A MAGAZINE FOR AIRLINE EXECUTIVES 2004 Issue No. 2

T aking your airline to new heights

AN ALLIED FRONT A conversation with … Geoff Dixon, CEO, Qantas Airways

INSIDE

Air France and KLM form 4 Europe’s Largest Airline

18 The Evolution of Alliances

A Conversation with oneworld, SkyTeam 26 and Star Alliance proven

Taking your airline to new heights 2004 Issue No. 2 leadership. Editors in Chief Inc. All rights reserved. an affiliate of Sabre Holdings Corporation. ©2004 Sabre Stephani Hawkins B. Scott Hunt 3150 Sabre Drive Southlake, Texas 76092 logo are trademarks and/or service marks of Sabre Airline Solutions and the Sabre Airline Solutions www.sabreairlinesolutions.com

Designer James Frisbie

Contributors Venkat Anganagari, Randal Beasley, Hans Belle, Nejib Ben-Khedher, Kathy Benson, Jack Burkholder, Cameron Curtis, Sally deFina, Karen Dielman, James Filsinger, Brenda Gale, Greg Gilchrist, Gretchen Greene, Jim Haley, Glen Harvell, Kathryn Hayden, Vicki Hummel, Carla Jensen, Craig Lindsey, Patrice Lipson, George Lynch, Michael McCurdy, Matt McLellan, Mona Naguib, Nancy Ornelas, Jenny Rizzolo, Dave Roberts, Sanjay Sathe, Shari Stiborek, Renzo Vaccari, Elayne Vick. Awards It’s time for all-out innovation. And it’s time for proven leadership. Mission-criti- 2004 International Association of cal areas require time-tested solutions. Longer than any other company, we’ve Business Communicators Bronze Quill and Silver Quill. pushed technology forward to deliver vital systems airlines need to stay ahead, 2004 Awards for Publication Excellence. to make the impossible practical. Reader Inquiries If you have questions about this Working closely with carriers, we’ve developed a portfolio of flexible, integrated publication or suggested topics for future articles, please send an e-mail solutions that can optimize operations of all airlines — any size, any business to [email protected]. model, anywhere in the world. Address Corrections Please send address corrections via Learn how together we can put proven leadership to work for you. Call us at 682 e-mail to [email protected]. 605 1000. Or visit www.sabreairlinesolutions.com. Sabre Airline Solutions, the Sabre Airline Solutions logo and products noted in italics in this publication are trademarks and/or service marks of an affiliate of Sabre Holdings Corp. All other trademarks, service marks and trade names are the property of their respective owners. ©2004 Sabre Inc. All rights smart. proven. bankable. reserved. Printed in the USA.

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The French– Spanning The Russian Maintaining A Turn for Britain’s Best Aligning 4 26 48 54 58 62 66 Dutch Connection the Globe Steps the Lead the Better Kept Secret? the Alliance By combining, Air France and A discussion with oneworld, Aeroflot Russian Airlines Sabre Airline Solutions and Mxi Despite several industry Eastern Airways, because of its Jointly implementing new practices KLM have created Europe’s first SkyTeam and Star Alliance leverages technology to adapt Technologies partner to provide an barriers, Air Jamaica has passion for customer excellence in untapped operational areas airline group and has become the reveals the significant impact to its dramatically changed industry leading, integrated mainte- discovered ways to reduce and “putting the passenger first” can bring dramatic benefits to world’s largest airline. global alliances have had on the home country. nance and engineering solution. costs and improve its financial mindset, continues to expand its members of global alliances. airline industry and the benefits and on-time performance. loyal passenger following. they bring to their member Good Share and Riding Uniform 51 56 71 9 carriers. Neighbors CodeShare Alike Out of the RAIL Service 60 ® ™ Africa To ensure their most valued Two regional airline associations, The Sabre AirFlite Planning and Migrating from a wide area network An Allied AACO and AFRAA, employ Scheduling Suite enables codeshar- EgyptAir has developed an to the redundant array of Internet passengers receive the highest 36 levels of customer service, Front economies of scale to help ing airlines to optimally manage extensive turnaround strategy links could reduce an airline's net- alliance members need integrated Qantas Airways CEO Geoff member airlines minimize costs complex schedule distribution to leverage its natural strengths work costs by 40 percent to 50 processes and procedures. Dixon discusses the effect and gain incremental revenue. processes. and minimize its weaknesses. percent while preserving reliability. alliances have had and will Linking continue having on his airline 13 Latin America and the industry as a whole. Latin American alliances, while The Next similar to those in Europe and 40 with Tom Klein Group President, Sabre Airline Solutions/Sabre Travel Network North America, take different IATA? perspective approaches to adjust to the local Ten carriers formed the environment. European Low Fares Airline ince it’s an election As you stroll through Lufthansa’s corporate campus in Frankfurt, And finally, while I am a customer of many of your airlines, I live Association to ensure govern- year here in the Germany, there’s no mistake that the airline is committed to in Dallas, Texas, which means that many of my trips start with The Evolution ment and industry policy 18 United States, there’s the Star Alliance and its members. Waving in the wind on poles oneworld. As I have traveled around the globe to visit with you, of Alliances makers understand the a lot of focus on the along the boulevard are flags representing the alliance members. I have experienced marked improvements in service across the From codeshare agreements importance of the low-cost S candidates’ voting records. The While Lufthansa is as fierce a competitor and brand builder alliance, resulting from a better understanding of alliance bene- to global alliances, partnerships carrier model. political spin is in full force, with as any, it is clear that it is willing to share the spotlight with fits by airline personnel, better access to customer advantages between airlines continue to each candidate declaring his its important strategic alliance partners. I have yet to hear a and more consistent treatment from trip to trip. I have experi- progress, helping to transform Declaring record is being misrepresented speech or major interview with Chief Executive Officer Wolfgang enced it with all the alliances, but most frequently with oneworld. 42 the airline industry. Independence? so he doesn’t come out on the Mayrhuber or his alliance-zealot predecessor, Juergen Weber, There’s no question that global airline alliances are continuing to wrong side of a popular point that hasn’t made reference to the importance of the Star Alliance The breakup of United build critical mass and are poised to take on new levels of coop- of view. So, in the spirit of the to Lufthansa and its customers. The airline has clearly taken a Airlines and its former regional eration and execute on the mission of providing more customer Carrying truth, I will lay out my “voting leadership role, and it has been consistent. 23 feeder carrier may have laid benefits. The approaches vary, but the consistent view is that the the Freight record” on alliances. the foundation for a changing If you visit the Web sites of SkyTeam members, you will see the alliance is one prong of each member carrier’s “re-invention plan” Following the direction of the relationship between majors I didn’t think global airline alliances would ever work. I thought the SkyTeam logo prominently featured next to the airline name at and that the financial salvation of the industry may lie, in part, on industry's leading passenger air- and regionals. hunger to expand organically or acquire other airlines was too the top of the home page of most member carriers. SkyTeam the success of these unique global collaborations of competitors. lines, many cargo operators seek great, and that governments and regulators would make it impossi- members have chosen to give their alliance prominent billing. So, while regulators around the globe have acted as inconsis- to form strategic partnerships. ble to have any real success. I believed that the cultural divides And, speaking of SkyTeam, the recent AirFrance-KLM merger tently as I expected they would (although I think they would spin could not be bridged, and that U.S. megas, in particular, would reminds me of when John Adams, the second president of the it to say they enabled the success), the sheer will of the airline have a difficult time adjusting to any form of alliance “governance United States, was responsible for diplomatic relationships with industry and the leadership of a few great CEOs have rendered 42 model,” which is counter to the business techniques developed Holland and France during the 1700s. Adams worked tirelessly my previous view of alliances flat-out wrong. I feel better having during the post-deregulation years of bloody competitive battles to understand and overcome the unique views and cultures of come clean with you, and I will ask my publisher to provide me where major airlines took on each other and the world in head- these two great countries and allies. Well, Air France CEO Jean- with an Ascend article in an upcoming issue where my current to-head competition. Cyril Spinetta and KLM CEO Leo van Wijk are undaunted by view is correct! Now, I know that at least some of you held or still hold to this their respective company’s cultural differences. They simply view. I, however, have altered my opinion based on the hundreds believe the upside is too large as they come together to form of examples of alliances that are progressing successfully. So let the world’s largest passenger airline. As a result, SkyTeam, me share a few of the more whimsical observations that have often mentioned as “the other alliance,” can now stake a legiti- helped change my way of thinking. mate claim to leadership. industry

The

– Connection French DThrough theirutch merger, Air France and KLM have formed one of the world’s largest airlines, potentially taking the first step in reshaping the airline industry.

By Christian Gossel | Ascend Contributor

oes Sept. 30, 2003, mark the beginning country had its own flag carrier. Such a frag- of a new era in the airline industry? mented industry, with multiple airlines com- We have always been convinced Photo courtesy of KLM Photo courtesy D Air France and KLM Royal Dutch peting for the same markets more as a matter “of the necessity of consolidation Airlines believe it just might. of national pride than as a rational business On the date the two airlines announced approach, is “an inheritance from a former in the airline industry. … This they would merge into a single entity, forming era,” the two airlines said in announcing their will bring significant benefits to Europe’s largest airline and the world’s third merger. customers, shareholders and largest in terms of passengers carried, officials “The need for structural changes and hailed the agreement as the first step in a consolidation in Europe is widely accepted, employees. needed industry consolidation. but has not yet commenced as a consequence ” “We have always been convinced of of regulatory and political constraints,” the air- the necessity of consolidation in the airline lines said in a statement. “The [merger] is the believe a consolidation would benefit other industry,” said Jean-Cyril Spinetta, chairman first significant move in this context and will regions, particularly in North America, where and chief executive officer of Air France as create a leading airline group in Europe.” competition among several major carriers has well as the combined organization. “Today, we The airlines said a changing regulatory resulted in excess capacity and, therefore, a announce a combination with KLM that will framework, with the European Commission lack of pricing power. create the first European airline group, which given the authority to negotiate open skies The two airlines made for logical part- is a milestone in our industry. This will bring agreements on behalf of all European Union ners. Their route networks overlapped mini- significant benefits to customers, sharehold- countries, has opened the door for a consoli- mally. Air France, with its strong network in ers and employees. Capitalizing on the two dation of the continent’s airlines. Experts also southern Europe, fit nicely with KLM, which is brands and on the complementary strengths strong in northern and northeastern Europe. of both companies, we should, within Together, the airlines will be able to expand SkyTeam, be able to capture enhanced growth Projected Financial Improvements their positions in central and eastern Europe. opportunities.” 385-495 The two airlines also have strong, complemen-

The combined group will become the 295-370 tary hub operations at Paris Charles de Gaulle

world’s largest airline in terms of revenue, 220-260 and Amsterdam Schiphol, two efficient opera- with estimated annual turnover of 19.2 billion tions with room for additional development.

a year (US$23.4 billion). The group will also Million Euros 110-135 The two airlines, which officially com- 65-75 serve 226 destinations worldwide with a fleet bined June 1 following approvals from ------of about 540 aircraft and employ about 2004-05 2005-06 2006-07 2007-08 2008-09 European and U.S. regulators, will maintain 106,000. And it will be the world’s largest non- their separate identities under a single holding consolidator cargo airline in terms of revenue Consolidation between Air France and company, Air France-KLM. Although the indi- ton kilometers. KLM is projected to improve the group’s vidual airlines will still operate under their cur- By launching the first cross-border air- combined operating income by 385 mil- rent brands, they will be more closely integrat- line merger in Europe, the two carriers may lion to 495 million (US$603 million to ed than airlines in one of the global alliances. have paved the way for other airlines to follow US$469 million) by 2009. “If commercial alliances have con- suit, bringing to a close the days when every tributed over the past years to initiate the first

4 ascend ascend 5 industry industry

steps toward consolidation, deeper coopera- Air France-KLM Synergies tion is now needed to generate significant and sustainable synergies,” according to the air- Financial improvement Main actions (million Euros) lines’ statement. Year 3 Year 5 Indeed, Air France and KLM expect their

new organization to have a positive impact on Photo courtesy of KLM Sales/distribution Harmonizing sales policies Coordinating sales forces the consolidated operating income of at least Reducing sales, catering and ground 385 million to 495 million (US$469 million to handling costs 40 100 US$603 million) by the fifth year of the group’s Network Optimizing networks and schedules joint operations. Airline officials have said 60 Revenue Harmonizing revenue management percent of the financial benefits will be derived management Optimizing fleet management from cost savings, the rest from additional rev- Fleet Coordinating management 95-130 130-195 enue. The combined group will offer three Cargo Optimizing networks core businesses: passenger transport, cargo Coordinating sales policies and maintenance. Sales cooperation 35 35 Maintenance Purchasing Insourcing of subcontracted work Through this innovative partner- Pooling of spares 25 60-65 “ship with Air France and our IT systems Gradual converging of IT systems 20 50-70 participation in the SkyTeam Other Joint purchasing 5-10 10-30 alliance, we are confident that TOTAL 220-260 385-495 we have secured a sustainable future for our company.” By leveraging synergies such as shared maintenance operations, combined sales and marketing strategies, joint purchasing, and cooperative cargo operations, the Air France- Officials expect the financial impact to KLM group expects significant financial improvements during the next five years. result from synergies in several areas: Sales and distribution — The combined organization has an improved global pres- ence and will also be able to offer passen- Deemed the world’s largest carrier in terms of revenue, with estimated annual returns of 19.2 billion (US$23.4 billion), industry giant Air gers a wider range of products. The group France-KLM, operates a combined fleet of about 540 aircraft, serving 226 destinations around the world. will cut costs by coordinating the sales structures of the two component airlines. Network, revenue management and fleet —

Photo courtesy of KLM Photo courtesy By codesharing, harmonizing the flight schedule and optimizing revenue manage- ment policies, the two airlines offer more destinations and a larger number of more THE HIGH LEVEL convenient connections for passengers. Cargo — Through a more extensive net- News Briefs from Around the Globe work, combined with coordinated freighter vıew planning, the merged airline can improve its product offering, resulting in a revenue Who airlines personalize service for their information needed to make a reser- increase. The group can also reduce costs Aerolineas Argentinas, ATA Airlines, individual passengers and provide vation, provide account balances, through a more efficient handling of its Frontier, Aeroflot and Jet Airways real-time marketing opportunities. exchange points for tickets and issue cargo hubs. Maintenance and engineering — The group tickets, all without having to transfer will jointly purchase spare parts as well as What Why the customer to another area.” create centers of excellence in engineering Implemented Customer Insight and “With Customer Insight, all of our call Sean Menke, Frontier’s senior vice and optimize the use of existing M&E plat- forms. The group will also coordinate pro- Customer Data Delivery capabilities to center personnel now have access to the president of marketing said, “One of the duction schedules and combine facilities. enhance service levels and retain passen- Aerolineas PLUS frequent flyer infor- key reasons we chose the SabreSonic On May 5, Air France Chairman and CEO Jean-Cyril Spinetta (center left) and KLM Information technology — Converging the ger loyalty. Features of the SabreSonic ™ mation,” said Claudia Toldeo, call cen- solutions over other competitors was President and Chief Executive Officer Leo van Wijk (center right) celebrate the consolida- IT applications used by the individual part- tion of the two airlines during a press conference at the Paris-Charles de Gaulle Airport. ners will reduce costs. Passenger Solutions, the new-genera- ter manager for Aerolineas Argentinas. for the ability it will give us to distin- Other — The group will optimize and tion technology is designed to help “The call center personnel have all the guish ourselves through service.” a

6 ascend industry industry

Initial Three-Year Structure Final Structure

Current Air France Current KLM Current Air France Current KLM shareholders shareholders shareholders shareholders Uniform Service

Air France – KLM Foundations Dutch State Air France – KLM The experience of a traveler — even the most valuable — can differ signifi-

Listed company 36.3% of 14.7% Listed company cantly from one alliance member to another unless the member airlines 100% 100% of economic rights voting rights of voting 100% 100% and 49% of voting rights rights work together to ensure uniform standards of customer service are applied throughout the network. Air France KLM Dutch State Air France KLM Option Operating company Operating company Operating company Operating company

During the first three years as a cooperative airline, the Air France-KLM group will perform under a strategic operating structure outlined By Stan Boyer | Ascend Contributor by Air France general shareholders. After the initial three years, the operating structure will be further refined to meet the needs of the merged airline. oining an alliance certainly has an impact logo on ticket office locations and airport around the world on a business-class fare J on customer service — hopefully a positive lounges, a carrier should consider the following: using three alliance partners. one. Many airlines expect that by aligning them- Can it provide the same level and type of After two days of continual travel and harmonize other activities such as simulator “KLM has been pointing out the need Aeroméxico, Alitalia, CSA Czech Airlines, Delta selves with one of the major global alliances services as the other members of the customer visits, the frequent flyer checked utilization, joint purchasing of goods and for consolidation in light of the challenges fac- Air Lines and Korean Air. With its merger with that their customers will have a seamless, alliance? in for a 10-hour flight, where he was involun- jointly negotiating with vendors such as ing our industry, and we have not made it a Air France, KLM became a member of pleasant and comparable travel experience with What level of service are the alliance part- tarily downgraded from business to econo- caterers and ground handlers, delivering secret we were looking for a strong European SkyTeam, which also added KLM’s long-time all member airlines. ners providing their customers? my class. additional cost savings. partner,” van Wijk said. “Through this innova- partner Northwest, and Continental, which Just because several airlines carry the Do its policies and procedures at all cus- The situation began during the check-in The combined group also offers several tive partnership with Air France and our partic- had a relationship with Northwest. alliance brand, however, doesn’t automatically tomer contact points adhere to the stan- process. While standing in the business-class customer benefits, including an expanded net- ipation in the SkyTeam alliance, we are confi- The impact of the Air France-KLM merg- guarantee that improved customer service will dards of other alliance members? check-in line, he was approached by a cus- work, access to shared airport lounges, com- dent that we have secured a sustainable er has just begun, but the ripple effect could be the outcome when customers of one air- Will the alliance partners meet or exceed its tomer service representative who asked if he petitive fares and enhanced onboard service. future for our company. Our valuable Schiphol hold the promise of creating waves of change line travel with an alliance partner. In fact, if air- customer service policies and procedures at was checking bags. After the passenger indi- The merged airline may also grow further. It hub will be an integral part of the dual-hub for the airline industry. a lines are not careful, the experience can actu- all customer contact points? cated that he was not, the representative has already held discussions about adding strategy of the new airline group, allowing us ally be less than expected. Consider the following true experience explained that the traveler could use the airline’s Italian flag carrier Alitalia. to build on what KLM and its staff have Before joining an alliance and placing its an elite-tier member had while traveling brand new “express” check-in kiosk. Thinking Leo van Wijk, president and chief execu- achieved over nearly 85 years.” Christian Gossel is a Europe-based tive officer of KLM and vice chairman of The merger also has implications for the account director for Sabre Airline AirFrance-KLM, said the merger was instrumen- SkyTeam alliance — which previously included Solutions. He can be contacted at tal for the future success of the Dutch airline. founding member Air France along with [email protected]. THE HIGH LEVEL vıew News Briefs from Around the Globe THE HIGH LEVEL Who domestic and international market. term and continued relationship News Briefs from Around the Globe Jet Airways Through the agreement, Jet Airways with Sabre Airline Solutions,” vıew will also deploy the Sabre ® AirMax ® said Wolfgang Prock-Schauer, Who scheduling functions. As part of the the recommendations made What Revenue Manager via Sabre ® eMergo ® chief executive officer for Jet China Eastern Airlines two-year agreement, an SOC expert by our valued Sabre Airline Entered a five-year agreement to Web access, an applications service Airways. “Beyond the value of the from Sabre Airline Solutions will be Solutions partners,” said utilize the SabreSonic ™ Passenger provider delivery method. In addition, SabreSonic solutions, which includes What assigned to China Eastern Airlines for Yu-Lin Wu, vice president for Solutions. The airline is the first the airline selected the Flight the e-ticketing capability with which Based on recommendations made by the duration of the agreement to China Eastern Airlines. “We in India, and one of the first in the Operating System from Sabre we will revolutionize the Indian Sabre Airline Solutions Consulting, ensure the new facility is optimally expect that the new efficiencies industry, to leverage the new Airline Solutions to manage its marketplace, Sabre Airline Solutions the airline will open a centralized implemented and functioning. we will achieve through the generation solution for reservations daily movement control and flight has an integrated suite of offerings system operations control center in operations control consolidation and passenger management, planning functions. that can help us automate our Shanghai, China, to consolidate its Why will heighten our performance including the introduction of both business more smartly and can movement control, flight dispatch, “We are confident we will see in this highly competitive e-ticketing and Internet booking Why help us increase our market share load planning, crew coordination and excellent results by implementing marketplace.” a services, revolutionizing the Indian “It is our intention to have a long- and profitability.” a industry industry

this was fantastic, the traveler proceeded to the kiosk. After the airline representative spent several minutes attempting — and failing — to The VIP Treatment help check the traveler in using the kiosk, the representative made a few phone calls and By Nico Stoman | Ascend Contributor gave him an economy-class boarding pass.

