togeth- ervations system and respond in real their systems must share data. They must “talk.” er, which solutions provider or providers does an time by applying advanced inventory A decision made in isolation, without the benefit of airline contact for customer service and support? controls based on revenue manage- input from other areas and what-if scenarios pro- An integrated suite of tools from a single provider, ment data. vided by technology solutions, can lead to loss of such as Sabre Airline Solutions®, can provide an Solutions are available to assist with revenues and consumer trust. Integrated data inter- airline with optimal decision support across its entire revenue generation: faces and business processes are key to effectively network. And that provider can simplify an airline’s Sabre® AirMax® Revenue Management developing a set of solutions in response to rapidly service and support concerns by offering a single Suite, changing operational environments and service dis- help desk number and integrated business process Sabre® AirPrice™ fares management ruptions. Integrated real-time solutions help prevent, and organizational support. system, for example, aircraft from being parked at gates for With no end in sight for the need to develop Sabre® AirFlite™ Planning and Scheduling longer than necessary waiting for available crews or strategic responses to schedule disruptions, airlines Suite, crews waiting at gates for arriving flights that have must become adept at anticipating and responding SabreSonic® Inventory, been delayed or gate locations changed. And in the to the known factors and even the unknown factors Quasar™ passenger revenue accounting case of disrupted operations, airlines’ system opera- affecting their schedules, for the sake of both the air system. tions control centers can better decide which flights travel industry and their passengers. And to accom- to cancel and which to operate when they have plish this successfully, integration is key. a Operational Efficiencies data on forecasted revenues for entire network’s Steps can be taken to lower operational flights readily accessible. Presenting the necessary costs and increase operational effi- information in a format that is easy to access and ciency, including: understand is critical for optimal decision making. Find practical ways to improve relation- For years, solutions providers have offered Lauren Lovelady can be contacted ships between functional areas. At any best-of-breed systems to assist airlines with a num- at [email protected]. time, one group may have vital informa-

40 ascend industry

tion that needs to be shared with other Focusing on customers rather than just one-stop customer services and assistance. areas. passenger name records by enabling Products equipped to address these Implement decision-support tools that uti- service personnel and travelers to eas- issues include: lize shared data and business logic, ily access real-time personalized infor- Sabre® Flight Control Suite or Sabre® resulting in higher-quality decisions. mation about itineraries via self-service Rocade® Airline Operations Suite, Use these tools to create and evaluate kiosk and the Web. Flight delays and Ramco MRO System, various what-if scenarios, incorporating cancellations or even special promo- Sabre® AirMax® Revenue Manager, necessary constraints, to find optimal tions can be relayed to travelers via Sabre® Traveler Loyalty System, solutions — sometimes within minutes e-mail or phone. Quasar passenger revenue accounting — to challenges in the planning stage Using advanced operational customer system, all the way to day of operations. relationship management to enrich and Sabre® WiseVision™ Sales Essentials, SabreSonic Customer Sales and Service Solution, Highlight AirPrice fares management system. Unexpected Disruptions “Although each carrier deals daily with a Airlines can do several things to handle unexpected disruptions due to combination of issues unique to its own operation, weather, mechanical, air traffic control or security issues while maintaining passenger safety and loyalty: there are some basic business challenges that Utilize proactive decision-support tools with what-if simulation capabilities to almost every airline, at one time or another, must efficiently recover and reassign aircraft, crews and passengers. rise to meet.” Minimize passenger frustration and loss of revenue by sharing data regarding recovery decisions across all impacted functional areas. In addition to revenue and cost data, Coordinate aircraft rotations and crew synchronize the reservations, self-ser- incorporate information from the loyalty rotations to minimize unnecessary vice and departure control environ- system to assess each passenger’s costs and increase operational reliabil- ments. value to the airline when rebooking. ity. Solutions that can help optimize the trav- Products that can help airlines Exchange data on regularly scheduled eler experience include: get back on track after a disruption maintenance events between the flight SabreSonic® Customer Sales and include: planning and scheduling system and Service Solution, AirOps suite, in particular Sabre® Decision the day of operations system to create Sabre® Loyalty Suite, Manager and Sabre® Reaccommodation optimal aircraft rotations and tail num- Sabre® Virtually There® Web site, Manager; ber assignments that are not changed Sabre® InformSM mobile services, Flight Control Suite or Rocade Airline when the schedule is passed from one Customer Data Delivery option within Operations Suite; area to the next. SabreSonic®Res. AirCrews suite. Ensure crew scheduling and opera- In addition, Sabre Airlines Solutions tions areas are continually fed real- Ideal Technology is researching further development and time information about changes made Advanced technology is available to integration of solutions in the areas of to the schedule by the scheduling help airlines not only get up and running but schedule and passenger forecast data department to help minimize opera- continue down a long-term, successful path, distribution, pricing and planning capabili- tional disruptions. including: ties, maintenance program updates, and Software designed to assist in these Start with the essential systems. Depending dissemination of real-time day-of-opera- areas include: on the size and type of operation, the list tions aircraft movement messages. a AirFlite Planning and Scheduling Suite, may vary, but will likely include technology Sabre® AirCrews® Crew Management tools that assist with flight planning and Suite, scheduling, day of operations, revenue Sabre® AirOps™ Operations Suite. management, pricing, crew scheduling, traveler loyalty, revenue accounting, and Best Travel Experience reservations and sales. Airlines can provide the best possi- Add consulting services into the mix to ble travel experience so their passengers better optimize the use of these tools in feel like valued customers before, during business processes, enabling the airline to and after their trips by: grow as demand for its services grows. Implementing flexible technology, such Focus on saving time and money from as an enterprise service bus, or ESB, the start. Some solutions providers offer to increase options for reaching cus- integrated systems that easily share real- tomers at various touch points during time critical data across multiple functional Lauren Lovelady can be contacted their travel experience. areas. In addition, these providers offer at [email protected].

ascend 41 TT hehe PowerPower ofof PartneringPartnering AA ConversationConversation withwith AbdulAbdul WahabWahab Teffaha,Teffaha, SecretarySecretary GeneraGenerall ArabArab AirAir CarriersCarriers Organization.Organization.

Afriqiyah Airways (2001) Oman Air (1993) Air Algerie (1953) Palestinian Airways (1995) Air Arabia (2003) Qatar Airways (1995) EgyptAir (1932) Royal Air Maroc (1957) Emirates (1985) Royal Jordanian (1963) Etihad Airways (2003) Saudi Arabian Airlines (1945) Gulf Air (1950) Sudan Airways (1946) Iraqi Airways (1945) Syrian Arab Airlines (1946) Jordan Aviation (2000) TransMediterranean Airways (1953) Kuwait Airways (1954) Tunis Air (1948) Libyan Airways (1964) Yemen Airways (1962) Middle East Airlines (1945)

42 ascend profile

ince its founding in 1965, Beirut, the team that developed IATA’s strategy Lebanon-based Arab Air Carriers beyond 2000. SOrganization has sought to promote Recently, Teffaha visiting with Maher cooperation among 23 Arab airlines head- Koubaa, account director for Sabre Airline quartered in the Middle East and Africa and Solutions® to discuss the AACO and its role in serve their common interests through service the air transport industry. excellence. By working to fulfill this mission, the Question: What are the major organization has given the carriers of the challenges AACO is helping Arab airlines Arab world a stronger voice and a means address? to work together. AACO has helped unite Answer: There are challenges the region’s carriers, enabling them to specific to the region and others facing the work collectively in several business areas, entire airline industry. Those that are industry providing a foundation for future success. wide are recognized by everybody — costs As part of its ongoing efforts to support that are beyond the control of airlines such and promote the region’s airlines, the orga- as fuel prices, over flying, user charges and, nization, which held its 40th annual general to a certain extent, labor costs. These have meeting in October, focuses on five key increased tremendously during the past few objectives: years. At the same time, the pressure to Promote the highest safety standards, increase revenues is getting greater and Provide a framework for a better econom- greater, so for the last 30 years, there’s been ic environment for airline operations, a continuous decline in yields and a steady Promote high standards of consumer- rise in costs. So a significant challenge for driven services, Arab airlines as well as carriers around the Provide high-quality and cost-effective world is containing costs and driving up rev- framework for human resources develop- enue while offering a compelling service. ment. Environmental issues are high on the Invest in the synergy of interaction among agenda as well as safety concerns. And, of members through establishment of joint course, there are internal challenges that are projects. still within the sphere of airlines’ influence. The member carriers participate in It’s a matter of remaining creative enough several standing committees, devoted to and innovative enough in terms of product issues such as fuel and information tech- development, product offerings and product nology, that provides a forum for exchang- delivery so the value proposition for the ing views and discussing issues affecting airlines will continue to be for the customer. the air transport industry. Now these challenges are actually across the Since 1996, the organization has been board for all airlines no matter where they are run by Secretary General Abdul Wahab located. Teffaha, who was elected to the top posi- The specific challenges for the Arab tion after serving for several years in the airlines, in addition to those mentioned, are organization. Teffaha joined AACO as an basically in three areas: assistant tariff analyst after receiving his Deregulation — The Arab world takes, post-graduate degree in socio-economic to great extent, a conservative approach development and political sociology. He toward market access. Almost 30 years worked his way up the ranks, becoming after the liberalization of air transport in assistant secretary general in 1992. the United States and 10 years for Europe, During his tenure at AACO, Teffaha the Arab world has not kept pace and still helped develop a new strategy for the applies a conservative approach toward organization that gave the member air- market access … toward granting traffic lines increased bargaining power through rights. Working within an environment of combined negotiations, resulting in bet- regulatory constraints is not the best envi- ter economics for the Arab airlines. The ronment for the airlines, and I believe all organization also quickly launched joint airlines would want to be able to be free in projects, including joint fuel purchasing, terms of offering capacity that meets mar- joint ground handling, joint MIDT process- ket demands and changing the dynamics ing and the establishment of a regional of how they operate according to market training center. changes. But his influence in the industry Changing the landscape — We are chal- has expanded beyond the Arab world. lenged by how to change the landscape He was instrumental in helping craft the of airline operations from the flag-carrier International Air Transport Association’s concept into a totally business-oriented currency system for pricing airline tickets concept, while at the same time delivering and its prorate system for revenue sharing on the objectives that the owners have set. among airlines. He also was a member of And let’s not forget that most of the Arab

ascend 43 profile All photos courtesy of Airbus of courtesy photos All airlines are still owned by the government In the areas of revenue maximization, and, therefore, there are strict government customer loyalty and product development, requirements. It’s extremely difficult to be we were instrumental in bringing a number of a commercially oriented, business-oriented Arab airlines into the area of market informa- entity and at the same time respond to tion data tapes processing, which provides demands from the owner, which often better visibility for marketing and market seg- go beyond business sense. For instance, mentation to be able to respond to customer securing jobs for people isn’t always the pri- needs. In other areas, AACO, through its train- ority anymore, serving destinations that are ing center, is contributing to human resource clearly not of commercial interest, outdated development, which is extremely needed in hiring policies at airports, etc. So I believe it the Arab world. is a big challenge and it’s something that all Our role is to raise awareness about our the airlines that are owned by governments, member carriers’ major challenges and lobby especially in the developing world, would for the airlines’ objectives. We provide that feel. The quicker privatization happens, the through a network of relations and information quicker airlines will be cut loose from these so we can deliver a message we believe needs shackles of government ownership. to be part of the collective mindset of the Arab A Fragmentationconversation — Until now, with the Arab world airlines — and give it its rightful priority. has at least one national airline or one airline thein everychief country executive — or perhaps even more Q: AACO members include a mix of than one national airline in every country. carriers including network carriers, low-cost These airlines are serving a number of objec- carriers, flag and national carriers. How can officertives: one ofof them Jet is the Airways creation of a new... such different kinds of carriers with dif- industry, a tourism industry, putting their ferent objectives and governance models country on the tourism map, promoting busi- possibly cooperate under the umbrella of nesses and so on. And the airlines are play- AACO? ing a very important role in actually achieving A: Well, it is about creating or identify- these goals, like what Emirates did to Dubai, ing the common denominators among airlines. what Qatar Airways is doing to Qatar, what We don’t, of course, force any airline to coop- Etihad will be doing and is doing to Abu erate or participate in any projects. What we Dhabi, and so on. But ultimately, I don’t see do is open the possibilities of participation if that this is going to be the norm in the Arab the airline is convinced that a project is good world. I believe that ultimately what needs for it. to happen is a liberalization of capital move- On the other hand, no matter whether ment, privatization of the airlines and, there- a low-cost airline, network airline, flag air- fore, the possibility of consolidation among line, cost cutting is important. So everybody Arab airlines, and not only among the Arab benefits from the fuel purchasing program airlines but between the Arab airlines and because you are interested definitely in hav- maybe some other airlines. ing a lower fuel bill. So that’s the common denominator where everybody has an interest. Q: Are you suggesting that Arab It doesn’t have to be that everybody needs to airlines create alliances and/or merge as The AACO’s 23 member carriers, includ- be a participant, but at least we have in every a way to address some of the challenges ing EgyptAir, Gulf Air and Emirates, have project a critical mass of airlines that are better they face? formed several committees to help col- off together dealing with a certain issue rather A: I am talking about merging rather lectively address critical issues such as than dealing with it individually. than building alliances. With alliances, every- fuel costs and technology. body can accede if they want to. The issue — Q: AACO is rated by its members airline consolidation — goes beyond alliances. and industry partners as very successful. It’s not only challenging for Arab airlines but What really makes AACO effective? also for the industry as a whole. There are this happens, airlines will be able to achieve A: I think three issues make AACO suc- too many players, too many airlines, too much economies of scale and scope that are not cessful relative to airlines’ concerns: over capacity globally, which has been plagu- possible today. 1. The pragmatism of the objectives and busi- ing the industry since it started. The industry ness plans. We don’t look at AACO as mere- is not being treated as a normal business Q: What is the AACO doing to help ly a trade association. We look at AACO as a and, therefore, is dealing with fragmenta- its member airlines address some of these business, and there are stakeholders [who] tion. The existence of so many players does challenges? need a return on investment. And we deliver not allow any of them to achieve optimum A: The AACO is involved in a number that return on investment, and we try to return on investment in terms of economies of joint projects that help airlines cut costs in make it the maximum return on investment of scale and economies of scope. This is the areas of fuel, ground handling and network that we possibly can. We are a business like very specific to Arab airlines as well; it is not optimization as well as leveraging our rela- any other business, and we deliver value to about how many airlines or flag carriers each tionship with global distribution systems and our shareholders. country has, it needs to be about how airlines deployment of electronic ticketing. So we have 2. The commitment of the stakeholders — the are able to grow (vertically and horizontally) a large number of joint projects, and all of them airlines. We are quite fortunate that airline through organic growth, through expansion, deliver cost efficiencies that were not possible executives don’t only feel the value of and through mergers and acquisitions. When without the collective work of the airlines. the cooperation but also are committed to

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cooperation. Now there is a culture of coop- year and in 2008. The airline business is very eration among airlines. And that culture, of dynamic, and I am sure that other issues are course, was built over a period of time. It going to pop up for us to address. wasn’t built overnight. It was built with hard work, with credibility, with commitment Q: What is the AACO doing to pro- from airline executives to make the collec- mote safety? tive work succeed. Of course, they know A: We’re comfortable with where that they are better off with the others than we are on safety. AACO members have on their own. It is much easier to do things excellent safety records. All of them are individually; it is much harder to do them col- also on the IOSA registry or will be by the lectively, but the dividends for the collective end of the year. Some AACO members work are greater. have already completed the IOSA, which 3. The AACO team. I am quite fortunate to is the international operations safety head a team that is dedicated, high spirited order from the International Air Transport and committed to AACO. Association. It has completed a second These three areas are what makes audit because it’s a biannual program. AACO vibrant and relevant to the airlines. So we are quite sure our safety record is Actually, it is more than relevant; it is important very good. During the last four years, we to the airlines. It is an important tool for the have had zero accidents, but again, the airlines to achieve better results. improvement of the quality of service and product development is going to be high Q: What were this year’s main proj- on the agenda as well. ects for AACO? A: We have completed negotiations Q: What changes would you like on the core reservations, inventory and to see in the AACO during the next departure control systems, and now we need five years that will help strengthen the to work with the airlines according to their position of your members? choices on the finalization of that relationship A: I believe its not about changes, it with the core systems. We are about to final- is more about an evolution of the process ize negotiations on global distribution system where AACO gets more and more involved deployment, and we will deliver by the end in areas where we haven’t until now been of the year on those two. involved as actively as we were in other We are also extending the coverage of areas. For instance, the technical coopera- the Arabesk alliance, including codeshares, tion area. During 2007, we started to place third and forth freedoms, and perhaps talk high emphasis on the technical cooperation to other airlines outside of the region to area. We lacked the resources before, which start some cooperation arrangements with resulted immediately in a couple of projects them. So, I believe Arabesk is going to be that are extremely valuable for the airlines an area of major work in the next year and — emergency response and maintenance especially after what will happen because of and overhaul. We are just starting our focus the interline ticket issue. The bigger airlines on those two areas, and we already have are revisiting the value of their interline part- Qatar Airways, Royal Air Maroc and two agenda issues we will address that will ners, and they are determining whether they Royal Jordanian, in conjunction with not only save the airlines millions of dollars, want to interline with other airlines based 20 other AACO member carriers, work it will also elevate their emergency response on their value. That will definitely put a chal- together on joint projects to help boost readiness to much higher levels than today. lenge in front of the smaller airlines that will operational efficiencies and reduce costs. The MRO is meant to save money and not make it to the top of the priority list for provide better inventory management. The bigger carriers. Smaller airlines need more airline industry is quite complex; it is becom- interline agreements than big carriers or ing even more complex as it grows and the alliances. So one of the issues we have on the agenda. We need to see how we evolves, and I think AACO needs to evolve identified and need to work on will include can address that in a way that does not put into doing more complex tasks that are now the help of Sabre Airline Solutions® because everybody in one basket because the Arab being done either individually by the airlines it’s our technical consultant for Arabesk. airlines have the youngest fleet anywhere in or by AACO but with not the right size and We are identifying where the Arab air- the world. Therefore, the Arab airlines’ com- scope. I see AACO not only as an alliance, lines need to have interline partners, which mitment to the environment is quite obvious, but a highly integrated alliance the airlines may continue to be the same ones in place and we can’t just sit back and be treated can rely on to do a number of tasks collec- today but may also change depending on like anybody who did not invest as much in tively. We have behaved like an alliance; we the wishes of the parties concerned. So its fleet renewal and be penalized if there actually started collective purchasing for fuel this, I believe is going to be very important were some sort of taxes or penalties on fuel and other things such as ground handling 10 because we will continue to do what we consumption. We invested tremendously in years before alliances started. But we have were doing before to deliver travel pos- the technology, and we believe we need to not publicized it as an alliance. The percep- sibilities for customers. Of course, there is be treated according to that investment so tion of AACO needs to be that this is a tool the continuation of the other work AACO is people and airlines are encouraged to look we can use collectively to do more. And I doing. In the airline industry, we always have for new technology. So this is also some- think this is what the way of the future is something new — now the environment is thing we’ll address the remainder of the going to be.

ascend 45 profile

Singapore Airlines: A True Pioneer

For Singapore Airlines, introducing the Airbus A380 super jumbo jet into its fleet and making aviation history was a smooth ride because of its upfront preparations.

By Apurva Mathur | Ascend Contributor

n Oct. 25, Singapore Airlines made Airbus of courtesy photos All history when it took to the skies with Othe new Airbus A380. While bringing the largest-ever commercial airplane online seemed effortless from outward appearances, it took a great deal of cooperation among many areas across Singapore Airlines’ operations. It required a strong management team that had a customer-centric vision. It took years of planning to ensure an all-around smooth entry into its fleet. And it took a great deal of creativity and innovation to ensure its A380 service was unique to the industry. It’s a true testament to the professionalism associated with Singapore Airlines in running an organization ready for any and all of the industry’s biggest challenges. And it is also a tribute to Airbus, which has introduced an airplane that looks very different than any other ever built, but at the same time, if well managed, can be easily integrated into an airline’s fleet. According to Capt. S.L. Leong, deputy chief pilot of the A380 program for Singapore Airlines, “The introduction of any new aircraft type is always challenging; none more so than the A380. While Airbus has strived to maintain its “family concept,” the introductions of some The first A380 for launch customer Singapore Airlines was painted in Hamburg, Germany, in of the innovation on the aircraft, especially preparation for its October delivery. the electronic flight bag, has required new processes and new ways of doing things. Our challenge is to minimize any disruptions from these new processes and ensure a smooth introduction of this aircraft into service. was designed to accommodate 555 passengers, delivery of the aircraft,” said Capt. Leong. “By Singapore Airlines won’t stop with only Singapore Airlines’ three-class configuration of now, we should have had six A380 aircraft in one of the world’s largest aircraft. It has 18 the A380 has only 471 seats, giving its custom- operation. The shortfall has been managed pri- more on order and six on option. In January, ers a spacious, comfortable ride. marily by deferring retirement of some Boeing the carrier will take delivery of its second While the carrier’s preparations made for 747-400 aircraft and short-term dry leasing of A380 for its Singapore-London route. The a smooth introduction of the A380, it faced a few aircraft.” airline plans to use these 569-ton aircraft on challenges, as expected with any new aircraft. Maintenance has also presented a chal- high-density long-haul routes to airports that “The key challenge has been to manage lenge. The carrier has put together a com- are slot restricted. And although the A380 the shortfall in planned capacity due to the late prehensive plan to ensure that inventory of

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lers. The A380 loads the required fuel to obtain the optimal center of gravity for optimal flight performance. There are many new devices that have been introduced to assist with pilot training on the A380. The 2-Dimensional Maintenance/ Flight Training Device, or 2-D MFTD, is used to get a comprehensive integrated training view of the A380 cockpit. One look at the 2-D MFTD makes it clear that there is a step function improvement in the technology that is being used to train for the A380. Such devices earlier were used only for familiarizing the crew with the cockpit, but with the A380, they are used like a simulator, less the motion and vision. Thus, crew not only learn the systems but also the procedures with flying the A380. Another new device in the cockpit of the A380, which spans 79.8 meters wingtip to wingtip and can carry more passengers than any other aircraft (the wings are so large that each one can shelter approximately 2,800 On April 11, the first A380 entered Airbus’ paint hanger in Hamburg, Germany. people), is the class 3 electronic flight bag. The onboard information system, or OIS, is also innovative and different and will provide aircraft performance computations as well as a suite of other applications such as eCharts, eLog Book and Electronic Flight Folder. Airbus has taken another novel idea into the design of the keyboard cursor control unit to allow better interaction between the pilot and flight management system. The new system includes a trackball and a qwerty keypad, enabling cockpit crew the option of direct point-to-point navigation with the click of a trackball rather than typing it into the flight management system. The new aircraft also is unique with the mezzanine level of the cockpit. Unlike the Boeing 747, the only other commercial aircraft with an upper deck, the cockpit on the A380 is located in between the upper and lower decks, allowing for easier operations by the cockpit crew. Pilot training on the A380 is straightforward and no different than any other aircraft type, which has a simple design, even though behind the cockpit is a super jumbo aircraft with a height of 24.1 meters (equivalent to the height of five giraffes) and a fuselage length of 72.7 meters (equivalent to the length of The painting of Singapore Airlines’ first A380 took 21 days and used more than 2,200 two blue whales). Singapore Airlines pilots liters of chromate-free paint. have undergone a three-week ground school conversion training course in Singapore followed by four weeks of simulator and aircraft training at Airbus headquarters in Toulouse, France. It’s the same amount of training pilots spare parts is well stocked and maintenance Despite a couple of minor challenges, receive for any other wide-body aircraft, such personnel are performing more checks dur- the aircraft sports features that are, to date, as the Boeing 747. Approximately 40 cockpit ing aircraft down times in between longer exclusive to the A380 (see related article on crew have undergone training, and Singapore turn times and in the evenings. Despite the page 8). Airlines will conduct future schooling at its capacity constraints, true to Singapore Airlines’ The weight and balance function on Singapore training facilities using its A380 full efficiency, its operations continue to run with the A380 is fully automated. This is different flight simulator and flight training device. on-time departures of 92 percent this year, 0.3 than other aircraft, where the take-off weight On the cabin crew side, the story is very points better than last year. center of gravity is calculated by load control- similar in that preparation for the introduction

ascend 47 profile

of the A380 requires preparation no different arm of SIA, also made preparations to maintain opportunity to auction its much-sought-after from any other new aircraft type into the fleet. the A380, training 59 licensed aircraft engineers tickets on its inaugural flight, donating the pro- Singapore Airlines plans to have more than and 173 technicians to care for the new aircraft ceeds to four charities: the minimum crew complement required per type. SIAEC has also invested US$16.2 million Community Chest of Singapore, government regulation — at least 18 crew- in tooling and ground support equipment, and Sydney Children’s Hospital, Randwick, members. Of course, there are new features it built a new hangar with a roof height of 44 The Children’s Hospital at Westmead in and gadgets on the A380 that are typical when- meters to accommodate the giant tailfin of the Sydney, ever a new aircraft is launched, but the training A380. Médecins Sans Frontières, also known as requirements are not any more complicated for Singapore Airlines has undergone all the Doctors Without Borders. the cabin crew. There is an extra day of safety preparations and training necessary to suc- Singapore Airlines Chief Executive Officer training to enable cabin crew to safely evacu- cessfully operate the A380, but perhaps Chew Choon Seng said the first commercial ate a double-deck aircraft. most importantly, it has made special provi- A380 flight is a landmark in aviation history as In addition to training and service require- sions to ensure its customers have a memo- well as a once-in-a-lifetime experience on an ments specific to the new aircraft, realignment rable, enjoyable experience. aircraft that marked a new chapter in air travel. of crew numbers is required to ensure the The carrier’s A380 cabin has been “While we will celebrate the event, we correct numbers are trained for various aircraft fitted with unique seats to ensure maxi- also wish to remember the people who are less types without compromising aircraft recency mum comfort. Panasonic has provided the fortunate and can be assisted by the charities to (each cabin crewmember can fly a maximum latest in-flight entertainment equipment, which all the proceeds will go,” Chew said in a of three aircraft types in accordance with giving passengers numerous entertainment recent press release. Singapore government regulations). For the options. And the airline promises a new The airline that prides itself to be “the first entry into service of the first aircraft, about 300 product, “Singapore Airlines Suites,” which to fly the A380,” Singapore Airlines has taken the crewmembers were affected. Cabin crew will it describes as a class beyond first. Its challenge head on in a manner that is only continue to be triple fleeted, thus allowing no business class will be modeled on the new becoming of the carrier. The professionalism and major rostering differences for A380-trained cabin product launched in October 2006, to efficiency with which SIA has approached this crew. worldwide acclaim, which offers a fully flat massive undertaking is testament to its focus as On the ground, Singapore Airlines had to bed, a wide sofa-style seat and direct access a pioneer in aviation history. a prepare its staff to ensure smooth operations from every seat to the aisle in a spacious including embarkation and disembarkation of one-two-one configuration. Apurva Mathur is sales director, passengers using direct upper deck access, or For Singapore Airlines, it was more Asia/Pacific for Sabre Airline DUDA, a third arm of the gate bridge. Singapore than just preparing and training staff to oper- Solutions®. He can be contacted Airlines Engineering Company, the engineering ate a huge aircraft. The carrier has taken this at [email protected].

+count it up

120 billion 43 2.5 billion The amount in U.S. dollars the indus- The number of airlines worldwide now The amount in U.S. dollars the try fuel bill is expected to grow in offering common-use self-service kiosk International Air Transport Association 2007 (26 percent of operating technology, and more than 100 airlines expects the airline industry to profit expenses at US$61 a barrel) due to are currently developing CUSS, accord- in 2007, the first profit since 2000. growth, hedging at higher prices ing to the International Air Transport Europe is expected to achieve the and an increase in refinery margins, Association. largest profit with a projected US$1.5 according to IATA. billion.

500 million 112 billion 4.8 The amount in U.S. dollars the indus- The amount in U.S. dollars the industry Percentage of the average annual try lost in 2006 as a result of high oil fuel bill grew (26 percent of operating growth rate of international prices, according to the International expenses at US$66 a barrel) in 2006, an freight volumes between 2006 Air Transport Association. increase from US$44 billion (14 percent and 2011, which is supported by of operating expenses) in 2003, accord- economic growth, globalization ing to IATA. and trade.

48 ascend It’s not Business Class, It’s Eos Class Eos Airlines pampers its guests with an exceptional end-to-end travel experience and no crowds as part of its best-in-class operation.

By Dennis Crosby and Rob Siegel | Ascend Contributors

ascend 49 profile

mong heavy competition for the “By serving fewer guests bet- tage,” said Roberto Lebron, the airline’s highly coveted premium pas- ter, Eos has redefined the premium director of corporate communications. A senger in the New York-London long-haul business category,” said Dave The trip begins with a curbside market, one carrier has taken a unique Spurlock, founder of Eos Airlines, when “meet and greet” followed by check approach to differentiating its product. presented with the 2007 Business Travel in. From there, each guest is escort- Eos Airlines has created a more effi- World Awards where Eos was named ed through security and guided to the cient, less stressful journey by simply Long-Haul Business Airline of the Year. airline’s pre-flight lounge, where food, eliminating the crowds normally seen at “We are very pleased to receive this refreshments and complimentary wire- check-in and security areas as well as industry award, which clearly recog- less Internet service is readily available. airport gates. nizes the renewed spirit, innovation and This process is so efficient that Eos The key is in the numbers. The service quality Eos has brought to the makes it possible for its guests to arrive carrier’s fleet of Boeing 757 aircraft is marketplace.” within 45 minutes of their departure. configured to only carry 48 guests in Another aspect that makes a Furthermore, the carrier’s boarding time an all-premium-class configuration. This remarkable difference to those travel- is typically less than 10 minutes. Taking advantage of London Stansted Airport is another key differen- tiator for the eastbound trip. Generally, there are no other international arriv- “Our best-in-class employees, flat-bed suites als when Eos’ flights arrive at London Stansted. In merely 25 minutes from and everything else that is necessary for an landing, guests can be onboard a train to the city. Of course, guests may take their time and elect to enjoy a shower at the extraordinary experience is what ‘Eos Class’ SAS Radisson Hotel, all compliments of Eos (on qualifying fares). Furthering its provides … minus the crowd,” guests’ experience at London Stansted, Eos recently completed the first phase — Jack Williams, Eos CEO of a new lounge facility that boasts capacity for 75 guests. The second equates to a very generous 21 square ing on Eos is the terminology the car- phase is scheduled to be completed by feet of personal space for each guest rier uses. It refers to passengers as the end of the year. with a one-to-eight flight attendant/guest “guests,” and its spacious seats are While its offerings are unique and ratio. called “suites.” It may seem insignifi- appealing, exactly how does Eos attract “The notion of taking away the cant, but to customers, the unique ter- customers in a market that is dominated crowds was a simple idea that has led minology says a lot about what can be with such heavy competition? to a dramatically better guest experi- expected aboard Eos flights. “We’ve had tremendous success ence,” said Jim Prebil, senior vice “One has to travel with Eos to truly with guest referral and word-of-mouth president and chief information offi- appreciate our category-of-one advan- advertising,” Lebron said. “Our net pro-

cer for Eos. “We are able to take Eos of courtesy photos All responsibility for each and every guest. We’ve accomplished this while being the fourth-largest airline in terms of frequency between New York and London.” The benefits of this “uncrowded” experience, according to Eos Chief Executive Officer Jack Williams, captures the true essence of what “Eos Class” is all about. “Our best-in-class employees, flat- bed suites and everything else that is necessary for an extraordinary experience is what ‘Eos Class’ provides … minus the crowd,” Williams said. “The removal of the crowd is what makes all the other best-in-class services that much more authentic and pleasurable to our guests.” Being one of the airline’s main attractions, the limited number of guests it serves for a given flight has also contributed to its winning top industry Eos offers elite, contemporary lounge facilities for guests who have layovers or arrive early at awards and its ranking of “best on- the airport. Its new lounge at London Stansted Airport will accommodate 75 guests. time performer” in the New York-London market.

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moter score tracks at 84 percent (higher “We also made a conscious decision evaluation of new routes and schedule optimi- than Harley Davidson in terms of compa- to utilize the Traveler Loyalty system for our zation, Eos is tapping into the expertise of the nies). It is a fairly regular occurrence for Club 48 frequent flyer program so more time Sabre Airline Solutions® consulting team.” a a guest to cross out the highest rating can be spent on servicing our guests versus of 10 and replace with a 15 on the com- developing technology. We’re also in the ment cards, and then go tell all of their midst of implementing the Sabre® CrewTrac® Dennis Crosby is a sales director and colleagues and friends about their Eos system to assist with our operational efficien- Rob Siegel is an account director for experience.” cy so we continue to maintain our No. 1 on- Sabre Airline Solutions. They can be Eos carries more business trav- time performance ranking in the New York- contacted at dennis.crosby@sabre. elers by far (about an 80/20 mix in London market. And as we continue our com and [email protected]. terms of business to leisure) but still targets the premium leisure traveler. The carrier’s mix of customers ranges from seven of the top 10 investment banks to celebrities in the field of music and film, athletes, and even members of the British Royal Family. The average guest, based on Eos’ research, is a predominantly highly educated, affluent male who holds a senior-level executive title. Eos has positioned sales teams in both the London and New York markets to target and deliver additional corporate travelers. “Currently, we are seeing a 50/50 split between U.S. and U.K. customers,” Lebron said. “We do market our product as business class to attract the managed corporate traveler, but in reality, we’re much closer to a first-class product. And while most of our guests travel on Eos for business purposes, we are continuing to target the discretionary leisure traveler.” The price of entry into the trans- Atlantic market has required Eos to offer its Club 48 frequent flyer program, Eos offers each guest a spacious 21 square feet of personal space on its fleet of Boeing 757 powered by the Sabre® Traveler Loyalty aircraft that are configured to carry only 48 passengers. System, which offers an impressive list of redemption possibilities, ranging from unrestricted black-out dates on Eos (as well as any major airline) to merchandise from brands such as Tumi and Harrods. However, Eos feels its service, quality and experience is more important than any loyalty program it could offer. “Note that Four Seasons doesn’t have a loyalty program,” Lebron said. “Brand loyalty is much more being driven through an outstanding service experience than to points. It’s the reason 98 percent of Eos guests are highly likely to return to Eos.” Technology has also played a key role in Eos’ success, according to Prebil. For example, the carrier relies heavily on the ability to market and reach distribution segments better than anyone else. “Travel management corporations are a large source of distribution,” he said. “Sabre® global distribution system connectivity and Electronic Ticketing [an option ® within SabreSonic Ticket] has been key As part of its all-premium-class service, Eos staffs its aircraft with one flight attendant per to enabling Eos’ distribution strategy and every eight passengers, providing a more personal, gratifying experience for its guests. has helped contribute to the rapid growth of our load factor.

ascend 51 Recipe for a Merger

54 Despite the many obstacles accompanying airline mergers and acquisitions, carriers that rise up to the challenge often remain the industry’s top players.

To the Core While some carriers are merging and/or expanding 59 their businesses, others, such as SAS, are selling parts of their organizations and getting back to their core competency of running a passenger airline.

Boom and Bust

61 A number of private-equity companies are taking an interest in airline ownership to help make the sometimes-struggling carriers better as well as boost the value of what they own.

A Bold GOL

63 In one of its patented straightforward business moves, GOL Airlines assumes ownership of Brazilian rival Varig.

ascend SPECIAL SECTION

Airline Mergers and Consolidation special report

Recipe for a Merger

Despite the many obstacles accompanying airline mergers and acquisitions, carriers that rise up to the challenge often remain the industry’s top players.

By Peter Berdy | Ascend Contributor

he appetite for mergers and acquisitions media and expensive to consume. They divert line industry, such as Air France/KLM and US seems insatiable in the airline industry. attention away from running the core business, Airways/America West. TCompanies link up in different ways imag- and they don’t always work. They are newswor- Across all industries, more than 75 per- inable, from joint ventures and cross-financing thy because of the association with corporate cent of mergers do not produce intended to friendly acquisitions and hostile takeovers. and personal survival, the potential drama sur- benefits, according to Booz Allen Hamilton’s Whether airlines are in poor financial shape rounding layoffs, and the closures that often 2002 “Airline Merger Integration: Take-Off or good condition, the lure to acquire seems accompany acquisitions … not to mention the Checklist.” Common reasons for failure include irresistible. possible loss of identity of a known brand. a collision of management styles, complexity of Yet mergers and acquisitions have a On the other hand, there have been tasks to make a merger work and differences mixed track record. They are highly visible in the showcase examples of success in the air- between corporate cultures.

Selected Merger and Acquisition Examples Concept Owner Target or example Notes Full merger Lufthansa Swiss 100% ownership, retain Swiss brand Partial acquisition SAS Spanair, bmi, Air Greenland Partial Ownership: 95% Spanair, 20%-bmi; 37.5%-Air Greenland Mixed ownership Cathay Pacific DragonAir wnership:O 100% DragonAir, Airways 17% Air China. Potential 3-way among Cathay, Air China and DragonAir Hostile takeover AirTran Airways Midwest Airlines Cross-border expansion LAN LAN Argentina, LAN Peru, Provide financing to acquire shares or New Varig set-up airline in non-home country Private equity Texas Pacific Ryanair, Iberia Private equity firm investing in Group different airlines Joint venture Virgin Air Jamaica Transfer LHR slots, operate Jamaica UK as a codeshare Global play Air One Alitalia Restructure and expand flag airline

Several merger and acquisition opportunities, ranging from full and partial ownership to joint ventures and hostile takeovers, have airlines around the world taking risks to secure their future.

54 ascend special report Photo by shutterstock.com by Photo

The key to a successful merger is to take the top attributes of each airline and merge into a single large, healthy operation. The teaming up of US Airways and America West combines the best aspects of a low-cost carrier and a full-service airline.

“What’s good for investors, shareholders as they will gain access to an enhanced offering Leveraging tax opportunities: Using the tar- and management may not be good for others,” and create substantial shareholder value.” get airline’s tax write offs to improve the said analyst Kevin Mitchell of the Business bottom line. Travel Coalition. “Lots of employees will be Why Join Forces? Business diversification: Expanding to related laid off, and customers can look forward to 20 The most powerful reason for a merger businesses (maintenance, repair and over- percent to 30 percent price hikes and several or an acquisition is to create shareholder haul; cargo businesses; travel agencies) as a years of customer-service misery.” value. This may be accomplished in several hedge against changing market conditions. But according to US Airways Chief ways, including: Geographical diversification: Circumventing Executive Officer Doug Parker, you can take Offering an immediate financial premium: regulatory hurdles by purchasing a company the best of each company and merge into one, Providing existing shareholders in the com- already in business in a new geographic area, large, healthy, successful operation. pany to be acquired a premium as a finan- which also gives airlines the ability to com- “US Airways is the product of several suc- cial incentive to do a deal. pete more effectively on a global basis. cessful mergers, most recently the combination Leveraging economies of scale: Reducing Transferring resources: Redistributing and of America West and US Airways,” Parker said. costs by eliminating duplicate departments combining scarce resources such as slots, “Working together, we have blended employ- or operations. airplanes and technology. ees and cultures to create a new standard in the Increasing market share: Combining to Selling undervalued assets: Releasing value industry, which combines the best attributes of generate greater overall revenue than each by spinning off business units, which can also a low-fare carrier and a full-service airline.” company could generate on its own. be used to pay for acquisition of other busi- And the story was much the same for Cross selling: Acquiring and selling comple- nesses. Air France and KLM. When the two carriers mentary products and services to boost Vertical integration: Acquiring part of a supply merged in 2004, they took a similar approach revenues. chain and benefiting from joint resources and and utilized the strengths of both companies to Exploiting synergies: Making better use lowering costs. build a thriving airline. of both airlines’ resources to lower costs Additional potential benefits for airlines “The new entity has the potential to and boost revenues — an acquisition can include: develop powerful synergies,” Air France/KLM uncover value that should exist through Strengthening the home market and attract- Chairman and CEO Jean-Cyril Spinetta said at scale, such as increased network connec- ing the business-customer segment, the time of the merger. “The complementary tivity, improved aircraft utilization, expand- Providing a network that offers multiple rout- nature of the two airlines, which will each retain ed market coverage, combined frequent ing choices to expand network coverage and their brands and unique values, will ensure that flyer programs and increased purchasing time-of-day choices as well as more connec- the new group is more attractive for passengers, power. tions to customers,

ascend 55 special report Photo by shutterstock.com by Photo Reducing overlapping flights, Integrating frequent flyer programs to offer customers more ways to earn and redeem miles, Expanding alliance membership, Improving the fleet through simplification and modernization, Reducing costs by integrating airport operations and lowering costs of procurement and financing.