“I’m sorry, sir,” she said, “but I’ll need By coordinating processes, procedures and systems, alliance Photo courtesy of Star Alliance to provide you with this economy-class board- members can ensure that their frequent flyers receive the ing pass to get you through security. Business class appears full; however, there are seven highest level of service from each of their partners. seats open in first class. Just speak to the lounge representative, and I believe you will be pleasantly surprised.” Combining frequent flyer programs is one of the main benefits of joining He thanked the representative and pro- an alliance. After all, by linking their programs, airlines can significantly expand ceeded through security to the airline’s lounge. the benefits they offer customers — providing access to hundreds of additional Upon entering, he approached the destinations, opportunities for upgrades on partner airlines and personalized counter and introduced himself, saying, “The attention to the most valuable customers. check-in counter agent should have called to If only integrated loyalty programs always worked like they’re tell you of my dilemma and told me that I supposed to. would be pleasantly surprised.” Frequent flyer programs are designed to increase loyalty toward the air- The lounge representative replied, line and retain valuable customers. Joining an alliance makes it even more “Oh yes, someone did call. Would you like important to ensure that all other members recognize high-value passengers cash or a voucher?” The traveler was taken and track their activity accurately. by surprise. “Cash or a voucher?” he Despite all the technology that has radically reshaped the industry, airlines inquired. “Yes,” replied the representative, still have difficulty adequately tracking flight activity and recognizing elite status “our business class is full, and we are offer- members consistently across the alliance network. Part of the difficulty is that ing $300 cash or a $400 voucher for you to such tracking is not as simple as it sounds. Just because a passenger has flown downgrade.” hundreds of thousands of miles with a single airline in an alliance does not “I was told that I would be pleasantly mean that person will automatically be recognized as a valuable customer by surprised and that there were seven seats the other alliance members. Establishing common customer service policies and procedures among alliance partners will likely result in consistent, high levels of available in first class,” he said. “Could I have What members of an alliance need, therefore, are integrated processes service, increasing customer loyalty and retaining valuable passengers. one of those?” and procedures — as well as the technology that supports them — because “We have no first class on this flight maintaining a thriving loyalty program requires that all alliance members provide today,” the lounge agent said. “Would you like the highest levels of service to the most valued customers of any individual partner. cash or a voucher?” The issue is magnified because as alliances increasingly synchronize their The traveler asked to speak with a schedules in order to expand the number of routes and destinations available, THE HIGH LEVEL supervisor, and related his story. The super- individual passengers are more likely to use several alliance partners to com- visor, however, said, “I can do nothing at this plete their journey. News Briefs from Around the Globe point.” The frequent flyer then asked Providing the highest levels of service throughout the alliance must begin vıew who had the authority to help his situation, at the start, with the booking process. Since travel agents, both online and and the supervisor indicated that the manag- offline, still account for a significant amount of reservations, an airline’s reserva- Who product available on the market to “We found limitations quickly arose er on duty at the gate could help solve tions procedures and processes should be geared to evaluate these incoming meet our needs,” said Valuair with the reservations system we imple- Valuair the problem. bookings to assess the accuracy of frequent flyer data. The same procedures Chairman Lim Chin Beng. “These are mented initially and decided to turn to By this time, the passenger was clearly should be in place for bookings that come from partner airlines. Determining the the only solutions available today that the market to identify the best solution irritated, and he knew his preferred airline quality of frequent flyer data includes validating the name of the passenger What offer an open-systems architecture to meet all our needs, both current and would have handled the situation at the ticket against the membership number and updating the customer information with that will enable us to quickly adapt to future,” he said. “The SabreSonic solu- counter prior to letting him pass through secu- the traveler’s correct status information. Selected the SabreSonic ™ passenger changing market demands and busi- tions will allow us to expand our reach rity. It would not have pushed the responsibili- Because travel agents typically do not include status-level information in solutions to manage its reservations, ty to the gate agent. At the gate, he was the passenger name record within a global distribution system, an airline must ness requirements. The modular via a number of different distribution informed that several first-class-assigned flight have systems in place to recognize the traveler and update the PNR with the pricing, ticketing, reporting and architecture and performance-focused channels; facilitate partnerships with attendants had not shown up for work, so the appropriate frequent flyer information in the proper fields. This will ensure that customer service operations. pricing of the SabreSonic solutions our industry members; maintain a low airline decided to fly without first-class service. the frequent flyer information is transferred from the airline’s computerized are exactly what we need as a low- cost of business; and provide a fast, First-class passengers were downgraded to reservations system to its own departure control system, or to other Why fare carrier, allowing us to use a vari- reliable, modern solution that meets business and several business-class passen- gers were downgraded to economy. The pas- “After conducting an extensive mar- ety of distribution channels to offer Valuair’s needs including capabilities senger begrudgingly accepted his fate and The VIP Treatment | Continued on page 12 ket evaluation, the SabreSonic solu- the most advanced travel experience for e-ticketing, Internet booking and boarded the aircraft. tions clearly stood out as the best at value-based pricing. codeshare agreements.” a

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Such actions can leave a passenger wondering about the quality of service on air- The VIP Treatment | Continued from page 10 lines in the alliance and questioning whether to use the alliance in the future for global travel. alliance partners or handling agents, prior to departure to ensure accurate Linking Latin America Although an extreme example, it illus- status recognition and mileage accrual. This will also assist the check-in trates the potential cultural differences agent in matching the passenger’s airline status level with the corresponding between alliance members with respect to level of the alliance as a whole. customer service. Alliances should be If the appropriate information is gathered initially during the booking As with most parts of the world, alliances are becoming more prominent aligned so that alliance partners support cus- process, all airlines can proactively act upon a traveler’s elite status. If airlines and more important in Latin America. However, the region’s alliances are tomers of all member airlines with the same wait until an elite passenger has displayed a membership card, they have level of service. missed an opportunity to provide high-quality customer service. taking some unique forms to adapt to the local landscape. Keys to solving these issues require Some GDSs, such as the Sabre ® global distribution system, store pro- appropriate access to information and clear files of an airline’s frequent flyer members, which can help airlines that communication within the individual airline, depend on sales from agents who use a particular GDS. Regularly providing By Marcela Lizárraga and Nadja Killisly | Ascend Contributors among partners and, most importantly, with the member’s travel agency of record or the GDS with updated member the customer. information can help ensure that frequent flyers automatically receive the ew would argue that forming an alliance hold four of the top five market share posi- When it comes to regulation, the In order to reap the benefits of the appropriate mileage credits. This also helps ensure that the name and F among airlines is the future of the indus- tions in Latin America, where trans-Atlantic development of open skies agreements has alliance, all airlines must focus on providing a account number of a frequent flyer will match the airline’s records when a try — alliances enable airlines to protect them- non-stop capacity has almost doubled during resulted in Latin America experiencing glob- high level of customer service. When joining reservation is made by an agent utilizing a GDS that stores frequent flyer selves in a highly volatile climate, where the the last 10 years. alization. This has allowed some existing an alliance, airlines should consider: information. The status level, however, must still be added to the PNR by the economy is unstable and competition is high. carriers to expand. In addition, the multiplica- The partners’ customer relationship man- airline’s system. They are also a way to increase revenue. tion of alliances between a North and agement capabilities, Coordination of processes and systems will also eliminate issues such In Latin America, the trends toward Codeshare Market Reach South American carrier is continuing to cre- The customer service philosophies among as passengers trying to “double dip” by accruing miles in more than one pro- consolidation and alliances are consistent for July 2004 ate even more pressure on governments in

partners, gram for a single trip. To prevent such abuse, airlines should have a copy or with those in Europe and North America. 1,600 ------the region to sign open skies bilateral agree- The volume and type of customer com- receipt of the ticket sold to the customer and a copy of the boarding pass However, they have been developing at a ments with the United States. The results 1,400 ------plaints for each partner, at least at a high prior to retroactively awarding credit. It is important to verify flight activity, slower rate and with a different emphasis, are rewarding: Costa Rica, Chile and El level, especially if supporting documentation is not available. focusing on building traffic from other 1,200 ------Salvador are examples of how open skies Whether there is a plan to provide solutions Equally important is ensuring that passengers do not inadvertently regions as well as leveraging the strength of agreements have benefited airlines and pas- 1,000 ------to common customer service issues and receive credit for flights that were booked but not flown. Preventing unearned the region’s flag carriers, which have strong sengers by allowing carriers such as TACA to the resulting customer complaints. credits being granted becomes complicated in networks that depend on other ties with local governments. Also, some 800 ------build a regional network and, in the case of Markets served With the right customer service policies airlines’ handling agents. In such instances, receiving an accurate flight close- alliances have had better chances to succeed 600 ------LAN, earn record profits. and practices in place, customers flying out report will facilitate the updating of PNRs prior to the start of the mileage than others — those with common/shared However, there are still some chal------alliance carriers should receive a consistent accrual process. goals in which the partners complement each 400 lenges to overcome:

level of service and experience seamless Joining an alliance opens up a new world of frequent flyer other and are willing to work productively 200 ------Latin America remains very nationalistic and travel as they move from one partner to mileage/point redemption opportunities, but only if the member airlines have with each other. is characterized by a patchwork of aviation 0 ------a the next. tightly coordinated processes, procedures and systems that allow them to AM CM LA MX RG TA agreements that considerably limit the busi- properly identify and care for their most valuable customers. The Latin American Airline Market Airline ness development of its airlines. In fact, the Nico Stoman is a senior management consultant with Sabre Airline Latin America is a growing marketplace. The Additional markets served with outdated regulatory systems do more to Stan Boyer is a line of business Solutions Consulting. He can be reached at [email protected]. region’s gross national product is increasing, regional codeshares generate income for the government than director for Sabre Airline Solutions resulting in air travel growing at a constant Additional markets served with developing airlines. north/south codeshares Consulting. He can be contacted at rate, particularly in markets such as Central Latin American carriers, which are small and Additional markets served with [email protected]. America, Argentina, Chile and Colombia. alliance partner codeshares medium sized, are plagued by high costs Today, Latin American countries are consid- Additional markets served and low efficiencies. Therefore, despite the ered to be among the fastest growing mar- alone growing traffic, Latin America is still experi- kets. Tourism between the United States and Sources: market information data tapes, encing economical crises and financial diffi- +count it up Latin America and within the region is increas- Sabre ® Planet ® profitability forecasting system culties. This is evidenced by the economic ing at a rapid rate. fleet-size reduction among Latin American 2006 — Year the world's 250,437 — Number of 10,335 — Distance in miles At the same time, leadership has Alliances have provided benefits to carriers and the fact that economic turmoil largest passenger jet, the Airbus U.S. dollars, mostly in loose change, of the world's longest commercial shifted while the market is increasing: North a number of Latin American carriers. and high jet fuel costs have caused airlines American and European carriers such as Air COPA and TACA have highly benefited to struggle to survive. A380, will begin operations from that was left by passengers at airport flight, which is served by Singapore Canada, Iberia Líneas Aéreas de España, from their respective alliances with At the same time, pressure is building for Australia's Melbourne Airport, security checkpoints during the last Airlines. The 18-and-a-half-hour American Airlines, Lufthansa German Continental and American Airlines. airlines to improve safety systems and the which will begin a multi-million- year. The money is collected by inaugural flight between Singapore Airlines, Continental Airlines and Air France LAN and Aeroméxico have increased quality of service that is expected by global dollar infrastructure development the U.S. Transportation Security and New York City, New York, are taking advantage of the increase in the number of markets they serve travelers. in preparation for the double- Administration and deposited into carried 181 passengers earlier demand to open new routes to Central and through the development of numerous As these issues are considerable, decker, 550-seat aircraft. the federal government's general fund. this year. Latin America, where fares and correspond- regional codeshare partnerships. alliance and consolidation strategies are topics ing yields are significantly higher, and grow of critical importance. They are viewed as a their market share. Today, European carriers way to gain strength and survive globalization.

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Proliferation of Alliances and necessity to head off competition, create competitive, particularly those based in Consolidation in Latin America economies of scale, and increase revenue by countries that are too small to provide a suf- Non-Stop ASMs for Top Carriers Between Europe and Latin America Consolidation in the region began with TACA’s expanding their presence and market share in ficient market to survive. highly successful mergers, which resulted in other regions. Although numerous alliances exist 3,000 ------one of the best networks in Latin America. U.S. and European carriers’ expansion today in the region, they can be categorized in 2,500 ------

Since TACA began its consolidation program, in the market has forced Latin American car- two ways: geographic (global, regional or inter- 2,000 ------

the number of similar efforts has been increas- riers to focus not only on the cost side but regional) or by the level of equity interest. 1,500 ------ing continuously. Currently, alliances can be also on the revenue side. Developing a more 1,000 ------found from Mexico to the southernmost attractive network with U.S. carriers and Global Alliances ASMs (million) 500 ------points of Latin America. Although they take offering better customer service has allowed A global alliance enables Latin American carri- 0 ------various forms, they are mainly driven by the Latin American carriers to become more ers to expand in other continents. Iberia V Air France Lufthansa KLM Argentinas Aerolineas Airways British Alitalia Portugal T Aeroméxico TAM LAN Swiss Air Europa Condor AP Air ARIG Aeroméxico, for example, has been able to offer routes to France and Italy as a result of 2003 Non-Stop ASMs Per Carrier Between North America and Latin America its relationship with Air France and Alitalia. As Carrier of today, only LAN (oneworld), VARIG (Star ------16,000 Alliance) and Aeroméxico (SkyTeam) have 2Q1996 2Q2000 2Q2004 ------14,000 joined this type of alliance, which still does not 12,000 ------extensively cover Latin American countries. Most of the leading European carriers that provide service to Latin America increased their available seat miles to the region during the 10,000 ------However, depending on their partners, these last six years; therefore, they profited largely from the traffic increase and open skies agreement. Latin American carriers are loosing their 8,000 ------alliances cover a specific region. Star Alliance, leadership in this market. ------6,000 for example, covers Brazil extensively through ASMs (million) ------4,000 its member airline VARIG. 2,000 ------The benefits recognized by Latin Non-Stop ASMs for Top Carriers Between North America and Latin America 0 ------Argentinas Aeorlineas American Mexicana United Delta Aroeméxico T LAN V TAM America West Air Canada LACSA US Airways COPA ATA Northwest LanPeru ACA ARIG American carriers when joining a global alliance include: 5,000 ------Acquisition of world-class experience from 4,500 ------

alliance partners, 4,000 ------Carrier Ability to offer a more comprehensive range 3,500 ------of services and programs (i.e. lounges), 3,000 ------A comparison of the available seat miles performed in 2003 for non-stop segments Improved branding, 2,500 ------between North American and Latin American carriers demonstrate that North American Expansion of the network in a cost-effec- 2,000 ------

carriers (American, Continental, United and Delta) hold four of the seven top positions, tive manner, ASMs (million) which allowed them to increase their market share in the region. Impetus to bring operation to a world-class 1,500 ------

standard. 1,000 ------

500 ------

2003 Non-Stop ASMs Per Carrier Between Europe and Latin America North-South Alliances ------T LAN Argentinas Aerolineas Airlines Alaska TAM Lacsa America West Air Canada 0 American Continental United Mexicana V Aeroméxico Delta ACA One trend in the region has been the develop- ARIG ------10,000 ment of north-south alliances — COPA and ------9,000 Continental Airlines, Delta Air Lines and 8,000 ------Aeroméxico, TACA and American Airlines. The Carrier ------7,000 results of the alliances are varied. On one ------2Q1996 2Q2000 2Q2004 6,000 hand, they open additional gateways in the ------5,000 United States and improve Latin America mar- ASMs (million) 4,000 ------ket presence there; on the other hand, many The trend varies for non-stop available seat miles between North America and Latin America. For example, for Latin America-based carriers 3,000 ------North American carriers have been attracted such as TACA and Mexicana, ASMs increased. American Airlines maintained its market share gained during the last eight years. Some 2,000 ------to Latin America because of its growth poten- United States-based carriers such as United and Continental showed a decrease in the last year. ------1,000 tial, which could lead to further competition in 0 ------Iberia Air France V Lufthansa KLM Argentinas Aerolineas Portugal T Alitalia British Airways Aeroméxico TAM Swiss Air Europa LAN Lauda Air AP Air

ARIG the home markets of the region’s carriers. Despite the fact that COPA, TACA and North American carrier more than its smaller Regional alliances allow area carriers to: grow. TACA, for example, formed a codeshare Aeroméxico have been successful with this Latin American counterpart, which, they Compete at the regional level and through- alliance with Avianca to take advantage of the type of alliance, other airlines see limitations. believe, would be on more equal footing with out Latin America, increased traffic between Central America and Carrier Some believe this trend could create tension European carriers. Provide services to smaller markets, Colombia. However, not every country has the among global alliance members because Reach cities that cannot be served with a size to have regional alliances and may find it A comparison of the available seat miles performed in 2003 for non-stop segments they may compete for the same customers Regional Alliances specific fleet type, more difficult to overcome the economic burden. between European and Latin American carriers demonstrate that European carriers (Iberia, in Latin America. Latin America is exemplified by the numerous Increase network reach. Air France, Lufthansa, KLM and TAP Air Portugal) hold four of the top five, five of the top Some carriers also fear the dominance regional alliances that have been developed by The success of this type of alliance can Alliances by Equity seven and seven of the top 10 positions. of the large North American carriers and small, successful airlines that are strong in be explained by the fact that markets are small Finally, as nowhere else, the history of believe that this type of alliance benefits the their home country, such as LAN. and carriers need to expand regionally in order to alliances in Latin America is characterized by

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Alliances Bring Benefits “In most cases, Latin American airlines Cultural and political differences. Alliance Status in Latin America Many carriers believe that alliances provide need to proactively approach the alliance to Global alliances also include risks: substantial benefits in terms of increasing the present the case on how there is a mutual Exorbitant expense due to IT commonality Equity alliances Regional North-South Global Alliances Codeshare and inter-regional alliances ability to compete at a regional or continental benefit if their airline gets to participate in that requirements,

TAM TAM Mercosul 80% share in Transportes Aereos American Airlines Air France, American Airlines, KLM, TAM Mercosul, VARIG, Uair level by extending their networks. alliance,” said Alfonso Acosta, director of High cost of participation to fulfill global del Mercosul of Paraguay During the past several years, alliances regional alliances at Mexicana. “Only in a few alliance standards, have been developed with various degrees of cases, the airline will be approached by other The dominance of stronger carriers, TACA TACA has equity stakes in TACA (49%), LACSA Yes American Airlines American Airlines and Air France (10%), AVIATECA (30%) and NICA (49%) success. The region’s most successful have domestic or regional carriers to develop a part- Less flexibility in meeting individual objec- been LAN, TACA and COPA: nership, and in fact, some smaller airlines in tives and standards. LAN LAN 73.3% share in Aerolinhas Brasileiras, 100% Yes American Airlines oneworld Aeroméxico, Alaska Airlines, American Eagle, British Airways, Iberia, COPA went from a domestic carrier to a the region do not have a lot of visibility.” in LanDominicana, 70% in LanPeru, 25% in LanExpress, LanPeru, TAM Mercosul, Qantas Airways, Florida West Florida West International Airways, 45% in International Airways successful regional hub operation. That principle was applied by Next Steps LanEcuador, 25% in MAS Air (Mexico) TACA’s early move not only resulted in the Aeroméxico, which took an active role in Latin American carriers value the benefits airline becoming a strong competitor but developing its alliances. alliances offer to both the airline and the pas- VARIG 99% in Nordeste Linhas Aereas Regionais, 97% in Star Alliance Air Canada, Alitalia, Aserca Airlines, Mexicana, PLUNA, South African Airways, Rio Sul Servicos Aereos Regionais, 49% in PLUNA Spanair, TAM also positioned it ahead of the curve in the “Aeroméxico, along with Air France senger. The region has begun to see open region before U.S. carriers began to enter and Delta, was a founding member of skies agreements signed, and the initial COPA 49% owned by Continental Airlines, 51% by Continental Commercial with Lufthansa, Aerosur, South African Airways, United Airlines, the market. SkyTeam and actively works toward the devel- results provide an indication of the substan- Mota family Airlines Nordeste Linhas Aereas Regionais. Codeshare with Cubana de Aviacion (Havana-Panama), Gulfstream International (Florida, Carribean, Bahamas), LAN has become one of Latin America’s opment and growth of the alliance,” said tial benefits they might offer throughout the Mexicana (Mexico-Panama City, Cancun-Panama City), TACA most successful airlines. Nicolas Rhoads, director airline strategy for entire region if it continues to embrace liber- Aeroméxico. alization. However, some key steps must Aeroméxico Belongs to CINTRA along with Mexicana, Aeroperu Delta Air Lines SkyTeam Air France, Alitalia, CSA Czech Airlines, Delta Air Lines, Japan Airlines , and several regional carriers within Mexico TACA, Korean Air, Atlantic Southeast Airlines (Atlanta-Mexico City, Monterrey Clear Goals and Objectives take place in order to achieve full potential, and on 14 flights from Dallas/Forth Worth), Continental Airlines (United States Alliance partners must not only share a strate- Preferred Models such as: and Mexico), Aeromar (within Mexico), LAN (Mexico City-Santiago), Mexicana gy and a vision but also common goals and an If the emphasis has been on north-south Modernize Latin America’s regional aviation (numerous markets within Mexico, and Mexico City-Santiago and Mexico City-Guadalajara and Mexico City-Oakland), TACA (Mexico City-Lima) understanding of how they can complement alliances, more thought is given today to inter- infrastructure and update its regulatory sys- each other through the partnership. regional alliances, which are seen as the pre- tems, Aeropostal Equity in Aerocontinente, 33% stake in Yes Codeshare with Cubana de Aviacion and Air Europa “Probably the main reason of the suc- ferred model because of more common politi- Embrace alliances as a way to gain access AeroRepublica (Colombia) and a 45% stake in Sol Air (Honduras) cess is that everybody worked toward the goal cal and economical alignment. to lucrative routes to the United States and of being one single carrier in many aspects,” Also, many airlines see equity alliances Europe, Mexicana CINTRA 99.95% Air New Zealand, All Nippon Airways, Iberia, Lufthansa, Scandinavian Airlines said Guillermo Bran, alliance and interline man- between Latin American airlines as preferable Improve management of the partnership. System, American Airlines, VARIG, Air Canada , Aeromar and Aeroméxico (within Mexico), Avianca (Mexico City-Bogota), COPA (Mexico City-Panama, ager at TACA. to the so-called vertical alliance between U.S. For partners that already have a part- Cancun-Panama), commercial agreement with Austrian and Asiana COPA is a clear best-practice example. and Latin American carriers because they may nership, the challenge is to make it stronger From the beginning, COPA and Continental relegate Latin American partners to a sec- and manage risks. For those that do not yet Avianca 94% of SAM Colombia — Owned by Federación Delta Air Lines Codeshares with ACES, Delta Air Lines, LACSA (Guatemala, San Jose and Nacional de Cafeteros 50%, Grupos Valores San Salvador to Bogota, Cali and Medallin), Mexicana (Mexico City-Bogota), shared a vision of establishing hubs in Central ondary role. have an alliance partner, the challenge is to Bavaria (43.73%), Helicol (4.77%) and Inversiones TACA (Colombia-Central America) America. Today, Panama is seamlessly connect- quickly find the right type of alliance. The key Fenecia (6.14%) ed to Houston, Texas, the Continental gateway Role of Information Technology success factors include professional man-

Aerolineas 92% owned by Grupo Marsans of Spain, 3% Yes No alliances/codeshares except that Austral Lineas Aereas and Aerolineas to 31 cities in 20 countries in Latin America. IT plays a key role in alliances, including: agement of the process, clear goals and Argentinas employees, 5% government of Argentina Argentinas operate as one airline, commercial agreement with Aerosur, Providing a seamless experience to the trav- proactive management. Austra Lineas Aereas, Iberia Alliance Resource Allocation eler when IT is properly integrated, Trends point toward continued consol-

GOL Has stakes held by American International Alliance relationships are complex. They bring Leveraging IT knowledge and skills among idation. Many airlines believe there will be Group (12.5%), Grupo Aurea (87.5%) profit opportunities but also losses if not man- partners, a series of consolidations and alliances aged correctly. For larger airlines, a carrier needs Integrating required IT processes, such as in formed during the next few years, leaving LAB 48.27% owned by the Bolivian government and LAB codeshares with TACA Peru (Santa Cruz-Panama, Mexico City-La Paz) 50% by a private investor and with TAME Linea Aerea del Ecuador (Quito-Lima, La Paz-Lima) to have a planning and negotiating team dedicat- codeshare, commercial, and frequent flyer the market dominated by only two or three ed to managing the process and keeping efforts interactions and agreements. carriers, with small carriers focusing on productive. Smaller airlines must also take niche markets. advantage of the tools and methodologies used Perceived Risks of an Alliance Alliances will also impact market by larger airlines to simulate the increase in traf- In addition to the lessons learned, Latin trends, changing the rules so that competition airlines acquiring an equity stake in another but also built one of the best networks in expand its regional network via equity alliance. fic that will be gained from the alliance. American carriers also recognize a number of may now be between alliances rather than carrier. LAN, formerly LanChile, started its Central America, achieving economies of scale. And Aeropostal has equity in Aerorepublica TACA’s planning department has run rig- perceived risks when engaging in alliances, airlines alone. a expansion by acquiring almost 57 percent of Other airlines in the region have also and Caribiana. orous financial and market analysis during the such as: Ladeco and then merging with Fast Air in pursued alliances by acquiring a stake in fellow The announcement in May by a Brazilian creation phase of the alliance. “We do an Disagreement among partners, 1998. Over the course of the next few years, carriers. Colombian carrier Avianca resulted investor of plans to purchase Avianca confirms analysis based on different options that are Uneven distribution of revenue sharing and the airline established subsidiaries in Peru, from a merger of SCADTA and Servicio Aero the region’s growing trend of weaker airlines present at the current time,” Bran said. “We benefits, Ecuador and the Dominican Republic. Colombiano. COPA believed that an equity consolidating with larger, more stable carriers then run financial analysis based on connectiv- Adverse reaction from local governments, Marcela Lizárraga is vice president of Latin TACA — by acquiring an equity position alliance would enable it to move from a small in order to grow and survive. ity and market sizes.” Less ability to react to market changes, American sales and account management and management control of Aviateca in Guatemala, domestic airline into a regional hub-and-spoke Less flexibility in managing individual objec- and Nadja Killisly is a consulting partner TACA de Honduras in Honduras, NICA in carrier. Today, 49 percent of COPA is owned Lessons Learned Proactivity tives and standards, for Latin America with Sabre Airline Nicaragua and LACSA in Costa Rica — formed by U.S.-based Continental Airlines and has one The experience of several Latin American car- Once airlines have selected their partners, Dilution of the small player in the alliance, Solutions. They can be contacted at one airline under centralized management. In so of the region’s more successful hubs. Small riers regarding alliances in the region has pro- they should actively manage the direction and Discrepancies in terms of sharing [email protected] and doing, it not only became a regional conglomerate Brazilian-based carrier Ocean Air is looking to vided several lessons: process of the alliance. objectives, [email protected].