Challenges Regardless of the size of the carrier, its business model or route network, there are always challenges that must be successfully addressed to make a merger or acquisition work well. The most common obstacles airlines face when merging or acquiring another carrier include: Inadequate due diligence of the target business, resulting in a lack of understanding the true state of the company about to be acquired. This may lead to overpaying for the company and misjudging financial per- The combined America West and US Airways operate under a single brand offering everyday, formance capabilities once the company is simple low fares to more than 225 destinations around the world. acquired. Losing focus on running the core business during the process of the acquisition or merger. The process can be lengthy and intense, requiring full-time attention and Gaps between targets set in the business With all the challenges inherent in merg- executive management participation. During plan and actual performance once the acquisi- ers and acquisitions, there is also a list of best this time, executives can easily lose focus of tion takes place. The plan needs to be stress practices to address certain issues: their main priority — running the day-to-day tested to consider the affects of poaching Perform adequate due diligence; understand business. by competitors (such as entering markets, the financial state of affairs of the company Underestimating labor complexities that arise running fare sales or offering jobs to key to be acquired, learn how the airline currently from negotiating changes to union work personnel) as well as a potential migration of runs its business, and identify the leaders and rules, existing labor laws and the difficulties loyal customers who are sometimes forgot- potential detractors. of integrating workforces. The risks range ten along the way. These sensitivity tests are Start well before the deal is closed, and allow from the potential for labor disruptions to important to evaluate the potential downside sufficient time to achieve integration of the paying a steep price for labor peace. There if key assumptions fail to materialize. acquired airline. are often imbalances in pay and work rules Cultural challenges. Differences between Assess the fit of the airline to be acquired, that need to be dealt with as well as the corporate cultures, political challenges and and determine if this company provides real need to create harmony across different language barriers are hurdles that need to benefits (expanding services to customers, companies that may share the same unions. be overcome. The company could be a providing market coverage to broaden the Financial considerations, such as how deep poor business fit if these are not addressed base of customers and enabling economies the pockets need to be to pay for integration upfront. of scale) and offers real efficiencies for the and cover unanticipated costs. There is the Management’s capability to deliver. Mergers combined entity. potential of a financial shortfall related to and acquisitions spur management to devel- After developing the strategic vision of the overestimating the value of synergies and op overambitious visions and plans that could combined entity, airline executives should achieving the actual financial performance lead to failure to deliver bottom-line results. move to tactical steps on the transaction that was projected in the business plan as Executives who have never been through structure and integration plan. They should well as pressures coming from competitors a merger or acquisition find they may have identify how the structure will take place and trying to take advantage during the transition underestimated the resources, talent and prepare a realistic timetable for the acquisi- period. There’s also unit revenue pressure time required to successfully complete a tion. with the expectation that the combined enti- deal. Appoint a leadership team that’s sole job is to ty should have greater capability to increase While an acquisition may look easy on work on the acquisition and implement the fares or control inventory. paper, the trick is how to actually integrate business plan. In addition, determine who Technology issues ranging from inheriting operations successfully and to really achieve will manage professionals, such as bankers, legacy systems, in- and out-sourced func- lower costs while avoiding service disruptions consultants and attorneys, during the acquisitions, and mismatches in capability and deliv- and even improving operational performance. tion process who are needed for the transac- ery. Technology touches all aspects of the Decisions can easily become politicized over tion. Determine how to use these external airline’s business as well as the customer items such as who flies in certain markets, resources efficiently and effectively, and have experience. Improper integration and cutover which employees stay or go, and who pays them commit to timelines and deliverables. of systems have serious adverse affects on for different costs that are incurred during the The leadership team must develop a detailed operations and customer satisfaction. transition. integration plan with key activities and work

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tasks to be completed. It needs to describe Understand the cultural and environmental would reinforce the need for consolidation. how they will get the job done, who is differences of the two companies, and They wanted to take advantage of changes responsible for which tasks and when those develop a plan to harmonize. Determine about to take place the in political climate tasks are to be completed. The leadership how to preserve key elements of employ- and economic environment that were on the team should also identify critical success ee pride, history and brand value of the horizon. This included the advent of a single factors, determine how to measure perfor- acquired company as a transition to a new European aviation market, preparation for likely mance, build a communications plan and state of evolution rather than positioning open skies between the European Union and create reporting structures. it as a company that has just conquered a United States, and opportunities resulting from Specify how processes and functions will be competitor to drive them out of business. enlargement of the European Union. integrated and what systems and resources will be needed. Set priorities, with the Highlight intent of realizing expected benefits quickly. Areas likely to produce early financial results include procurement, pricing, revenue man- “Regardless of the size of the carrier, its agement, sales and distribution. These should be followed by benefits derived from business model or route network, there are network and schedule changes and operations consolidation. Review ways to reduce complexity and always challenges that must be successfully simplify operations. This includes harmo- nizing fleet through a reduction of airplane addressed to make a merger or acquisition types, reducing the number of suppliers and parts, and identifying specific synergies work well.” that should provide cost savings, including consolidating overhead and sharing facilities such as airport counters and gates. Measure and evaluate synergies realized by the merger or acquisition and compare the Air France/KLM Success They had a clear vision of what to offer actual performance to the plan. Air France/KLM announced intentions to customers and shareholders: a solid financial Establish controls and processes to resolve merge in 2003 and completed the transaction company, providing superior customer service, problems that may arise from the acquisi- in 2004. Following the announcement, the car- the willingness of management to extract value tion, especially in operations, to avoid crip- riers followed their plan and have outperformed from synergies while at the same time preserv- pling interruptions or staff defections. financial expectations. In 2004, these two major ing their identities, brands and value. Communication must be consistent and fre- flag airlines combined, creating the largest Air France/KLM also saw opportunities in quent to deliver management’s goals, objec- airline in terms of passenger revenue with a cargo operations as well as in the maintenance, tives and timetable for specific targeted combined turnover of approximately €20 billion repair and overhaul business. Their combined audiences. A communication plan should (US$27.4 billion). networks also provided extensive coverage of include different employee groups at both What was the rationale for their merger? major global cargo flows to create the largest airlines as well as separate communication They recognized that a single E.U. market cargo revenue turnover in the world. They plans for investors, airports, government and regulatory agencies, suppliers and part- shutterstock.com by Photo ners, and the press. Address existing relationships with partners, vendors and suppliers in terms of communicating the transaction, and identify what they should expect from you and you from them. Be sure critical suppliers are paid on time, and identify how to address past liabili- ties the acquired company may have. Look at the customer’s point of view and see how to make customers benefit from the onset. To retain and expand business with existing and acquired customers, consider using promotions, special events, fare sales, frequent flyer program bonuses and similar activities linked to the acquisition. Address labor concerns early on to avoid resource issues. Identify and communicate the overall plan, specifically what is expected of each of the labor groups. Answer questions concerning critical labor items such as if there will be job cuts, work rule While KLM and Air France continue to operate under their own brands, their merger three changes, trade offs and other issues that years ago has enabled the combined group to develop powerful synergies and provide a will be of high concern to employees of more attractive passenger airline. each airline.

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viewed expansion as a MRO provider to their revenue management harmonization; improv- would include representation from its partner existing customer base of other airlines since ing fleet utilization, coordinated management. airline. they had Airbus and Boeing capabilities and Estimated synergies: €100 million (US$137 The financial transaction provided a pre- had good relationships with original equipment million), mium to KLM shareholders that included ben- manufacturers. Cargo: Network optimization, commercial efits from the restructuring plan that was already The companies had complementary net- alignment, support services. Estimated syn- underway at the time of the merger. It also works and foresaw benefits to an enlarged ergies: €35 million (US$48 million), enabled KLM shareholders to benefit from future SkyTeam alliance. Previously, KLM was not a Maintenance: In sourcing, procurement, pool- synergies and growth opportunities as well as full member of SkyTeam. At the time of the ing spares and stock; creation of “center of be shareholders in a significantly stronger group. merger, the carriers had 101 long-haul destina- excellence.” Estimated synergies: €60 mil- For Air France shareholders, their financial benefit tions, including 31 common destinations, 43 lion to €75 million (US$82 million to US$103 included gains from annual synergies derived in unique destinations for Air France and 27 for million), the first year and large potential upside from KLM. They recognized their hub airports as Information technology: Convergence of sys- expected financial synergies in future years. assets that could be leveraged to propel further tems. Estimated synergies: €50 million to There was a three-year timetable to enable a smooth transition and allow time to secure regulatory permissions and traffic rights. On Highlight the regulatory front, the carriers needed anti- trust clearance from the European Commission, the U.S. Department of Justice and the French “A well-designed airline merger or acquisi- Commission des Privatizations et des Transferts. They indicated creation of greater oppor- tion can produce superior results, including tunities for employees and worked with labor groups on harmonization. returns to shareholders and benefits to Air France/KLM acquisition activities also focused on their customer base. They consumers, despite the complexities of inte- publicized a larger overall network, linking two systems with schedule enhancements and frequencies between hubs. They grating two businesses.” enhanced service to home markets with greater frequencies, offered frequent flyer benefits to earn and claim rewards in either program, and provided lounge access in both airlines’ networks to eligible customers of expansion. At the time of their merger, 75 €70 million (US$69 million to US$96 million), either airline. They announced electronic percent of long-haul flights in Europe were con- Procurement: Cost reduction. Estimated syn- ticketing and offered attractive fares as well centrated in 10 European hubs, with four hubs ergies: €10 million to €30 million (US$14 as special promotional fares. Through sched- providing more than half those flights (Paris, million to US$41 million). ule coordination, they offered customers France; Amsterdam, Netherlands; Frankfurt, The carriers estimated 60 percent of total connections via Paris or Amsterdam, which Germany; and London, England). Air France’s synergies would come from cost savings. Of offered more choices of routings and time- hub in Paris at Charles de Gaulle and KLM’s the total improvement projected for operating of-day travel. hub in Amsterdam Schiphol are among the earnings, half was to come from internal costs, A well-designed airline merger or E.U.’s largest hubs. The carriers knew their a quarter from external cost savings, and a acquisition can produce superior results, two airports allowed for network expansion quarter from network adjustments and fleet including returns to shareholders and ben- while other large hub airports had capacity rationalization. efits to consumers, despite the complexities constraints. The merger structure and organization cov- of integrating two businesses. There are The carriers effectively communicated ered areas of interest to key stakeholders, and it significant hurdles that need to be overcome passenger benefits — such as a larger choice was to be a publicly listed holding company with to integrate two airlines, and a smooth ride of routes and destinations, more seats at lower two operational airlines. The structure preserved is not assured. fares, and more attractive frequent flyer programs two brands and identities and was designed Airlines are a service industry, requir- — to the public and their customer bases. to operate with simplicity. Both airlines were ing cooperation of employees who are in They took advantage of synergies and to maintain their operating licenses, transport direct contact with customers and operate developed a timetable to achieve them smoothly. certificates and traffic rights. They were to be the day-to-day business. An appropriate labor A recap of the actions the carriers undertook and managed by cooperative governance, with Air strategy and implementation is essential to estimated annual value of synergies produced France appointing the chairman and CEO and secure employee buy in and obtain coopera- by the fifth year is based on a 2003 presenta- KLM vice chairman of the board and KLM CEO. tion to ensure satisfactory operational perfor- tion entitled, “Creating Europe’s Leading Airline They used a strategic management committee mance. a Group.” The airlines worked strategically in sev- to govern the implementation, which consisted eral key areas to secure their future together, of an equal number of members of both carriers. including: The committee was responsible for network and Sales: Coordinate sales structures; sales hub coordination, fleet and investment strategy, cost improvements; handling and catering. and alliance and partnership strategy. Each airline Estimated synergies: €100 million (US$137 would be responsible for its own commercial and Peter Berdy is a partner for Consulting million), operating management, including airworthiness and Solutions Delivery at Sabre Airline Network, scheduling and revenue manage- and flight safety, human resources, and product Solutions®. He can be contacted ment: Network and schedule optimization; delivery. Corporate governance of each airline at [email protected].

58 ascend special report

Fuel-Saving Systems To the Core While some carriers are merging and/or expanding their businesses, others, such as SAS, are selling parts of their organizations and getting back to their core competency of running a passenger airline.

By Phil Johnson | Ascend Staff

t a time of tremendous flux in the global shutterstock.com by Photo airline industry — with a number of air- Alines looking to establish more-aggressive growth opportunities through alliances or mergers and acquisitions — it’s interesting to observe the actions of some airlines in what may eventually prove to be either shrewd strategic positioning or simple repri- oritizing within the worldwide transportation picture. Stockholm-based SAS Group, for example, has recently made several moves that seem to signal a “drawing in” or focus specifically on serving greater Scandinavia along with adjacent areas of northern Europe — deemphasizing other regions that have traditionally been served by a broader- based SAS family of affiliates. SAS President and Chief Executive Officer Mats Jansson recently announced that SAS intends to shed its interest in SAS Group has elected to shed some of its external operations to better focus on serving Spanair as well as its substantial shares of greater Scandinavia along with adjacent areas of northern Europe — putting less emphasis bmi and Air Greenland. on other regions that have typically been served by SAS affiliates. So, while many airlines are looking to increase their size and reach through mergers, SAS has taken a different course. But what underlies this decision? After all, likely as many sound economic arguments larger move of preparing SAS to join with every business analyst understands that for paring down operations so a company another carrier (Finnair is a logical rumored nothing in the world of the transportation can claim to be operating as a proverbial partner) or be absorbed into an even larger and travel industries happens in a vacuum. “lean, mean, fightin’ machine.” consortium. And Jansson — in tandem with other top SAS management says it is further Comparing SAS’s actions (and pro- company executives — most certainly evaluating whether to hang on to other posed actions) to those of prominent com- envisions a greater strategic direction ancillary parts of its business — having panies in other industries could help pro- behind SAS’s business moves. recently sold off SAS Flight Academy. vide insight into the carrier’s motivations. Could SAS be completely out of That evaluation includes parts of the busi- Stock analysts on both sides of the synch with its counterparts in the greater ness such as SAS Technical Services Atlantic have long been only too ready and global airline industry? Indeed, could SAS and SAS Ground Services, either or both willing to recommend bundling and ditch- be out of synch with a whole lot of suc- of which could follow the way of the ing portions of a business that are either cessful companies in other industries? Or Flight Academy and be spun off or sold notably different from a company’s core could SAS — on the contrary — actually outright. economic emphasis or are seen to be per- be a trailblazer? Or those parts of the business may forming poorly. Or, significantly, are seen The reality is that no one will know simply be reorganized and retained in to have a more-than-even chance of per- the answer for several years. Just as house. forming much better as separate entities. there are logical reasons many airlines are And the entire process may be sub- These business-partitioning and -part- looking to combine with others, there are ordinated in what would be the much ing exercises usually occur as either spin

ascend 59 special report Photo by shutterstock.com by Photo offs, which are often accompanied by initial public offerings, or sales to other companies whose businesses are at least theoretically more closely aligned with the entities’ interests. To look at one of the most prominent companies in global business over the past hundred-plus years, one need only observe some of the various ownership stakes that have gone together to make up the current version of General Electric Co. Over the span of many decades, General Electric has actually been directly involved in the airline industry through its state-of-the-art aircraft engines and electronics, as well as airline financing with its GE Aviation Financial Services. But in this case, zero in on a few other pieces among the many that comprise GE at this stage of the 21st century and how those pieces may be logically apportioned in the near future. GE is one of the most successful As part of its initiative to more closely focus on its core competency of running its passenger conglomerates the business world has airline, SAS plans to divest its interest in Spanair as well as its substantial shares of bmi and ever seen, with assets and expertise in Air Greenland. such diverse areas as electricity, lighting, medical imaging, factory automation, finance, entertainment, aerospace, railroad of GE’s present business units — including Or is SAS signaling that it’s per- locomotives … and the list goes on. those analysts have conveniently pointed fectly willing to make any number of key Today’s business analysts are none- out as prime candidates — is a foregone changes to emerge more attractive as a theless prone to recommend the separa- conclusion. partner — either for a merger or as a buyout tion of business functions into different How does all of this relate to SAS candidate? better-focused spin-off companies, and and other airlines around the world that are The vital answers to these and many GE is not immune to receiving this type of continually trying to make their businesses other intriguing questions, in fact, should advice. operate more efficiently? become much more abundantly apparent in the days, weeks and months to come. But one thing will never vary: Airlines, such as SAS, operate under the same business pressures and forces as a corporation “I’ve always been of the mind that if of the worldwide stature of GE — and neither SAS nor GE nor any other company somebody can run a business better than will ever be immune to those pressures and forces. More than one industry observer we can, we will sell it.” along with many within the companies themselves have noted that under its pres- — Jeffrey Immelt, GE chairman and CEO ent economic structure, Europe has quite a few more national airline companies than are necessary to adequately, efficiently Not long ago, for example, GE did spin Actually, there are more similarities and competitively serve the total European off its hefty mortgage and life insurance than might at first seem apparent. travel market. arm into a separate company now known Like upper management at GE, the So those with an interest — particu- as Genworth Financial, and GE is also in the corporate executives at SAS and other larly in merging with or acquiring all or parts process of selling its formidable but slower- admirably managed airlines are trying to of airlines, or just an airline’s publicly traded moving plastics business. think strategically while acting tactically to stock — need to keep a sharp eye out for Now, analysts are calling loudly for GE optimize their positions within the scope of airlines sending what could be diverse mes- to shed its high-profile NBC Universal enter- their day-to-day as well as long-term busi- sages. a tainment sector as well as its real-estate ness interests. division. Does SAS management look at the “I’ve always been of the mind that if overall transportation landscape and see somebody can run a business better than we some major moves that seem to afford can, we will sell it,” GE Chairman and CEO better current capability to enhance the Jeffrey Immelt recently said, although Immelt airline’s profit potential as well as its labor- was simultaneously cagey and cautious not relations outlook (which, of course, are by Phil Johnson can be contacted at to tip his hand that the divestiture of any no means mutually exclusive)? [email protected].

60 ascend special report

Boom and Bust A number of private-equity companies are taking an interest in airline ownership to help make the sometimes-struggling carriers better as well as boost the value of what they own.

By Phil Johnson | Ascend Staff

onsidering the preponderance of buzz shutterstock.com by Photos — including multiple rumors as well Cas actual offers of various companies bidding to acquire all or portions of different airlines around the world — it’s not surpris- ing that some of the speculation centers on private-equity firms. More specifically, certain private-equity firms such as TPG Capital, which, along with Silver Lake Partners, recently took Sabre Holdings® private, appear to be very interested in moving deeper into airline ownership. And while it may seem farfetched for some traditionally “non-airline” companies to move their airline holdings up to majority stakes or even outright ownership, in TPG’s case, the airline connection is fairly obvious. David Bonderman, who co-founded Texas Pacific Group (now TPG Capital) in the early ‘90s, has a history of being involved in airlines stretching back to his association with Continental Airlines, shepherding the once-distressed carrier out of bankruptcy to become one of today’s strongest international players. More recently, TPG Capital also moved to acquire the catering arm of the former Swissair, and Bonderman himself has served for a number of years as chairman of the board of Ireland-based discount carrier Ryanair. “Not every private-equity firm is willing to touch the airline industry,” said Stan Block, Ph.D., a finance professor at Texas Christian University’s Neeley School of Business. Among Block’s spe- Texas Pacific Group, which was co-founded by David Bonderman, former Continental Airlines cialties is the study of corporate mergers and chief executive, has explored the possibilities of acquiring several airlines including Qantas acquisitions. Airways and was recently backed by British Airways to bid on Alitalia, for which it later with- “In many ways, airlines operate in a ‘boom- drew. and-bust’ industry,” Block said. “And in terms of coming into the airline industry, it really does require a very special talent — it takes somebody like Bonderman, who has had the experience stands the airline industry well enough to want to Really, it depends on how any particular and knows how to turn an airline around. It’s participate.” company’s moves are interpreted by analysts who interesting because Bonderman is not one who So what exactly is involved when assess- may or may not have all of the facts at their dis- gets hubris or thinks because he’s done some- ing TPG or any other “non-airline” company posal. Earlier this year, TPG explored agreements thing well previously, he can do something else. looking to get further involved with airlines? Is it to aquire Australia’s Qantas Airways and Alitalia, He’s a hardnosed business guy, and he under- a trend? although both efforts were unsuccessful.

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And it was recently reported that TPG is Block said. “That’s their objective — because they referring to Braniff Airlines, a once-highflying carrier being backed by British Airways in a bid to acquire want to maximize the value of the company.” that went bust in the 1980s. “Braniff was heavily Iberia. British Airways itself, in fact, has been Buying aircraft and leasing them to various into the hotel industry, and it got them in trouble. I rumored as a potential takeover target upon the airlines as highly valuable commodities is another think what you see in the airline industry is: It’s an occasion of a significant increase in BA shares major way a number of private-equity interests are industry that tends to go to extremes. We know owned by investment brokerage Goldman Sachs, becoming more heavily involved in the airline busi- that at certain points in time, an airline is highly already a major BA stockholder. ness as a whole. prosperous; at other points in time, it operates What might be the motivation of private- And there’s even been some speculation almost out of desperation. equity firms to be so involved among airlines? that the major delivery-service companies — FedEx “And what happens, just going back to “These private-equity interests are not and UPS, for example — might consider moves to the classic Braniff case, when they’re making tre- ‘nice guys,’ per se,” Block said. “They’re ‘good’ acquire airlines. It does not, however, necessarily mendous profits and have more money than they guys — they’re efficient guys who make compa- require as much imagination to detect the logic in seem to know what to do with — and this is also nies better, but they’re not trying to do anybody that type of prospective combination, since FedEx true of the oil industry and other industries as well a favor. They want to increase the value of what and UPS are already major global airlines in and of — they tend to give themselves too much credit. they own. In any company, there’s a tendency for themselves, albeit not on a passenger basis. They may say, ‘We’re doing so well, we could take activities to be continued because of personalities Airlines — in times of major cost cutting on other industries and spread our brilliance into and tradition and so forth. But once a firm like and emerging efficiencies — also tend to divest those industries.’ So what will happen is that when TPG comes in, they’re starting from a clean board. themselves of any “non-core” properties that are they’re at the peak of profitability, they will enter They’re looking to see what works and what extraneous to the primary business of safely flying other activities — just spreading their good will and, doesn’t work. and connecting people among their chosen global supposedly, their superior management. “So they’re going to reallocate for things destinations. “Then when things change, those are the that are unnecessary, that are not cutting costs, “I think this goes all the way back to Braniff, very things they need to jettison. They can’t be that are not making the operation more efficient,” and maybe even further than that,” Block said, tying up capital there — they can’t be taking those huge losses, particularly if they’re not diversified

Photos by punchstock.com by Photos away from the travel industry. And the problem with things like hotels is that when the airline industry is going poorly, chances are other components in the travel industry are going poorly as well. So there is a strong desire to jettison things like hotels and other extraneous business. And just take the example of when an airline that’s had to declare bankruptcy goes into the bankruptcy court, about the last thing a trustee or judge wants to talk about — in trying to keep the airline flying — is to keep its other activities going.” Indeed, not all airlines struggle as much as others during lean times. But the extent to which an airline’s economics become distressed can be a key measure of the type of bargain a potential buyer might accrue through an acquisition. And once a private-equity firm or another non-airline company acquires an airline, its longer- term objectives may be very clear. “They’re only likely to move in where they see two things: potential and inefficiencies,” said Block. “What I mean is the potential to be much better, and inefficiencies that can be eliminated to maximize the value of the company and maximize its profitability.” And therein lies the true potential value of the interest non-airlines have shown in getting into the airline industry in a very big way: improvement in efficiency and profitability, which in the long run can only help the entire industry grow stronger. a

In addition to private-equity firms that are taking an interest in the air transport industry, delivery-service companies such as FedEx and UPS may consider moves to acquire airlines. Phil Johnson can be contacted at [email protected].

62 ascend special report

A Bold GOL

In one of its patented straightforward business moves, GOL Airlines assumes ownership of Brazilian rival Varig.

By Phil Johnson | Ascend Staff

razil’s GOL Airlines has sustained fly to various highly desirable destina- Also in the near future, Varig is its well-established reputation as tions in Europe and North America. expected to make regularly scheduled B a growing industry force by boldly And while yesterday’s heavily debt- round trips from Brazil to New York, New acquiring the assets of its previously burdened Varig was not making active York; Miami, Florida; and Mexico City, struggling Brazilian competitor Varig for use of very many of its coveted São Mexico, in North America, as well as approximately US$275 million in cash Paulo slots, under GOL’s ownership, serve South American destinations includ- and stock. Varig figures to be flying regularly to ing Santiago, Chile; Bogota, Colombia; Not only is GOL’s plan to maintain places including London, England; Paris, Caracas, Venezuela; and Buenos Aires, separate operations and executive staffs France; Milan, Italy; Madrid, Spain; and, Argentina, in addition to numerous high- heading up the two primary branches of course, to Frankfurt, Germany, which demand Brazilian destinations besides of its airline business — GOL and Varig Varig has continued to serve from Brazil’s Varig’s scheduled arrivals and depar- — but in theory, at least, the two will Rio de Janeiro and São Paulo. tures at São Paulo and Rio. essentially continue to compete against each other, although their business mod- Archives Solutions Airline Sabre els vary significantly and, therefore, the customer demographic each pursues is distinctly different. The primary objective for the GOL brand is to economically provide the opportunity to experience the pleasures and efficiencies of air travel to the “everyman” passenger among Brazil’s (and much of greater South America’s) potential traveling public. For the Varig brand, on the other hand, the objective may be a little more difficult to characterize. Varig is Brazil’s traditional international air carrier with a proud and storied history dating back to 1927, but in recent years it has been rocked by operating inefficiencies and steep costs that in 2005 sent the airline into bankruptcy. In 2006, Varig was bought by Brazilian consortium Volo de Brasil along with private-equity investors and Varig’s own logistics/cargo arm, VarigLog. In fact, among the key assets GOL has received in acquiring Varig are the industry-respected capabilities of VarigLog. Through the Varig transaction, GOL has also acquired lots of other business Brazil-based GOL made a bold move earlier this year when it acquired assets of its struggling advantages, including Varig’s valuable competitor, Varig, for approximately US$275 million. The airline plans to operate separately, slots at Brazil’s São Paulo-Guarulhos and both carriers will keep their executive staffs. International Airport that can be used to

ascend 63 special report Sabre Airline Solutions Archives Solutions Airline Sabre ing about were the non-Brazilian airline companies, particularly Chile’s LAN, which had been seriously evaluating the potential of acquiring Varig (and prior to GOL’s deal for Varig, Brazil’s No. 1 international airline TAM was also speculated to be weighing a Varig bid). Obviously, GOL’s preemptive acquisition kept Varig under Brazilian ownership and enhanced Varig’s capability to help strengthen Brazil’s international economic hand in the coming years. But it did much more than that. One of the great questions regarding international air travel in the early 21st century is whether hard-nosed, relatively frugal economic principles can be applied to allow a truly low-cost carrier to succeed on a global scale. GOL would like to find out — and some analyst speculation has it that the carrier would like to try spreading its Through the Varig acquisition, GOL has obtained several other business advantages, such as own intercontinental wings to Europe Varig’s slots at São Paulo-Guarulhos International Airport that can be utilized to serve numer- and North America, among other world- ous attractive destinations in Europe and North America. wide destinations. Perhaps the operations of Varig — particularly in Varig’s coach cabin, Under current plans, the Varig fleet As part of the deal, GOL has assumed which should most closely resemble — which had been carved down to a vir- approximately US$45 million in Varig debt, operations under GOL’s single-cabin tual skeleton complement of 17 aircraft, but GOL obviously sees many exciting principle — could prepare the inter- a number barely capable of maintaining potential advantages in its future with continental path for GOL to launch a viable operations — is to be doubled by its Varig that may thoroughly outdistance the broader worldwide schedule within the GOL ownership to 34. costs within a relatively short timeframe. next several years. More specifically, those 34 aircraft In one of GOL’s early press releas- Certainly, the airline today directly are to consist of 20 efficiently configured es explaining its reasoning behind the experiences the advantages of interna- and maintained Boeing 737s, plus an acquisition, its chief executive officer tional operations within South America, additional 14 of Boeing’s longer-haul 767 Constantino de Oliveira Jr. said, “With but its ambitions — after all, GOL was only founded with a total of six aircraft in 2001, and under current orders will have more than 150 aircraft by the end of 2012 — seem limitless. “With this acquisition, Brazil will maintain Consider the additional fact that not long before announcement of the an important flag in global aviation, the Varig acquisition, GOL had established codesharing with TAP Portugal — basi- industry will benefit from an increase in cally prying open a significant conduit into the European market through which GOL could begin figuratively dipping its jobs and demand will be better served.” toes in the trans-Atlantic water. With the Varig deal, GOL has fundamentally incinerated all barriers — Constantino de Oliveira Jr., GOL chief executive officer to its full intercontinental air travel participation. Yet the eventual form into which that participation will evolve aircraft for intercontinental routes. this acquisition, Brazil will maintain an remains an intriguing mystery. And although it is GOL’s intention to important flag in global aviation, the indus- Suffice it to observe at this point have Varig operate under many low-cost try will benefit from an increase in jobs that GOL’s Varig arm is going to be a parameters as established by GOL — and and demand will be better served. real and substantial presence in inter- to benefit from further efficiencies of scale “We will work so our companies continental air travel. And regardless between the two branded carriers — Varig become the Brazilian carriers of choice of its own low-cost business model, still differentiates itself from GOL with two for both domestic and international GOL is going to be — at the very least travel classes (business and coach) and its passengers.” — on the minds of airline thinkers and “Smiles” frequent flyer program, which is In this context, among the salient planners throughout the Americas and and will remain a Varig-exclusive feature. items Oliveira was undoubtedly think- Europe, not to mention those in the

64 ascend special report Photo by shutterstock.com by Photo vast Asia/Pacific regions that could also be dimly visible in GOL’s future. For now, owning Varig will do, but what’s next for GOL? What new parameters is this young South American upstart establishing for the industry? Judging by GOL’s history, the answers will probably be big and brash. And lots of the carrier’s worldwide competitors may be left wondering why they didn’t have the nerve and fore- sight to be so audacious first. a

Despite its fallback in 2005 when Varig, Brazil’s network international airline, filed bankruptcy, the carrier’s brand is still strong, dating back to 1927, and the acquisition by GOL will Phil Johnson can be contacted likely secure a future for the struggling airline. at [email protected].

+count it up

70 3 million 4,650 The number of airports the The number of passengers that will The number of shipments of spare International Air Transport board 42,300 flights on Boeing jetliners parts Boeing will send to airline Association expects to have com- in the next 24 hours, carrying them to customers worldwide in the next 24 mon-use self-service kiosk technol- nearly every country on earth. hours. ogy, or CUSS, by the end of 2007, resulting in annual airline savings of US$1 billion at 40 percent market penetration and an average industry- per-check-in savings of US$2.50. 5.3 5.1 24 Percentage of the average annual Percentage of the average annual growth The number of hours millions of travel- growth rate of domestic passenger rate of international passenger demand, ers, hikers and boaters will find their demand, which is expected to grow which is expected to rise from 760 mil- way home using the global positioning from 1.37 billion passengers in 2006 lion passengers in 2006 to 980 million in system designed and built by Boeing. to 1.77 billion in 2011. The increase is 2011. This will be lower than the 7.4 per- fueled by expansion in the Indian and cent AAGR recorded during 2002-2006, Chinese domestic markets. largely due to slightly slower global economic growth.

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Maximizing Manpower

An effective resource plan and the right tools to support it enable airlines to smoothly introduce new aircraft types into their fleet mix.

By Michelle Willams | Ascend Contributor

leet expansions are always an exciting A traditional approach to examining a may be able to operate the Boeing 747 and time for an airline. But introducing a manpower plan is to look at three basic cat- 777 and the Airbus A320. Also, the movement Fnew fleet into the operation opens up egories: Availability (supply of crew), require- toward a common cockpit for some airlines is a whole new task list of things to consider, ments (demand for the crew) and balance. increasing the complexity of this analysis in especially from a crewing perspective. Once the balance is calculated, the crew plan- the flight deck group as well. When Singapore Airlines chose the ner will study a variety of additional statistics Airbus A380 (see related article on page and make several recommendations of how to Calculating Availability 8), there’s no doubt it had to consider the smooth out the balance against the different The availability of crew involves impact on its crewing operations. However, categories. information such as total headcount, con- utilization of a disciplined approach and solid Planning these resources should be tribution of different types of crew (the tools can make changing fleet numbers and examined within a given segregated crew contribution from a particular part-time demands a smooth exercise for the entire group. For example, at Singapore Airlines, it crew group), movement out of and into crew and airline. is critical to examine its Boeing 747 captains the group, and situations that make a Traditionally, airlines have a designated separate from its Boeing 777 captains. Due to crew unavailable for a given period of group of employees who regularly examine crew qualifications and other requirements, time. Combining this information gives the crew workforce plan, or “manpower” plan. When examining the plan, carriers Highlight answer a variety of questions, such as: 1. Where do I have a shortfall of crew? 2. Where do I have an excess of crew? 3. What duties, training classes and leave When Singapore Airlines chose the Airbus plans can be adjusted to decrease short- ages? A380, there’s no doubt it had to consider 4. When should I hire new crew? 5. From what crew groups should I move the impact on its crewing operations. resources? These questions may be accessed daily or monthly. Therefore, in terms of daily operations, if the carrier has a shortage of crew on a given day, it can quickly determine the available Boeing 747 crew resources an analyst a starting point to determining what duties can be moved around. The are typically the only ones qualified to fulfill the total available crew group. Resource granularity of the manpower plan varies Boeing 747 crew requirements. Segregating Manager calculates the value on a given depending on the amount of information the crew becomes increasingly complicated day: available. Of course, the accuracy of the when crewmembers can operate a variety of Initial headcount plus crew moving in plan is also significantly greater closer to fleets, and the combinations are not neces- (new hires, transfers in, promotions in), the day of operations and less accurate sarily the same among the crew members. Crew moving out (retirements, termina- further out. For instance, at Singapore Airlines, cabin crew tions, transfers out, promotions out), Utilizing tools such as the Sabre® can have qualifications on up to three different Unavailable crew (long-term leave, down AirCrews® Resource Manager can assist an aircraft types. However, there are not neces- time for crew, transitional training). airline in aggregating this wealth of infor- sarily common group qualifications, and there Considering this information gives mation as well as analyzing and presenting are overlaps. For example, one crew may be the basic availability of the crew. Resource it to a crew planner for consideration and able to operate the Boeing 777 and 747 as Manager is able to easily aggregate this decision making. well as the Airbus A340, while another crew information from all operational, leave and

66 ascend products Photo courtesy of Airbus of courtesy Photo training information available within the database.

Calculating Requirements Calculating requirements is considerably more complicated than calculating available resources. Requirements rely on more forecasting, hence, introducing a greater degree of error. When calculating requirements, an analyst should consider a variety of information such as the planned operational schedule; training plans; and days-off, leave and reserve requirements. Schedule requirements can be derived from a planned pairing set, an operational schedule or even a basic aircraft plan. Training requirements should consider items such as recurrent training plans for the crew, instructor requirements and other ad hoc training requirements. Leave requirements should consider issues such as the annual leave plan, allocated leave for the crew and expected sick rates. Typically, a combination of actual known data (such as the leave bank The A380’s India visit in May included a multi-day stopover in Mumbai for airport compat- for the crew) and forecasted information ibility trials. (such as a sick bank) are considered in calculating this value. When using Resource Manager, this value is calculated on a given day as “Schedule + Days Off + Along with determining how many many airlines, this information sits with- Training + Reserve + Leave.” Similar to employees to hire or move between groups, in different departments and systems, the availability calculation, Resource an airline needs to also determine when and it must be manually collected and Manager easily aggregates this informa- the crew should be trained. “Just-in-time” input into a spreadsheet or another tool. tion from the database. Tools such as manufacturing should be applied to the However, when the crewing department Resource Manager also make it easy to crew resource movement. Training should is managed with a common database, evaluate different alternatives within the be conducted with the introduction of the the information can easily be collected flying schedule. Analysts may consider new fleet type. As new fleet demand grows and analyzed. Resource Manager makes different pairing or schedule options. All throughout the schedule (due to the arrival updating the plan a simple task. As the of these can have an impact on the final of new aircraft), the airline can continue latest information becomes available in requirements, and hence, the final balance to add crew to training classes. The key is the database, the analyst can request a for the crew. to maximize the utilization of the available refresh on the plan, which produces reli- crew resources across the schedule. This able figures to determine the appropriate Balance and Statistics will reduce any overhead costs from having course of action. Resource Manager can The balance of available resources too many available crewmembers without also make suggestions to the timing of and the requirements on these resources enough flying, or aircraft unable to fly due the training plan and how to manage the is a key starting number for an airline. to unavailable crew. new resource group with items such as From these figures, carriers can evaluate Once a reliable manpower plan leave plans and recurrent training plans. the trends of their resources and deter- is agreed upon, the airline incorporates Overall, a reliable manpower plan mine the best movement and placement the new aircraft type into its fleet mix. can assure a successful introduction of of these crewmembers. Crewmembers can be chosen for the new new aircraft types in an airline’s fleet. fleet, training classes can be added and The manpower planning process should Applying to the new Fleet scheduled, and all other down-line activities be conducted regularly within the airline So given the challenge of incorpo- can begin. environment. a rating a new fleet into the department, The plan should be regularly re-eval- a reliable resource plan provides a strong uated and compared to the current status starting point for an analyst to determine of the airline. Once new crewmembers are how to best incorporate the new fleet. The hired, training has begun or more accurate analyst can answer questions such as: What schedules have been received, analysts crew resource groups would be the best should re-evaluate the plan and make any to convert or promote into this new fleet? necessary adjustments. This process pro- Taking the surplus from one group and tects utilization of resources and aids the applying it to the new group and schedule is airline in staying aligned with the objective one option an airline can use when staffing to bring the new aircraft online. Michelle Williams is a principal in the a new fleet. A reliable manpower plan can One of the challenges of the crew airline operations product area for Sabre also answer a key question as to how many planner is to collect all the key informa- Airline Solutions® . She can be contacted crew the department should hire. tion required in the manpower plan. At at [email protected].

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The Focal Point Using an application service provider delivery method enables airlines to focus on their core business while having the technological backing necessary to optimally run their airline.

By Emily Tate | Ascend Contributor

rom a young age, children learn to rec- applications. Servers do not have to be pur- Beyond the physical hardware infra- ognize things that belong together and chased and third-party software licenses structure needed, using an ASP also reduc- Fthings that don’t. When looking at an do not have to be obtained. Hardware typi- es the number of personnel that must be apple, an orange and a carrot, many children cally must be refreshed every three to four dedicated to monitoring and maintenance understand that the carrot is not a fruit like the years, adding more to the total cost over — an expense that can greatly increase others. With businesses, it can be easy to lose the life of an application. In addition, ASP costs but is necessary to maintain stability. sight of this basic fundamental and try to focus providers can typically run more than one By reducing the amount of support needed, on things that don’t fit within the core function instance of an application simultaneously, ASP providers can often lower the total of the company. Looking at an airplane, a pilot, achieving economies of scale that internal cost of ownership between 20 percent and a passenger and a database server, it becomes IT departments cannot attain. 50 percent over a locally installed solution. clear that some aspects of running an airline

should demand greater focus from airline shutterstock.com by Photo executives than others. Information technology is constantly becoming more sophisticated, providing better optimization tools and functionality. While it may be appealing in an age of intense competition, with this sophistica- tion comes IT complexity. Many of the best solutions in the marketplace require significant investment in hardware, third- party software and other IT resources. At the same time, airline IT departments are seeing reduced budgets and finding that too much time is being spent on tactical projects rather than focusing on driving value. To maintain focus on their core business, airlines must find a way to get the benefits of these technology solutions while minimizing the increase in IT burden. One way to achieve this is to utilize an application service provider model, in which an application resides on the servers of a different company and is accessed via the Internet or a secure, dedicated communications line. Using an ASP can reduce IT costs for an airline as well as provide other benefits that can improve the bottom line.

Lowers Total Cost of Ownership When critical incidents caused by hardware or software malfunction occur, it’s vital to get By eliminating many of the upfront back online as quickly as possible so airline professionals, such as pilots, as well as passen- costs associated with running an appli- gers, are not negatively impacted. Running solutions remotely via an ASP can reduce resolu- cation, ASPs can decrease the overall tion time by 55 percent versus applications that were locally installed. amount being spent on airline-specific

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Carriers using an application service provider delivery method to operate valuable information technology solutions can better focus on their core competency of running an airline. Through the ASP environment, solutions can be implemented and maintained outside of an airline’s local data center.

Allows for Scalable Solutions party software that requires additional training kept in a more stable condition than most As airlines grow, hardware capacity and familiarization for the airline’s staff. Using airlines can achieve themselves. can become an issue. The loads placed on an ASP solution, significant time can be saved In addition, when the critical inci- servers can become too high, requiring the so this group is not burdened with the day-to- dents did occur, the resolution time IT department to purchase more expensive day operation of complex systems. An ASP for applications hosted on the eMergo hardware and further increasing the cost to provider owns the responsibility of keeping the platform was 55 percent lower than for monitor and maintain equipment. applications running in an acceptable manner, applications that were locally-installed. With an ASP solution, capacity can including: Through monitoring and on-site staff, the be increased with the airline’s growth Installing maintenance releases and patch- problems can be diagnosed and solved much more easily. The spike in costs that es, more quickly, getting the applications can be seen when the applications are Monitoring systems to ensure they are func- back in productive mode faster. hosted in an airline’s local environment is tioning properly, Airlines will always require sophisti- greatly reduced as the ASP is responsible Upgrading hardware and third-party soft- cated software to meet their complex for maintaining enough capacity to keep ware, business needs. Like a child choosing the the airline’s system running smoothly in Troubleshooting issues — whether hard- carrot from a fruit bowl, airline execu- production. ware or application related, tives must recognize that supporting IT Maintaining the most recent version of the applications requires a different skill set Lowers Fixed-Cost Base airline-specific application. to operate effectively. Using an ASP The airline industry is highly cyclical delivery method, valuable solutions can and high fixed-cost bases can make slower Reduces Operational Impacts be implemented outside of the airline’s times extremely difficult. Having to main- Unplanned downtime for a critical local data center, enabling them to focus tain the overhead costs associated with a application can be very costly for an air- on their core business — running an air- full data center and all of the hardware and line. Loss of productivity and disruption of line. a third-party software licenses significantly operations as well as resources required increases the fixed costs of an airline. to get the issues fixed can greatly impact In an ASP model, these fixed costs the bottom line. are turned into variable costs with predict- According to research done on the able pricing, providing more flexibility in Sabre® eMergo® Web access ASP solution, slower times and making costs easier to the number of critical/high-impact service shed if needed. incidents was about 33 percent less for a hosted application than for a locally Simplifies Internal IT installed application over a 10-month With a locally installed solution, the period. With data center experts on site airline’s internal IT group must spend time and whose sole responsibility is to minimize Emily Tate is senior product manager money keeping the applications in production. incidents caused by hardware and soft- for Sabre Airline Solutions® . She can be Vendor-provided applications may use third- ware malfunctioning, the environment is contacted at [email protected].