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because it is highly technical, and proper allo- cation requires a substantial understanding of market price elasticity, demand forecasts, pas- Joining An Alliance The Evolution of Alliances senger preferences and several other impor- tant factors. Building on the SPA, the next layer is By Robert Westgate | Ascend Contributor the codeshare agreement. By codesharing, From their early beginnings as basic partnerships between airlines, today’s two carriers that operate between city pairs During the next few years, carriers will not decide whether global alliances have evolved into a major force that is helping to reshape agree to share space on the aircraft of one or they should join an alliance but rather when and how integrated both airlines. By codesharing, airlines increase the aviation industry. their network. A connection between two air- they want to become in this type of network relationship. lines is less desirable than a codeshare between the same two carriers, and even By Shane Batt | Ascend Contributor global distribution systems will display on-net- Joining an alliance or developing a codeshare agreement provides several benefits: work connections, including codeshare flights, Access to more extensive distribution channels, lobal alliances have become worldwide not coordinate schedules; they lacked ticket as the different alliances competed for long- ahead of off-network connections. Access to frequent flyer programs, Gbrands. Virtually all frequent internation- and baggage transfer agreements, and they distance travelers. Global alliances typically prefer free-sale Increased pricing power, al travelers are familiar with oneworld, did not share airport facilities. Flying from The evolution of these partnerships, codeshare agreements — where each carrier Possibility of increased feed traffic, SkyTeam and Star Alliance. In fact, they Mexico City, Mexico, to Karachi, Pakistan, 20 which began with basic bilateral agreements can sell as many seats as are available on the Decreased risk for entering new markets. account for more than 60 percent of global air years ago, for example, could take days and between airlines, has added layers like a flight without restriction. But all alliances also capacity. Given how prominent they have several intermediate stops to switch airlines. Russian nesting doll to become a highly inte- use block space codeshare agreements, in Therefore, most carriers will develop some form of network partnership; it is become, it is difficult to remember that glob- Although the development of global alliances grated business relationship. which the ticketing airline has a pre-deter- just a matter of choosing the right partners and type of agreement. al alliances are a relatively recent phenome- increased the ease of travel for road war- mined maximum number of seats that it can non in the aviation industry. The main global riors, this was not the main reason they In the Beginning sell on a flight that cannot be sold by the oper- Sabre Airline Solutions Consulting has developed an alliance checklist from its alliances have been active for less than a were formed. Today’s global alliances are only the outermost ating airline. Building a codeshare agreement varied alliance development engagements that can assist carriers in developing decade. Before the alliances formed, of Global alliances developed primarily as a layer of the relationships among airlines. At is also complex because schedule connectivi- a successful network partnership and make them aware of issues that can arise course, airlines cooperated extensively on way to improve returns for stakeholders by the core of the global alliance relationship is ty must be agreed upon between the two air- when evaluating and joining an alliance. flights, but even codesharing is a fairly recent increasing profitability of member airlines. By the special prorate agreement, or SPA, which lines and then maintained through successive innovation that only became prominent with- obtaining feeds from other members and shar- is essentially a ticketing agreement that estab- schedule, flight time and time zone changes As airlines look to join with new partners, they should: in the last two decades. ing the revenues of the total ticket prices, lishes a set price to be paid by the ticketing air- within minimum connection times. 1. Evaluate the carriers under consideration according to: To paraphrase the English philosopher members of a global alliance gain access to line to the operating airline. The SPA also The next layer is the marketing alliance, A. Quantitative factors: Thomas Hobbes, prior to global alliances, new revenues without the associated costs of establishes the fare rules and fare-class align- in which two airlines share marketing and i. Type of codeshare (hard or soft block of seats), worldwide travel was “nasty, brutish and carrying the passengers. Secondly, global ment that determine how much space a par- sales resources. Two carriers, for example, ii. Value to partner seats, long.” Individual airlines have lacked true alliances enable their members to share ticipating carrier can reasonably expect on the will link their frequent flyer programs in an iii. Cost of selling seats, worldwide coverage since the collapse of resources including airport facilities, sales other airline. SPAs are vital because in their “earn-and-burn” relationship where a traveler iv. Revenue sharing, the first Pan American Airlines more than 20 offices and maintenance facilities, which absence, an airline flying relatively short dis- can earn points on her host airline while travel- v. Inventory coordination/management, years ago. Even before the ultimate demise reduces unit costs. As a byproduct, the forma- tances to connect to a long-haul member ing on the partner airline and can also vi. Frequent flyer program liability. of Pan-Am, the carrier’s network shrank tion of global alliances included benefits for would have little incentive to feed traffic to its exchange points for flights on the partner air- B. Qualitative factors: rapidly, and many of its more exotic locations customers, such as increased connectivity as partner. Still, the SPA is generally one of the line. In addition to frequent flyer programs, i. Strength of the carrier (name recognition in the market place), were extremely difficult to reach. Airlines did well as a worldwide reduction in average fares most difficult negotiation items in an alliance marketing alliances include sharing sales ii. Network value (market access and value of those markets), offices, joint advertising, cooperative promo- iii. Other carriers’ interest (additional traffic opportunities), tions, joint distribution through various chan- iv. Implementation duration (system requirements), nels and similar marketing cooperation. v. Regulatory issues (open skies availability), THE HIGH LEVEL Marketing alliances are the genesis of the vi. Customer expectations (identifying and managing expectations): global alliance, and they are a very sophisticat- a. Opportunities for frequent flyer members (increased mileage), News Briefs from Around the Globe ed relationship between two airlines. b. More flights, vıew The outermost layer is the global c. Synchronized schedules, alliance, which expands the marketing rela- d. Pricing coordination, ® Who implement the Sabre Load Manager future changes in the marketplace,” tionship among multiple carriers that offer e. Smooth reservations and ticketing, Air Blue to produce optimal aircraft loading said Tariq Chaudhary, chief executive market coverage over a significant portion of f. Single check in, plans. officer of Air Blue. “The SabreSonic the world. Global alliances share not only g. Streamlined airport procedures, What commercial resources but also operating h. Easy connections, solutions give us the competitive resources, such as airport terminal space, i. Product consistency, Selected the SabreSonic ™ Passenger Why advantage we needed and the departure and premium lounges, ground j. Expanded reservations network, Solutions to manage its entire “As a start-up carrier, Air Blue needed functionality to respond to future equipment, and even maintenance facilities. k. Knowledgeable employees. Because global alliances are built on each reservations and departure control a flexible passenger management market changes whilst delivering a member generating as much revenue as Joining An Alliance | Continued on page 21 operations. The airline will also solution capable of adapting to the solution with bankable results.” a possible at the lowest possible unit costs,

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member airlines share resources wherever partners, which are slowed by their less- alliances, several trends point to an evolution possible. Global alliances are increasingly Alliance Structure sophisticated partners. that will change the impact these business Joining An Alliance | Continued from page 19 negotiating common agreements with man- Despite the disadvantages, most air- relationships have on the aviation industry. ufacturers, maintenance providers and simi- lines would credit their alliance membership While global alliances have already had a sig- 2. Prepare for issues that could have a significant impact: Global Alliance lar vendors. with substantial financial benefits. And, more nificant impact on the airline industry, they A. Business issues: Marketing importantly, global alliances make individual continue to evolve along with the changing i. Governance (establish bilateral agreements in key areas), Emergence of Global Alliances Alliance airlines more competitive. business environment. ii. Organization (appoint key officials to manage agreement), Because of their complexity, it is little won- Alliances have a significant impact on iii. Safety, quality and security (develop and sign safety, quality and der that global alliances are a fairly recent Code-share competition because they often have exemp- Future Alliance Trends security commitments), development. In fact, they probably would tions from anti-trust regulations that allow As global alliances mature, certain trends are iv. Brand and advertising (set and adhere to guidelines), not have evolved at all if not for the deregu- Special members to dominate certain markets. appearing that will affect their viability as well v. Communication (coordinate product offering and announcements), Prorate lation of the industry that is, even now, a Alliance members can also share market infor- as their members, competition and passen- vi. Signage (install co-branded signage for product identification), agreement process that is not complete globally. Prior to mation, discuss common pricing, coordinate gers. These trends can be split into four vii. Training (perform training for front-line staff to ensure consistent deregulation, airlines had a built-in profit mar- capacity and schedules, and even discuss categories: customer service). gin that meant they could survive without competitive actions taken in markets. Equity participation — Global alliances are B. Operational issues: much difficulty. Prior to deregulation, most Increasingly, airlines that are members of glob- increasingly expanding the financial relation- i. Revenue management (implement unified practices), airlines were government owned (or at least al alliances have significant advantages over ships between their members. ii. Sales (provide training for promotion and sales changes), partially government owned) and were oper- their competitors that are not. Regulatory framework — Government regu- iii. Reservations (ensure systems have functionality to interface with ated as public utilities. The impact of alliances on passengers lations are changing the landscape of global codeshare partners), Deregulation, however, changed the Today’s global alliances are, like an has also been significant. Long-haul passen- alliances. iv. Web site (update to include codeshare partner(s), including FAQs), industry dramatically. onion, several layers thick. To function gers favor global alliances because of the “Lite” partnerships — Global alliances are v. Airports (identify and address key issues at terminal and airport Deregulation caused airlines to com- properly, alliances depend on series of advantages they offer, including: becoming more selective about how and facilities), pete in ways that had never previously been agreements between airlines to establish Electronic ticketing that is easy to change when they allow new members to join. vi. Customer care (manage passenger correspondence and address required. To continue to operate, airlines need- the relationships that make the whole from any participating carrier, Procurement partnering — Global alliances codeshare customer issues at the same level of service as partner ed to find new ways of operating that would a functioning entity Through-baggage checking and boarding are only now beginning to understand the carriers), give them more access to revenues at lower pass generation across alliance members potential they possess to reduce unit costs vii. Frequent flyer program (estimate and manage program growth), unit costs. The volatile business environment and the use of common facilities at airports, through common procurement practices. viii. In-flight products (perform product audit across alliance and that resulted from deregulation led to the tion in global alliances during their financial dif- Participation in frequent flyer programs with Alliance members will increasingly use this negotiate with suppliers for discounts based on codeshare/alliance development of global alliances. ficulties. Global alliances, however, also have truly global reach, potential to drive favorable supplier rates. relationship), Although global alliances generally ben- disadvantages: Lower prices for long-haul travel, Each of these trends is impacting global ix. IT and financial systems (audit and adjust system to address new efit their members, there are advantages and Their competition has generally accelerated Common quality standards among members. alliances but will have greater affects in the future. relationship and communications needs). disadvantages to participation. For some air- the reduction in global yields as they com- These significant benefits have little, if Equity participation is evolving along lines, membership in a global alliance has pete for long-haul passengers, any, downside to customers other than the with global alliances. The merger of Air France 3. Ensure that a partnership plan is implemented successfully by evaluating: meant the difference between solvency and They can restrict the rapid growth of mem- possible increase in fares that results from a and KLM Royal Dutch Airlines (see related arti- A. Network plan (develop a long-term, detailed passenger estimate for insolvency. Both Iberia and Aer Lingus benefit- bers that must cooperate with partners reduction in competition. cle on page 4) is the most prominent example each carrier and identify route and market phasing plan), ed from oneworld membership during their before expanding capacity in markets, Global alliances are in their adolescence of evolving equity participation. Air France was B. Transition plan (establish internal resource estimates and communica- successful restructurings. And United Airlines Their increased requirements for common and, like teenagers, they are “subject to able to use European Union free-trade regula- tion plan that supports implementation and codeshare benefits), and American Airlines also benefited from the technologies and common planning and change without notice.” While there is no tions to purchase a majority stake in KLM, C. Implementation plan (develop external plan that supports the joint protection they received from their participa- operating practices can restrict fast-moving crystal ball to determine the future of global which will now participate in SkyTeam as a full codeshare implementation), member in cooperation with Air France. Both D. Post-implementation tune-up. oneworld members American Airlines and British Airways owned minority stakes in Robert Westgate directs the planning and operations THE HIGH LEVEL Iberia at one time, and other global alliance line of business for Sabre Airline Solutions Consulting. members share equity. He can be contacted at [email protected]. News Briefs from Around the Globe In addition, Star Alliance members were vıew asked to provide loans to United Airlines to sustain its capital requirements during its bank- Who inefficiencies and implement industry business and where we want to be,” ruptcy reorganization. The U.S. government is currently considering a bill to loosen foreign cost of capital and the enormous capital rapidly — anti-trust legislation is increasingly best practices in those key areas. Air China said Jian Xiong Huang, deputy general ownership regulations on airlines in line with requirements that such ventures would being used on the global stage in order to fur- What Why manager of information technology the ownership regulations of the European require. Still, it is possible that alliance partners ther political agendas. As trade disputes erupt Union. Easing foreign ownership regulations in will increasingly tie each other together with between the North America Free Trade “We are very confident that such a for Air China. “Once we have the Selected Sabre Airline Solutions other industries (notably, automobile manufac- equity participation to strengthen their relation- Association and the European Union coun- Consulting to conduct an extensive thorough examination of our business report, we can allocate IT funds turing) has led directly to consolidation within ships and provide better alignment. Ultimately, tries, for example, regulatory agencies are gap analysis of its airline planning and by the consulting team at Sabre accordingly and target specific the sector, and this is a trend that appears set however, the level of equity participation increasingly using global aviation as the testing to continue within the aviation sector. among global alliance members will be restrict- bed for new regulation. Airline Solutions will prove invaluable business issues with expertly scheduling, pricing, and data ware- It is doubtful that global alliances will ed by the existing regulatory framework. Despite the desire among passengers housing operations to help identify in addressing where we are in our recommended solutions.” a evolve into single mega-carriers due to the high The regulatory framework is changing for greater flexibility and more services from

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global alliances, elected officials are often both the current alliance members as well as Global alliances will continue to evolve increasing anti-trust scrutiny. While the new associates. Existing members can as business conditions change. Some of the European Union and NAFTA are on opposite observe the business practices of associate evolution will benefit members and some will sides of the debate, they are not the only members without fully committing to part- not. One rule of evolution, of course, is “sur- Carrying the Freight regulatory bodies impacting global alliances nership. The associate members can ease vival of the fittest.” today. Many countries are signing open skies their way into the alliance without having to agreements, which foster global alliance rela- make all of the necessary business and tech- Unraveling Global Alliances tionships because they remove bilateral restric- nical changes at once. Perhaps the most worrying characteristic of Like their passenger counterparts, global cargo alliances, although still tions to capacity and frequency of air service. Lite participation will also certainly entail global alliances is that they are not easy to in the early going, have potential to help reshape the airfreight industry. Meanwhile, the E.U. requirement to fewer regulatory issues than full membership. unravel. Alliance members share many remove country designators from third-coun- The risk, however, is that lite membership may resources: commercial, financial, operational try bilaterals is meeting resistance from non- lead to a two-tier structure where the more and technical. While sharing resources is one E.U. countries as well as countries that do not junior members of the alliance have fewer of the primary benefits, it also exposes a belong to a large trade pact such as NAFTA. In benefits and more burdens than the full mem- weakness. What happens when a primary recent discussions between a Japanese and a bers. For example, CSA Czech Airlines, a member of an alliance dissolves? Several large European airline, the issue of bilateral restric- smaller carrier, is a full member of SkyTeam members of global alliances are struggling for tions was broached with the Japanese govern- while Malev, a partner of CSA that is actually financial stability. The failure of any of these ment, which said that it would not allow the slightly larger than the Czech airline, may only carriers would have a profound impact on the European carrier to operate to Japan because be allowed to enter SkyTeam as an associate health of its alliance partners. its ownership was not majority held in the member. Such lite memberships should be When the Wings alliance led by Photo courtesy of Lufthansa Cargo European country in which it was based. watched carefully to see if they evolve suc- Swissair unraveled, the ripple effects impact- Such issues could, for example, cause cessfully for all participants. ed all members. Although more of a regional problems for airlines such as KLM, a Dutch The final alliance trend is toward pro- than a global alliance, the fate of Wings illus- company whose majority ownership will be in curement partnering. When global alliances trates the effect of the collapse of a key France. Certainly, as global alliances become were first formed, one of the envisioned ben- alliance member. Wings was devastated by more pervasive and complicated, the regulato- efits was the purchasing power members the failure of its anchor carrier. Almost all of ry environment will also become more thorny. would enjoy. For the most part, however, the former members of the Wings alliance This added complexity might make more limit- these advantages have not been a significant have gone out of business or suffered financial ed participation in a global alliance attractive. contributor to profitability of individual airlines. hardship following the collapse of Swissair. As global alliances become more com- This lack of impact may soon change. When With rising fuel prices, dropping yields and plex, a trend toward “lite” membership could oil was around US$20 a barrel, airlines had lit- increasing competition, it is difficult to imagine accelerate. Under lite agreements, an airline tle incentive to enter large procurement part- that all of the troubled carriers will survive, becomes an associate member of a global nerships for fuel. threatening the health of the current alliances. alliance to obtain most of the benefits of par- Purchasing economies that could be Global alliances improve the passenger ticipation without the requirements of full realized through procurement partnering are experience and benefit member airlines. Even membership. small at US$20 per barrel. Today, oil, at more with the challenges they face, global alliances In the SkyTeam’s associates program, than US$40 per barrel, is considerably higher, can look forward to a healthy future — even if for example, a full member may sponsor an and procurement partnering among alliance individual members continue to struggle. a airline for the associates program through members becomes much more attractive. which it only participates on certain routes Other procurement partnering is already taking and with certain restrictions while receiving place with manufacturers, maintenance access to common resources such as fre- providers, ground handlers, catering compa- Shane Batt is a partner with Sabre Airline quent flyer links, branding and promotion. nies and similar suppliers, and it is a trend that Solutions Consulting. He can be contacted This form of lite membership is desirable for is sure to grow. at [email protected]. By Mukundh Parthasarathy | Ascend Contributor

xpanding network reach. Providing seam- of services they received from their passen- The cargo alliances help airlines “meet E less services across airlines. Generating ger alliance. the demand for rapid deliveries to all parts of +count it up incremental revenue. Reducing costs. For Building on those discussions, in April the world,” according to an article in SAS years, large passenger airlines have known 2000, Lufthansa Cargo, SAS Cargo and Singapore Cargo’s Cargotimes. 700 million — Euros per 12 — Percent of possible fuel savings 3 — Number of doctors who delivered about the benefits of membership in a global Airlines Cargo launched the New Global Cargo “[A]irfreight companies have recog- day, according to the International Air the European Organisation for the Safety a baby aboard a KLM flight from alliance. Now, more and more cargo airlines alliance, now known as the WOW alliance, which nized that they must create global networks,” are discovering the same thing. has since been joined by Japan Airlines Cargo. the article said. “The new economy has made Transport Association, that aviation of Air Navigation, or EUROCONTROL, Amsterdam to Chicago Aug. 18. The About five years ago, the cargo divi- Five months later, the cargo divisions of sever- cooperation essential. No single airfreight contributes to the tourism industry estimates could be generated by minimiz- Jordanian woman and her healthy baby sions of Star Alliance members Lufthansa al SkyTeam alliance members — Aeroméxico company has a reasonable chance of meeting in Europe, creating considerable ing the inefficiencies in air traffic manage- daughter were taken to a local hospital German Airlines, Scandinavian Airlines Cargo, Air France Cargo, Delta Air Logistics the needs of all customers.” employment in the aircraft and ment systems, according to the in Newfoundland, Canada, where the System and Singapore Airlines began looking and Korean Air Cargo — also joined together By joining together, the members of the engine manufacturing industries. International Air Transport Association. aircraft made an emergency landing. for ways to create a cooperative airfreight to form the SkyTeam Cargo alliance. CSA WOW alliance can provide customers a com- group to provide some of the same types Cargo and Alitalia Cargo later joined the alliance. bined fleet of 43 freighters and the belly

22 ascend ascend 23 industry industry

capacities of more than 760 passenger air- future,” said Peter Grølund, general manag- SkyTeam Cargo has a member from South work of alliance members, cargo alliances by differing information technology systems, craft. Together, the alliance’s network compris- er of SAS Cargo, when WOW was launched. America or Africa. Leading Cargo Airlines deliver a better product to customers. corporate and national cultures, and varying es 523 destinations in 103 countries on five “A stand-alone model is no longer sustain- Several large cargo airlines, including The alliances also allow their members to cargo services. continents. Similarly, the SkyTeam Cargo able if we are to offer customers the ser- American Airlines Cargo, United Airlines The top 20 airlines for international consolidate ground sales and marketing Alliance members must standardize freight traffic in 2003. alliance members combine to provide more vices they demand.” Cargo, British Airways World Cargo as well as (in millions of scheduled freight infrastructures. pricing, as well as product offerings and lev- than 8,217 daily flights serving 512 destina- Although they are relatively new, and cargo-only airlines such as Polar Air Cargo, ton kilometers) The alliances are gaining acceptance in els of service. Individual airlines must also tions in 114 countries using more than 1,200 include just a handful of members, the glob- continue to keep their options open. Some air- the industry — last year, the Asia Freight and harmonize their similar products — express 1. FedEx 13,320 aircraft. Also, by seamlessly coordinating their al cargo alliances will have a dramatic impact lines have remained on the sidelines due to Supply Chain awards even created a new cat- delivery, for example — so that packages 2. Lufthansa 7,260 networks, alliances can drastically reduce the on how freight is transported. Airline indus- the degree of integration required by member- egory for best air freight alliance, won by move seamlessly through the network. 3. Korean Air 6,896 amount of time — in some cases by several try observers say they expect the cargo ship in a successful cargo alliance. WOW in 2003 and 2004. They also must set up a mechanism to deter- 4. UPS 6,732 hours for an urgent delivery — required to alliances to grow and new alliances to form Despite such gaps, the cargo alliances In addition to the large alliances, many mine how to split the revenue generated 5. Singapore Airlines 6,681 transport freight. in the coming years. The current alliances represent a response to the demands of the cargo divisions are, like their counterparts on from a shipment that involves multiple 6. Cathay Pacific Airways 5,197 Joining an alliance “will lead to exten- themselves still have plenty of room to grow. current marketplace. By providing extended the passenger side, exploring individual links alliance members. 7. Air France 4,875 sive advantages for our customers and WOW, for example, currently lacks a North global networks that can better handle with specific partners through codeshare One promising development that may 8. China Airlines 4,727 strengthen our market position into the American partner. And neither WOW nor express shipments and by utilizing the net- agreements. Smaller airlines are creating such assist cargo carriers in addressing these chal- 9. EVA Air 4,713 links with larger international carriers to pro- lenges is that developing technology is emerg- 10. Japan Airlines 4,388 vide worldwide coverage. Air Jamaica Cargo, ing — such as cargo reservations, revenue 11. Cargolux 4,348 for example, has formed alliances with 13 air- accounting and claims managment — that can 12. British Airways 4,194 lines and four major trucking companies. help airlines integrate their cargo operations. 13. KLM 4,085 hightech There are also numerous individual relation- Standardizing IT platforms will enable the indi- 14. Northwest Airlines 3,001 ships. JAL Cargo and American Airlines Cargo vidual carriers to more efficiently coordinate 15. Emirates 2,586 have a strong relationship as do British operations as well as communicate with each 16. Asiana 2,566 News on New and Improved Products Airways and Qantas Airways. And there still other. Consistent standards will help the cargo 17. American Airlines 2,555 exist some relationships outside the global alliances offer a unified service. and Services from Sabre Airline Solutions 18. United Airlines 2,388 alliance framework, such as SkyTeam Cargo Although still in the early developmental 19. Nippon Cargo 2,321 member Korean Air Cargo’s alliance with phase, cargo alliances likely will play an 20. Air China 2,177 WOW member SAS Cargo. increasingly important role in the future of product Rapid recovery — Crew schedulers can features Although positioned to become more freight transport. a Source: International Air Transport Association develop a solution quickly, resolving important in the industry, cargo alliances still Sabre ® AirCrews ® both pairings and crew, and then target Automated solutions — Once a crew face a number of challenges to their operation. Disruption Control the most efficient resolution to a particu- tracker receives updated flight informa- The world’s top 50 cargo airlines One of the key steps for a successful lar type of disruption. tion, Disruption Control provides an transported 125,299 million freight ton cargo alliance is to create a unified “store- Cost savings — Disruption-related costs, automated solution to a particular kilometers in 2003, of which 95,010 front” that coordinates pricing and selling at a Mukundh Parthasarathy is in the cargo description such as lost short-term revenues caused disruption based on data provided million FTKs were handled by the top global level, leading to cargo transported under product marketing group at Sabre Airline by cancelled and delayed flights and by the crew tracker. 20 cargo airlines. the alliance brand rather than that of an individ- Solutions. He can be contacted at AirCrews Disruption Control is an decreased customer satisfaction and Deadheading or positioning of crew — ual airline. To do so, however, is complicated [email protected]. industry-leading system designed to loyalty that may have a long-term The system considers all flight legs avail- help airlines overcome crew schedule impact on an airline’s brand, can be able for deadheading, utilizing a unique minimized through efficient disruption deadhead-selection logic to select a disruptions quickly so crewmembers recovery. subset of all deadheads to be included THE HIGH LEVEL are able to return to regular operations Smart integration — While offering in the development of a solution. with minimal schedule interruption. direct integration with other products in Graphical user interface — The system’s News Briefs from Around the Globe the Crew Management Suite, Disruption user-friendly interface enables a crew vıew benefits Control can also interact with other crew tracker to quickly create a solution operations systems. scenario by specifying the inputs and Who review work schedule changes and “Partnering with Sabre Airline Efficient deployment — Utilizing recovery parameters, which control the The system lessens the economic impact Comair perform trip trades automatically Solutions will have a positive impact Disruption Control, crew schedulers can type of crew and flights chosen for the of unexpected costs to airlines and online. on daily operations at Comair, analyze various solutions as scenarios solution. What prevents significant revenue loss during prior to implementation, ensuring that Recovery parameters — With the providing us with improved opera- times of irregular operations. By integrating a solution adequately addresses the recovery parameters defined, the system Selected the Sabre ® AirCrews ® Why tional reliability while maintaining the capabilities of Disruption Control with desired needs without causing additional provides a list of affected and candidate Operations Manager to efficiently “With the implementation of a level of cost effectiveness that those of the Sabre ® AirCrews ® Crew problems to crew operations. crewmembers, which can be reviewed by Cross-functional integration — the crew tracker to determine whether to track flight crew. Included in the Operations Manager, Comair will a carrier our size needs. Management Suite or the Sabre ® Flight Integration with other Sabre Airline include or remove crew from the solution. agreement is the Sabre ® AirCrews ® have quicker, more reliable access to “We expect Comair to benefit Control Suite, the system provides several Solutions recovery products provides Multiple scenarios — At any time, the Crew Connection, which will provide information about all aspects of our from the increased operational flexi- benefits enabling airlines to competently airlines with the necessary tools to recovery parameters can be changed manage both flight schedule and crew produce recovery solutions in the areas in Disruption Control so an alternative increased benefits to Comair’s flight crew operations,” said Pat Ryan, bility granted by the proven system,” disruptions: of crew, aircraft and passengers. solution can be considered. a crewmembers, enabling them to director of crewmember services. he said. a industry

world

one

Photo courtesy of Photo courtesy Photos courtesy of Star Alliance Spanning the Globe he past decade has seen the rise of the major international airline alliances — T Star Alliance, oneworld and SkyTeam. From the start, alliances have offered their members key benefits, such as the ability to offer customers access to more

destinations around the world and the ability to redeem frequent flyer miles on a

number of carriers.