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Conquering Chaos By Dave Roberts, Tom Samuel and Kamal Singhee | Ascend Contributors

Robust decision-support tools can help airlines quickly recover from unexpected schedule disruptions, keeping passengers satisfied rather than frustrated and disgruntled.

eather. Storms. Air traffic con- took three days to correct the problem All of these advancements and mod- trol. Mechanicals. Delays. and complete the first powered flight on ern systems have not alleviated the delays W Misconnections. Cancellations. Dec. 17, 1903. that still occur, and flight schedules con- Disruptions. Off-schedule operations. But that was 1903 — before the tinue to be affected by many different Irregular operations. These words or technology revolution and automation factors. Despite modern developments, phrases bring forth travel woes and frus- kicked into high gear. Major advances the number of delayed flights has recently trated, annoyed, hungry passengers who have been made in aviation technolo- been on the rise in the United States, and feel more like prisoners than customers. gies that include jet aircraft with multiple the length of delays has increased. It’s a story that has become increasingly redundant back-up systems, and sophis- “Ultimately this is a numbers game,” common in the airline industry. ticated weather forecasting and alerting Don Dillman, managing director of system From the start, irregular operations systems to warn of impending problems. operations control for American Airlines, have been on the scene in aviation. The In addition, automated airline planning and told the Fort Worth Star Telegram. very first scheduled flight by the Wright tracking systems ensure the most com- Dillman, who is also a pilot, over- brothers had to be cancelled due to a plex flights are matched with necessary sees the airline’s cavernous operations mechanical problem during take off. It resources. center in Fort Worth, Texas, which moni-

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tors and directs every American Airlines flight in the world. When storms assault the network, he said, “it literally becomes a math issue.” Airlines want to minimize the extent of irregular operations for a couple of reasons: The disruption to their passengers and the inconvenience it causes — in the short term, not getting home in time, and in the long term, goodwill toward the airline. While many irregular operations, such as weather delays, are unavoidable from an airline’s view, how the airline responds to these disruptions is critical in maintaining passenger support. The impact on an airline’s bottom line since irregular operations add considerable expenses as the airline attempts to return to normalcy. For many years, airline leaders have thought that they could only be reactive to problems that cause off-schedule operations. They have sought new methods to handle disruptions and minimize their impact. Many plans called for holding Sabre® Rocade® Crew Management System spare aircraft in reserve or having spare The offers easy access to view the status of flight crew in a live environment, showing warnings for any legality items, training issues, crewmembers standing by just in case travel and hotel bookings as well as make amendments to the working patterns that are they may be needed. Each of these required to keep the operation on time and on schedule. proved to be very expensive and not as effective as desired. During the early years of aviation, the only solutions were based on human endeavors (manual) and, in most cases, At the forefront of airline automa- Manager, the Sabre® FliteTrac® system were handled by each individual airport tion for day of operations and the man- and Sabre® Rocade® Airline Operations independently of other airports in an air- agement of its SOC with its movement Suite and suggests flight delays, cancel- line’s system. In the mid 1960s, airlines control and crew management solutions, lations, equipment swaps and diversions began to consolidate the oversight of their Sabre Airline Solutions® is addressing to quickly and effectively recover from a day of operations into a central location in the root causes of irregular operations schedule disruption. one of their major cities. These system and has developed new tools to enable An effective schedule recovery sys- operations control centers consisted of airlines to minimize the impact of off- tem has to consider aircraft maintenance, staff members responsible for overseeing schedule operations. crew scheduling, passenger itinerary, air- the operations of the airline from a macro These solutions address passen- port resource allocation and network oper- view. ger needs when flights are cancelled, ational constraints to accurately accord Even with this consolidation, the delayed or diverted while helping airlines typical decision making within an airline. airline was still based on a manual opera- develop and execute a recovery plan to Decisions to cancel or delay a sched- tion. With the advent of computers and return to normalcy at the earliest possible uled flight have to be based on the bot- information technology, the manual sys- moment. tom-line benefit to the airline. It’s not tem shifted to automation during the just important to consider the number next 30 to 40 years, enabling the airline’s Decision Support of passengers on the aircraft but also SOC staff to have better control over Aircraft, flight crews and passen- what revenue contribution comes from the day of operations as well as flights, gers are the primary components affect- the flight. In addition, an airline control- aircraft, crews and passengers. Reaction ed by irregular operations that must be ler has to consider all possible solutions to problems was more exact, quicker and addressed to return an airline to its sched- including potential equipment substitu- involved multiple airports at the same ule. Sabre® Decision Manager considers tions and dynamic flight schedule adjust- time. aircraft maintenance routings, crew con- ments. Such decision-making procedures Today, irregular operations are a nection assignments, passenger origin- require timely access to passenger itiner- very hot topic among airline leaders as and-destination itineraries, operational ary data in conjunction with aircraft and well as the traveling public. Passengers constraints (air traffic slots, airport slots, crew assignments. are demanding that airlines better handle curfews, gates, weather alerts) and rele- Because Decision Manager derives irregular operations while minimizing, if vant market considerations (coverage, rev- all requirement data directly from the not eliminating, the impact on them. The enue, equipment requirements). Decision centralized flight operations database, belief is that today’s technology should be Manager has been developed to seam- suggestions proposed by the system will able to handle any set of circumstances. lessly integrate with Sabre® Movement adhere to prevailing operating conditions

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The Sabre® Rocade® Commercial Planning System is used to construct, optimise, analyze and review future schedules. The application com- municates through various media to other parties having an interest in the schedule, and it is the basis for all work taking place in the Sabre® Rocade® Crew Management System and the Sabre® Rocade® Airline Operations Suite.

and restrictions. For example, if a par- passenger according to an airline-defined cus- Reduced cost by automating the reaccom- ticular airport is unable to support operations tomer relationship management index. Airlines modation process. of a specific aircraft type, Decision Manager may define the value of the passenger based Reaccommodation Manager provides does not assign this aircraft type to operate on various criteria such as fare paid, class of real-time integration with a flight operations into the given airport. Of course, the solution travel, frequent flyer status, miles flown (to and movement control system, such as generated by the decision-support system recognize high-mileage travelers that may be Movement Manager and Decision Manager. will depend on the integrity and accuracy of traveling on a free ticket), passengers on inter- Through this integration, passenger coordina- the data stored in the centralized database. national connections, unaccompanied minors tors have access to the latest schedule in real If an aircraft’s minimum equipment list is not or passengers traveling with infants. The CRM time including schedule manipulations made updated after a scheduled maintenance event, index is used to prioritize passengers to effec- by operations controllers. Decision Manager may inadvertently prevent tively create alternative itineraries that address Reaccommodation Manager can be the aircraft from being assigned to a specific passenger needs while enabling the airline to deployed as a standalone solution or integrated flight with special operational requirements. As minimize disruption-related costs such as hotel with a flight operations and movement control such, the successful deployment of Decision expenses, passenger compensation and inter- system, such as Movement Manager. Manager will dictate a well-established data line fees. Next, the itineraries are rebooked Decisions that consider all aspects of an management procedure. and passengers are notified via an automated airline’s operations (resources, costs and rev- One of the benefits of implementing alerting process. enue) ensure a constant focus on minimizing a decision-support system such as Decision The system is designed to create a passenger disruptions and protecting profit- Manager is establishing consistent decision rebooking solution based on the list of dis- ability. In addition, the ability to make quick yet making across the airline. In many cases, indi- rupted flights provided. The overall strategic accurate operations decisions will enable air- vidual airline controllers make split decisions business objective of a passenger re-accom- lines to maintain their competitive market that have a significant impact on the carrier’s modation system is to build solutions where position. a profitability. By standardizing the decision-mak- an airline can meet customers’ needs and con- ing process, managers can be confident that tractual obligations while minimizing the overall the optimum decision was made based on cost impact due to schedule disruptions. suggestions provided by Decision Manager. Reaccommodation Manager simplifies Dave Roberts is senior principal, the process of moving disrupted passengers Tom Samuel is product director and Reaccommodation and minimizes schedule changes, resulting in Kamal Singhee is product manager Sabre® Reaccommodation Manager improved customer service. Benefits include: for airline operations for Sabre enables airlines to optimally reaccommodate Optimized reaccommodation of passengers Airline Solutions. They can be passengers who have been displaced due based on user-defined rules, contacted at [email protected], to flight cancellations, delays or diversions. Increased customer loyalty by taking care of [email protected] and To accomplish this, the system values each premium customers, [email protected].

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Virtually There With the flux of passengers using wireless technology and mobile devises, airlines should leverage technology to make sure their customers receive up-to-date, real-time flight information.

By Bobby Thoms | Ascend Contributor

eeping travelers up to date with nec- flight alert notifications and local city guide Time Savings essary trip information is vital to a and restaurant information. Virtually There mobile services deliver K successful loyalty strategy. Today’s anytime, anywhere access to flight notifica- online-savvy travelers are equipped with Expanded Reach tion alerts. These services notify travelers the latest wireless technology and mobile Virtually There mobile services if there are any interruptions with respect devices, and they expect immediate com- enable airlines to connect with their cus- to flight delays, cancellations, terminal and munication regarding their travel plans. tomers throughout the entire trip, creat- gate changes and itinerary trip remind- With Sabre® Virtually There® mobile ing an enriched and differentiated experi- ers. Notifications are specified based on services, an airline can provide personal- ence. When the airline provides access to traveler preference and can be delivered ized travel information to its most valued the Virtually There mobile services site, via SMS text message, e-mail or voicemail customers 24 hours a day, seven days a travelers recognize the value-added ser- directly to the mobile device. As a result, week. In addition to all the components of vice that creates competitive differentia- customer service phone calls are reduced a traveler’s itinerary, airlines can send real- tion, customer retention and satisfaction. while enhancing a traveler’s experience and time information about flight schedules, Additionally, travelers enjoy increased con- satisfaction. gate and terminal assignments, airport venience and efficiency and the ability to security checkpoint wait times, Mapquest® connect with other business colleagues, Mobile Site Benefits driving directions and maps, up-to-the- family and friends with respect to their Virtually There mobile services offer minute weather forecasts, and destina- personal travel plans and details delivered airlines several benefits, including: tion information. Additionally, travelers can in real time via Virtually There mobile Reduced costs associated with delivering e-mail their itineraries as well as sign up for services. itinerary-related documents such as delivery charges, Reduced costs associated with providing post-booking information, Increased customer loyalty and traveler experience reach, Ensured travelers’ personal information is secure and confidential. Having the ability to contact customers about their itineraries and posting it to an updated mobile services site is one of many critical aspects of a customer loyalty strategy. The Virtually There mobile services site offers customers a sense of security while reducing costs for the airline. a

Using advanced technology such as Virtually There mobile services, a carrier can offer round- the-clock tailored travel information to its most valued customers. Through the tool, airlines can send real-time information to passengers about schedule changes and gate assignments Bobby Thoms is a product marketing as well as their full itineraries. principal for Sabre Holdings®. He can be contacted at [email protected].

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Fast Track High-speed train lines, because of their ability to competitively serve the same routes as some carriers, have had a substantial impact on Europe’s airlines.

By Michael Clarke | Ascend Contributor

urope, France in particular, has been that was once the largest air route world- Recently, high-speed railways of sev- at the forefront of the development wide based on the number of passengers eral countries, including Austria, Belgium, E of regularly scheduled advanced boarded. Today, the two major United France, Germany, Switzerland and the high-speed rail passenger service. Since Kingdom network carriers that serve the Netherlands, joined forces with Eurostar the early 1970s, France has developed a London-Paris route have substantially and Thalys to create Railteam — a new mar- comprehensive rail network that leverages reduced the number of scheduled flights keting alliance to better compete against existing rail tracks and has led to the estab- in the market. other modes of transportation, specifically lishment of dedicated high-speed tracks.

This has, in turn, led to improved service RailEurope of courtesy Photo quality, with higher average speeds and increased frequency of service. Within the French domestic market, high-speed rail commands a leading market share. In some city pairs, rail service accounts for more than 90 percent of the shared community passenger service (rail, air, bus). This phenomenon has gradually spread across continental Europe, and similar rail networks now exist in Germany, Spain, Belgium and the Netherlands. Naturally, this has created a powerful competitor for air travel, especially in short- to medium-haul markets with flying times less than three hours. Within the last decade, we have seen the introduction of cross-border high-speed networks with Eurostar (Paris- London) and Thalys (Paris-Brussels) providing regularly scheduled service from France to neighboring countries. Today, the Thalys service dominates the Paris to Brussels market, and there are no longer scheduled airline flights between to the Rival of many airlines in Europe, Thalys, also known as the red train, links Paris to two cities. Eurostar has managed to gain Amsterdam, Brussels, Cologne and Dusseldorf. At a speed of 186 miles per hour, 18 Thalys a substantial market share (65 percent) trains per day take passengers from Paris to Brussels in under 90 minutes. in the London to Paris market, a city pair

74 ascend regional Photo courtesy of RailEurope of courtesy Photo that’s clear, the level of competition among established network airlines, growing value- based carriers, existing rail services and yet-to-be-determined rail competitors will be beneficial to the traveling public. Proponents of each mode of transportation (air travel and rail service) often highlight the underlying level of public sub- sidies and special arrangements such as tax exemptions on fuel charges that influence the success of a given transportation system. While these debates continue to rage on, the competition between air travel and high-speed rail service will only intensify in the coming years. The ultimate winner will depend on many factors including but not limited to convenience, cost of travel, comfort, connectivity, conscience, congestion (airspace and airport), competition and cooperation. These factors, in turn, influence passenger behavior and preferences and will dictate the preferred mode of transportation. Travelers’ preferences will vary depending on the primary purpose of the trip. Since most business passengers do not pay directly for their trips, they place a greater emphasis on travel time, reliability and comfort as well as the ability Austria, Belgium, France, Germany, Switzerland, the Netherlands and other countries with to work enroute. On the other side of high-speed railways aligned with Eurostar and Thalys to create Railteam — a new marketing the spectrum, leisure passengers tend to alliance to aggressively compete against other forms of transportation, specifically air travel. be more cost sensitive and are willing to compromise on convenience for a better ticket price. However, most passengers air travel. The goal is to develop a central- is attributed to the gradual dispersion of still prefer air travel unless there is a ized Web site that will enable travelers to populations outside city limits. This is par- compelling advantage of journey time view timetables and published fares, and in ticularly true in the leisure market, where and total travel cost. This is especially one streamlined process purchase tickets for travel across the entire rail network (from one end of Europe to the other). Highlight Since deregulation of air travel within Europe, competition between established airlines and developing high-speed rail “Eurostar has managed to gain a sub- networks has been heavily influenced by emerging value-based carriers such as easy- stantial market share (65 percent) in the Jet and Ryanair. In many cases, these new- breed airlines offer competitive scheduled flights from primary and secondary airports London to Paris market, a city pair that that are able to compete against both network carriers and burgeoning high-speed was once the largest air route worldwide rail networks. The success of high-speed rail in most markets can be attributed to based on the number of passengers many factors, one of which is convenience. The ability to provide fast and convenient boarded.” service to and from the city center is very attractive to business travelers, especially when the population density is centered around the city center. This is true of many travelers from areas such as the Midlands true of passengers traveling on same-day of the French TGV, Trains a Grande Vitesse, in the United Kingdom now have the choice return trips. It is imperative that airlines lines, the German ICE, Inter-City Express, of using convenient air service from second- and rail transport companies understand lines, the Paris-London Eurostar and the ary airports to major cities across Europe why people decide on a given mode of Paris-Brussels Thalys passenger services. such as Paris, Amsterdam, Frankfurt and transportation so they can better match At the same time, the rapid growth of Brussels. It is unclear today what the pend- (or at least try to meet) the quality of value-based carriers in many parallel mar- ing deregulation of international passenger service anticipated and demanded by the kets (relative to existing high-speed lines) rail services will bring in 2010, but one thing traveling public.

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Convenience, Congestion, 3. The wait or transfer time (if required), pensity of delayed flights has increased Conscience 4. Terminal time — Time required for substantially, and so has the level of There are many aspects to the notion check in, security checks, immigration frustration for airline passengers. of convenience when looking at each travel and customs (if required). The issue of congestion is more mode including travel time, frequency of The frequency of service looks at pronounced at major hub gateways such service, schedule reliability, network con- both the number of departures by time as London Heathrow Airport, and this nectivity and accessibility to the corre- period as well as the distribution of has enabled value-based carriers to offer sponding gateway (airport or station). Even departures across a given day. The ability more reliable air service from secondary if the main transportation is quick, if it is to use a direct routing without transfers airports and effectively compete against hard to get to, passengers may not consider will be more attractive to travelers, an both network carriers and high-speed it as a viable option and choose to use the important reason why some value-based rail. According to figures from the United travel mode that, on the surface, appears carriers have been able to effectively Kingdom’s civil aviation authority, airline less attractive. compete in some markets against net- on-time performance at London’s major When considering travel time, travel- work carriers and the burgeoning high- airports average 70 percent. In contrast, ers often look at both the actual time spent speed rail services. Eurostar’s punctuality in 2006 was more on the transportation itself as well as the Schedule reliability is important to than 90 percent, much better than airline additional time required for the entire jour- both rail and air travelers, and it’s more competitors on both the London-Paris ney including: important because of increased conges- and London-Brussels routes. 1. Access time — The time in advance nection at airports and within the air space. Similar on-time performances have essary for a passenger to leave the point The strong growth in air travel during been observed in the Spanish domes- of origin until reaching the airport or train the last couple of years has resulted in tic market, where high-speed AVE, or station, increased capacity problems at major Alta Velocidad Española, trains run with 2. The egress time — Time between arrival European airports and network conges- 90 percent promptness. Until now, the at the intended transportation point and tion throughout Europe’s air traffic control Eurostar covered the 250-mile distance the passenger’s final destination, network. As a result, the number and pro- between downtown London and downtown Paris in two and a half hours without any additional ground transportation. But recently, this travel time was further reduced to two hours and 15 minutes Comparative Journey Times Versus Rail Market Share with the opening of the new international rail station at London’s St. Pancras. Paris – Bruxelles 310 km As rail travel time increases, Travel times from London’s city center to Brussel’s city center is less than two 95 rail market share decreases hours. Many passengers are frustrated Madrid – Seville 471 km Paris – Lyon 430 km with the hassle factor associated with 85 increased security measures. They simply find it more convenient, less stressful and easier to travel by rail when pos- Rome – Bologne 358 km sible. The quality of the travel experience 75 Paris – Marseille 783 km offered by rail is now seen by many passengers as more attractive because they require less access and egress time, and 65 they are able to work while enroute in a London – Paris 400 km more comfortable environment. It is also important not to overlook London – Brussels 340 km Stockholm – Gateburg 455 km the role of environmental concerns in 55 consumers’ decision making. Most trav- Rail market share (%) elers tend to believe that high-speed rail is friendlier to the environment when Paris – Amsterdam 540 km compared to air travel. By providing 45 faster services, railway companies hope Rome – Milan 560 km that the rising environmental concerns will drive more passengers to rail travel. Recent surveys of the traveling pub- 35 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 lic have identified that concern over Travel time (hours) Source: International Union of Railways the environmental impact of travel is rising, but it is still not a key factor for passengers when they make their In European, high-speed rail commands the dominant market share for origin-des- travel booking. For the time being, cost tination markets with travel times less than two hours. Rail market share is driven of travel and convenience (speed, fre- by overall travel time and not necessarily the distance traveled between the city quency, reliability and accessibility) are pairs. High-speed rail networks with higher average speeds are able to attract more the dominant factors in making the final passengers from air travel. decision on what mode of transportation to choose.

76 ascend regional Photo courtesy of RailEurope of courtesy Photo Paris-Marseille air/rail market. Within four have started to coordinate their timeta- years of operations, the market share bles, and the amount of connecting traffic of rail increased to 65 percent and by has increased substantially. For example, 2006, rail commanded almost 70 percent the number of passengers transferring market share. This in turn led to easyJet from Eurostar to the TGV network has abandoning its Paris-Marseille flights as increased almost 40 percent this year. At it could not effectively compete with the the same time, many value-based carriers TGV. have been forced to reduce their ticket In Spain, the AVE has a leading prices to remain competitive with these market share in the air/rail/road traffic on rail services and maintain their high load the popular Madrid-Seville route. The suc- factors for profitability. cess of the Eurostar and Thalys service Many network carriers have aban- to/from France has led many carriers to doned their short-haul markets that com- discontinue or significantly reduce their pete directly with high-speed rail, and operations on these air routes. Since British Airways went as far as selling starting operations in November 2004, the majority of its short-haul network to Eurostar has more than doubled the total value-based flybe. Since it began operations three years number of passengers traveling (by air and Despite the success of high-speed ago, Eurostar has more than doubled rail) between London and Paris/Brussels. rail, airlines (both established network and the total number of passengers travel- On routes within a two-hour rail travel new value-based carriers) are still able to ing (by air and rail) between London and time, it has been consistently observed effectively compete with rail service by Paris/Brussels. On routes across Europe across Europe that high-speed rail can offering a wide range of ticket prices that with two-hour rail travel time or less, the high-speed rail dominates a 90 percent command a 90 percent market share. are, in some cases, a fraction of the rates market share. The recent introduction of the TGV East for rail tickets to the same destinations. line connecting Paris to eastern France In some European markets, air travel con- and neighboring countries will see rail tinues to dominate. From 1995 to 2004, As the attractiveness of high-speed travel times reduce by half, if not more air transport within the European Union rail increases in Europe, it could poten- in the coming months. Currently, the rail (intra-E.U. and in each domestic market) tially lead to a reduction in the number of trip from Paris to Strasbourg takes four experienced nearly a 50 percent increase short-haul flights across the continent. In hours, and once it’s reduced to two hours as a result of deregulation and the rapid reality, the majority of scheduled flights and 20 minutes, it’s anticipated that the growth of value-based carriers. In 2005, in Europe are short haul (45 percent high-speed rail service will initially gain the total number of passengers carried less than 500 kilometers) and revolve 75 percent market share and ultimately on domestic air travel amounted to more around the current economic center of reach 90 percent market share. than 160 million, representing almost a the European Union (the zone between As new high-speed tracks are intro- quarter of all air travel in Europe. London, Paris, Frankfurt and Amsterdam). duced across the continent, traffic routes In markets where high-speed rail As a result, the continued growth and that were once considered inaccessible networks have not been fully estab- development of high-speed rail in these to high-speed rail service will develop, lished, the corresponding airports have seen immense growth since air travel deregulation. Air transport is able to Highlight quickly establish operations and react immediately to new passenger demand situations. Among the 30 airports handling the largest passenger volumes “As the attractiveness of high-speed rail increases in 2005, Madrid Barajas International Airport served 19.5 million domestic pas- in Europe, it could potentially lead to a reduction sengers, Paris-Orly Airport served 15.6 million, Barcelona Airports served 13.1 million in the number of short-haul flights across the and Rome Fiumicino Airport served 12.1 million. continent.” Madrid-Barcelona represents the largest air travel market within the European Union, with 4.3 million passengers carried on more than 60 scheduled flights per day in travel markets could arguably help reduce and air travel will potentially decrease, each direction. In this particular origin-des- the environmental impact of air travel in depending in part on the role the rail ser- tination market, the high-speed rail network Europe. vice plays in the given market. is still under construction, and it is anticipat- The level of competition between ed that a highly contested competition will Competition rail and air services in short- to medium- eventually develop between the existing air The ability of high-speed rail to distance markets is heavily influenced travel shuttle services and high-speed rail. effectively compete with air travel is by the presence of low-cost carriers. In Today, air fares offered by estab- most evident in the French domestic some cases, air travel is cheaper as well lished network carriers between Madrid and travel market. Before the introduction as faster than rail travel. As the competi- Barcelona are relatively high because this of the TGV Mediterranean in 2001, rail tion between high-speed rail and short- market primarily comprises price-insensitive held only 22 percent of the combined haul air travel intensifies, rail companies business traffic. In addition, the number of

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travel distance, similar to the existing structure in the airline industry, the high-speed rail feeder services may be placed at a commercial disadvantage in terms of their corresponding compensation. This could discourage them from playing an overall beneficial role in an inter-modal environment. Since a local rail passenger would most likely end up paying more than a connecting air passenger, the rail service could limit the number of connecting air passengers. With the pending introduction of the recently signed open-skies agreement between the European Union and the United States, it is anticipated that high- speed rail will play an increasing role to provide connecting service from secondary markets to major connected hub airports with established trans- Atlantic services. At the same time, it’s unknown how the development of additional direct trans-Atlantic flights to and from secondary airports will impact passenger levels at these hub airports. The future coexistence of high- speed rail and air travel within the intra-European market will depend on several external factors including During the last 10 years, cross-border high-speed rail services, such as Thalys from Paris to established and proposed regulations Brussels, has increased significantly, providing regularly scheduled service from France to as well as the development and neighboring countries. Because the Thalys service dominates the Paris to Brussels market, improvement of supporting infrastruc- scheduled airline flights on this route no longer exist. tures. The recent introduction of European Union regulation on flight scheduled flights has been previously con- important emphasis has been placed delays and cancellations in conjunc- strained by limited infrastructure (terminals on network connectivity, with a large tion with increasing competition from and slots) at Madrid Barajas International number of existing European high- high-speed rail may ultimately encour- Airport, which was addressed last year with speed rail networks having access to age and/or force network carriers to the opening of a new state-of-the-art pas- primary international air gateways in fully abandon short-haul flights that senger terminal. corresponding countries. Passengers can be better served by high-speed The growing presence of value- are given the opportunity to purchase rail. As each European city modernizes based carriers at these high-volume end-to-end journeys across air travel its primary rail stations and further airports will influence the ultimate and rail using a single ticket as well as improves connectivity between the impact of high-speed rail on air travel the convenience of direct connection complementary high-speed rail net- to and from these airports. Only time at the airport. works and local transportation net- will tell which travel mode will prevail, In major airports, such as Paris works, both the competition and the dictated in part by passenger choices. Charles de Gaulle International collaboration between high-speed rail Airport, Amsterdam Airport Schiphol and air travel will only intensify in the Collaboration and Frankfurt Airport, the transfer path coming years. a The impact of high-speed rail from a flight arrival to a train departure on air travel in Europe is, however, is more or less equivalent to a flight- a two-sided story. In one situation, to-flight connection. they are fierce competitors, while in High-speed rail is able to expand the other, they are partners provid- the effective catchment area on an air- ing effective and efficient inter-modal port based on the premise that time, transportation options to the traveling not distance, is the primary aspect of public. The level of cooperation varies airport access. The continued success from simply coexistence at a com- of both existing and future collabora- mon location to outright codesharing tion between high-speed rail and air and coordinating alliance services that travel will depend on the negotiated enable seamless transfers between tariff structure and streamlined pas- Michael Clarke is principal research each mode of transportation. Since senger connection services. If the scientist for Sabre Holdings®. He can be the introduction of high-speed rail, an negotiated tariff structure is based on contacted at [email protected].

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Musical Chairs

Next-generation regional carriers have advanced from once-junior operators to prominent forces within the U.S. air transport industry.

By Michael Clarke | Ascend Contributor

nce considered secondary players in the Under these capacity purchase agree- carriers were able to command target opera- U.S. domestic airline system, regional ments, network carriers assume all the market tion margins ranging from 10 percent to 15 Oairlines have evolved to become pow- risk and are responsible for commercial plan- percent under most CPAs, which were usually erhouses that now play a major role in overall ning, revenue management, marketing, sales re-evaluated on an annual basis. network operations. The global airline industry and distribution of the airline product, and they Within the last decade, regional carriers is heavily impacted by external geopolitical and generally assume high risk items such as air- that were once wholly owned and/or managed economic forces that drive its very existence craft ownership and insurance as well as fuel by an individual network carrier now have the and shape the prevailing environment for effi- costs. The regional carrier operates the flight freedom to operate flights for multiple part- cient and profitable operations. and ensures the availability of capacity for ners. This change in policy and operations was As U.S. network carriers tried in earnest the major airline. In their glory days, regional not easily achieved but was an outgrowth of to deal with the aftermath of terrorist attacks, economic downturns and the dramatic rise shutterstock.com by Photos in fuel prices, regional carriers were given a greater role in shaping airlines’ networks. And when major network carriers began focusing on more lucrative international routes, they worked with their regional partners to counter not only the rise in fuel costs but also the advent of low-cost carriers that now have a significant presence. In this ever-changing landscape, the relationship between network carriers and their regional partners have evolved from being one of a dominant master and subservient subject to one of business partners sharing a common goal of maximizing profitability through cost-effective and efficient operations. The relationship between network and regional carriers is typically governed by a capacity purchase agreement, or CPA, that usually involves a fixed fee for departure or cost-plus contract. Under the bylaws of these agreements, regional carriers were restricted to operate a limited number of aircraft below an agreed seat capacity and on specific routes through specific pilot scope clauses, and they were, in effect, under the strategic control of the network carrier. When the dominant carriers increased the number of outsourced lower- density routes to regional subsidiaries, the Regional carriers have risen above their underdog stereotype to become some of the indus- regional airlines’ profitability increased since try’s most prominent players. Mesa Airlines, Continental Airlines, Northwest Airlines and they were guaranteed a given profit margin in Delta Air Lines all rely on their regional carriers to maintain a successful operation. light of the prevailing market conditions.

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craft and new aircraft deliveries among regional Regional Airline Group Flying Assignment partners, driven, in part, by economics as well as labor considerations. As pilot unions at the regional Airline Network Partner (Percent of operating revenue) mainline carrier started allowing more large-sized (less than 76 seats) regional aircraft, Comair was ExpressJet Continental Airlines (70%) prevented from receiving these aircraft. Delta Air Lines (20%) As network airlines exerted their pressure on regional carriers, some regional carriers ExpressJet Brand (10%) devised creative ways to circumvent the agreed- Mesa Airlines Delta Air Lines (17%) upon restrictions. Since most capacity purchase agreements were specific to a given carrier and Mesa/Go! (6%) operating certificate, regional carriers such as Mesa United Airlines (36%) Airlines and Republic Airlines simply set up holding companies that either acquired another existing US Airways (41%) regional carrier and/or started a new subsidiary to Pinnacle Airlines Continental Airlines (12%) fly for another major network carrier. In effect, the cozy relationships between network and regional Northwest Airlines (70%) carriers have given way to very competitive con- United Airlines (8%) tract negotiations and agreements. This phenomenon is now common in US Airways (12%) the marketplace, and there have emerged five major regional carrier powerhouses that dominate Republic Airlines American Airlines (9%) the U.S. domestic system — ExpressJet, Mesa Continental Airlines (14%) Airlines, Republic Airlines, Pinnacle Airlines and Delta Air Lines (30%) SkyWest Airlines. As regional carriers tried to diversify their portfolio of operations, network carriers Frontier Airlines (3%) pursued a similar strategy to the point that some United Airlines (20%) network carriers now coordinate regional flying by seven partners, and some regional carriers fly for US Airways (24%) six different network carriers. SkyWest Airlines Delta Air Lines (65%) Regional carriers that once focused their operations on a specific geographical region of United Airlines (35%) the country were now faced with multiple hub Midwest Airlines (new) Source: Company Reports operations and often a diverging fleet with multiple equipment types. With this change in operating conditions came increased infrastructure costs as The percentage of operating revenue the mega-regional carriers receive from each well as greater pilot training needs and associated network carrier is based on their current contract agreements. costs. Nonetheless, many regional carriers have figured out the correct formula to make this new paradigm work for them and maintain profitability the challenging negotiations between network needs, network carriers also consider the impact at acceptable margins. carriers facing bankruptcy reorganization and of labor relations at the regional carrier. Since most Changes in the working relationship regional carriers eager to preserve their high regional carriers enjoy very flexible and favorable between major network carriers and their regional level of profitability. As a result of these contract work rules, their cockpit crews are able to fly partners were also complemented by changes in negotiations and concessions, regional carriers more time than their network carrier counterparts. the overall ownership structure of the regional car- won the right to seek new flying opportunities, Regional carriers that maintain a low cost structure riers. In some cases, such as Continental Airlines diversify their operations and have much more and are not unionized often win more contracts for with ExpressJet and Delta Air Lines with Atlantic control over their future fortune. flying from network carriers. Southeast Airlines, the regional subsidiary was During the reorganization process, net- In light of the labor relationship breakdown partially or fully divested via an initial public offering work carriers such as Delta Air Lines, Northwest and subsequent three-month pilot strike at Comair or a complete sale to another regional carrier. In Airlines, United Airlines and US Airways put in Cincinnati, Ohio, in early 2001, network carriers other cases, such as Northwest Airlines, the major out almost all of their existing regional flying for started to re-evaluate the sole regional carrier network carrier decided to secure complete own- bidding, and other regional airlines were quick reliance at major hub airports. As one of the larg- ership of some of its regional partners (Mesaba to compete for the contracts. Regional carri- est regional carriers in Delta Air Lines’ network, Airlines) and at the same time set up an entirely ers were forced to accept lower profit margin the shutdown of Comair severely impacted its new regional carrier (Compass Airlines) to fly larger targets (less than 10 percent) on new contracts operations at its secondary hub and resulted in lost regional jets. Each business decision has been or face the complete loss of flying for a given market share. In the aftermath of this prolonged driven by the desire to achieve lower operating network carrier. In addition, some regional strike, Delta Air Lines chose to fully diversify its costs and better terms and conditions under the carriers were required to share in the risk of regional operations at all of its existing hub airports, capacity purchase agreements between major fuel and insurance costs. As a result, many including Atlanta, Georgia; Cincinnati; Dallas/Forth network carriers and their regional partners. network carriers now have multiple regional Worth, Texas; New York, New York; and Salt Lake The strength of the new-generation mega- partners serving multiple airports within their City, Utah. Other network carriers subsequently fol- regional carrier was demonstrated during the system network. lowed this strategy to prevent the same dilemma. bankruptcy of US Airways when two regional Although most regional aircraft assign- During the bankruptcy process, Delta Air carriers — Air Wisconsin and Republic Airways ment decisions have been driven by economic Lines used its freedom to reallocate existing air- — each invested US$125 million in the major

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network carrier in exchange for guaranteed flying Regional Partners for Major Network Carriers once the network carrier emerged from bankruptcy protection. At the time, Air Wisconsin was on the verge of losing its partnership agreement with United Airlines as they could not agree on favorable terms for the capacity purchase agreements. A similar fate occurred with Atlantic Coast Airlines, which decided to fly as an independent carrier and later failed and went out of business entirely. As part of its agreement with US Airways, Republic Airways assumed the operations of the recently formed MidAtlantic Airways and took over its entire young fleet of Embraer 170 E-jets. Today, these airlines play an inte- gral part of US Airways’ regional network, whose regional aircraft fleet size almost equals that of the mainline fleet. Regional carriers that once relied on their network partners to finance new aircraft acquisitions are now in a position to purchase their own aircraft outright and dictate with which network carriers they partner. While they are still restricted by scope clauses, regional airlines have found creative ways to introduce larger jets such as installing multiple service cabins onboard. The growth of the U.S. regional carrier sector during the last decade has been phenomenal, with six carriers achieving “major” status as defined by the U.S. Department of Transportation. These include American Eagle, Comair, ExpressJet, Mesa Air Group, Republic Airways and SkyWest Airlines. An airline is considered a major carrier if its annual operating revenue exceeds US$1 billion. As network carriers continue to offload more domestic flying to their regional partners, this elite group of mega-regional carriers will continue to grow and further play a substantial role in shaping the future of the U.S. domestic airline network. U.S. regional carriers transport in excess of 100 million passengers annually and account for an estimated 12.5 percent of the available seat miles in the domestic network. What is unclear today, however, is which regional carrier will be aligned with which network carrier as each sector continues to pur- sue the most favorable capacity purchase or pro-rate agreement that meets their operational goals. a

U.S. network carriers partner with several regional airlines that serve a variety of Michael Clarke is principal research ® routes using anywhere from one to nearly 300 of the regional carriers’ aircraft. scientist for Sabre Holdings . He can be contacted at [email protected].

ascend 81 MONTHS DAYS HOURS

Countdown to Beijing

By Lynne Clark | Ascend Staff

Beijing’s travel and transportation industries, including airlines, airports, hotels, ground services and government agencies, are gearing up for next year’s Olympic Games.

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n the Chinese culture, certain numbers “China will migrate from an ‘aviation Overall, the airport and airlines received are believed by some to be lucky based giant’ to a world-class ‘aviation power’ “satisfactory performance” marks for I on the Chinese word in which the in 20 years,” Yang said at the China guaranteeing flight safety. number name sounds similar. Because Civil Aviation Development Forum held in Beijing Capital International Airport of the supposed auspicious properties of Beijing last May. got high marks also for good traffic man- certain numbers, some people spend large To help it achieve aviation power agement around terminals. Air China, sums of money for lucky numbers for their status, the CAAC’s air traffic control Hainan Airlines and Shenzhen Airlines phones, addresses and bank accounts. plan for the 2008 Games call for many scored best among the eight Chinese air- Chinese officials are banking on the other improvements to Beijing Capital lines on service, etiquette and the level of number eight — which in Chinese sounds International Airport. These include English spoken by their flight attendants. similar to the words for fortune, prosper upgrading existing facilities as well as On the list for improvements were and wealth — to lend its mystical qualities building two new radar navigators and a better allocation of carousels for deliver- to making the XXIX Olympiad an unparal- series of signal processing systems for ing luggage and improved visibility from leled success. Held in Beijing, the “One communication and weather observation. the airport terminal buildings. Also, the World, One Dream” Games will begin The plan also calls for new air routes link- airport was called upon to improve emer- Aug. 8, 2008, at precisely 8:08 p.m. The ing China with Mongolia and the Republic gency plans due to large-scale weather- country will play host to participants in of Korea. In addition, new routes linking related flight delays already reported this 28 sports, 38 disciplines and 302 events Beijing and Shanghai and south China’s summer. during the 18-day competition, taking Guangzhou city will open soon to alleviate “The capacity to deal with emergen- place at venues across the country includ- busy air traffic between Beijing and east cies should be given particular attention in ing Beijing, Qingdao, Tianjin, Shanghai, China. next year’s practice when more airports Shenyang, Qinhuangdao and Hong Kong. will be involved,” said Yang Guoqing, When China won its Olympic bid in Testing, Testing CAAC deputy director, in a July 7 edition 2001, it seemed to outsiders that it would The Beijing Olympics in 2008 and of People’s Daily Online. take more than luck to accomplish the Shanghai World Expo in 2010 are expect- The Beijing Capital International ambitious plans to bring the “ancient” ed to attract an unprecedented number Airport has also recently tested its three city up to modern standards expected by of overseas visitors to China. To make runways in the configuration designed for an estimated 800,000 foreign and 1 mil- sure the country is prepared, the CAAC the Olympics. The CAAC has contracted lion domestic visitors. One year away, is is holding two rehearsals aimed to give with the Boeing Company to conduct a it ready? airports, airlines and air traffic control the study of the operating mode for the three knowledge to work together and support runways and comparing it with the Atlanta Beijing Capital International each other better. International Airport. Airport The first rehearsal in late June Computer simulation modeling and Fifteen years ago, air travel in China involved eight major airlines, the Beijing analysis will help maximize the efficient was characterized by dark, dingy and Capital International Airport and the operation of the two old and one newly smoky air terminals, long lines, no food Northeast China Air Traffic Control Bureau. constructed runways. service, and bus rides to board aircraft parked on remote tarmacs. Even the shutterstock.com by Photo country’s main airport, Beijing Capital International Airport, serviced only an average 100 flights a day. Today, it’s the second-busiest airport in Asia and ninth-busiest worldwide. In 2006, it served 48,501,102 passengers and moved 1,028,908 metric tons of cargo. It is home to the world’s largest airport terminal, the newly constructed Terminal 3. The dragon-shaped super- structure stands seven stories high and spans 2.4 miles. If all goes as planned, 35,000 workers will have erected Terminal 3 in a record-breaking rate of just more than two years. Terminal 3 will provide the airport an additional 66 jetways, 120 gates and a number of remote parking bays. Terminal 3 is a lavish example of China’s commitment to becoming an aviation power in 20 years. The General Administration of Civil Aviation, or CAAC, the top regulator for civil aviation in China, is spearheading this great effort. Chinese The 2008 Summer Olympics, which is expected to drive significant business for the travel Minister of Civil Aviation Yang Yuanyuan and transportation industries, will begin in August at the Beijing National Stadium in Beijing, has made China’s aviation ambitions clear People’s Republic of China. on various occasions.

ascend 83 regional Photo by shutterstock.com by Photo in Atlanta, Georgia, last year for a conference on how to prepare for the Olympics. Of particular concern was security. “The art of airport security is having force without presence,” said Mario Diaz, the Atlanta airport’s deputy general manager during the conference. “Security was not in the face of the passengers and did not include armed soldiers.” Based on talks with Atlanta officials, Beijing airport authorities consulted with security experts in Sydney and Israel. In addition, they have invited security experts including the president of the European Aeronautic Defense and Space Co. EADS N.V., to come to Beijing and offer advice on improving security for the 2008 Games. Based on their findings, the Beijing airport plans to increase its security staff to 5,000 and will employ an estimated 800 police officers.

Skies Busy Over China The National Aquatics Centre for the 2008 Olympic Games in Beijing is the designated venue Backed by the country’s burgeoning for swimming, diving and synchronized swimming competitions. With the anticipation of economy, expanded U.S.-Chinese bilateral thousands of spectators, the centre offers 6,000 permanent seats and 11,000 temporary agreements and the pre-Olympics effect, seats. aviation news has buzzed with rumors of new alliances, aircraft purchases, routes and bidding wars. Beginning March 28, United Airlines Vertical Air Space Beijing before the end of this year, with began daily flights to Beijing following its Last year, flight delays in China terminals shared by both the military win of the coveted direct link to the city. topped passengers’ complaint list. and the civil aviation department. The The win was a victory in a hard-fought bat- Industry insiders said air traffic control International Air Transport Association, tle among Northwest Airlines, Continental was a major reason for the delays. Under which helped the Athens, Greece, and Airlines and American Airlines. Battles are pressure from the CAAC, the state-run air Sydney, Australia, organizers with air traf- likely to resume based on an expanded traffic control department was ordered to fic control during these recent Games, civil aviation agreement reached in May come up with a plan to make better use of said it would do the same with Beijing. by U.S. Secretary of Transportation Mary the airspace, increase air traffic flow and Also receiving attention prior to the Peters and Yang Yuanyuan. The agree- reduce flight delays. Olympics are habitually tardy airlines. In ment more than doubles the number of In May, the CAAC announced that late June, Beijing’s Capital International daily passenger services between the later this year China will reduce the vertical Airport issued a notice that said domestic United States and China by 2021. air space between aircraft. Called reduced flights missing arrival times by more than Starting this year, the new agree- vertical separation minimum, or RVSM, it 50 percent of the time or accumulating ment will allow for 13 new daily services shortens the space between aircraft from more than 20 departure delays will be operated by U.S. carriers to and from 2,000 feet (610 meters) to 1,000 feet (305 listed and publicized every month and China within five years. One new daily meters), allowing the number of layers of issued a yellow warning, according to the service will be added in 2007 and 2008, aircraft flying between 29,000 feet (8,841 China Daily. four new daily services in 2009, three meters) and 41,000 feet (12,500 meters) For its part, the airport has commit- more daily services in 2010, and two new to be increased from seven to 13. ted to improving monitoring systems and daily services in 2011 and 2012 for a total “We can make better use of the air- ground services. A plan to shorten take- of 23 per day. Under the current agree- space, increase air traffic flow and reduce off intervals, including rearrangement of ment, U.S. airlines today can operate only flight delays,” said Wang Changshun, boarding gates, has been implemented, 10 daily services into Beijing, Shanghai CAAC’s deputy director, in a May issue of and the airport’s computer system has and Guangzhou. China Daily. “It is good news for travelers been updated. Also, two inspection lanes In addition, this agreement will allow who will have to spend less time sitting in will be added to speed passenger clear- the United States to designate five U.S. cabins waiting for aircraft to take off.” ance and more customs officers fluent in carriers to operate to China. The deal also Adoption of the measure means foreign languages have been hired. will provide U.S. cargo carriers with virtu- that local airlines will have to equip their ally unfettered access to Chinese markets aircraft with specially certified altimeters Olympic-Sized Security by lifting all government-set limits on the and autopilots. Beijing Capital International Airport number of cargo services and cargo carri- officials turned to planners at Hartsfield- ers serving the two countries by 2011. Tardy Airlines Targeted Jackson Atlanta International Airport for Peters also stated that, as part of The CAAC is pursuing another mea- advice on security and operations plans. the agreement, U.S. and Chinese officials sure to set up an air control region in Some 30 Chinese aviation officials met have committed to resume negotiations in

84 ascend regional Photo by shutterstock.com by Photo China Eastern Airlines Corp. Ltd. recently reached an agreement allowing Singapore Airlines to buy a stake in the mainland carrier. Buying into China Eastern Airlines will give Singapore Airlines a sizeable share of the domestic travel market in China, in which China Eastern Airlines has a 40 percent share. Additionally, Singapore Airlines will have access to China Eastern Airlines’ fleet of 202 aircraft and intensive domestic and international networks from China.