Certainly, the alliances have already had a significant impact on the industry and will

likely continue to do so in the future. Ascend magazine asked representatives of the

three main alliances to answer a few questions about the affect they’ve had, and the

changes they will continue to make.

Photos courtesy of SkyTeam

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Question: What are the advantages of as in raising revenues, and we know there is Overall, Star Alliance views technology as key Star Alliance: Membership in an

being a member of your alliance? world more work we can be doing in this arena. to putting customers more in control of their alliance is an important strategy for traditional

Star Alliance: On the customer side, one Star Alliance: Emerging technologies travel experience and airlines more in control carriers; indeed it is a key element in their tran- member airlines can significantly enhance continue to play an important role. of their passenger boarding costs. sition to new, more profitable business mod- their product offering by providing access to For example, together with three of our Additionally, Star Alliance is looking at els from both a revenue and cost-saving per- an unsurpassed global network of over 14,000 member carriers, we are working on a com- other initiatives to reduce costs for the mem- spective. daily flights to 755 destinations in 132 coun- mon IT platform project that will revolutionize ber carriers, including managing the purchase SkyTeam: Airline alliances are key to pro- tries, better flight connections, alliance-wide Photos courtesy of the industry by replacing current systems with of commodity items. viding customers with the most travel options. frequent flyer benefits, lounge access and pri- one technology platform based on industry- Q: Is membership in an alliance key to sur- For a traditional hub-and-spoke airline to best ority baggage. leading products and state-of-the-art technolo- vival for the existing traditional carriers? serve its customers, global alliances open the For the member airlines, the improved gy for passenger services systems. The initia- oneworld: Carriers — and not just legacy world for travelers and allow them to offer offering brings more passengers and gener- tive will have the flexibility to admit other carriers — are certainly recognizing the bene- more destinations and greater frequencies. ates more revenue. members of the Star Alliance network at a fits that come from being a member of an Q: How does your alliance differ from the Additionally, Star Alliance has initiated a later date. Driving the effort is the desire to alliance. other two? variety of projects — in areas such as fleet improve customer service, significantly lower Today, 19 of the world’s 20 biggest air- SkyTeam: SkyTeam is the youngest of coordination, the joint purchasing of media distribution costs and dramatically increase lines are already part of one of the big three the global airline alliances, having formed in advertising, third-party services and fuel as the speed of delivering new products to market. groupings or talking about joining. Smaller air- 2000, but has the most momentum. This fall, well as the collocation and consolidation of We’re also developing Star Alliance self- lines, too, have seen what a global alliance can we added three new carriers — Continental facilities at airports across the network — that service check-in units and will be launching do for them. Airlines, KLM Royal Dutch Airlines and reduce costs for member carriers. We have true multilateral interline electronic ticketing — But, of course, becoming a member of an Northwest Airlines — resulting in a new nine- also generated savings as the result of infor- a product that features common and shared alliance cannot in itself be the key to survival. member alliance. mation technology sourcing via alliance-wide business processes and messaging verses a It can certainly help, but airlines must also ensure In addition, we differentiate ourselves frame agreements for high-cost IT spend myriad of bilateral solutions — in 2004. their own houses are in order if they are to prosper. from other airline alliances with our emphasis items such as wide area network services and technology platforms. oneworld: oneworld provides our mem- bers with benefits and value that no airline can provide or achieve on its own or working bilat- Possessing more international The 15 members of the Star Alliance, erally with other carriers. presence than any other global which was formed in 1997, provide This flows from the opportunity to alliance, oneworld serves a total access to 772 airports in 133 countries increase and protect revenues through the of 135 territories, offering its as well as 575 lounges around the world. additional services and products oneworld travelers a 575-destination network enables them to offer — a wider route net- with access to nearly 400 airport work, and more opportunities for frequent lounges worldwide. Photos courtesy of Star Alliance flyer program members to earn and redeem rewards, use lounges and enjoy priority ser- vice in more parts of the world, etc. It also comes from fare products and sales offerings that no single airline can offer on its own. Added to that are the substantial oppor- products and services. SkyTeam will provide oneworld: Global alliances were created tunities we have provided our partners to customers with the benefits and advantages originally as marketing and sales tools for air- reduce their costs. they want. lines to help partners increase and protect Members of oneworld have generated Q: You’ve already achieved many benefits their revenues by providing additional services additional value totaling many billions of U.S. from partnering, such as expanding the and products to their customers. dollars under the alliance’s umbrella. reach of member airlines and sharing fre- The potential of alliances to help reduce With margins in this industry so tight, quent flyer programs. What untapped ben- costs only came to the forefront during the that’s more than a welcome contribution. efits can be gained as your alliance contin- market softening ahead of 9/11. Since then, SkyTeam: SkyTeam is designed for the ues to evolve? there has been as much of a focus, or even passenger from the ground up, with an SkyTeam: We are developing a strategic more, on how airlines can improve their effi- excellent core network and the best growth plan that includes many areas of cost syner- ciency by working together. potential of any alliance. Membership in gies, including co-locations at ticket offices We’ve made some impressive strides in SkyTeam will present an airline with signifi- and within airports and joint purchasing of air- this direction, saving hundreds of millions of cant opportunities, including an enhanced craft components and fuel. SkyTeam has ten- U.S. dollars through joint purchasing of items position in response to competitive challenges dered 40 joint fuel purchases during the last ranging from fuel and aircraft spare parts to within its region of the world and develop- three years. towels and plastic glasses and by cooperating ment of global cargo service. In order to sat- We are looking at joint aircraft purchases in many other areas. isfy the needs of today’s traveler, airlines as part of our long-term fleet strategy and We feel there is as much scope to con- must continue to extend and diversify their developing strategic specifications. tribute on the cost-savings side of the equation

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on passenger services and benefits. SkyTeam Q: As airlines continue to automate, what is the first alliance built around customer plans do you have for increased future inte- needs. SkyTeam has the best hubs in key mar- With the entrance of newcomers The “Star Alliance Visit Japan Campaign,” gration of IT systems among your member kets where 80 percent of the world’s traffic Continental Airlines, Northwest launched earlier this year, has helped airlines? flies: Atlanta, No. 1 in the world; Paris-Charles Airlines and KLM, the SkyTeam boost travel to Japan by about 30 percent Star Alliance: The common IT platform, de Gaulle, No. 1 in Europe; Incheon, the only alliance serves 341 million passengers year over year. as was mentioned before, will be a breakthrough Asian hub with room to grow; Mexico City, No. a year to 658 global destinations in this area, and each carrier will have the option

Photos courtesy of SkyTeam

1 in Latin America; and more importantly, cus- in more than 130 countries and Photo courtesy of Star Alliance Star member All Nippon Airways earlier of participating in the future. Additionally, we tomers are able to earn and redeem frequent provides access to almost 400 this year received its first Boeing 777-300ER, will continue to develop and leverage StarNet flyer miles on any SkyTeam operated flight. lounges worldwide. the first ANA aircraft to have mobile Internet to deliver new products and services to the Star Alliance: Overall, the Star and e-mail service. customers and our member airlines. Alliance network features more flights, to oneworld: While using a single platform more destinations, more often. We have also can deliver advantage by making it simpler to led the way in developing products that ease develop common business processes, where travel for international passengers. All of this appropriate, and a consistent approach to led to Star Alliance being voted the best airline systems. This is a mandatory requirement of single check in, meaning passengers receive delivering the customer proposition at the alliance in 2003 by customers, in a SkyTrax poll membership as it to enables carriers deliver boarding passes and baggage transfers for same time facilitating quicker and less costly of more than 30,000 frequent flyers, as well as the oneworld customer proposition. multi-leg international itineraries at the start functional changes, the cost of moving plat- by influential publications Business Traveler Consistent delivery of customer service of their trips. forms, in terms of business change apart from magazine (United States) and Business (customer recognition, seamless journey and Star Alliance: From the outset, it was anything else, is very significant and not Traveller magazine (United Kingdom). transfers, global support, more opportunities clear to Star Alliance that developing count- undertaken lightly. Over time, we anticipate Being founded more than seven years for frequent flyer program members to earn less bilateral connections among the mem- more convergence to take place as opportuni- ago, Star Alliance has accumulated a wealth of and redeem miles, etc.) is seen as an impor- ber carriers’ varying IT systems would not be ties present themselves. experience, which has transformed it into a tant oneworld differentiator. an efficient solution. Instead, we opted to SkyTeam: Right now, SkyTeam is more mature and effective organization. In An example of how well our systems seamlessly integrate business functionalities focused on ensuring that passengers of our fact, a dedicated project and brand manage- connect is that oneworld will be the first of without conducting system integration. For three newest member airlines, Continental, ment organization has been installed in the global alliances to offer interline e-ticket- this, Star Alliance developed StarNet, a mid- KLM and Northwest, receive all of our 10 cus- Frankfurt, Germany, to coordinate and support ing between all partners, on track for com- dleware platform and network infrastructure tomer benefits. As part of the new member member carriers in the development and deliv- pletion by the end of this year, far ahead of that connects key member carrier systems. integration process, all carriers are investigat- ery of new products, services and a host of our competitors. StarNet, in addition to providing the basics ing ways to collaborate further. For example, cost-saving initiatives. SkyTeam: Currently, our IT systems such as through check in across the alliance, SkyTeam intends to start interline electronic oneworld: It starts with the quality of our are integrated to allow our passengers to enables Star Alliance to provide flight infor- ticketing next year to customers traveling via members. We believe we have the highest accrue frequent flyer miles on every mation on any member carrier’s flight at any member airline. quality carriers in each region on board — in SkyTeam coded flight and redeem mileage check in, and it also allows customers to Q: How has your alliance transformed since terms of their customer service and overall The oneworld alliance itself was named journeys across our alliance network for awards on any SkyTeam operated flight. book award travel on any member carrier it began? soundness. the World’s Leading Airline Alliance in the smoother still. In addition, our systems are enabled for a with one phone call. SkyTeam: Since SkyTeam’s launch four How can we justify that bold claim? It is most recent World Travel Awards, which We are also different in our overall a fact that oneworld was the only alliance describes itself as the travel industry’s No. 1 membership philosophy. We are not just par- whose members collectively reported profits awards scheme, based on votes cast by ticularly choosey about who we invite to join, for 2003. 80,000 travel agency professionals from more but we are also determined to keep the num- THE HIGH LEVEL Our partners also regularly win more than 200 countries. bers of our partners to a manageable number awards than their counterparts in the other The oneworld alliance offers a wider of high-quality carriers who can work well News Briefs from Around the Globe two groupings combined. For example, range of alliance fares than all the competition together. vıew oneworld members accounted for four of the combined, earning hundreds of millions of This all results in financial contributions six 2004 Airline Strategy Awards presented in U.S. dollars a year for our partners. to our members that, we believe, stand any Who flight operations. The suite will challenge of regular fogs in Delhi, July by leading industry magazine Airline We are committed to customer service comparisons with our competitors. Jet Airways enable theairline to drive improve- India, every year for two months; Business. The top prize, for executive leader- leadership and innovation. We are on track to Q: How extensively are the IT systems of ments in on-time performance, hence, it is imperative that we have ship, has remained since its inception in 2002 be the first alliance with interline e-ticketing your member airlines integrated? What in the hands of oneworld partners. Our eight among all member airlines by the end of 2004, oneworld: Five oneworld carriers (British maintenance and disruption costs. the best tools available to manage carriers took five top places in the 2004 OAG providing greater convenience to our cus- Airways, Qantas, Iberia, LAN and Finnair) are In a move to modernize its operational our flight operations. To meet Airline of the Year Awards. tomers and saving scores of millions for our converging around a single passenger service systems, the airline selected the Why our growing needs — and also for These and the other awards oneworld member airlines. system while American Airlines is hosted on ® ™ carriers have won are a reflection of the excel- A number of the benefits that we’ve another and Cathay Pacific and Aer Lingus Sabre AirOps Suite, which is “There is no doubt flight operations is international routes — we realized we lent customer service and value they offer — had in place since the launch of our alliance maintain their own in-house PSS systems. designed to monitor daily flight mission critical,” said Peter Luethi, required a robust, integrated solution from the flat beds most of them provide in more than five years ago have only recently Comprehensive links have been developed movements and assist operations chief operating officer for Jet Airways. that is proven in the marketplace, their long-haul premium cabins to the attrac- been offered by our competitors. between these platforms and among the carri- tive fares they market. We are now looking further ahead ers’ in-house revenue accounting, frequent flyer controllers in making informed “It is a particularly pertinent issue for and the AirOps suite met all our They also work well together as an alliance. at how we can work together to make program management and business intelligence decisions regarding all aspects of Jet Airways as we face the unique criteria.” a

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years ago, the alliance has shown significant SkyTeam: SkyTeam members have a certainly invite airlines to join us. Our member- growth. During this growth period, we have commonly held position about the necessity to ship door is very definitely not closed. maintained our customer focus by expanding have a unique set of rules pertaining to open SkyTeam: Because SkyTeam’s mission flight options through our strong network skies. How the rules are applied is key. As an is driven by customer needs, we continue to of airport hubs, providing exclusive services alliance, we need to maintain the current open consider a select number of airlines that will The three main global airline alliances, together, comprise more than to recognize frequent business travelers skies agreements. expand the reach and benefits for our cus- 35,000 daily departures — oneworld with 7,526, SkyTeam with 14,320 and make them feel special, and enhancing Star Alliance: The Star Alliance net- tomers around the globe. and Star alliance with more than 14,000. the quality of service across all its member work has always operated successfully within As mentioned above, this fall, we added airlines. the regulatory framework of the various agen- three new carriers — Continental Airlines, Star Alliance: We have grown as a cies across the globe and will continue to do KLM Royal Dutch Airlines and Northwest network, maintained our position of leadership so in the future. Airlines. in the industry and matured as an organization. Q: What are your plans for future expan- In May, SkyTeam signed an agreement As a result, we can more quickly develop new sion — do you plan to invite new airlines with Aeroflot as a preliminary step in the new products while at the same time reap the bene- into your alliance? member process. The agreement outlines fits of synergies and resulting cost reductions. Star Alliance: We continue to evalu- Aeroflot’s intentions to undertake exclusive oneworld: We’ve doubled in size — our ate our network and hope to expand it in those discussions to become a part of SkyTeam. In founding four members have been joined by areas of the world where we feel the need for the last five years, Aeroflot has made signifi- Star Alliance world, SkyTeam,

one four others. greater presence. With the integration of both cant progress as far as its Russian domestic At the same time, our focus has South African Airways and TAP Air Portugal in network, renewal and improvement of its expanded to many areas beyond the services 2005, we will substantially improve the quality fleet, its in-flight product and hub at Moscow and benefits we offer to passengers as our of our network, especially in Europe, Africa Sheremetyevo. Today, Aeroflot is undergoing

members have rightly wanted to increase the and Latin America, and offer a total of more a process that will ensure it will meet Photos courtesy of value they gain from the alliance. than 15,000 daily departures to 833 destina- SkyTeam requirements in terms of quality of Q: How does the current international reg- tions in 152 countries. By implementing our service and organization so that it can effec- one of the country’s most affluent regions levels consistent with the existing oneworld details on matters of governance cannot be ulatory environment affect the continued regional member concept, Star Alliance will tively join our alliance. with promising growth opportunities. As China members, disclosed. development of alliances? further enhance its network presence into In August, SkyTeam signed an agree- Southern’s main base, Guangzhou is also a key Enjoy strong brand awareness, Q: Are the current alliances the first step oneworld: Judging by some of their rul- more markets. This will occur in Finland once ment with China Southern Airlines, laying the transportation center in southern China. The Maintain high operational standards, in a worldwide airline consolidation? ings on alliances recently, the regulators seem our first regional carrier, Blue1, joins. Of groundwork for the airline to officially join the new Guangzhou Baiyun International Airport, Add value to both the alliance’s customers Star Alliance: The benefits that come to take on board more nowadays the benefits course, both China and India remain as two of alliance — an event to occur once China which opened earlier this month, will comple- and its existing partners, with membership in an alliance, both in terms that alliances can offer customers. The key the key markets that are of great interest to us. Southern fulfills SkyTeam’s requirements for ment SkyTeam’s strong hub network and fur- Contribute positively to oneworld’s “man- of increased revenue and reduced costs, cre- issue here is that all alliances are treated fairly oneworld: Where they can add benefit to quality standards. China is one of the fastest ther expand the alliance’s Asian offerings. ageable nature.” ate significant value and reduce the need for and equally. our customers and existing members, we will growing aviation markets and Guangzhou is China Southern is also preparing a new facility Q: How involved is the process of joining consolidation. in Beijing to serve customers. your alliance? oneworld: Undoubtedly. But alliances will Last year, SkyTeam announced that it is oneworld: Once it has been elected on still be able to provide big, consolidated air- developing an associate member concept that board as a member designate, any new recruit lines with benefits and value that they cannot THE HIGH LEVEL will allow smaller, regional carriers to join the must be able to offer the full range of achieve on their own — the ability to work SkyTeam network and provide customers with oneworld services and benefits before it can with other carriers to earn more revenue and News Briefs from Around the Globe access to even more destinations around the join. What this involves is spelled out in what reduce costs. vıew world. As we finalize this concept, we will we call our delivery requirements document. SkyTeam: There are several political and have several associate members to announce. One of our existing carriers will act as a economic hurdles that must be resolved Who carrier to effectively manage all the minimum cost while maintaining Q: What criteria do you use to determine sponsor, to provide guidance and assistance to before industry consolidation can occur. Korean Air aspects of its crew management flight reliability and schedule integrity. which new carriers to invite to join your the new recruit in this process, with our cen- Alliances, however, provide the benefits of operations. “By extending the AirCrews alliance? tral alliance team supporting the overall pro- cooperation by allowing members to improve What SkyTeam: As with all decisions, new gram. their market positioning, reach new destina- suite to our cabin crew, we will be member invitations are discussed among the How involved this all is depends on how tions, enhance customer service and enjoy Selected the Sabre ® AirCrews ® Crew Why able to further improve operational Governing Board and agreed upon by unani- aligned the new recruit is with oneworld’s poli- cost savings and knowledge sharing. Management Suite to improve cabin “The AirCrews suite has delivered efficiency and lower crew-related mous consent. Each new member must meet cies, procedures and processes. Yet, an alliance is only as strong as its a stringent set of requirements prior to receiv- SkyTeam: SkyTeam membership members. SkyTeam continues to move for- crew efficiencies and support end-to- excellent results in the management costs,” Lee continued. “Our staff will ing an invitation for membership. requirements comprise numerous factors ward, generating great value for our cus- end crew management needs as a of our cockpit crew, from long-term greatly benefit from the technology Star Alliance: They must be quality including customer service, safety levels and tomers and member airlines. part of an “innovative excellence” crew resource planning through day- from Sabre Airline Solutions, including carriers with outstanding safety and service technology adaptability. All new members Q: Do you anticipate any low-cost carriers reputations that enhance our network, product must live up to the alliance’s customer service will ever join one of the existing major strategy. During the last six years, the of-operations crew tracking,” said innovative tools like team rostering and service offering. standards and provide a consistent, high level alliances? airline has relied on the tracking and S.M. Lee, vice president of information and the Sabre ® AirCrews ® Crew oneworld: Any new recruit has to pass six of quality for their passengers everywhere SkyTeam: A key element of the scheduling capabilities of the suite to technology for Korean Air. “With the Connection. The technology will also membership benchmarks. They must: they fly. SkyTeam global network is the hub-and- Broaden and deepen our alliance’s network Star Alliance: There are a number of spoke system, which provides unparalleled help manage its cockpit crew. Utilizing AirCrews suite, we can always be sure act as a catalyst for us to continue our in strategic world regions, technical requirements that must be met; connectivity and an outstanding method for the entire AirCrews suite will enable the of the efficient deployment of crew at quest for innovative excellence.” a Offer a high-quality product and service however, as agreed with our member carriers, customers to travel using members of the

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same alliance from their departure city to any Some low-cost carriers offer a better Finnair location in the world. A majority of the level of service and network than some of Scandinavian Airlines Helsinki, Finland Stockholm, Sweden world’s low-cost carriers focus on point-to- their traditional counterparts. As they grow fur- Lufthansa Frankfurt, Germany point travel and thus would not enhance our ther, more are likely to see that global alliance bmi Derby, United Kingdom global network. However, several members can provide them with benefits while still British Airways Northwest Airlines London, England LOT Polish Airlines St. Paul, Minnesota, USA Warsaw, Poland have relationships with low-cost carriers, enabling them to maintain their cost focus. Aer Lingus Dublin, Irelannd and those relationships benefit our passen- Q: Do you think the membership of United Airlines Chicago, Illinois, USA Air France-KLM CSA Czech Airlines Paris, France and Amsterdam, Prague, Czech Republic gers since most are both business and alliances will remain stable for the most part, The Netherlands Air Canada Korean Air leisure travelers. or do you ever expect to see movement of Montreal, Quebec, Canada Iberia Seoul, South Korea Madrid, Spain US Airways Austrian American Airlines Star Alliance: The business models members from one alliance to another? Is Arlington, Virginia, USA Spanair Vienna, Asiana Airlines Fort Worth, Texas, USA Alitalia All Nippon Airways (ANA) Delta Air Lines Palma de Mallorca, Spain Austria Seoul, South Korea Tokyo, Japan and product lines of network carriers and there anything to prevent member airlines Continental Airlines Atlanta, Georgia, USA Rome, Italy Houston,Texas, USA Cathay Pacific low-cost carriers are not compatible, particu- from moving to another major alliance? Hong Kong larly when you consider that global access oneworld: Companies in shipping formed and network connectivity are fundamental alliances long before airlines. That industry has Aeroméxico Mexico City, Mexico parts of our business. shown that the more members you have in an Thai Airways Bangkok, Thailand oneworld: They already have. alliance, the less stable it becomes. That is

Aer Lingus has transformed itself into a one reason why oneworld has maintained our Singapore Airlines Singapore, Singapore low-cost carrier since it joined oneworld four membership at manageable levels. oneworld years ago. The no-frills subsidiaries of some Some alliances have already lost mem- other legacy carriers who are members of other bers. For example, Canadian International SkyTeam groupings are also affiliates of those alliances. was forced to leave oneworld when the airline

Star Alliance VARIG Rio de Janeiro, Brazil Air New Zealand Auckland, New Zealand LAN Santiago, Chile Finland’s Blue1 will become Qantas Sydney, Austrlia the first regional carrier to join Members of oneworld, SkyTeam and Star the Star Alliance thanks to spon- Alliance have headquarters in 32 cities sorship by its parent company, around the world. SAS, a current member

Photo courtesy of Star Alliance Photo courtesy of the alliance.

was taken over by Air Canada. So there for member airlines — helping members alliance is implementing an associate THE HIGH LEVEL may well be some further movement, but the offer a better product for their customers, member program and expects to announce core membership is likely to remain stable. develop their business, benefit from cost the first SkyTeam associate members News Briefs from Around the Globe SkyTeam: Members of the SkyTeam savings, etc. During the past four years, next year. vıew alliance have strong ties with each other, and SkyTeam has proven its ability to do just Star Alliance: A membership in Star many member carriers have relationships with that, making it an attractive alliance Alliance needs to be a win-win situation for Who Why each other that have spanned decades, dating prospect for many carriers. As stated previ- the carrier and the alliance as a whole. In to before the alliance was formed. ously, SkyTeam continues to consider new other words, as long as a member carrier Air Andaman “In the first year of operation, Air it is a best-of-breed solution with the The foundation of a successful alliance members in key regions, such as Southeast sees the value of being in the alliance, there What Andaman is expecting significant pas- most advanced functionality of any is its ability to maximize and maintain benefits Asia and South America. In addition, the will be no need to move elsewhere. a senger volumes due to interline and on the market. We recognize that the Selected the SabreSonic ™ Passenger codeshare partnerships we have reservations and departure control sys- Solutions to power its regional growth established, and we are forecasting tems are the core of all our opera- strategy by providing a reliable, significant year-over-year growth in tions, and we’re confident the +count it up scalable and flexible information passengers boarding,” said Dean SabreSonic solutions will help us — Year Ellen Church became the world's first flight attendant. Prior to becoming a flight attendant for United Airlines, technology solution that will enable Mills, president of Air Andaman. reduce operational costs, improve 1942 Church served in World War II as an on-board nurse, providing medical care for wounded soldiers. the carrier to adapt quickly as its “To support this future growth, we efficiency and enhance our customer business model evolves. selected the SabreSonic solutions as service.” a

ascend 35 An Allied Front

A Conversation Photos courtesy of Qantas Airways With … Geoff Dixon, CEO Qantas Airways

n the past few years, airlines around the world have increasingly I worked together to expand their reach and provide additional services for customers. From basic codeshare agreements through

its more extensive airline association with oneworld, Qantas has

formed relationships that enable it to increase revenues as well as

customer service.