Olympic Hotels and Hot Venues Early this year, Beijing Olympic Games organizing committee signed with 113 star-grade hotels and 253 non- star grade hotels in Beijing to provide accommodations for next year’s Olympic Games. As soon as the information of these signed hotels was published, the majority of the rooms were booked, according to a June issue of China Hospitality News. Up to 70 percent of Guests visiting the National Grand Theater during the 2008 Olympic Games in Beijing must the 113 star-grade hotels will be used pass a security check similar to those conducted at the airport, with bag scanners and walk- to house Olympic officials, government through metal detectors. officials, sponsors and referees. The remaining 30 percent will be available to individual bookers. Despite the limited supply of Olympic hotels, individual 2010 to establish a timetable to achieve Oct. 1, using a 211-seat Boeing 767- tourists can choose to stay at serviced the mutual objective of full liberalization. 300. The Shanghai-Toronto service apartments or rent a house from Beijing Following are just a few of the many also increased daily service during citizens, many of whom have already developments in the skies over China summer peak and will continue as realized this big opportunity to make spurred by new bilateral agreements and a three-day-a-week service for the money. economic opportunities: 2007-2008 winter schedule. Organizers announced in June that the rowing and shooting venues are complete and 10 more will be complete by the end of the year. Many of the venues, including an 80,000-seat stadium, 14 gyms and other sports facilities, an “We can make better use of the airspace, increase athlete’s village and an international exhibition center will be located at the Olympic Park, providing world-class air traffic flow and reduce flight delays.” sports, recreation and civic facilities for the people of Beijing long after the 2008 — Wang Changshun, deputy director for the Civil Aviation Administration of China Games. “These investments will not only ensure that Beijing’s readiness and infrastructure to host the 2008 Games are Dragonair announced in June that it Qantas Airways announced plans second to none, but will also perma- would strengthen its services to a to launch twice weekly Melbourne- nently improve the quality of life of number of major destinations in main- Shanghai service beginning in Beijing’s 12 million citizens,” said Liu land China, with Chongqing and Xian March, with two-class Airbus A330 Jingmin, vice mayor of Beijing and seeing a rise in frequencies to daily, aircraft fitted with Qantas Airways spokesman for the Beijing 2008 Olympic while services to Fuzhou will double Skybeds in business class, operat- Games bid committee. “The Olympic bid to 14 a week. The number of flights to ing from Shanghai on Mondays and is already helping to create a better, Bussan — Dragonair’s latest destina- Fridays. Also in March, the carrier greener and more livable Beijing. We tion, launched in January — recently will offer 10 return services a week invite the people of the world to see the rose from three a week to daily. to China — five between Sydney and new Beijing.” a Air Canada doubled its daily Beijing- Shanghai, two between Melbourne Vancouver service and increased its and Shanghai, and three between Shanghai-Toronto non-stop flights in Sydney and Beijing. It will also offer July. The added Beijing-Vancouver daily two codeshare services with China Lynne Clark can be contacted at flight operated between July 2 and Eastern Airlines. [email protected].

ascend 85 Openingregional the Skies

The recent open-skies agreement between Europe and the United States will give carriers more trans-Atlantic flying freedom and travelers more choices at better fares.

By Lynne Clark | Ascend Staff

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“The freedom to travel is often underestimated, but it is a value that lies at the core of democracy. ... one which we should always protect, promote and preserve.”

— U.S. Transportation Secretary Mary Peters

fter negotiating for 11 years, agreements or none at all. The United Creation of a cooperative joint com- European Union and United States and the European Union have mittee to further airline deregulation; A States transportation officials agreed to begin second-stage negotia- Guarantees for U.S. investors to par- gathered in Washington, D.C., on April tions on further liberalization within 60 ticipate as minority shareholders in 30 to sign a comprehensive, first-stage days of application of the agreement. any majority-E.U.-owned airline (effec- U.S.-E.U. transportation agreement. The According to a May report published tively including minority shares of open-skies agreement was a decisive by the U.S. Department of Commerce, state-owned firms); step toward an open and completely International Trade Administration, the Investment in U.S. airlines: Restatement liberalized trans-Atlantic aviation mar- new agreement contains several major of U.S. policy (25 percent legislated ket. With this agreement, said U.S. provisions: cap on voting equity, 25 percent- Transportation Secretary Mary Peters, Open skies between the United States minus-one-share regulatory cap on “the honeymoon in Paris, [France], the and the European Union and all its 27 non-voting equity); the United States business trip to Dublin, [Ireland], or the member states; will consider foreign requests to hold family reunion in Naples, [Italy], will be Broader entry into cooperative mar- larger shares of non-voting equity, cheaper, easier and within the reach of keting arrangements for codesharing, including combinations in which the more Americans and Europeans than franchising and leasing; ever before. And people from every E.U.

country will enjoy these same benefits shutterstock.com by Photo when they buy that trip to Disneyland or Washington, D.C.” Put simply, open-skies agreements remove regulatory limits on the number of carriers a country may designate, the number of flights, the routes flown and the type of aircraft an airline may use. Open routing provisions that permit unlimited flights between the parties also allow carriers to continue flights on to third-country markets. While removing barriers to market entry and service, the agreements affirm the critical operations of civil aviation, such as safety and security. The arrangement covers operations by scheduled and charter operators, for passenger and all-cargo services.

The Agreement The new agreement, which will be provisionally applied beginning March 30, 2008, dismantles the patchwork of agreements that has limited trans- Atlantic air service since World War II. Unlimited entrance to the United Kingdom, specifically London Heathrow Airport, the busiest It extends ,open-skies, principles to 11 point in the European Union and currently limited to two U.S. carriers, is one of several ben- E.U. countries, including Greece, Ireland, efits of the new open-skies agreement between the European Union and the United States. Spain and the United Kingdom, where the United States has had restrictive

ascend 87 regional

total of voting and non-voting equity United States without having to pass members of the European Common exceeds 50 percent; through Germany); Aviation Area, Kenya or African coun- The ability for E.U. carriers to route U.S. agreement that purchase by an E.U. tries — would not jeopardize the flights between any E.U. member state carrier or investor of a controlling share acquired airlines’ rights to operate in and the United States without touching in a carrier (passenger or cargo) from the United States; the home country’s “community carri- third countries that have open-skies Authorization for E.U. carriers (sched- ers” (for example, a Lufthansa German agreements with the United States uled and charter, passenger and cargo) Airlines flight can go from Paris to the — such as Switzerland, Liechtenstein, to carry certain “Fly America” traffic, except for the U.S. Department of Photo by shutterstock.com by Photo Defense; For E.U. cargo carriers, the ability to route flights between third-party states and the United States without touching the home country and between the United States and members of the European Common Aviation Area. The ITA report also outlines specific benefits that accrue to the air services sector under the new agreement: A unified set of rules governing air services arrangements across the E.U., replacing multiple national-level air services agreements for passenger and air cargo routes served by U.S. operators; Potential simplification of the existing passenger and cargo operating relationships, including competition-law issues, in the non-open-skies E.U. countries, helping to rationalize the industry further (for example, more choices in partnership or co-branding relationships, broader selection of passenger and cargo hubs) and improve operational efficiency; Unrestricted access to the United Photo by shutterstock.com by Photo Kingdom and especially London Heathrow Airport, the busiest point in the European Union and currently limited to American Airlines and United Airlines among U.S. carriers.

Carriers Jockey for Position For airlines, stakes in the coming rules change are high. Trans-Atlantic air traffic between Europe and the United States is expected to increase by 55 percent during the next five years. Washington, D.C.-based aviation consultant Jon Ash told USA Today recently that Heathrow is the “cash cow” carriers are hoping to milk. That’s because in the 12 months ended in February, the average fare from the United States to London Heathrow Airport was 29 percent higher than that from the United States to London Gatwick Airport. Clearly, stakes are high for carriers that are making major investments to take full advantage of deregulation. Already, there have The new open-skies agreement between the European Union and the United States will been numerous reports relating to the allow airlines in those regions to serve some of the world’s most traveled airports, such as new open-skies agreement: London Gatwick Airport and John F. Kennedy International Airport, that were previously off Delta Air Lines is scrambling for limits. operating rights at London Heathrow Airport so it can launch service from

88 ascend regional

to figures gathered by the ITA. Similarly, Highlight travel between Toronto, Canada, and Minneapolis, Minnesota, jumped 55.3 percent in the first year after the U.S.- Canada agreement. “If history is an accurate barometer, investments The joint commitments on the part of the United States and the European made by carriers hoping to profit from open skies Union to launch second-stage negotiations in 2008 holds open the possibilities agreements are a good bet.” for even greater commercial opportunities in the future. Further liberalization of traffic rights and additional possibilities of investments abroad is a next step. its Atlanta, Georgia, base as soon as didn’t use it until deregulation was on “This agreement will bring many the treaty takes effect. the horizon. concrete benefits, and it will bring Virgin Atlantic Airways is studying United Airlines and British carrier bmi change,” said European Transport new flights from six European cit- are seeking final approval from U.S. Commissioner Jacques Barrot in remarks ies. If launched, the carrier would regulators to expand their codesharing during the signing ceremony. “Even start the routes out of the John F. partnership. Passengers would be able before the signature, different players in Kennedy International Airport and to visit United’s Web site and buy one the European industry have been stak- Newark International Airport, where it ticket to get to their final European ing out their position in preparation for now flies. Possibilities include Madrid, destination. a new era. Partners on different sides Zurich and Milan, Italy. of the Atlantic are considering how to Continental Airlines hopes to launch History Confirms Open Skies develop further their cooperation. Heathrow service from its Houston, are Profitable “Financial institutions, in particular, Texas, base before summer 2008. If history is an accurate barometer, are looking for progress that ensures avi- Immediately after the open-skies investments made by carriers hoping to ation has the same investment and trad- agreement in March, Aer Lingus profit from open skies agreements are ing opportunities as other industries.” announced plans to launch service a good bet. After the 1995 adoption of Looking ahead, he said the United this year to three new U.S. cities: San the U.S.-Canada trans-border air servic- States and European Union must address Francisco, California; Orlando, Florida; es agreement, one-year traffic jumped air transport emissions and the cost of and Washington, D.C. The Irish carrier 146.4 percent between Vancouver, “green technologies” as well as better had the authority for the service but Canada, and Phoenix, Arizona, according air traffic control. “We must also now work together Photo by shutterstock.com by Photo more closely than ever on safety and security,” Barrot said. “We need to protect our citizens when they fly, but we must not make their journey unbearable with uncoordinated security measures. So there is a lot of work to do, but with this deal, we are giving ourselves an excellent basis for future work. Aviation is essential to trans-Atlantic trade, and with this agreement, aviation takes its place as an example of what the European Union and the United States can achieve together. Now we must press on with our work to ensure that aviation continues to lead the way.” a

Virgin Atlantic Airways is considering operating new flights from six European cities as a result of the recent open-skies agreements between the United States and Europe. If it moves forward with these plans, it will begin the routes out of the Newark International Airport and the John F. Kennedy International Airport. Lynne Clark can be contacted at [email protected].

ascend 89 company

Disaster Recovery

Sabre Holdings® enhances its disaster recovery program using the Cherokee Data Center — the only tier-4 facility available to the travel and transportation industries.

By Sally West | Ascend Contributor

t would be difficult to find anyone who has Disaster Avoidance disaster recovery program is built upon these not heard of the recent natural disasters Disaster avoidance includes the res- traits with detailed task plans and redundant criti- Iand political upheavals that have impacted toration and recovery from major impacts. It cal systems at the Cherokee Data Center. corporations worldwide. As a result, many cor- includes hardened data facilities, redundan- The facility is designed to survive natural porations are reviewing their disaster recovery cies, extensive back-up procedures and disasters and bomb blasts, and it continues to plans and making enhancements. And Sabre operations expertise. It also utilizes a operate without on-site staff. The only tier-4 Holdings is no exception. tier-4 (comprising multiple active power facility available to the travel and transportation The company’s disaster recovery pro- and cooling distribution paths, has redun- industries, it will withstand F5 tornados with gram consists of extensive processes designed dant components, and is fault tolerant, winds of up to 300 miles per hour and storm to protect mission-critical systems and data providing 99.995 percent availability) data movement of up to 70 miles per hour. It can also in the event of natural or man-made disas- center site with physical security providing withstand blast threats to the building of up to ters. This program has successfully protected active monitoring against intrusion. This 500 pounds of TNT. Sabre Holdings’ systems and the continuity of tiered approach can sustain operation dur- its customers’ operations and data for more ing severe weather and natural disasters. Disaster Recovery than 35 years. And now, the company has The primary data center provides two or Sabre Holdings has production-capable implemented an additional layer of protection more service (power and cooling) distri- systems located in the Cherokee Data Center. to ensure its customers’ systems function bution paths for redundancy at the sub- Ongoing captures of production systems, appli- without significant disruption at all times by system level, and the facility is designed cation configurations and databases are copied utilizing a second data center facility, the EDS to eliminate points of failure and supports from the primary data center to this data center Cherokee Data Center in Tulsa, Oklahoma. 24 hour-a-day, 365 day-a-year availability. as part of the disaster recovery solution. A full The disaster recovery program includes A minimum of two copies of each record network infrastructure is in place as well, and two primary areas: disaster avoidance and is written to the databases, and network all operational support can be conducted from disaster recovery. communication lines are redundant. The an alternate site. Testing of this solution is per-

Sabre Airline Solutions Archives Solutions Airline Sabre formed at least once a year and includes using operational support from the alternate location. With both the extensive processes, use of two tier-4 data centers and redundant production capable systems, Sabre Holdings has the ability to minimize system disruption to support its customers’ critical business functions. The company is committed to continuously improve its disaster recovery capabilities, and using the EDS Cherokee Data Center is yet another step to preserve and protect its customers’ vital operations. a

The Tulsa-based EDS Cherokee Data Center is the only tier-4 facility available to the travel Sally West is a senior principal in the and transportation industries. Operating without an on-site staff, the disaster recovery facil- enterprise operations area of Sabre ity is designed to withstand natural disasters and bomb blasts. Holdings. She can be contacted at [email protected].

90 ascend company

Going Private After being purchased by two dominant investment firms, Sabre Holdings® can focus more closely on its long-term goals of providing state-of-the-art technology solutions to its customers without the severe pressures of a publicly traded company.

By Phil Johnson | Ascend Staff

abre Holdings, having been purchased endorsement of our business model, our “Sabre Holdings is well positioned to and taken private by Silver Lake Partners industry leadership and the hard work and continue innovating,” said Karl Peterson, a Sand TPG Capital, continues to offer the dedication of our talented people around partner at TPG Capital. “And we’re excited same world-renowned service and innovative the world.” by the opportunity to invest in Sabre ideas to its many global clients — but as a Becoming a private company, Sabre Holdings given its leadership position in private company, its overriding objective is to Holdings gains a considerable degree travel technology and distribution, and offer even more. of flexibility in developing and offering the strength of Travelocity® and the com- And its clients have every reason options to its worldwide array of clients. pany’s other leading online brands. We to expect more from the company that “Sabre Holdings has a remarkable look forward to helping Sabre Holdings has spawned many of the most popular track record of pioneering and deliver- management profitably build upon this features in global travel service over the ing best-in-class technology solutions for very strong franchise.” years. the global travel industry,” said Greg Its headquarters remains in Southlake, Texas, and although Sabre Holdings is no longer a publicly traded Highlight company, it will continue to post periodic financial updates on its Web site. “The advantage to Sabre Holdings of “For Sabre Holdings, being a private company being private is that it’s no longer under the extreme pressure of being a publicly and having private-equity parents such as TPG traded company,” said Stan Block, Ph.D., a finance professor at Texas Christian Capital and Silver Lake Partners may well prove University’s Neeley School of Business and a keen observer of mergers and acquisitions. an advantage of immense proportions — particu- “When you’re a publicly traded company, you’re under tremendous pressure larly to the company’s worldwide multitude of for short-term performance,” Block said. “And by that, I mean the next quarter’s customers and business associates.” earnings report. As a public company, a large percentage of your attention is focused 30 to 60 to 90 days into the future. And if you don’t make your numbers, if you don’t make your goals for the “After a thorough assessment, Mondre, a managing director of Silver quarterly report, you tend to be punished we concluded that this transaction rep- Lake Partners. “We look forward to work- in the financial markets. resents a compelling outcome for our ing with the members of Sabre Holdings’ “And what happens in that case shareholders, customers and employees,” talented management team as they con- — when you’re a public company — is said Sabre Holdings Chairman and Chief tinue to deploy technology as a source of you lose your vision of where you want Executive Officer Sam Gilliland. “We look competitive advantage and value-add for to be three to five years from now,” he forward to a strong future, partnering with customers.” continued. “You’re too worried about 60 two preeminent investment firms that are No significant changes have occurred to 90 days. So instead of making the type closely aligned with our strategy and long- in the company’s executive management of plans that would allow you to grow and term objectives. This transaction is a clear team, and none are anticipated. prosper and meet and adjust to changing

ascend 91 company Sabre Airline Solutions Archives Solutions Airline Sabre

Southlake, Texas-based Sabre Holdings, which was recently purchased and taken private by two dominant investment firms — Silver Lake Partners and TPG Capital, will continue to offer it’s worldwide client base the highest possible levels of service and innovation.

competition, you’re worried about wheth- tunity to come out way behind in the late private market — Burger King, MGM, er you’re going to hit that US$1.20 in 60 innings. Neiman Marcus,” said Block. “So TPG is days, or you’re going to unfortunately “Being private now, Sabre Holdings what I would call a ‘generalist,’ not neces- come in at US$1.18 and be punished by has the opportunity to concentrate more sarily specializing in a given industry. For your stock price going down 10 percent.” on the future. Now, the people running the example, TPG right now — along with Interestingly, one of the best- company are not looking just 60 to 90 days Goldman Sachs — is looking at taking TXU known private-equity firms in the world, Blackstone Group LP, recently put itself Highlight at least partially on the public market with an enormously successful initial public offering. “There’s an old saying that every “Sabre Holdings is well positioned to continue private company wants to be public, and every public company wants to be pri- innovating ... We look forward to helping Sabre vate,” said Block. “And there’s some truth to that. “But what it boils down to is that Holdings management profitably build upon this only about 10 percent to 20 percent of companies that do go public are really suc- very strong franchise.” cessful and happy that they went public. — Karl Peterson, TPG Capital, partner Those are the ones that make Bill Gates and others multi-billionaires,” he said. “On the other hand, the great majority down the road, they’re looking one year, Energy Corp. private. And TPG has the that find themselves public — the 80 per- three years, five years down the road with expertise among its management people. cent to 90 percent — they find themselves a plan to enhance their operation.” When they take a company private, quite under tremendous pressure. Often, they Then there’s a whole other area of often it’s with the intention of the compa- find themselves at a stock value less than discussion related to the companies that ny being private for, perhaps, three years what they initially went public for, and bought and took Sabre Holdings private: — and then maybe bringing the company they’re disappointed they ever made that TPG Capital and Silver Lake Partners. back to the public market. move. So being public is an opportunity to “TPG has tremendous experience “But the only way they can do that hit a home run — but it’s also an oppor- taking companies from the public to the successfully is by making it a much better

92 ascend company Sabre Airline Solutions Archives Solutions Airline Sabre never been happier just to get around Sarbanes-Oxley. So definitely, the additional capital that can be invested by private-equity firms is important to the future of the private company, but also the capability to not have the extreme supervision of the U.S. Securities and

“This transaction is a clear endorsement of our business model, our industry leadership, and hard work and dedication of our talented people around the world.”