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and different operating environments? tive enhancements like e-ticketing and like, and global alliances have been a very A: This was really not as difficult as it might QuickCheck self-service kiosks as well as pro- effective mechanism for bringing airlines appear. By operating as a small, cohesive ducing cost savings and additional customer together in the interim. How the alliances group, oneworld is able to operate by consen- service benefits. respond as airlines begin to integrate their sus while striving for enhanced services and Q: one Photo courtesy of Qantas Airways How has the world alliance evolved activities more fully is one of the challenges customer benefits collectively. New members over the years? they will face. are unable to enter oneworld unless they can A: The oneworld alliance has grown from Q: Airlines also have relationships with meet all of the alliance’s deliverables immedi- an already strong base involving partners vendors, service providers, distribution ately, which offers a highly effective service with a clear understanding of how the partners. How important and strategic are guarantee. alliance would work, and this path has been those relationships? Q: What kind of standards and contractu- adhered to throughout its history. The A: All of Qantas’ business relationships are, al requirements are involved with forming alliance began with four airlines and has now of course, very important to us, and we try to an effective alliance? grown to eight. achieve mutually beneficial outcomes with all A: To become a member of oneworld, you Q: Where do you see the alliance going of our service providers and clients. must meet set standards and requirements. If in the future? Will the alliance expand Q: What advice would you give to airline you can’t, you are not admitted. This gives further? How do you think alliances will executives who are considering joining an oneworld very solid performance platforms. shape the future of the industry and serve alliance? Q: What role does technology play in as a possible foundation for consolidation? A: It is vital to adequately explore what integrating the alliance members? How A: China is an obvious area for expansion. alliance will suit their company’s objectives by important is it for partnering airlines to use There may be other opportunities else- analyzing the real substance of the alliance similar information technology? where. However, any new membership and ensuring this matches their individual A: It is not necessary to achieve complete must enhance the alliance before it will be goals. Alliances do deliver significant benefits, integration of members’ IT platforms, but IT accepted. but new members need to ensure their busi- is an important part of customer service deliv- Structurally, the airline industry is nesses are prepared to commit the resources As the world’s second oldest airline, Qantas’ perspective on how alliances have lenges you face with your fellow alliance ery and continues to be a strong focus of heading toward consolidation. However, the and time that alliances need to make them Qantas is no stranger to forming strategic impacted, and will continue to affect, his air- members? How are you resolving them? the alliance. Technology has produced defini- pace has been slower than many of us would truly effective. a alliances. In fact, as far back as 1931, Qantas line and the airline industry. A: The aviation sector as a whole is facing formed its first link — with Imperial Airways, a Question: As a founder of the rapid and sustained change and there are predecessor of British Airways — when it car- oneworld alliance, what led Qantas to join many challenges for the industry. External ried mail to Darwin as part of an experimental forces with other airlines? events including Sept. 11, severe acute respi- Australia-United Kingdom service. Answer: Entry into the oneworld ratory syndrome, Iraq, threats of terrorism, In recent years, Qantas has continued alliance followed naturally from Qantas’ high fuel prices, and the continuing impact and to leverage the benefits of strategic alliances. deepening bilateral relations with fellow threat of low-cost carriers are all significant In 1998, Qantas teamed with American oneworld founding members British Airways challenges to be faced both as individual air- Airlines, British Airways and Cathay Pacific and American Airlines. lines and collectively by alliance groups. Airways to launch the oneworld alliance, To meet Qantas’ aspirations as a global Airlines must be progressive and innovative which today also includes Iberia Líneas Aéreas airline, it was important to explore the oppor- to meet and overcome these challenges. A Photo courtesy of Qantas Airways de España, LAN, Finnair, Aer Lingus and 17 tunities offered by a global alliance with strong key objective is to increase efficiency and related regional carriers. Through the alliance, partners. reduce costs. Qantas provides its customers access to more Q: How have you been able to measure Q: In what ways are you integrated with than 575 destinations around the world, more the success you’ve gained by joining the the other oneworld carriers? Do you fore- than quadrupling the 138 destinations Qantas oneworld alliance? How has the oneworld see the alliance becoming more integrated offers alone. alliance strengthened Qantas? in the future? Qantas, recently named the best airline A: The oneworld alliance has become estab- A: Of all the alliance groups, oneworld has in the Asia/Pacific region at the 2004 OAG lished as the premium global alliance, and placed a lower priority on integration, prefer- Airline of the Year Awards, has also looked to Qantas has benefited from this through both ring multilateral solutions only when they add strengthen ties with its trans-Tasman counter- bilateral and multilateral partnership arrange- value and placing greater emphasis on bilater- part, Air New Zealand. ments under the oneworld umbrella. al and inter-carrier relationships. Geoff Dixon, who was named chief Q: Where do you believe your airline A key factor in the success of oneworld executive officer of Qantas in March 2001, would be today if it had not joined is the maintenance of members’ individual has been at the airline since 1994 and in his oneworld entities. The alliance remains a grouping of tenure has had responsibility for all commer- A: Clearly, Qantas would have looked at other eight successful airlines focused on growing cial activities, including worldwide sales and alliance opportunities. But we are very happy their own networks and meeting their cus- marketing, network development, revenue with the decision we made. The oneworld tomers’ requirements successfully. management, fleet planning, cabin crew, alliance has been good for Qantas and so, I Q: How difficult was it to form an alliance customer service, product development and might add, has Qantas for oneworld. involving carriers from different countries airline alliances. He recently discussed Q: What are some of the greatest chal- facing different government regulations

38 ascend industry industry

Commissioner for Transport and Energy and that governments and other regulatory author- want to associate with IATA or any of its mem- the Commissioner for Competition at the ities should treat air travel like any other mode ber airlines. In fact, forming ELFAA can be European Commission. of mass transportation — such as buses, fer- seen, in part, as a response to IATA — a way The Next IATA? ries or trains. ELFAA sites the recently pro- for low-fare airlines to legitimize their exis- Influence Airport and posed passenger compensation legislation, tence with regulatory authorities as well as Aircraft Manufacturers which applies only to air transportation, and reinforce the idea that the low-fare airlines rep- In recent times, Ryanair has stated that its the fact that governments subsidize a smaller resent the future of the industry and should The European Low Fares Airline Association, launched in January to future aircraft might not have window blinds percentage of security costs for air transporta- have a bigger role in shaping the legislation represent the specific views and interests of its constituent airlines, may or seats back pockets and that its seats might tion than for other modes of mass transport as and mandates that govern the industry. evolve along with its members to become increasingly influential within not recline. It has also suggested that passen- two key examples of modal discrimination. And therein lies the irony. If the low-fare gers might not be allowed to check in luggage. ELFAA argues that these and other discrimina- business model is the way of the future, will the airline industry. While some of these statements by Ryanair tory practices put aviation at a competitive dis- all European airlines in five to 10 years be part are made to highlight its low-fare image, oth- advantage compared to other modes of trans- of ELFAA? And over time, will the “E” in ers are quite real and could be leading indica- portation. ELFAA be dropped as the association extends By Vinay Dube | Ascend Contributor tors of aircraft to come. Although ELFAA has Certainly, a number of these issues around the world? Is this the next IATA? For not stated this explicitly in its charter, it could are not unique to low-fare airlines. The those who think that notion is absurd, it should ow-cost carriers, or low-fare airlines, are denied boardings, long delays and cancella- larger catchment area. Regional airports all also work collectively to influence the future International Air Transport Association has be noted that the forerunner of IATA, the L the fastest growing segment of the airline tions. The E.U. Regulation on Air Passenger over the world have, for some time, provided design of aircraft and airports to better suit the filed similar complaints with the European gov- International Air Traffic Association, was industry. According to some projections, such Compensation requires airlines to pay a fixed incentives to attract airlines in a fairly unbiased low-fare operating model. erning bodies; however, ELFAA argues each founded in The Hague in 1919 as a solely airlines will carry up to 50 percent of all air traf- amount to passengers — the cost of hotel manner — they are willing to offer incentives ELFAA may also work to influence air- aspect of a case with a particular focus on low- European venture. (Pan American was the first fic by 2010. Despite their robust business accommodations, meals, drinks, taxis, phone to not just low-fare airlines but to any airline ports. Singapore recently announced that it fare airlines. Some issues such as the passen- non-European airline to join the association model and extreme popularity with con- calls, etc. — for cancellations, denied board- willing to serve the airport with a direct ser- would build a separate low-fare airline terminal ger compensation legislation, the harmoniza- in 1939.) sumers, low-fare airlines have long believed ings and long delays, even when the event is vice. Airports offer such incentives based on to support the growing popularity of the seg- tion of pilot hours and the subsidies provided No matter what the future may hold, it that government and air transport industry pol- out of the airline’s control. ELFAA supports the idea that non-stop service is extremely ment in the Asia/Pacific region. While by publicly owned airports have an exaggerat- is likely that the 11 members of ELFAA will icy makers have not acknowledged the central legislation that benefits passengers but says instrumental in the economic development of Singapore is the first to announce this publicly, ed effect on low-cost carriers. For example, soon be joined by several more and that as the role they have played in the growth of air trav- the magnitude of the required compensation the demographical area they serve. Incentives a number of European airports are seriously the fixed sum of money payable to passen- low-fare model proliferates to other regions of el demand during the last five to 10 years. In is disproportionate to the face value of the attract airlines, therefore speeding up this eco- contemplating a similar move. gers in the case of cancellations is significant- the world, ELFAA might evolve into a more fact, low-fare airlines in Europe believe that tickets and further complains about being held nomic development. ELFAA argues that the ly higher for low-fare airlines as a percentage international organization. a recently proposed legislation is overly punitive accountable for disruptions beyond airlines’ E.U. ruling is bad for the consumer and will Treatment of Air Travel of fare than it might be for other types of to their business model and will be detrimen- control, such as weather or air traffic control eventually cause a sharp increase in fares to Low-cost carriers are responsible for a mas- carriers. In some cases, this might even be tal to the development of a strong and com- delays. Earlier this year, ELFAA filed a case and from such airports. sive shift in the way people view air travel. No several times more than the fare paid by the petitive European aviation industry. Initially, with the London High Court challenging this more is it only for those who can afford to pay passenger. European discount carriers tried to individually regulation because it did not have the standing Harmonizing Pilot Hours more to get somewhere faster; it is simply a A natural question arising from such influence policy makers with little success, to refer the case directly to the European Earlier this year, an E.U. civil aviation proposal way of getting from point A to point B — a issues is why don’t low-fare airlines band Vinay Dube is vice president of the Europe, and they finally decided to band together to Court of Justice. In July, the London High called for, among other things, the harmoniza- mode of transportation that everyone can rea- together with IATA to tackle some of these Middle East and Africa region for Sabre jointly command more clout and visibility. Court referred the case to the ECJ, which has tion of pilot hours. The proposal limited flight sonably expect to take several times during issues jointly? And, to a certain extent they do. Airline Solutions. He can be contacted at In January, 10 European low-fare not yet issued a ruling. time and detailed requirements for rest and their lives. The ELFAA, therefore, contends But to a large degree, low-fare airlines do not [email protected]. airlines formed the European Low Fares other safety and technical issues. ELFAA sup- Airline Association to represent the specific Incentives from ports proposals that make air travel safer, but views and interests of its constituent airlines. Publicly Owned Airports it argues that these proposed changes do not Today, ELFAA has 11 member airlines from In February, the E.U. commission ruled that no increase air safety but rather severely impact nine European countries — Transavia/BasiqAir publicly owned airport could provide incen- operational efficiency. It has asked the regula- THE HIGH LEVEL (Netherlands), Air Berlin (Germany), Sverigeflyg tives to attract traffic from other airports in the tory authorities to set standards that promote (Sweden), Volareweb (Italy), Flybe (United safety and security but yet provide enough News Briefs from Around the Globe Kingdom), SkyEurope (Slovakia), Sterling flexibility to support multiple business and vıew (Denmark), Ryanair (Ireland), Hapag-Lloyd operational models. Express (Germany) and WIZZ Air (Hungary) — Who growth of flight availability requests. The bargain-minded online shoppers, carrying approximately 49 million passengers, State Aid and or roughly 15 percent of all intra-European traffic. Benefits for Flag Carriers Sabre Airline Solutions ability to evaluate reservations requests which is driving down yields and While the organization is still in its infancy, ELFAA is concerned that the national airlines What in real time and maximize total revenue increasing processing costs,” said it already has a clear set of policies and inter- of Europe will receive state aid in a manner Launched SabreSonic ™ Inventory, of the entire flight network through the Gianni Marostica, president of Airline ests that it lobbies for passionately. that is inconsistent with the legislation responsible for the liberalization of the an advanced inventory management Inventory component is considered a Passenger Solutions for Sabre Airline Passenger European aviation sector. ELFAA is particularly solution that leverages open-systems breakthrough in revenue management. Solutions. “We developed the Compensation Legislation concerned with the flag carriers of the new technology to ensure revenue integrity Inventory component to address The European Union has passed legislation, E.U. member states but does not discount Why which takes effect in February, that would this practice in non-European countries as through real-time application of inventory the challenges airlines face from force all airlines to compensate passengers for well. It has raised this issue with both the controls while addressing the dramatic “Airlines are faced with increasingly the impact of these trends.” a

40 ascend industry

Declaring Independence? Photo courtesy of Independence Air

Facing reductions in its fee-for-departure contract with United Airlines, Atlantic Coast Airlines decided to part ways and transform itself into a separate low-cost carrier. Could the launching of Independence Air be the “shot heard ‘round the industry” indicating a changed relationship between network carriers and their regional affiliates?

By B. Scott Hunt and Stephani Hawkins | Ascend Editors in Chief

tlantic Coast Airlines didn’t intend to become the focus of attention in the A Who’s Hub is it Anyway? regional airline industry. Currently serving 40 cities, Independence Air plans to expand its network to 50 destinations with 350 flights a day, making Washington Total overall % of hub departures % of hub seats Until two years ago, the carrier was con- hub carrier branded operated by operated by Dulles International Airport the largest low-fare hub in the United States in terms of total departures. tent to continue providing regional feeder traf- Major carrier Hub departures per day regional partner(s) regional partner(s) Continental CLE 216 79% 54% fic for its long-time partner, United Airlines. Delta DFW 258 79% 55% But in December 2002, United filed for United IAD 264 77% 53% signing up at a lower profit margin only to go International Airport, where it fed traffic into forefront of a dramatic industry change if it bankruptcy and sought to restructure its con- Delta CVG 573 73% 47% back into bankruptcy with them a year or two United’s hub. Independence Air is now basing achieves its goals. US Airways PIT 350 71% 40% tracts with regional partners. Under its fee-for- down the road.” its core operation at Dulles. ACA also had out- “If Independence is successful and Delta SLC 315 70% 39% departure agreement, common in the United Northwest MEM 213 60% 39% standing cash reserves, a savvy and experi- builds up a market presence and shows prof- States, ACA was guaranteed a set income for US Airways PHL 350 52% 26% Watching Closely enced executive team, and in-house expertise itability — which is a big ‘if’ — then other Continental IAH 482 51% 25% each flight regardless of the number of pas- Whether or not Independence Air will gener- in marketing and planning. regional carriers would probably be more Continental EWR 310 50% 26% sengers on board. When United proposed US Airways CLT 443 50% 25% ate a wave of imitators is subject to debate. “We have some extremely unique enthusiastic about embracing that model,” revising the agreement to significantly reduce “I don’t see a trend coming out of it,” resources in place here that have allowed us Batt said. “But if it is not, if it is unsuccessful Source: OAG June 2004 flight schedules. compensation, ACA officials said their hand said Shane Batt, also a partner with Sabre to do what we want to do,” Pollack said. “I’m and goes to the wall, then what choice do was forced. The top five major U.S. airlines operate 11 hubs. Of those, regional partners fly half Airline Solutions Consulting. “There are only a not sure many other regionals could realistical- regional carriers have?” “We would still be a fee-for-departure or more of the daily departures and operate 25 percent to 54 percent of the hub seats handful of carriers that are large enough that ly try what we’re trying. But I think there’s a lot Debby McElroy, president of the carrier had United chosen to honor our con- at those airports. can duplicate that behavior.” of interest, and I think people will learn a lot Regional Airline Association, an organization tract, and we would still be (flying for United) ACA was unique in that it held the rights from what we’re doing.” representing 51 regional airlines that combine for the next six or seven years,” said Jeff to all of its gates at Washington Dulles Still, Independence could be on the for 97 percent of the regional airline traffic in Pollack, senior director of market planning for rebranded airline officially took to the skies as argued, ‘Let’s go and see if we can move some Independence Air. “We negotiated with them Independence Air, flying its fleet of 50-seat of our capacity to other fee-per-departure pro- for many months, probably eight or nine, CRJs to 22 initial destinations. grams.’ But, frankly, there was a pretty well- understanding that our partner was in pain and The decision, however, did not come supplied pipeline of other regionals offering to THE HIGH LEVEL we were going to have to assume some of without a bit of separation anxiety. do that for other carriers. Ultimately, they that pain as well and be good partners. We “Without a doubt, it was not a snap deci- decided that maybe there was an opportunity News Briefs from Around the Globe were willing to do that. But as the level of that sion,” Pollack said. “But all things considered, to become the next big success story.” vıew pain and the level of what United expected to we’re pretty pleased with where we are. We Although it may have been a logical get out of the deal became more obvious, we think we’ve built a really strong customer base, move, breaking away and launching a stand- Who Why goals. Our primary goal was to find had to just weigh that against what other and we’re beginning to develop our brand.” alone airline is a decision that is being watched opportunities we had. Steve Hendrickson, a partner with throughout the industry. ATA Airlines “We wanted a complete resource a partner that had the experience “At some point, the scales tipped, and Sabre Airline Solutions Consulting, said leaving “The jury’s out, and everybody is wait- management system that could help and ability to tailor a product for our we said what United is offering just does not the security of guaranteed, though reduced, ing to see how they’ll do,” Hendrickson said. What us plan and manage employee needs, yet still meet our absolute provide the same risk/return value that inde- revenue for the uncertainty of a stand-alone, “You sort of have the servant rising up against ® ™ pendence does,” he said. “The unique risk low-cost airline made sense. the master. Selected the Sabre Streamline resources,” said Doug Yakola, vice requirement to do so in the most cost- inherent in partnering with a company in bank- “ACA took a good hard look in the mir- “It has some risk, but what doesn’t?” Resource Management Suite to president of station operations for ATA. efficient way possible. After an inten- ruptcy outweighed the security of a fee-for- ror and said, ‘This is just going to hammer our he asked. “The other alternatives have risk as increase its operational efficiency by “The solution had to be flexible and sive evaluation, the Streamline suite departure model.” valuation. We’re not serving our shareholders. well without much upside. That’s a more pru- So in June 2003, Atlantic Coast, literally, Is there a better way to go about this?’” dent bet for the company to make than signing optimally planning and allocating adaptable not only to address our cur- was proven to offer the solution that declared its “Independence.” A year later, the Hendrickson said. “Certainly, one could have up for another round with United. You could be employee resources. rent needs, but also our future business best fit our needs.” a

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the United States, also said members of her “Independence is not only competing in flux, the definition of a regional carrier “is For years, many in the industry have that has been playing itself over and over again here. You are making higher earnings while we organization are taking a wait-and-see with the regional carriers, but they are com- probably in today’s world a carrier that oper- debated whether it is better for majors to own since deregulation. You have a small partner are losing money’ Then they say, ‘Let’s rene- approach before possibly following in peting with some of the limited-service carri- ates airplanes at or below 70 seats,” their regional partners. In recent years, some that is a capacity provider. It gets to a certain gotiate the agreement.’” Independence Air’s footsteps. ers, like AirTran, and with some of the Hendrickson said. major airlines have considered selling all or level and the amount that the mainline carrier The issue of disagreement between major carriers like US As regional airlines have outgrown part of their regional subsidiaries in order to is paying to the regional operator grows high majors and their regional partners also stands Airways and Delta,” those old definitions, they have also changed generate much-needed cash. Hendrickson enough that something has to occur. to become more pronounced given the Independence is not only she said. “I think the relationship with their larger airline part- said ownership is unnecessary — as long as “The difference is, in the past, what changes many major carriers are making to many people in the ners, he said. the agreements are structured in such a way normally happened was that the mainline car- become more cost efficient. “competing with the regional industry are watching as to prevent an Independence-type move. rier, in order to increase its assets, would pur- As carriers de-peak their hub opera- carriers, but they are com- Independence Air.” A Revised Relationship? “You don’t want to spin them off and chase the smaller carriers,” he said. “But now tions, for example, they will conduct more

Photo courtesy of RAA Photo courtesy peting with some of the Regardless of how Independence fares, it will wind up losing the value of the feed,” he said. they don’t have the money to purchase the point-to-point flying, squeezing out regional A Changing likely affect the relationship between major “With a well-structured, protective agree- smaller carriers. They have to increase their carriers from these markets. The increased limited-service carriers, like Industry carriers and their regional partners. ment, you can still, as the marketing carrier, profitability by lowering their costs. So, they point-to-point service resulting from a de- AirTran, and with some of The transformation Hendrickson said future agreements enjoy the benefits of a codesharing relation- are going to ask their regional partners to peaked hub also has major carriers looking to the major carriers like US of ACA to Indepen- between major airlines and their regional part- ship with regional operators, and you don’t lower their margins.” fly the smaller aircraft that will be only slightly dence Air is one ners might be structured so that the major air- have to own them to get that.” And as the network carrier struggles larger than regional jets. Airways and Delta. ” aspect of a regional line controls not only the marketing of its McElroy agreed there is “a mixture of financially and faces competition on its major “You will see a divestiture in the main- — Debby McElroy, airline industry that regional partner but also some of its key opinion in the industry” on regional ownership. routes, it turns to its regional partners for addi- line carriers of capacity,” Batt said. “They will President is undergoing signifi- resources. He pointed to the example of “Some carriers believe it is not neces- tional relief. get rid of their bigger units and fly less hub to cant change. Even Northwest, which controls the gates and air- sary to own their regional partner and have “ACA was continuing to prosper and hub. As they do that and bring in 100- to 120- Regional Airline Association what constitutes a craft of its regional partners such as Mesaba spun them off,” she said. “There are others grow, and its cost structure was a lot lower,” seat jets to operate those routes, the regional “regional carrier” is Airlines. that have stated in the past that for now, they Batt said. “United wanted to renegotiate the operators will have fewer routes.” under revision. “For Mesaba to break away from are going to keep their regionals.” fees because it was losing money while ACA Meanwhile, regional carriers are looking “Independence Air is being closely “Our old definitions of what a regional Northwest is almost impossible because it In fact, Batt said, the issue regarding was making a bundle off of the relationship to fly larger aircraft, increasing the number of monitored by all the regional carriers, so its carrier are have kind of been reshaped,” would lose its gates and its airplanes,” ownership of regional partners has been because it was insulated from revenue and markets in which they can compete with major success could change the viewpoint of many Hendrickson said. “Regional carriers have Hendrickson said. “Not that it couldn’t try to around for years, and actually lies at the heart demand fluctuations.” carriers. Independence Air, for example, has carriers, and they may seriously consider an grown out of their traditional mold. You used go out and get more gates and more airplanes, of the Independence issue. The issue is not limited to United and added Airbus 319s to its fleet, and regional independent operation, but I am not aware to be able to point to a carrier that had pro- but it makes it much harder to revolt. ACA, he said. carrier Chautauqua Airlines recently began now that there are large numbers of regional pellers on its airplanes and say, ‘That’s a “United allowed ACA to control two Underlying Causes “More of these (regional) carriers are adding 50 Embraer 170 aircraft, which seat 70 to carriers that are considering doing the same regional airline.’ You used to be able to say vital elements, which were gates at the hub “The perception is that Independence is growing to such a level that they are a major 78, to add additional capacity for United. thing,” she said. they’re not going to fly anything more than and aircraft,” he said. “All it had to do was add something that is brand new,” Batt said. “It is expense for the mainline carriers,” Batt said. Previously, the airline flew Embraer 135, 140 Regional carriers aren’t the only specta- 350 miles, maybe 500 at the utmost.” a marketing infrastructure and stir — not to not. This phenomenon has been happening for “And as they become a larger expense, they and 145 aircraft with between 37 and 50 seats. tors closely watching the developments with Today, regional carriers fly jet aircraft belittle what it’s gone through because it did a while. The mechanism that triggered the are generating more earnings. Then the main- One issue currently slowing this compe- Independence Air, she said. on longer and longer routes. Although still have to recommercialize the airline.” Independence Air situation is a mechanism line carriers are saying, ‘Hold on a second tition concerns the scope clauses in many

THE HIGH LEVEL THE HIGH LEVEL vıew News Briefs from Around the Globe vıew News Briefs from Around the Globe

Who Why flexibility we need to quickly adapt to Who Why the most experienced vendor in the Air One “Our growth goals are aggressive, growth and new business models in Air Tahiti Nui “We are entering an exciting phase at market and turned to the expertise of What and we need an aggressive technology the future. This technology integrates What Air Tahiti Nui with the future expansion Sabre Airline Solutions after an Entered a multi-year agreement to utilize partner,” said Air One Chief Executive with its decision-support software to Signed a five-year contract for of our flight services to New York and exhaustive six-month evaluation. We the SabreSonic ™ Passenger Solutions to Officer Lino Bergonzi. “Our business keep a keen focus on operational the SabreSonic ™ Passenger Sydney and the move to adopt e-tick- are 100 percent confident in the services boost its reservations, check-in and Web strategy is based on offering convenient excellence while driving out costs and Solutions to help manage its eting standards across our network,” and capabilities of the SabreSonic ™ capabilities. As part of the agreement, and efficient service, and the agree- improving our revenues, all in a rapid- end-to-end reservations and said Nelson Levy, chief operating offi- solutions, and we are looking forward Air One has access to an integrated ment with Sabre Airline Solutions is a growth environment. During the departure control operations, cer for Air Tahiti Nui. “In line with this to leveraging the new capabilities of package of performance-enhancing key element of our strategy. The course of our evaluation, there was as well as manage the airline’s operational expansion, we required the passenger management suite and and decision-support tools as well as SabreSonic solutions have the tech- no other company that could provide new electronic ticketing the information technology support, the added e-ticketing capability to the Sabre ® global distribution system. nology we need now and provide the the power of this combination.” a capabilities. functionality and commitment from support our expanded operations.” a

industry industry

union contracts that dictate the size of aircraft was somewhat self-serving and not always place a different model that would basically “If you pay enough of a premium, peo- a number of different partners. see if the carrier successfully transforms itself that can be flown by majors and its regional for the betterment of the overall combined say that you are now risk free.” ple are willing to give up control of their own “Many of them are looking to diversify from a regional feeder to a stand-alone airline. partners. network,” Hendrickson said. “In those “We’ll refocus your company to do vir- destiny,” he said. “But when that premium and grow their business,” she said. “They rec- And according to the early results, Because regional airlines have a lower days, (regional airlines) kept all the revenue tually nothing of a commercial nature and vir- goes away, all of a sudden people want to ognize that they have to continue to expand as Pollack said, it’s so far, so good. cost of operation, they can better fill the 90- to from a local passenger. Often, even relatively tually everything of an operational nature,” he understand and be in control of their destiny.” a way to increase revenue and enhance share- Within a month after its launch of inde- 110-seat niche, McElroy said, and therefore, high-fare connection passengers did not said. “This will get your cost levels down. We Pollack said he believes the fee-for- holder value and to continue to provide opportu- pendent operations, Independence Air her organization would like to see scope claus- produce enough revenue, after subtracting will give you a schedule and tell you when and departure model “has got some fundamental nities for growth for their employees. Carriers increased the number of departures and num- es removed so regional airlines can help their the majors’ prorated share of the ticket value, where to fly. We’ll price your inventory. We’ll flaws to it.” have been aggressive in seeking new partners ber of passengers carried. It continues to add partners “match the right size airplane to the to overcome the alternative value the regional do the inventory management. And for letting “For an airline getting paid the fee, it’s a and expanding their business with existing part- capacity, with the Airbus 319s coming on line right market.” could get from even a discounted local us do all this and for accepting this new busi- great place to be,” he said. “From the other ners. It’s a logical business strategy.” in November. And it also continues to add des- Scope clauses, she said, are “an anachro- passenger. ness model, we will pay you the cost of the side, it’s hard to (encourage) that carrier, who tinations and routes, with plans to grow its nistic, artificial restriction on the market.” “This is the force behind the majors departure, plus a modest, but guaranteed, you are basically paying a ‘cost-plus’ deal to Around the World hub and make Dulles the largest low-fare hub wanting to reinvent the relationships with the margin on top of that.” maintain their cost structure. It’s really not a The changes for regional carriers are more pro- in America, eventually serving 50 destinations Fee-For-Departure regionals,” he said. “Basically, they were say- partnership anymore when you start talking nounced in North America, where the fee-for- with 350 flights a day. As the changing industry impacts the relation- ing, ‘These guys, because they control their The Changing Business Model about a fee-for-departure deal. All the respon- departure relationship predominates. In much “The competitive environment is one ship between majors and regionals, it could inventory, pricing and scheduling, they have Given the struggles of the major network car- sibility goes on the major, and that’s really of the rest of the world, most of the majors that I think everybody is struggling with right also affect the fee-for-departure arrangements shown a tendency to do their own revenue riers, the fee-for-departure model is undergo- what they said they wanted, but it’s an expen- continue to take an equity stake in their region- now,” Pollack said. “But the results in many common in North America. The fee-for-depar- optimization by showing preference toward ing changes, McElroy said. sive way to do business.” al partners in order to directly influence their aspects have just been wonderful.” ture agreements evolved as major carriers the carriage of local passengers and to avoid “We have seen those relationships Batt said he also expects the fee-for-depar- operation. If the airline continues to grow and sought to exert more influence over their all but the richest of the connecting passen- evolve in a number of ways,” she said. ture model to continue with some modifications. “They (major carriers) set the schedule. expand, it might find itself leading a charge of regional partners. gers. That’s contrary to what we’re trying to “Obviously, they (regional carriers) have been “Most likely, the fee-for-departure They set the prices. They handle the sales and independent regional airlines. In the days of regulation, major carriers accomplish as a major network carrier. asked to accept lower compensation. They model will remain, although (major carriers) distribution. And the regional carrier provides “Should we have the success we and their much smaller regional partners main- “‘If we just opened the inventory a little have been asked to accept longer periods for will want the regional carriers to accept less lift,” Batt said. “They are simply a capacity believe we’re going to have here, it’s tained a “more or less symbiotic relationship,” bit more for connections, we would see a adjustment. In some cases, the contracts reward because they have less risk,” he said. provider, and they receive the prorated rev- inevitable that other people will try to follow,” Hendrickson said, with joint fare agreements tremendous amount of revenue and traffic on used to be adjusted every quarter, every six The major carriers will also likely enue from the passengers on their planes. Pollack said. “Whether others can successfully and joint bag agreements on a bilateral basis our network,’” he said. months or every year; now, they are longer. attempt to decrease the costs associated with “It is, ‘We are to going to purchase a follow remains to be seen. There aren’t a as well as a “really crude form of sharing traf- To encourage regional airlines to carry There is less of a variable that allows for feeder service by increasing competition for portion of you and have a marketing relation- whole lot of successful airline business plans fic and revenues.” connecting traffic, the major carriers began to increases in costs whether they are airport or regional flying. ship, but we are going to also take a couple of out there, so the ones that are successful tend Over the years, airlines developed more pay the regional partners a set fee that cov- field related. It is absolutely correct to say that “If I am a major airline and I have some seats on your board of directors and have a to get emulated often, though not necessarily formal codeshare arrangements of linking with ered expenses and provided a profit margin in the regional carriers have been asked, like all new flying, I am going to have a bid process symbiotic relationship,” he continued. “We accurately.” a regional carriers, and the partners developed a exchange for taking over scheduling and pricing. other partners to the major, to sharpen their and say, ‘OK, everybody, give me your best tell you what to do because we are bigger, form of revenue proration to settle accounts. In the fee-for-departure model, pencils, to be more efficient and to provide offers to do this flying,’” McElroy said. “If I wiser, and we own a portion of you.” Such agreements, however, failed to provide Hendrickson said, the major carriers took the lower costs.” have multiple partners, I have more opportuni- the network carriers with the regional traffic position that “rather than sharing risks and And that might lead to more regional ty to get the best cost.” Looking to the Future B. Scott Hunt and Stephani Hawkins can they needed for their hubs. rewards in the marketplace with our regional revolt, Pollack said, and more carriers looking In the same way, some regional carriers With the industry’s eyes trained on be reached at [email protected] and “The way in which regionals behaved partners, let’s throw that model out and put in to follow Independence Air’s lead. are looking to expand by providing service for Independence Air, many will be interested to [email protected].

THE HIGH LEVEL THE HIGH LEVEL vıew News Briefs from Around the Globe vıew News Briefs from Around the Globe Who need for separate bilateral agreements, process, but do not want to have Who The airline will also use the Sabre ® information systems for Ethiopian

™ Philippine Airlines saving US$2 to US$6 per ticket. to build and host a separate system Ethiopian Airlines AirFlite Profit Manager to effectively Airlines. “We chose to work with to do so, nor desire to change our manage its earnings. Sabre Airline Solutions because its What Why current reservations system. The What industry-proven flight scheduling Selected SabreSonic ™ Ticket as a “The Ticket component provides the component approach of SabreSonic Signed a three-year agreement to Why product can do just that. Moreover, stand-alone component, taking advan- perfect solution for us,” said Kevin Ticket provides the flexibility to do utilize the Sabre ® AirFlite™ Schedule “As a critical link from Africa to the it is our firm belief that further tage of its flexibility to move quickly to Hartigan-Go, vice president of exactly what we want when we want Manager to help develop a more rest of the world, it is vital that we implementation of Profit Manager complete e-ticketing capabilities. The information systems for Philippine to move to a paperless environment efficient schedule while improving the can offer our customers as flexible will give us a solid return on invest- interline hub offering provides con- Airlines. “We want to achieve the cost while adding another positive utilization of aircraft and providing a schedule as possible,” said Henock ment by keeping a close check on nectivity between carriers without the savings of moving to a paperless customer service element as well.” a customers with more flight options. Woubishet, director of marketing our profitability.” a profile profile

inventory control and distribution. In connec- tion with the IT push, in 1997 Aeroflot imple- mented systems from Sabre Airline Solutions The Russian Steps to automate and streamline its operations. Aeroflot’s 11 In 2001, to continue updating its IT, Aeroflot selected Sabre Airline Solutions as its As part of its new information technology program, Aeroflot primary technology partner, gaining access to has selected a bundle of 11 decision-support tools in key a wide range of leading technology that would The new 21st century Aeroflot, by leveraging operational areas such as planning and scheduling, fares advanced technology, is emerging as a dynamic not only bring the carrier’s operations up to speed, but also lay the foundation for future management, crew management, dining and cabin ser- and progressive national flag carrier, reflecting growth and expansion. Airline officials the major changes taking place in Russia today. believed choosing a single, primary technology vices, and reservations. partner would provide functional, integration, commercial and contractual benefits that The solutions Aeroflot has selected include: would help it update its systems to accommo- ™ By Jeremy Sykes | Ascend Contributor date the growth in the Russian marketplace. SabreSonic Passenger Solutions, In selecting a primary technology part- Sabre ® AirMax ® Revenue Manager, or most of its 80-year history, Aeroflot ority. About a decade ago, with the move ner, Aeroflot officials said they chose Sabre Sabre ® AirMax ® Group Manager, Russian Airlines didn’t have to worry away from communism, the country began Airline Solutions “because of its insight and Sabre ® AirFlite ™ Profit Manager, about keeping up with the trends moving quickly to catch up and now has one of successful track record of working with global F Sabre ® AirFlite ™ Fleet Manager, impacting the world’s aviation industry. the fastest-growing IT industries in the world. and regional airlines.” Sabre ® AirFlite ™ SlotManager ™, As the state-run flag carrier for the Much like its home country, Aeroflot has also “The breadth of the offering from Sabre ® ™ Soviet Union, Aeroflot, launched in 1923, made IT development a priority. As the airline Airline Solutions provides an integrated solu- Sabre PC AirFlite flight scheduling system, merely was tasked with providing affordable entered the fast-changing international mar- tion across all of our operations. In fact, we Sabre ® AirPrice ™ fares management system, Photos courtesy of Aeroflot Photos courtesy transportation across the vast expanse of the ketplace, Aeroflot officials realized that they believe the technology solution it has pack- Sabre ® AirPrice ™ Contract Composer, Soviet Union, a country of 865 million square needed to change quickly to keep pace with aged for Aeroflot offers benefits that are Sabre ® WiseVision ™ sales expansion system, miles, linking the nation’s major cities as well their technologically advanced competitors. unmatched in the industry,” said Sergey Sabre ®ProVision sm MIDT processing service. as serving remote areas previously connected Kiryushin, Aeroflot’s chief information officer. only by rail. “This smart technology means improvements But the fall of communism, and the Aeroflot was determined to get introduction of market forces, dramatically “the most advanced and effective changed Russia and its most well-known air- line, forcing the carrier to adjust in order to sur- technologies in the industry. THE HIGH LEVEL vive and compete on the international stage. It is for this reason we chose Now, as Russia continues to experience dra- News Briefs from Around the Globe the Sabre Airline Solutions matic economic growth, travel in the country vıew is soaring, and Aeroflot is working hard to technology package. keep pace. ” Who complex operations,” said Jim Tabor, operations in our ability to keep The Russian economy has been grow- general manager of operations perfor- everyone on plan.” ing at a rate of 4 percent to 8 percent in recent AirTran and jetBlue years, inflation has slowed, and travel is In 1997, Valery Okulov assumed the post What mance for AirTran. “FliteTrac Web JetBlue — “The two products will reflecting the surge. Russian airline travel is of chief executive officer of the airline and replaced every functional area of the benefit jetBlue by streamlining Updated their system operations expected to continue to grow both regionally moved quickly to incorporate modern business old system and brought new functions internal communications and and internationally. The growth of Russian air approaches, including adding technology. The control centers with new browser- travel during the next six years is forecasted to new CEO brought in external expertise to add a into the field station’s toolkit. Our field reducing reliance on telephone based modules for its operations increase 60 percent to 100 percent. Some new dimension to his management team, stations can now link via the Web to and teletype communications,” control and crew tracking systems. The experts predict that the number of passengers recruiting executives from the highly dynamic get estimated arrival and departure said Tom Rinow, director of system boarded in Russia will grow from 28 million Russian banking industry and bringing in indus- modules, part of the Sabre ® FliteTrac ™ last year to 100 million by 2015. try expertise from foreign airlines. times, station profile information, and operations for jetBlue. “As jetBlue and the Sabre ® CrewTrac ® systems, Airline officials realized that maintaining The new executive team focused on integrated log entries. continues to grow and expand can provide remote access to these Aeroflot’s position as the leading Russian air- improving the basics — the network and air- “FliteTrac Web meets our needs its route structure, station-specific line would take a drastic overhaul of its opera- line fleet were rationalized and service was applications using Sabre ® FliteTrac ™ tions, particularly its information technology. emphasized. External consultants assisted very well,” Tabor continued. “The communication will become even Web and Sabre ® CrewTrac ® Web. From top: Valery Okulov, Aeroflot chief For 70 years, as the state-run airline of a with strategy development. instantaneous ‘link and sync’ keeps more important. FliteTrac Web executive officer; Evgueni Bachurin, communist nation, Aeroflot, unlike many other As part of Okulov’s strategy, Aeroflot Why our field stations and customers will provide the kind of detailed Aeroflot commercial director; and Sergey free-market airlines, neglected to focus on also began using IT to help move to the next ™ Kiryushin, Aeroflot chief information officer. development of IT. Throughout the Soviet level of efficiency, embracing practices such AirTran — “FliteTrac Web exhibits better informed. We have seen major information that targets and is Union, business IT development was not a pri- as revenue management, fares management, the capabilities needed to manage our improvement during irregular tailored to each specific city.” a

48 ascend profile profile

Partnering with a single IT provider gives Aeroflot access to a broad portfolio of advanced decision-support tools Good Neighbors designed to meet its current and future objectives.

Photos courtesy of Aeroflot Regional associations enable member airlines to collaborate by sharing expertise, interacting with each other and leveraging purchasing power.

By Badal Vyas | Ascend Contributor

lobal alliances and individual partnerships fulfill its mission “to promote cooperation cialized airline forums. The Industry to our operations and that means better we chose the Sabre Airline Solutions technol- ble traffic in the next five years. Gare not the only kinds of relationships amongst Arab airlines and to serve their com- Partnership Program enables these companies results to our bottom line and improved ser- ogy package. Its solutions are the only ones The airline is poised to take another that benefit airlines. mon interests through service excellence.” to build relationships with AACO members. vice to our customers.” that will provide both flexibility for our clients’ large step by joining the SkyTeam alliance in Around the world, regional airline orga- The organization, formed within the AACO’s leading role among the Arab air- Through its IT partnership, Aeroflot selling, booking and ticketing air travel, as well November 2005, positioning it to resume its nizations have developed to not only promote framework of the Arab League of States, now lines provides fertile ground for future in-depth selected advanced tools for its market data as maximizing productivity for agents. In addi- place among the world’s pre-eminent airlines. regional cooperation but also to assist mem- includes 20 airlines. Photo courtesy of AACO and analysis, fares management, flight opera- tion, the new technology will provide many With SkyTeam’s various operational and IT bers with their operations, share ideas about The organization’s tions, planning and scheduling, and revenue new features both for Aeroflot and for travel requirements, Aeroflot continues to rely on its how to cope with a changing industry environ- main objectives The AACO airlines have management. Earlier this year, Aeroflot agents as well as for our passengers.” chosen IT partner, placing its primary systems ment, and provide education and training for include: “realized the need to take expanded the agreement again, adding com- Although the airline’s move to incorpo- in the hands of Sabre Airline Solutions, which members. Promoting the ponents from the SabreSonic ™ Passenger rate advanced IT represented a culture will help the airline prepare to enter the global As they developed, these regional asso- highest safety action and have begun Solutions for reservations, departure control change, it proved successful, helping Aeroflot alliance. ciations also realized they could assist mem- standards, introducing new revenue- and Web shopping. The open-systems archi- improve its financial performance from annual Through innovative leadership, taking bers by helping them bargain for products and Providing a frame- growing techniques. tecture of the SabreSonic solutions provides losses of US$100 million in 1998 to profits of bold initiatives and by relying on a strong, sta- services or by acting on behalf of all members work for a better ” Aeroflot with leading functionality and the flex- US$100 million by 2002. The changes have ble technology partner, Aeroflot has taken the in order to secure better bulk rates from ven- economic environ- — Abdul Wahab Teffaha, ibility to integrate new technology. The agree- helped Aeroflot take advantage of the coun- necessary steps to shake off the shackles of dors. Today’s associations go beyond their ment for airline secretary general, AACO ment also will provide Russian travel agencies try’s continued economic stability, generating its communist past and transform itself into a original purpose by uniting to form collective operations, with full access to the Sabre ® global distribu- after tax profits of US$113 million on revenues leading, modern airline. a bargaining consortiums focused on collabora- Promoting high tion system, giving them the ability to directly of US$1.5 billion in 2003. tion and attaining cost-effective solutions from standards of con- book air travel, car rentals, cruises, tours and Last year, the airline carried 6 million vendors and suppliers. sumer-driven services, cooperation and success stories. The AACO rail travel worldwide. passengers, a far cry from its Soviet heyday of Two regional associations — the Arab Providing a high-quality and cost-effective airline consortium strives to enable Arab air- “Aeroflot was determined to get the the 1970s when it transported more than 100 Jeremy Sykes is Sabre Airline Air Carriers Organization and the African framework for human resources develop- lines to better understand and respond to their most advanced and effective technologies in million as the world’s largest airline. But Solutions’ head of sales for the Europe, Airlines Association — are leading examples of ment, national markets, allowing them to expand the industry,” said Evgueni Bachurin, commer- Aeroflot’s passenger traffic is growing steadi- Middle East and Africa region. He can be how neighboring airlines can work together to Investing in the synergy of interaction their share and services. AACO’s committees, cial director for Aeroflot. “It is for this reason ly, and the airline has aggressive plans to dou- contacted at [email protected]. benefit themselves. between members through establishment formed from subject matter experts from of joint projects. member airlines, meet regularly to share Continuously working to study and insights, examine industry trends and deter- update the needs of the airlines it represents, mine market needs. These committees invite THE HIGH LEVEL AACO is part of an emerging new breed of vendors to present their products and then partnerships. The AACO Industry Partnership evaluate the product’s features and match News Briefs from Around the Globe Program, for example, helps create a mutually them with airlines’ needs. vıew Pan-Arab Partners beneficial environment for airlines and other AACO joint projects entail more than The Arab Air Carriers Organization has been a companies. The program attracts carefully volume discounts and extend into the quality Who Why regional consortium pioneer. Since its found- selected world-leading companies and pro- of service as well as the common require- ing in 1965, the organization has worked to vides them with exclusive access to its spe- ments of AACO member airlines. All AACO bmi bmi’s process of tracking daily “We are very pleased to be changes to industry fares by implementing the AirPrice system, What maintaining all Airline Tariff which will complement other Sabre +count it up Selected the Sabre ® AirPrice ™ fares Publishing Company published Airline Solutions products currently in management system to boost fares in a common database, use,” said Adrian Parkes, commercial 230 — Length in feet of the Russian Antonov AN-124-100, the world's largest regularly operated cargo plane. The aircraft has a profitability through tactical and enabling the carrier to retrieve director for bmi. “We look forward to wingspan of 240 feet; it weighs 175,000 kilograms (385,800 pounds) when empty and can carry a total payload of 120,000 kilograms strategic analysis and management of both published and unpublished reaping the benefits of a fully (265,000 pounds). The aircraft's 24-wheel landing gear allows it to kneel down, which significantly reduces loading and unloading times. fares. The system will streamline fares by origin and destination. automated pricing solution.” a