— Sam Gilliland, Sabre Holdings, chairman and chief executive officer

Exchange Commission with Sarbanes- Oxley, which a lot of people now feel is counterproductive.” For Sabre Holdings, being a pri- — Sam Gilliland, Sabre Holdings, chairman and chief executive officer vate company and having private-equity parents such as TPG Capital and Silver Lake Partners may well prove an advantage of immense proportions — particu- company than it was before — and this means Another obvious advantage of having larly to the company’s worldwide multi- taking a hard look at all of the operations and savvy private-equity ownership is the ability of tude of customers and business improving them,” he said. “They know they that ownership to invest substantially in busi- associates. a can go in and improve costs and make Sabre ness growth and improvements. Holdings a more efficient operation in providing “The ability to invest considerable solutions for its customers. And they’re able to amounts of capital is certainly a significant do this without the severe pressure of being factor,” Block said. “But I would also add that public: They’re not worried about next quarter being a private company affords Sabre Holdings — they’re worried about taking steps that are another advantage in terms of freedom from going to make the company much better in the Sarbanes-Oxley, which is a very tough law that longer term.” was passed in the early part of the decade. Silver Lake Partners has accumulated a While the intentions behind Sarbanes-Oxley history somewhat different from TPG — but may have been good and pure and forthright, also quite favorable to future prospects of Sabre this law — when you’re a public company Holdings. — makes it much more difficult to present “Unlike TPG, Silver Lake’s people spe- your financial situation without potential cialize in information technology,” Block said. liability to stockholders. “Their expertise is very specifically in informa- “And it’s certainly something pub- tion technology and the area Sabre Holdings is lic companies fear and private companies in. So the two companies taking Sabre Holdings can basically ignore,” he said. “I happen from public to private have the right combination to be on the board of a public com- Phil Johnson can be contacted — a good combination for Sabre Holdings.” pany that has gone private, and we’ve at [email protected].

ascend 93 the high level vıew News Briefs from Around the Globe

North America shutterstock.com by Photo

Caribbean Airlines Caribbean Airlines signed an agreement with Sabre Airline Solutions® to provide a new system for its maintenance, repair and overhaul applications, which will be delivered via Sabre ® eMergo ® Web access. Caribbean Airlines chose the Ramco MRO System because of “its time to market, product superiority, hosting and the fact that Sabre Airline Solutions will be a single vendor for all our operations and MRO solutions,” said Capt. Ian Brunton, executive vice president of operations for Caribbean, the national airline of Trinidad and Tobago. Caribbean Airlines’ predecessor, BWIA, had been using the Sabre ® Maxi- Merlin™ maintenance, engineering and inventory system for the last 24 years. It opted to use the Ramco MRO system as the upgrade to the Maxi-Merlin system. “After 24 years on the Maxi-Merlin system, we recognized immediately that combining Sabre Airline Solutions’ proven Airlines CIO Mike Malik. “Sabre [Airline enables the airline’s valued customers to track record with the Ramco MRO system’s Solutions’] proven technology will create make personal choices based on seating extra functionality would be a winning sys- the efficiencies we need to allow us to be preference and cost. tem for us,” Brunton said. “In addition, successful in today’s competitive airline “Sabre [Travel Network] has been the eMergo solutions delivery process environment.” innovative and creative in its development ensured we would be up and running right of solutions that support Midwest’s initia- away, which was vital to us. It supports Midwest Airlines tives to provide the flexibility our custom- our quest to be self sustaining and a profit Midwest Airlines is the launch customer ers want,” he said. center in our MRO operations.” for new merchandising technology from “We have enjoyed a long-term part- Sabre Travel Network®, which introduced nership with Sabre [Travel Network]” said Aloha Airlines another merchandising first through its Alex Yarmulnik, chief information officer for Aloha Airlines has turned to Sabre Airline distribution merchandising suite. The suite Midwest Airlines. “They understand what Solutions® to assist the Honolulu-based will enable airlines to differentiate and sell airlines need to be competitive. They have carrier’s continuing efforts to improve premium airline seats in a coach-class air- proven, reliable technology with solid inte- its bottom line and secure a competi- craft cabin. The Milwaukee-based carrier gration capabilities, which provide Midwest tive advantage. Bracing for expansion, will use the new merchandising capabil- with operational efficiencies and cost sav- Aloha Airlines has asked Sabre Airline ity in conjunction with the addition of its ings.” Solutions to provide four technology solu- Signature seating — its two-by-two seat- tions — the Sabre ® Flight Control Suite, ing option with exceptional legroom — on AirTran Airways the Sabre ® Streamline® StaffPlan™ system, its MD-80 aircraft. As part of Midwest’s AirTran Airways is serving as the launch the Quasar™ passenger revenue account- continuing rollout of its long-term strategic partner for new technology developed as ing system and the Sabre ® Qik® Business plan, the airline’s all-coach-class cabin will part of the ongoing evolution of the Sabre ® Processing Solutions — all of which are feature both Signature and Saver seat- global distribution system. designed to either reduce an airline’s oper- ing, beginning with flights on the MD-80 AirTran Airways is launching XML con- ating costs or improve revenues. aircraft and continuing next year on its nectivity. The airline — for the first time “Now more than ever, it’s vital that Boeing 717 fleet. — has the ability to provide enhanced ser- Aloha Airlines invests in technology to According to Scott Dickson, senior vices through the GDS, giving Sabre Travel streamline our operations and to maximize vice president and chief marketing officer Networks’ vast network of corporate and the use of our resources,” said Aloha for Midwest Airlines, the new technology leisure customers a distinct advantage.

94 ascend Photo by shutterstock.com by Photo cent in June 2006. And 161 airlines have implemented e-ticketing in the Sabre GDS, up from 122 late last year. Condor, Corsair, Ethiopian Airlines, KD Avia, Malev Hungarian Airlines, Olt- Ostfriesische Lufft and Royal Jordanian have become the latest carriers to implement e-ticketing through the Sabre GDS. While 161 airlines worldwide offer e-ticketing through the Sabre GDS, its sister company, Sabre Airline Solutions®, is working closely with many airlines to ensure they will be compliant with the International Air Transport Association’s 100 percent electronic ticketing mandate. SabreSonic ® Ticket enables an airline to distribute electronic tickets both through its own sales channels and through travel agencies, check in passengers with electronic tickets and issue interline electronic tickets. Sabre Airline Solutions “[The] new XML connectivity is a big better shopping experience for agents and Sabre ® eMergo® Web access, the industry’s win for AirTran Airways because we’re highly travelers that can result in increased sales largest application service provider host- focused on our ability to leverage a variety of dis- for airlines using the new solution. ing platform, is being utilized by more than tribution channels and capitalize on our invest- Enhanced fare quote and availability that 100 airlines around the globe because it ments in XML — just two of the things that our incorporates airlines branded fares into Sabre provides them flexibility to deploy a num- partnership with Sabre [Travel Network] helps GDS displays, enabling them to merchandize ber of operational programs to address us accomplish,” said Kevin Healy, vice presi- through the GDS the attributes of their prod- the needs of a constantly changing travel dent of planning, AirTran Airways. “Together, ucts in a manner consistent with their mar- marketplace. we’ve provided travel agents the ability to sell keting strategies. On the MySabre™ agent The eMergo delivery method is a AirTran Airways’ unique products, view our booking portal, agents can quickly review complete solution that includes application seat maps and communicate frequent traveler those attributes on the interactive display, delivery, hardware and third-party software, information, all through the efficiency of the and with one click, they can view summaries management of that software, data stor- Sabre GDS.” used to easily compare attributes across car- age, help desk support, and maintenance XML connectivity enables reservations riers’ different fares. releases. It enables airlines to access and capabilities and enhanced services, such as employ more than 60 of the Sabre Airline interactive seat maps, frequent flyer numbers Solutions® products via the Internet, sav- and pre-reserved seats for carriers whose Sabre Travel Network ing them as much as 60 percent in upfront reservations systems don’t fully support tradi- According to Sabre Travel Network® , 90 costs over local installation of the same tional communication protocols used for GDS percent of all tickets issued worldwide solutions. connectivity. This provides improved capabili- through the Sabre ® global distribution sys- “No one — absolutely no one — has ties for carriers participating in the Sabre GDS tem are now electronic, up from 80 per- been able to duplicate the success of the and a platform to enable distribution of carriers shutterstock.com by Photo eMergo delivery method,” said Vinay Dube, that haven’t previously participated in GDS vice president, marketing solutions for Sabre systems. Airline Solutions. “Airlines have adopted this Other enhancements include: unique solution, far surpassing the adoption Next-generation availability that enables the rates of any other industry provider.” Sabre system to house a real-time represen- The eMergo delivery method goes tation of an airline’s true inventory, which beyond a traditional ASP model because it reduces response time and provides more provides a one-vendor solution for airlines: accurate last-seat availability, ultimately pro- one point of contact, one business relation- viding more accurate available fare informa- ship, one complete solution for hosting as tion when agents search across a large well as a single price point for its applica- number of itinerary options. This creates a tions.

ascend 95 the high level vıew News Briefs from Around the Globe

Southwest Airlines based on a number of scenarios,” said Kevin of planning and sales for Virgin America. Southwest Airlines Cargo selected Sabre ® Russell, manager of cargo revenue manage- “This important distribution channel will CargoMax™ Revenue Manager to help ment for Southwest Airlines. allow us to more efficiently and broadly increase efficiency, cargo revenue and prof- distribute fares for our San Francisco, itability. Revenue Manager is an integrated, Virgin America New York, Los Angeles, Washington, comprehensive solution that supports the Virgin America, the U.S.-based low-fare D.C., and Las Vegas routes.” end-to-end cargo revenue management next-generation airline, signed a multi- needs of an airline. year distribution agreement with Sabre “We are constantly seeking ways to Travel Network ® that will enable the air- Latin America improve our efficiency and processes, and line’s fares and inventory to be made Revenue Manager will help us meet those available to all Sabre ConnectedSM travel objectives,” said Matt Buckley, senior direc- agents worldwide. tor of cargo for Southwest Airlines. “While The Sabre Travel Network distri- Aerolitoral delivering the excellent customer service for bution agreement with Virgin America Aerolitoral, the regional airline of which we are known, Revenue Manager will makes all airlines’ fares available to Sabre Aeromexico, in looking for ways to help us increase revenue, specifically through Connected travel agencies and corpora- reduce costs in the face of the apprecia- more effective cargo space management.” tions worldwide. tion of the peso and increased competi- “Our aim is to implement a world- “We are delighted to be a part tion on its routes to the United States, class revenue management solution that is of the Sabre ® global distribution system has selected the Ramco MRO System able to support decision-making capabilities channel,” said Brian Clark, vice president from Sabre Airline Solutions® to efficiently maintain and engineer its fleet.

Photo by shutterstock.com by Photo By implementing the Ramco MRO system, Aerolitoral will be able to achieve optimal utilization of resources, improve performance and decrease costs. “Aerolitoral decided to migrate to Sabre Airline Solutions and the Ramco MRO system because we recognized the potential to reduce our direct and overhead costs and optimize inventory,” said Cesar Garcia, Aerolitoral’s vice president of maintenance and engineering. “Combined with the ability to ensure safety and regulatory compliance, the MRO solution will allow us to become more cost efficient and compete even more effectively in the Latin American marketplace.”

Europe, the Middle East and Africa

Aegean Airlines Aegean Airlines, the fast-growing, pri- vately owned Greek carrier, signed a major revenue management contract with Sabre Airline Solutions®. This follows a similar decision by Swiss no-frills carrier flybaboo.com to use Sabre ® AirMax® Revenue Manager to help meet expanding revenue management requirements. Aegean will use the product to control seat price and availability, both

96 ascend Photo by jupiterImages.com by Photo Royal Air Maroc will use Sabre ® AirFlite™ Schedule Manager to develop flight schedules that best meet customer needs, while Sabre ® AirFlite™ Profit Manager will help it analyze strengths or weaknesses in its flight timings and the financial impact of individual timetable changes. The crew management deal sees Royal Air Maroc using the Sabre ® Rocade® Crew Management System to generate optimal crew pairings, automatically generating rosters and tracking daily crew operations. The system generates cost-effective crew pairings and automatically generates crew rosters that meet crew legality rules, including gov- ernmental and regulatory requirements, airport restrictions, crew training and licensing, airline-specific requirements, and individual crew preferences. “Sabre Airline Solutions has the technology we need now and provides the flexibility we need to adapt quickly to growth and new business models in the future,” said Mohamed Diane, chief information officer for Royal Air Maroc. by flight leg and segment. It anticipates site powered by Holiday Autos. This “Their decision-support software will significant incremental revenue as a lastminute.com-owned car rental broker enable us to drive out costs and grow result. Revenue Manager features a already powers the car hire section of revenue, all while maintaining opera- comprehensive range of decision-sup- Atlas Blue, the no-frills carrier owned tional excellence in a rapid growth envi- port processes including data collection, by Royal Air Maroc. ronment.” forecasting, overbooking, optimization, alerting, and performance measurement shutterstock.com by Photo and reporting. “Revenue Manager tested best in the area of forecasting and operations research,” said Roland Jaggi, Aegean’s head of revenue management and pricing. “Sabre [Airline Solutions] will provide comprehensive support to Aegean in the course of the implementation and post go-live period so that Aegean maximizes the benefits from the use of the system.” Royal Air Maroc Royal Air Maroc signed a multi-million dollar deal with Sabre Airline Solutions® for products to help plan and improve flight scheduling. Another deal has been signed for crew management products. The North African carrier has also signed with lastminute.com, sister company to Sabre Airline Solutions, to have the car hire section of the carrier’s Web

ascend 97 hightech

Product Optimized staff utilization — Enhanced maximum planning weights, and perfor- traveler-processing options enable staff mance limit weights. The fuel plan data ® Sabre Ground Assist to improve service to customers outside lists all pertinent information for each of the traditional ticketing and check-in of the aircraft fuel tanks. Description: counters. Provide efficient IATA-standard Ground Assist, the Sabre Airline Simplified deployment — Constrained worksheet — Load planners can use Solutions® passenger processing solu- by resource availability, traditional air- online screens to enter all weight data tion for ground handling companies, port automation deployment depends for flights. Weight-and-balance infor- provides comprehensive support for on location-specific conditions for suc- mation is then calculated based on passenger handling, passenger self- cess. The Ground Assist solution simpli- aircraft type. service and weight-and-balance pro- fies application deployment and mainte- cesses. The departure control sys- nance through an application service Increased productivity — Users can tem provides one of the most rapid provider approach, ensuring uniformity easily and safely work more flights per response times in the industry and across the operational network. shift. A single user can conduct load delivers unsurpassed reliability and planning for multiple flights simultane- stability. These feature-rich passenger Increased revenue opportunities — ously. The result: planners have been self-service products are International Faster passenger check in and shorter able to work as many as 20 flights per Air Transport Association compliant, lines increase traveler satisfaction, eight-hour shift. helping ground handlers streamline the resulting in repeat business. check-in process and reduce costs. And the load planning application sup- Load Control Features: ports industry-standard functionality and external messaging — a must for I m p r o v e d w e i g h t c a l c u l a t i o n s — W e i g h t The Ground Assist solution provides ground handling companies. information is retrieved for checked- a fully functional hosted departure in passengers and baggage, allocating control and load planning system that weight according to passenger type. provides complete support for ground Benefits: User-defined parameters enable special handling activities: weights for specific groups, seasons of By utilizing the Ground Assist solution, the year and load types. Departure Control improvements in customer processing and load control can provide several Increased fuel savings by optimizing The DCS host solution provides indus- operational benefits: center of gravity — The load control try-standard passenger processing fea- option can considerably reduce an air- tures for flight check in and boarding. Passenger Processing craft’s fuel consumption by optimizing Support for industry mandates, IATA the ideal trim through the automated compliance for e-ticketing and BCBP, Enhanced airport passenger process- tools provided in the weight-and-balance external messaging, security require- ing — Industry-standard check-in and program. This can result in improved ments, and other obligations guaran- boarding functionality lets ground han- fuel savings for airline clients. tees compliance with all airport handlers offer superb passenger-process- dling needs. ing automation and capabilities to their Automation of important processes airline clients. — The load control system automatically Check-in Staff — The solution includes plans the payload for optimal center of a graphical user interface that simpli- Adherence to control authority gravity through the auto-deadload func- fies complex, multi-step processes requirements — Users can be sure that tionality. It also automatically receives and completely eliminates the need the departure process complies with and formats messages while distribut- for staff to memorize complex host local and destination-specific security ing payload and down-line messages. formats. This reduces training require- requirements. Exceptionally easy to use, the system ments, keystrokes and input errors, displays important alerts and valida- enabling staff at the check-in counter R e d u c e d o p e r a t i o n a l c o s t s — P r o v i d i n g tions. to provide exceptional customer ser- self-service options to individual travel- vice. ers reduces the need for additional Display of vital information — Data airport staff and enables growth at a displayed online about loading aircraft Passenger self-service tools — The lower cost. includes planned and required fuel, passenger-processing solution pro-

98 ascend New and Improved Products and Services from Sabre Airline Solutions

eler check-in and boarding process, enabling ground handlers to provide a premium level of customer service. Addressing the need for effective and efficient customer service, these solutions deliver valuable traveler-processing tools to ground handler staff:

Offering a state-of-the-art combination of Web browser and PDA technologies, the Roving Agent module provides airport staff with real-time wireless, portable access to the airline’s host reservations and departure control systems. Designed to supple- ment existing airport positions, the module enables airport staff to service customers away from traditional ticket and gate counters.

The Gate Reader module is integrated with the graphical user interface, processing boarding documents and cards to verify traveler information including flight, date, origination, and traveler name and seat number. It automates the boarding process, enabling a more accurate accounting The Check-in Tab provides a quick and easy passenger check-in method with comprehensive of boarded travelers. This automation features within one view. Agents can view available seats, change seats, issue boarding provides a more accurate closeout passes and bag tags and many other essential functions all by selecting the row number of of flights, reduces flight delays and the passenger. improved operational efficiency.

Load Planning vides a full set of self-service check-in base determined by the handler, thus The load control option helps maximize tools that empower travelers with the providing travelers with quality cus- payload while creating the optimal cen- ability to perform multiple functions tomer service. The application is IATA ter of gravity based on aircraft opera- related to their journeys. Accessible CUSS compliant, ensuring flexibility tional data. The system addresses all both within and outside the airport and integration with most CUSS kiosk concerns of load planning personnel, environment, these tools enable travel- platforms. incorporating automation to provide a e r s to p e r fo r m fu n c t i o n s ot h e r w i s e h a n - consistent, accurate and straightfor- dled by airport staff, such as obtaining Web check-in module — The mod- ward way to perform required weight- a valid boarding entitlement, changing ule displays traveler itineraries, sup- and-balance tasks: a seat assignment or confirming flight ports flight check-in functions, pro- status. vides interactive seat maps, verifies Load Manager provides the capa- flight status and generates boarding bilities of a centralized load planning Self-service kiosk module — This passes, which can be printed from the system offered by expensive main- solution provides passengers with a customer’s computer. frame computers, but with a more convenient, easy-to-use self-service flexible user-friendly interface. The check-in option that enables them to Airport Staff Tools solution may be deployed as a local- perform routine travel functions with- ly-installed system or hosted by out the involvement of airport staff. The staff tools empower airport staff Sabre Airline Solutions and delivered The module provides a broad content to handle multiple facets of the trav- via Sabre® eMergo® Web access. a

ascend 99 Helping you better market, sell, serve and operate — from planning through execution.

We help you plan how to best offer your schedules market to customers and generate the most revenue. • Cargo management • Loyalty management • Revenue • Fares management • Revenue accounting management • Inventory • Revenue integrity • Schedule management management development

We help you determine the best distribution channel sell to sell tickets to customers. • Booking engines • Customer relationship • Reservations • Business process management • Shopping management • Market data • Ticketing • Channel distribution and analysis

We help you make the experience easier for your serve customers throughout the travel process. • Customer notification and trip information • Customer processing

We help you manage daily operations to efficiently operate fly your schedules. • Crew management • Ground support • Resource • Dining and cabin • Maintenance, management services repair and overhaul • Schedule • Flight operations distribution

smart. proven. bankable. Sabre Airline Solutions and the Sabre Airline Solutions logo are trademarks and/or service marks of an affiliate of Sabre Holdings Corp. ©2007 Sabre Inc. All rights reserved. contact making E-mail: [email protected] E-mail: 3210 6511 +65 Phone: 049483 Singapore #15-02 Hub Samsung Street Church 3 President Vice Powell Andrew Asia/Pacific representatives: regional Solutions Airline Sabre following the of one contact or www.sabreairlinesolutions.com at site Web our visit please Ascend, of issue this in featured services and products about information more For [email protected]. at staff the to message e-mail an send please list, mailing the to someone add or address your change article, future possible a for topic a suggest To [email protected]. to message e-mail an send please in advertise to like would you If [email protected] E-mail: 5335 605 682 +1 Phone: 76092 Texas Southlake, Drive Sabre 3150 President Vice Fritschel Kristen America North [email protected] E-mail: 5399 605 682 +1 Phone: States United 76092 Texas Southlake, Drive Sabre 3150 President Vice Qatato Kamal America Latin [email protected] E-mail: 4540 814 208 +44 Phone: Kingdom United 3HE, TW3 Middlesex Hounslow, Road Staines 50-59 House Somerville President Vice Smyth Murray Africa and East Middle Europe,

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2007 Issue No. 2 www.sabreairlinesolutions.com