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members participate in at least one of the Analysis suite. In addition to using the quickly and reliably using the Internet. port services to, from, within and through discounts. Because not all of AFRAA’s mem- posals from vendors based on several criteria organization’s joint projects, which group carri- ProVision service and the WiseVision system, “The (tools) have helped the AACO car- Africa and to study problems connected to bers are always interested in similar techno- such as how they fit the requirements, their ers by similar interests and needs. These joint Gulf Air also uses the Sabre ® TransVision ® traf- riers as a whole to be more proactive,” Teffaha the region’s industry, logical and operational solutions for their cost and service level agreements, and con- projects provide a framework for a better eco- fic flow analyzer to manage its routing structure. said. “Efforts are being directed towards cost- respective airlines, tract flexibility. Through this approach, AFRAA Photo courtesy of AFRAA nomic environment for member airlines. “As our airlines grow and their net- effectively achieving tactical goals, and they AFRAA negotiates on gets a consensus from the workgroups or task “The AACO airlines have realized the works expand, a clear understanding of pas- go hand in hand with the airlines’ strategy.” [AFRAA] offers forums through behalf of interested forces on the optimal product/service offer for need to take action and have begun introduc- senger flows in and between new markets carriers. The associa- the specific group of airlines. “which member airlines meet, ing new revenue-growing techniques,” said becomes important,” Teffaha said. “Sabre The African Connection tion either approach- Both AACO and AFRAA use several cri- Abdul Wahab Teffaha, secretary general of Airline Solutions has provided the AACO carri- Another regional organization, AFRAA, also develop and consolidate a common es vendors to attain teria to determine if they have selected the AACO. ers with market systems and services that provides a framework for its member airlines approach to key issues in the avia- an approximate cost most cost-effective solution for their mem- One key way AACO has helped meet its respond to the true needs of the carriers, and, to work together to share ideas to improve based on different bers, including post evaluation, feedback from tion industry. members’ strategy and revenue-generation in more than one respect, revolutionize the operations, interact with peers and also seek ” volume levels (such users and ongoing monitoring of application needs is by providing them market information way business is done within the AACO carriers. ways to jointly reduce costs. AFRAA, officially — Christian E. Folly-Kossi, as traffic volume or usage by member airlines. These organizations analysis tools. Through these tools, the mem- “The process of decision making in all founded in 1968, traces its beginnings to earli- Secretary General, AFRAA transaction volume), closely monitor the results as well as maintain ber airlines are better able to examine their aspects — such as market competition, com- er in the decade when several African coun- or it first identifies an ongoing relationship with service providers. markets for opportunities to increase share mercial conditions and network scheduling — tries gained independence and formed nation- member airlines that The strongest factor, however, is direct feed- and, therefore, earn incremental revenue. is now based on facts,” he continued. “The al airlines. The Africa-based carriers began are interested in a back from member airlines following each pro- AACO helped several of its members versatility and user-friendliness of the systems meeting informally in conjunction with the particular service and then contacts possible ject and the strong support emerging projects obtain tools from the Sabre ® Data Analysis ensures that correct decisions can now be International Air Transport Association annual vendors of that service. receive from the member airlines. a Solutions suite, which provides market data made at every level and at all locations inside general meeting. Realizing they had much in AFRAA also works with airlines to information to help AACO carriers make time- the member airlines.” common and could collectively present the establish their priorities for the next few years ly and fact-based operational and commercial The ProVision service helps AACO unique needs of the region during IATA meet- to consolidate requirements prior to approach- decisions. In October 2002, five AACO mem- member airlines interpret transactions from ings, the African carriers formed AFRAA, ing potential vendors. Member airlines are bers — Kuwait Airways, Middle East Airlines, the global distribution systems into meaningful which today includes more than 40 members grouped according to their specific needs. In Royal Jordanian Airlines, Saudi Arabian Airlines information and provides essential competitor from 31 African countries. To foster closer commercial and technical addition, AFRAA member airlines are orga- and Yemen Airlines — selected the Sabre ® information to help make timely and fact- The organization, according to Christian cooperation among African air transport nized into workgroups to discuss specific ProVision sm MIDT processing service and the based operational and commercial decisions. E. Folly-Kossi, “offers forums through which enterprises, product/project areas of interest to those air- Sabre ® WiseVision ™ sales expansion system. The WiseVision system graphically presents member airlines meet, develop and consoli- To serve as common forum to articulate the lines. AFRAA then invites specific proposals The successful usage of these tools by these market analysis results to support the sales date [a] common approach to key issues in views of member airlines on common matters from vendors on behalf of the different work- Badal Vyas is a senior product AACO members has generated interest by process and provides users the ability for [the] aviation industry.” and problems and defend such interests. groups or task forces. These proposals are management specialist for Sabre Airline other fellow member carriers. ad hoc query analysis. It also offers office AFRAA has three main objectives: Today, it represents its members, not evaluated by AFRAA before a recommenda- Solutions. More information about One of AACO’s most prominent carri- automation capabilities that can save time and To promote the development of safe, only for issues related to IATA, but also in tion is made to the member airlines. The asso- AACO and AFRAA can be found at ers, Gulf Air, also relies on the entire Data money while pursuing winning opportunities reliable, economical and efficient air trans- approaching vendors to obtain volume ciation then compares the various offers/pro- www.aaco.org and www.afraa.org.

THE HIGH LEVEL THE HIGH LEVEL vıew News Briefs from Around the Globe vıew News Briefs from Around the Globe Who valuable assets, and it is critical that to produce slot requests quickly British Airways and Qantas Airways we get the best use out of them,” said and accurately,” said Hope Who will provide Russian travel agencies Bachurin, commercial director for ® Robert Moran, slots and schedules Antzoulatos, manager of long-haul Aeroflot Russian Airlines with full access to the Sabre global Aeroflot. “It is for this reason we What coordination manager, fleet and schedule development for Qantas. distribution system, which is the first chose the Sabre Airline Solutions Successfully implemented the network planning for British Airways. “Using the SlotManager system What to provide the ability to directly book technology package. Their solutions latest release of Sabre ® AirFlite ™ “The SlotManager system provides as an integrated part of the Sabre ® Selected the SabreSonic ™ Passenger travel worldwide including airlines, are the only ones that will provide SlotManager ™, enabling their flight decision-support capabilities that will AirFlite ™ Planning and Scheduling Solutions, which includes passenger car rental agencies, cruises, tour oper- flexibility for our clients’ selling, book- schedulers and slot portfolio managers help us identify opportunities. In Suite enables us to generate slot reservations, a Web site that enables ators and rail outside of Russia. ing and ticketing airline travel as well to efficiently request and maintain addition, using the system lets us data for initial submissions and potential travelers to shop and book as maximize productivity for agents. their slot portfolios. manage our slot portfolio from a single will allow us to make changes travel on Aeroflot, and airport check- Why In addition, the new technology will centralized database, providing directly from the schedules main- in functionality as well as a number of “Aeroflot was determined to get the provide many new features both for Why multi-user access to the slot team.” tained in Sabre ® AirFlite ™ Schedule other key passenger service capabili- most advanced and effective technolo- Aeroflot and travel agents as well as British Airways — “Our slots are very Qantas Airways — “We need Manager.” a ties. The comprehensive offering also gies in the industry,” said Evgueni our passengers.” a products products

Sabre Airline Solutions to help airlines achieve Line maintenance — business benefits through the application of Offers maintenance advanced information technology to mainte- control, line station Maintaining the Lead nance,” said Matthew Tobin, vice president of planning and sched- marketing and alliances for Mxi Technologies. uling, and execution “We are honored to have the Maintenix sys- of line maintenance tem as Sabre Airline Solutions’ new M&E work, assisted Sabre Airline Solutions and Mxi Technologies have formed an alliance to offering, and we are excited about Sabre throughout by real- offer the aviation industry an integrated, fully supported maintenance and Airline Solutions’ unique ability to offer the time diagnostics and system through a hosted ASP option.” prognostics and line engineering solution. Sabre Airline Solutions will also provide discrepancy manage- training for the system as well as around-the- ment capabilities, Through its alliance with Mxi Technologies, Sabre Airline clock customer support though its help desk Heavy maintenance Solutions delivers industry-leading, integrated maintenance By Allan Bachan | Ascend Contributor and customer support Web site. — Includes visit and engineering solutions, increasing safety and efficiency for Maintenix System Product Map A reliable M&E system has become planning, production airlines around the world. or years, many of the world’s leading vital for airlines in the new cost-conscious planning and control, airlines have relied on the Sabre ® Maxi- Line Maintenance Line station Line Diagnostics environment. Current industry estimates and execution of maintenance control planning maintenance and F Merlin ™ maintenance, engineering and execution prognostics show that 9 percent to 13 percent of an air- heavy maintenance work including heavy serialized parts, demand planning, fulfill- inventory system to minimize maintenance line’s operating cost is attributed to the main- check templates and progress monitoring ment, material requisitions, asset induction, Heavy HM production Heavy costs while still ensuring the safety of passen- Heavy tenance of its fleet and represents about 20 for in-maintenance activities, quality control, warranty, warehouse man- maintenance maintenance planning maintenance gers and crew. But, when the time came to visit planning and control execution percent of the total workforce. An efficient, Shop maintenance — Provides shop con- agement, and material routing, enhance it for the future, a leading system advanced, easy-to-use system for an airline’s trol, production planning and execution of Fleet management — Facilitates advanced Shop Shop Shop Shop available through a strategic partnership maintenance maintenance production maintenance maintenance, repair and overhaul operations shop maintenance work for both compo- planning and business intelligence intended control planning planning helps it control costs by minimizing the effects nent and complex assembly shops, driven to improve visibility into all aspects of the Maintenance Maintenance Configuration Reliability Engineering of disruptions caused by unforeseen mainte- by up-to-the-minute visibility of material organization and proactively develop effi- engineering program and records analysis support nance and by optimizing the productivity of requirements, cient and effective procedures and policies. management management M&E personnel. Maintenance engineering — Features main- Specifically designed to handle the unique Materials Demand Material Warehouse The system, built on a modern architec- tenance program definition and manage- complexities of aviation maintenance, repair offered the promise of more quickly meeting management management receipt management ture, provides advanced capabilities such as ment, organization modeling, configuration and overhaul, the Maintenix system helps air- the needs of airlines. automated workflow, electronic signatures management, record keeping, reliability lines achieve value in five key areas: The Maxi-Merlin system, which has Fleet Advanced Business and support for portable wireless devices. analysis, and engineering support for main- Increased aircraft availability, been installed at more than 40 airlines, pro- management planning intelligence A uniquely designed role-based system, tenance including recommended corrective Improved maintenance visit planning, vides robust functionality that led it, in 2001, to the Maintenix system seamlessly fulfills the actions and engineering authorizations, Reduced inventories and improved supply be rated in a study by Cap Gemini Ernst & continuum from line maintenance to heavy Material management — Supports the chain management, Young as the No. 1 aviation maintenance and A comprehensive maintenance and engineering system delivers integrated functionality maintenance and component repair through maintenance process through comprehen- Improved maintenance efficiencies, engineering system based on the number of for maintenance, engineering, materials and fleet management through six intercon- its six interconnected components: sive management of data for tracked and Reduced delays and cancellations. aircraft managed by the system as well as the nected modules. “The Maintenix system will take our number of installations. offering in the maintenance and engineering In 2002, however, Sabre Airline Maintenix System Architecture areas to a new level with the kind of smart Solutions began looking toward the future and could provide the missing pieces to complete By partnering with Ottawa, Canada- technology we strive to bring our customers Thick client Web further enhancing the product, including revis- a comprehensive M&E solution. based Mxi, Sabre Airline Solutions offers air- interface interface — technology that simplifies the process and ing its architecture, migrating to open struc- After thoroughly evaluating potential lines a leading M&E system that is fully inte- provides near-term cost savings,” said Steve tured query language, or SQL, and Java and partners, Mxi Technologies, a leader in aviation grated with the other products in its portfolio, Clampett, president of Airline Products and ® ™ moving the system’s database from Adabas to maintenance management software, was such as the Sabre AirOps Suite and the External LDAP Business objectives Maintenix Services for Sabre Airline Solutions. “A Web- Security administration adapters XML messages External Oracle. Although the Maxi-Merlin system con- selected. Earlier this year, the two companies Sabre ® Flight Control Suite. By integrating security (Enterprise Java Beans) enabled user interface and an Oracle-based server (XML processing) applications tinues to provide the necessary functionality established an alliance that would enable them with flight operations tools, the Maintenix sys- platform make the Maintenix system easy to for the industry, the system needed to be to combine their strengths to provide an indus- tem provides personnel in an airline’s system access and easy to use. This combination of brought in line with the direction of other try-leading M&E offering. operations control center with centralized, access and relational database capability is Maintenix Database Sabre Airline Solutions products. As initial Through the alliance, the companies will real-time access to critical data to make the particularly important because the mainte- Support and ® Baseline XML routing work began on the enhancements, however, jointly market Mxi’s Maintenix MRO system. best, unbiased decisions for an airline. admin. data maintenance Transactions nance of an airline falls within many different company officials realized it could take up to The tool — selected by leading aviation companies The Maintenix system can also be model disciplines, crossing many different systems, five years to complete the enhancements. including Delta Air Lines, KLM Royal Dutch Airlines, accessed via Sabre ® eMergo ® Web access, an and in fact, can be an even greater challenge While Sabre Airline Solutions will contin- Qantas, Boeing, Rolls-Royce, Dassault, Bombardier applications service provider delivery method for airlines to manage than their reservations ue to support the Maxi-Merlin system until Aerospace, Executive Jet Management, Lockheed that reduces the cost of ownership. By Mxi Technologies uses modern platforms that meet the standards and expectations of for- systems.” a customers are ready to migrate, the company Martin’s F-35 JSF program and the U.S. Navy — accessing the system remotely via an ASP, air- ward-looking organizations. To meet the goals of scalability and platform independence, Allan Bachan is product manager of decided that to quickly meet the changing provides an all-inclusive tool that delivers inte- lines avoid the up-front costs and maintenance the Maintenix system has been built as an “n tier” system compliant with the Java 2 maintenance and engineering products needs of the industry required a more immedi- grated functionality for maintenance, engi- of installing the hardware and software on site. Enterprise Edition specification. for Sabre Airline Solutions. He can be ate solution — finding a strategic partner that neering, materials and fleet management. “We look forward to working with contacted at [email protected].

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numbers onto the new schedule. In a tradition- codeshare flights. The major alliances use dif- PRBDs must be derived from both a partner’s al codeshare arrangement, where airlines ferent strategies for assigning responsibility, cabin offering and its PRBDs so bookings can share services beyond a gateway, a tool such but they all have one carrier empowered map to the appropriate category in the host Share and CodeShare Alike as the Sabre ® AirFlite ™ Codeshare Manager to make the decisions and keep the distribu- global distribution system. The Schedule can automate the overwhelming task of tion process flowing smoothly. In many Manager can preserve all of the aspects of the assigning flight numbers. The tool will careful- cases, the operating carrier or marketing car- partner’s schedule and apply the required data ly analyze both the passenger connection rules rier is responsible for its individual flights in an automated process. It can even derive Codeshare agreements and alliance memberships can multiply the and the underlying agreement to ensure that rather than empowering one partner for all the appropriate PRBDs using the partner’s complexity of an airline’s schedule distribution process. But the use of the correct passenger origin and destination shared flying. offering. This automated process can extend advanced technology, such as the Sabre® AirFlite™ Planning and combinations are continuously served. Once the task of flight selection and the time available for analysis on the schedule Partnerships where the networks over- flight number assignment is complete, the dis- knowing the clerical work will be easy and Scheduling Suite, can optimize the process. lap or where nearly every flight in the network tribution task shifts to the efficient data prepa- accurate. is shared with a partner require a more power- ration of the codeshare schedule for external With the appropriate automated sys- ful tool to forecast the overall network prof- distribution. The timing is critical to coordinate tems in place, the codeshare analyst can By Kevin Stupfel | Ascend Contributor itability. This analysis is performed prior to the external release of schedule data at the evolve from a clerical position coordinating flight number assignment to choose the opti- same time as the partner carrier. The schedule data entry to a strategic position empowered he codeshare revolution has pushed the mal set of flights to apply to the codeshare system must read and store the appropriate to maximize the profitability of the codeshare T schedule distribution departments at many route. A forecasting tool, such as the Sabre ® data from the partner’s SSIM to reattach the relationship. As technology continues to airlines to the brink. Not only has the volume AirFlite ™ Profit Manager, is needed to predict information for external distribution about the evolve, the industry must embrace alliances of data increased exponentially, but also the the share of traffic flowing from the codeshare codeshare relationship. If an alliance partner working together to maximize the profitabili- increased complexity of codeshare relationships network onto the mainline services and can offers dinner and a movie, then its codeshare ty of the combined network. The effective requires greater analysis to extract the maxi- quantify the profitability benefit of each code- partners must also show this information on communication and distribution of code- mum value from each partnership. Airlines have share service. Since time is limited between their codeshare service for competitive reasons. share data is the first step in this industry struggled to find automated solutions that sim- the moment the partner schedule is received Not all commercial data can be derived evolution. a plify the problem, but they usually resort to and the codeshare schedule must be distrib- from a partner’s SSIM. A tool must apply the additional resources to manage the demands uted, these tools will improve the codeshare proper traffic restrictions to meet the market- of publishing an accurate and timely schedule. selection process. ing goal of the codeshare as well as remain Kevin Stupfel is a product manager for the Today’s airline landscape has forced the In the distribution solution engineered compliant with all governmental regulations. planning and scheduling group at Sabre distribution strategies of just 10 years ago to for the Star Alliance, it was important for Additionally, the PRBDs are important to a dis- Airline Solutions. He can be contacted at change drastically. Historically, codeshare one partner to be responsible for selecting tribution strategy. In some cases, a carrier’s [email protected]. agreements were commuter franchise arrangements using a shared designator. Without duplicate legs to worry about, distrib- ution was as straightforward as tacking the hightech commuter schedule to the end of the mainline timetable. The birth of duplicate legs added complexity to the distribution, requiring carriers News on New and Improved Products to update their codeshare schedules in a coor- and Services from Sabre Airline Solutions dinated manner with their partners’ updates. The current challenge facing many air- lines is far more then just a clerical distribution Gantt charts with an easy-to-use graphical user interface enable airline analysts to quickly problem. The codeshare agreement of yester- and effectively evaluate and modify their flight schedules, minimizing disruptions and product benefits day, when airlines extended their networks reducing costs. Restriction-free pricing — The system ® ® beyond a gateway, no longer meets the needs Sabre AirMax Low-Fares Utilizing Low-Fares Manager, airlines can enables carriers to continue effectively of airline planners. Today, partners operate in Manager better manage costs and generate revenue managing their revenues by accepting the same home geographic region, causing through the system’s ability to calculate or rejecting passenger bookings based network analysis to be pushed to a new level ize the maximum benefits from their code- and used by all partners. A graphical schedule the price of each seat while remaining on their overall revenue contributions. of sophistication. With the complexity and share relationships. The Sabre ® AirFlite ™ editing tool, such as the The Sabre ® AirFlite ™ Graphical user interface — With the competitive. rapid development of codeshares, manual pro- Planning and Scheduling Suite, for example, Schedule Manager, can easily read any part- description system’s easy-to-use interface, analysts cessing is no longer an adequate solution. has been modified specifically for the distribu- ner’s SSIM and display the information for the can adjust and override settings such While the surge of codeshare flights in tion needs of partners in the Star Alliance, and analyst to examine. Like Schedule Manager, AirMax Low-Fares Manager is the features as demand values, fare curves and overlapping networks is a relatively new con- the experience can be applied to any code- systems should be able to retain all of the industry’s first revenue management class-open and class-close timing. cept, the technology that has supported the share relationship as well. commercial information, such as passenger Customer buying behavior — Low- solution designed for highly competitive Reliable forecasting — Incorporating major alliances for years is already capable of The distribution strategy begins with reservations booking designators and in-flight advanced algorithms, Low-Fares Fares Manager estimates customer low-cost markets. It delivers enhanced supporting the complex analytical and distribu- the exchange of industry-standard schedule service indicators, to be used later in the distri- Manager considers data specific to the buying behavior, enabling airlines tion needs created by these agreements. A files. Chapter 7 of the Standard Schedules bution process. modeling techniques that help airlines low-fares environment, resulting in more to adjust inventories and prices in suite of tools can help automate the schedule Information Manual, or SSIM, is the most The tricky part of processing a partner’s effectively minimize revenue dilution due reliable forecasting that better estimates response to demand to generate distribution process, ensuring that airlines real- widely accepted and should be easily created schedule is mapping the codeshare flight to passenger buy-down behavior. low-fare demand. maximum revenue. a

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“By benchmarking our excess baggage from the tool and procedures we now use is The airline also enlisted the help of the and unaccompanied minor charges against the to inform crews on changes in their sched- consulting team to re-launch its frequent flyer competition, we have now increased these ule patterns.” program, 7th Heaven, to increase service as A Turn for the Better fees, resulting in additional revenues to the air- Maintenance — The airline experienced well as better monitor the program. line,” she said. “Also, with the addition of new higher than usual technical problems result- “The re-launch will enable us to expand technology, we are able to monitor our collec- ing in flight delays during the peak summer 7th Heaven to better serve existing airline and tions on a daily basis. This enhancement season. “We identified a straightforward non-airline participants, offering us the capabil- A spirit of renewal at Air Jamaica, one of the Caribbean’s largest airlines, makes sure we keep our eyes on the ball con- solution tied to spares support and proper ity to extend promotions as well as manage has the airline on track for improved financial performance. stantly. Giving immediate feedback to our adjustment of inventory levels to alleviate and track success of the program,” said Mike front-line team is a great motivator when it the problem,” said Capt. Lloyd Tai, senior Going, Air Jamaica’s senior vice president of comes to getting the job done.” vice president of technical services for Air marketing and sales. “We are excited that it By Peter Berdy and Ed Bowman | Ascend Contributors Many other operational and commercial Jamaica. will offer broader customer appeal and bring areas identified as areas where performance In heavy maintenance, the technical new membership.” ravelers who call the headquarters of Air onus is clearly on the airline’s management was now tasked with examining the spectrum could be improved: team realized the airline was performing As a result of the consulting study, the T Jamaica are among the first to get an team to improve its financial performance. of commercial and operational areas to identi- certain maintenance tasks airline identified substantial measurable bene- inkling of the new spirit at Air Jamaica. Because Air Jamaica has a small manage- fy potential cost-saving and revenue-generat- earlier than was recommend- fits resulting from new revenues or cost sav- Greeting its customers with, “Welcome to the ment team responsible for overseeing the entire ing opportunities. After a diagnostic review, We expect to see ed by the aircraft manufactur- ings that were identified during the project. To new Air Jamaica,“ the Kingston-based airline operation, the airline decided to bring in a team the consulting team discovered that changes er. “The team introduced pro- achieve these benefits, the airline plans to “these benefits fully shows its commitment to becoming a top- of technical experts to independently diagnose in the airline’s processes and procedures could cedures to reduce mainte- closely follow the recommendations that notch carrier. different aspects of the company to identify reduce costs and increase revenues as well as attainable for the nance costs by extending emerged from the consulting study. foreseeable future time between maintenance “The airline is ramping up new proce- visits and improved the over- dures and following those already in place and are counting on Unique customer amenities, Photo courtesy of Air Jamaica all efficiency of the mainte- in commercial and operational areas,” said such as hot meals and their contribution to nance schedule,” Tai said. Chris Zacca, Air Jamaica’s chief executive unlimited complimentary the bottom line. Commercial — The team officer. “Each department is aligned to deliver identified that revenue benefits results. We expect to see these benefits champagne, wine and — Chris Zacca, ” beer on every flight, keeps could be realized through a fully attainable for the foreseeable future and with Air Jamaica’s new CEO, Air Jamaica combination of performance are counting on their contribution to the bot-

Photo courtesy of Air Jamaica Photo courtesy spirit that has helped monitoring to identify where tom line.” a with the airline’s positive action should to be taken in financial turnaround. Crew planning — The team put in place areas such as pricing, and by putting in place improved crew scheduling practices new procedures to firm flights and control designed to ensure optimum coverage of discount seat offerings. pilots and copilots while focusing on cost “By working in partnership with travel reduction. “We are now using the [Sabre ®] agencies and creating structured sales incen- Peter Berdy is a partner and Ed AirCrews ® [Crew Management Suite] opti- tives, as well as managing distribution channel Bowman is a principal of management mization process for planning projects and costs, the airline will realize a combination of consulting for Sabre Airline Solutions crew pairing,” said David Banmiller, execu- additional revenues and cost savings,” said Consulting. They can be contacted tive vice president and chief operating offi- John Lewis, Air Jamaica’s executive vice pres- at [email protected] and cer of Air Jamaica. “An additional benefit ident and chief revenue officer. [email protected].

THE HIGH LEVEL

ways to improve its financial performance. add new elements the airline lacked such as News Briefs from Around the Globe “We wanted to identify practical cost tools and techniques to manage and measure vıew savings and revenue generating opportunities performance. The new attitude reflects a changed across the company as the first step in putting “In the area of purchasing, we had pro- discounts on fares for coach, business America for Lufthansa. “Lufthansa environment at Air Jamaica, which has together real, workable solutions that would cedures in place with vendors, but we were Who embraced the spirit of a turnaround in its finan- have a payback that could show benefits not following them,” Smith said. “The (con- Lufthansa German Airlines and first class flights. is eager to welcome Travelocity cial performance despite continuing obstacles quickly,” said Keith Smith, vice president of sulting) work revealed that by simply following Why Business customers onboard, where such as rising fuel prices, stiff competition information technology for Air Jamaica. our own guidelines, we could reduce and con- from U.S.-based major airlines and fickle con- Smith, who led the initiative, said Air trol our spending to produce strong savings in What “Travelocity Business has an excellent they can experience everything from sumers looking for the least-expensive vacation. Jamaica selected Sabre Airline Solutions’ tech- this area.” Began offering special corporate fares understanding of the unique needs of all-business class, Executive Jet While the airline has been supported nical consulting team, which had been used Sue Rosen, the airline’s vice president service to FlyNet — the first-ever, partly by the Jamaican government, which previously by the airline to develop a program of customer service, said the new procedures through Travelocity Business that give corporations and their travelers,” said continues to own a stake in the company, the to improve on-time performance. The team quickly generated results. corporations competitively significant Mathias Friess, director of sales, North broadband Internet in flight.” a

58 ascend regional regional

As a result of these changes, Egypt is projected to become an important gateway for Africa to Europe and Africa to Middle East Out of Africa traffic. With the realignment of the network and improved connectivity, both flow traffic and total traffic are expected to grow about

Photo courtesy of EgyptAir 30 percent and 24 percent respectively during As EgyptAir revamps its operations and route network, it stands to play the next four years, resulting in improved a big role in traffic from Africa to Europe and the Middle East. profitability. In addition to network adjustments, EgyptAir also made several downline changes, By Vijay Bathija | Ascend Contributor including: Better availability of published fares, gyptAir has always had the ingredients for The team started with an analysis of the air- EgyptAir to increase service to Vienna, Austria, Availability of seats and fares in online trav- E success — it is the flag carrier of one of line’s strengths, weaknesses, opportunities on Austrian Airlines’ code and begin providing As part of its recent turnaround strategy, EgyptAir created a new network schedule and el agencies, the most populous nations in the Middle East, and threats — known as a SWOT analysis. daily service between the two partners. In implemented an innovative codeshare plan, helping increase network profitability and Initiatives to establish a ticket sales Web site, a country with an impressive history and cul- Through the analysis, the team developed a addition, through Vienna, EgyptAir passengers customer convenience. Implementation of a five-year comprehen- ture that annually draws thousands of visitors; comprehensive strategy to address the air- would have more frequent service to more sive performance strategy, it operates one of the youngest and most line’s weaknesses and take advantage of its European destinations such as Stockholm, More efficient summer schedule, modern fleets of aircraft in the world; and it is opportunities. Sweden. The airline also examined its code- plays of online travel agencies such as The introduction of a 24-hour call center, Cairo hub and fleet plan recommendations, strategically positioned among Europe, Africa “Through the SWOT analysis, we were share agreements in Asia, and as a result, Travelocity and Expedia. Additionally, major which is slated to open this month, will further New published fares significantly extending and the Middle East. clearly able to see where we could make dra- EgyptAir is working to develop new codeshare online connecting markets have now filed enhance accessibility for reservations. This EgyptAir’s offering in the marketplace, matic, immediate improvements to our air- partners in the region. fares and more competitive offline fares can will help to not only increase sales but also Changes in the airline’s revenue manage- line,” Hassan said. To implement the network redesign be offered. EgyptAir also introduced advanced increase satisfaction levels with better ment paradigm and practices, strategy, the consulting team used the Sabre ® revenue management procedures and estab- response to customer enquiries. Redefined distribution strategy, AirFlite ™ Fleet Manager, the Sabre ® AirFlite ™ lished a centralized group desk to handle Focused sales team training, Schedule Manager and the Sabre ® AirFlite ™ group reservations, which represent a major Turning it Around Station audit checks with recommendations Projected Cumulative NPV for Yet, officials of the Cairo, Egypt-based Profit Manager to optimize EgyptAir’s net- portion of the airline’s business. By redesigning its network so as to optimize for changes, medium carriers airline believed EgyptAir was not fully utilizing work. The consultants used the joint approach Besides improved availability on the performance, EgyptAir: Knowledge transfer in key areas. these natural advantages to reach its full 200 ------of running the planning tools and showing the Web and in global distribution systems, sales Improved its Cairo hub connections from All of these changes, developed in con- potential as one of the region’s leading airlines. 150 ------continuous improvement results over various and field office personnel were trained on the Africa to Europe and the Middle East, junction with the consulting team, helped to

“When we looked at our operation, we 100 ------iterations to reach the optimum solution. This new pricing and revenue management strate- Restructured 13 low-performing stations, significantly increase profitability and position

realized we were not getting fair market 50 ------process, which took two months, resulted in gies and sales approaches to support the rede- Eliminated tag flights and focused on the EgyptAir as a major player in the region for

share,” said Eng. Mohammed Hassan, advisor 0 ------an optimal network that focused not only on fined distribution strategy. Also, refined largest non-stop markets, continued future growth. a to the chairman of EgyptAir. “We also believed Millions (U.S. dollars) 2005 2006 2007 2008 network profitability but also customer conve- processes to monitor booking information data Implemented consistent flight times to all Vijay Bathija is a principal that we could improve our pricing, sales and nience. As a result, EgyptAir improved service tapes/market information data tapes were rec- major markets, consultant with Sabre Airline Solutions distribution operations so that we didn’t miss As a result of revamping their opera- to major markets such as North Africa and the ommended to align agency payments with Increased utilization of aircraft resources, Consulting. He can be contacted at revenue opportunities.” tions, airlines like EgyptAir have Gulf region while also streamlining services actual productive bookings. Built alliances to extend its reach. [email protected]. Given the desire to improve its opera- the potential to realize significant from Europe to popular beach destinations tions, EgyptAir officials began to thoroughly financial benefits. such as Sharm-El-Sheikh. examine the airline, enlisting the help of Sabre “We were very excited to see how Airline Solutions Consulting to identify areas much revenue we could generate by simply THE HIGH LEVEL where the airline could improve. One element of the turnaround strategy revamping our network,” Hassan said. “By The airline asked the consulting team to involved developing a new network schedule doing so, we were able to ensure that we News Briefs from Around the Globe assess the current environment and develop a that optimized aircraft deployment and helped enhanced the utilization of our aircraft and vıew comprehensive turnaround strategy to help the carrier reach profitability. Network optimized passenger flows.” EgyptAir capitalize on its natural strengths and redesign was supplemented by a new strate- Based on its analysis, the consulting Who Airlines via its Web site, to partner with Travelocity and its rich minimize its weaknesses. gy of codeshare alliances and by implementing team estimated that EgyptAir could improve Southwest Airlines www.southwest.com, providing offering of leading cruise brands,” said best practices for pricing, revenue manage- results by US$40 to US$50 million a year if the Taking a Hard Look ment, and sales and distribution. right changes were made. Southwest Airlines a best-in-class Kevin Krone, Southwest Airlines’ vice “Sabre Airline Solutions consultants were To extend EgyptAir’s reach, the consult- The positive effects of the network What cruise product for its customers. president of interactive marketing. “We focused on our needs and took the time to ing team analyzed potential codeshare part- redesign consulting work were further look forward to fostering a significant understand our specific issues before propos- ners throughout different regions and deliv- enhanced by internal process changes in pric- Joined the Travelocity Partner ing a solution,” Hassan said. “Then, the team ered a report showing the maximum benefits ing and revenue management that incorporat- Network sm, making Travelocity the Why cruise relationship with Travelocity — worked closely with EgyptAir to implement of implementing a new codeshare strategy. ed industry best practices. exclusive supplier of cruises for “We continue to bring our customers one that is mutually beneficial for each that solution.” For example, a codeshare agreement with In terms of pricing, the new automated Working with the consulting team, Austrian Airlines was enhanced to benefit both fare filing process the airline introduced Southwest Airlines. Travelocity will the best products, the best service and company as well as our mutual part- EgyptAir prepared a holistic turnaround plan. parties. The new codeshare strategy enabled enables it to appear prominently in the dis- provide cruise content to Southwest the best values, which is why we chose ners in the cruise industry.” a

60 ascend Britain’s Best Kept Secret? Eastern Airways, a successful regional carrier based in the United Kingdom, sets itself apart by providing customer amenities and keeping service at its core. Photos courtesy of Eastern Airways Photos courtesy

By Marcus Pearson | Ascend Contributor

sk most passengers traveling said Richard Lake, chief executive officer of The joint owners said they have a pas- through London’s Heathrow or Eastern Airways is all about the airline. sion about customer service that is rare in Gatwick airports about Eastern The up-and-coming airline anticipates these days when the low-cost carrier is king. “service. It’s important we Airways, and it’s likely they carrying nearly 500,000 passengers this year And their view is reflected in everything haven’tA yet heard of the growing regional car- recognize that the passenger on its 650 weekly flights, and it has developed Eastern does, from its onboard amenities to rier based at England’s Humberside Airport. regional press and Spectator magazine, radio is a person and not a number. a loyal following because it incorporates a its outstanding operational performance. It all Indeed, you might find the same is true among spots, and contests and promotions, the air- different mindset from many other “new- comes back to putting the passenger first. — Richard Lake, chief executive ” travelers at some regional airports throughout line also benefits from word of mouth testimo- generation” airlines. The experience of an Eastern Airways the United Kingdom. But ask one of the grow- nials from its growing legion of converts. officer, Eastern Airways When Lake and Huxford, longtime busi- flight might shock those who’ve grown accus- ing number of passengers who’ve flown “Many of our passengers fly with us on ness partners, reorganized the airline in 1997, tomed to bare-bones service on domestic Eastern, and they’ll tell you that it might be the a regular basis, and if we deliver good service they could have followed the path of most flights. The amenities on Eastern include free best kept secret among U.K.-based airlines. then they are keen to recommend us to their new start-ups and adopted a variation of the snacks and refreshments on all flights and a Although the airline actively promotes friends and colleagues,” said Bryan Huxford, His business partner agreed. “That’s low-cost model. But they choose a slightly dif- glass of champagne on even some of the air- itself through its Web site, advertisements in Eastern’s chairman. the best marketing campaign I could hope for,” ferent route. line’s shortest flights. Eastern also offers

62 ascend ascend 63 regional regional

Photo courtesy of Eastern Airways some of the same benefits as larger carriers 1999, the airline added an 18-seat Jetstream such as fast-track processing at Leeds 32 and a nine-seat Jetstream 31. In the fol- Bradford and Southampton. The airline’s char- lowing years, the airline continued to add to ter service offers customers added features its fleet. Today, Eastern Airways operates a such as VIP meals, hot towels and a full bar. fleet of 22 aircraft — a mixture of Jetstream The airline will even brand the aircraft with the 31, Jetstream 41, Embraer ERJ145 and Saab chartering company’s identity if desired. 2000. Eastern’s strategy of developing But all the steps Eastern takes have the routes other carriers have ceased to operate same underlying motivation — to add value to works because the airline initially substitutes Photo courtesy of Eastern Airways the customer. smaller, “right-sized” aircraft and then grows “If it doesn’t add value, then why do it?" frequency. Lake asked. “Eastern Airways is all about ser- “We are always looking for opportuni- vice. It’s important we recognize that the pas- ties for new routes and new frequencies,” senger is a person and not a number.” Huxford said. “But this is done after a careful Huxford and Lake, having experienced consideration of the suitability of the aircraft to first-hand what they described as “the bitter- the route.” ness of bad service” on other airlines, wanted Even with its focus on service, Eastern, Eastern to stand apart. which maintained profitability during the indus- The airline’s service provides a value to Many of our passengers fly with try downturn of the past few years, still man- customers that they are willing to pay for, Lake ages to control costs. For its 2002 fiscal year, “us on a regular basis, and if we and Huxford said. The airline sets its fares so the airline reported profits of £2.2 million that it can “charge appropriately for the job,” deliver good service, then they (US$4 million) on revenues of £47 million Placing a strong emphasis on service excellence, Eastern Airways has successfully balanced exceptional customer amenities with reason- Lake said, enabling the airline to provide are keen to recommend us to (US$86 million), an increase of nearly 125 per- able fares, resulting in a rapidly growing customer base and continued profitability. increased service, yet without overcharging. cent over the previous year’s profit of their friends and colleagues. The airline’s point-to-point network, ” £984,000 (US$1.8 million). which links most of the regions of the United — Bryan Huxford, Chairman, Eastern uses a number of methods to airline, which operates entirely in a ticket- from the retail sector of the electrical and commitment. It also shows that an airline can Kingdom, enables businesspeople to “create Eastern Airways contain costs — for example, stockpiling less environment, is looking to add addition- domestic appliance field. be a success as a niche player offering quali- their business” throughout the country, said inventory of spare parts because it can buy al features, such as installing self-service One thing is clear, as Eastern contin- ty business services.” Lake, who was a former merchant navy offi- them in bulk at significant discounts. All kiosks. ues to thrive and profit in today’s volatile air- As Eastern continues to grow and gain cer, mining engineer and film producer before this adds up to a carefully managed approach Providing welcome amenities and serving line industry, it is unlikely to remain a secret recognition, it has positioned itself to become he took on the task of running an airline. The expanded again, taking over seven routes that Huxford and Lake believe drives their routes no one else does leads to one thing — for much longer. Last year saw the airline the niche player that everyone is watching. a revamped Eastern began with a single route from British Airways Citiexpress. Today, it business forward. The airline, which utilizes when you talk to Eastern’s passengers, they awarded the 2003-2004 Airline of the Year between Humberside and Aberdeen. The air- serves 17 destinations throughout the United the SabreSonic TM Passenger Solutions for like to think of the airline as their little secret, Silver Award. In accepting the award, Marcus Pearson is a London-based line next added a route between Aberdeen Kingdom. its reservations functions, also relies on almost like a club that they invite good friends Huxford said, “This is about our team — all account manager for Sabre Airline and Norwich and then Aberdeen and East When it re-launched, Eastern began information technology to help contain to join, said Huxford, who had been associat- 350 of them — who’ve made our growth pos- Solutions. He can be contacted at Midlands. In March 2003, the airline rapidly with a single Fairchild Metro 23 turboprop. In costs and operate more efficiently. The ed with the airline since 1973 after coming sible with their dedication, enthusiasm and [email protected].

THE HIGH LEVEL THE HIGH LEVEL vıew News Briefs from Around the Globe vıew News Briefs from Around the Globe

Who agencies and airlines and enhancing improve revenues by minimizing Who Why now have reliable numbers, giving Continental Airlines carriers’ inventory control. spoiled inventory, so we needed a Mexicana Airlines “Providing employees with systems our sales representatives greater system that automates the sale of What What that offer more efficient ways of negotiation power. With these sys- Why group or block space while providing ® Sabre ® TransVision ® detecting market trends and changes tems, Mexicana has increased overall Implemented the Sabre Group “In order to reduce costs, we needed inventory control. We’ve found that Selected the ® has helped Mexicana make wiser confidence in the business decisions Management Tool, a new system to to eliminate manual processes and Sabre Travel Network’s Group traffic flow analyzer and the Sabre ™ decisions,” said Sergio Allard, we make and has allowed Mexicana help airlines automate the agency increase the efficiency of our group Management Tool does both. Not only WiseVision sales expansion system group booking process. The system desk and reservations department,” does it automate the process, but it to maximize cost-savings opportunities, executive vice president of sales to negotiate new commission agree- automates the sale and management said John C. Slater, managing director returns all unsold inventory to us at a gain market share, improve schedules and marketing for Mexicana. “By ments with agencies, track their per- of group or block airline reservations, of distribution planning for Continental predefined time based on our uniquely and optimize commissions disburse- using the TransVision analyzer formance and greatly increase sales increasing efficiencies for both Airlines. “In addition, we wanted to defined business requirements.” a ments to travel agencies. and the WiseVision system, we representative efficiency.” a company company

tainly present a challenge for an industry so the smooth flow of passengers between significant impact on airline profitability. affected by the volatility of the global econo- alliance partners. Because airline planning is often a matter of my. But, by developing new practices in the Competitive positioning for an airline seeking profitability, shifts in demand should Aligning the Alliance untapped areas of planning and scheduling, generally involves assigning resources to mar- affect the relative attractiveness of markets revenue management, passenger service, and kets to maximize expected profit. Each carrier and change individual airline plans. Timetable operations, airlines can further take advantage in the alliance has the same objective and con- coordination helps maximize the benefits of of alliance membership. straints. Without accurately accounting for the demand share shift created by the alliance. By more tightly aligning their operations in areas such as planning and alliance traffic, an individual airline could allo- Relatively small changes in the timetables of scheduling, revenue management, and passenger service and operations, Planning and Scheduling cate an aircraft with insufficient capacity, all alliance carriers will increase the quality of individual members of an airline alliance can further cut costs as well as To be most effective in schedule planning, air- thereby generating passenger spill in a given alliance service. On a more subtle level, this line alliance partners should have a common O&D market that could be competitively coordination can also maximize the portion of realize additional incremental revenue. view of: served by the alliance. Alliance membership traffic retained in the alliance when demand Alliance objectives, creates a new variable — how significantly exceeds capacity. This requires an O&D view Market size, should a given airline’s market position be of passenger spill and recapture. By Michael Clarke and Abdoul Sylla | Ascend Contributors Passenger preferences, modified to take advantage of alliance demand Schedule coordination within the Revenues, and revenue opportunities? alliance results in potential demand increase. n recent years, global alliances have Yet, there is still plenty of work left to be The foundation for some of the coming Operating costs. Alliances also should coordinate fleet assign- I evolved from simple marketing partner- done before airlines reap the full benefits of changes is already in place. With schedule Since individual airlines are not likely to ments to ensure that capacity is in place to ships to more integrated entities striving to alliance membership. Although necessary coordination, codesharing and joint pricing, relinquish control of planning and scheduling Without accurately accounting accommodate this demand. achieve operational synergies as well as mutu- technologies already exist, airlines have been alliance members have begun the process of to a centralized alliance group in the near The fleet assignment process for each “for alliance traffic, an individual al cost reduction. hesitant to take this final step toward full inte- integrating their operations. But there remain future, each airline must be capable of com- partner, or for the alliance, must be sensitive Already, alliances have helped their gration of planning and scheduling operations, several untapped areas for future growth, municating key information to fellow alliance airline could allocate an aircraft to the flow of passengers within each airline member airlines generate additional revenue, in part because of the potential for unexpect- including greater coordination of airline plan- members during the planning process. By opti- with insufficient capacity, there- and alliance network. This requires that control costs and deliver incremental value for ed changes in the alliance composition and ning, marketing and operations. By establish- mizing the alliance’s scheduling processes, demand and revenue forecasts used in fleet by generating passenger spill in a their customers. Individual airlines are begin- prevailing competitiveness between partner ing new business practices that maximize the partner airlines can effectively coordinate their assignment consider the flow of traffic across ning to realize the economies of scale offered carriers for high-end passengers. Secondly, interests of each airline, the interests of the timetables and take advantage of alliance mar- given O&D market that could multiple partners. It also requires that the by membership in one of the main global some aspects of schedule coordination are alliance are also advanced. In such situations, ket presence and the resulting market share be competitively served by the capacity optimization process is also sensitive alliances — facility sharing at key airports, restricted by regulatory constraints as well as an airline’s individual agenda has to be aligned shift it creates. to this O&D flow. alliance. common information technology systems, and established contractual work rules. with that of the global alliance. By doing so, Doing so involves the alliance compet- ” common data repositories and joint purchas- As the global alliances continue to each member airline is better off due to its itive position (rather than airline competitive Revenue Management ing programs. Alliances also provide key cus- develop, each member airline faces the chal- cooperation with other partners, and the position) in origin-destination markets in By maximizing the flow of revenue through tomer service benefits such as an increased lenge of making the necessary cultural evolu- alliance is enhanced due to the participation of terms of service frequency, quality and The potential impact can be a 1 percent the network, alliances boost the income of network, seamless travel through tools such tion and business process transition that will every member. timetable coordination to ensure that the to 2 percent increase in market share for a individual members. The revenue manage- as interline electronic ticketing, and shared fre- ensure the success of alliances’ combined The new business practices should alliance provides quality online service. It given O&D market. A demand increase of 1 ment process is complex for an airline alone, quent flyer benefits and lounges. operations. encourage long-term relationships, which cer- also involves capacity allocation to ensure percent across multiple markets can have a much less for an alliance. But, in essence,

THE HIGH LEVEL THE HIGH LEVEL vıew News Briefs from Around the Globe vıew News Briefs from Around the Globe

Who negotiated fare contracts. Why Who analysis and flexibility. In addition, Randy Laser, vice president Sabre Travel Network With the automated solution, “We are committed to providing Aloha Airlines the airline has implemented the for Aloha Airlines. “We gain airlines file published fares and rules quality fare information, enhancing ® ™ What What Sabre PC AirFlite flight scheduling performance-enhancing capa- via Airline Tariff Publishing Company efficiency and guaranteeing fares that Will utilize the Sabre ® AirMax ® system to improve the carrier’s air- bilities without having to resort Released enhanced capabilities for the using the Category 25 fare by rule are auto-priced and auto-ticketed in Revenue Management Suite and the craft utilization. to costly infrastructure upgrades. Sabre ® Air Pricing suite that fully process to attach corporate discount the Sabre GDS,” said John Stow, Sabre ® AirPrice ™ fares management By choosing the eMergo delivery automate fare by rule capability. The formulas and client-specific fare rules president of Sabre Travel Network. system through Sabre ® eMergo ® Web Why model, we avoid major upfront global solution for Category 25 pro- to the fares they file. The Sabre® global “This development allows more access, an applications service “These products will enable Aloha costs and better position vides airlines the ability to automati- distribution system then accepts the accurate and quicker filings, decreasing provider delivery method, to leverage to grow, streamline our operations ourselves to focus resources cally accept and process discounted ATPCO Fare by Rule feeds, automati- the agent workload and the presence an integrated solution for pricing and compete effectively,” said on our core operations.” a fares and further simplifies complicated cally calculating the appropriate fare. of human error.” a company company

revenue management for alliances must Current revenue management facili- cost — this seat could have been sold at a alliance. Since bid prices change with time, account for the flow of passengers among tates communication and cooperation among higher fare later. Bid prices are used to control some history of the changes for all partners Integrated Operations partners through an O&D approach. Because it partners. Leading carriers are moving to an availability — a booking request valued higher must be maintained in order to adequately Decision-support systems is unlikely that alliance members will relinquish O&D control structure using bid prices, which than bid price is accepted, a request valued share revenues. This could prove a costly control of their revenue management process- represent the free-market value of a seat on lower than bid price is rejected. For carriers exercise unless bid prices are directly incorpo- Crew planning Airline Airline Crew planning es, business rules must be established to any future flight. A fare exceeding the bid price using bid prices, the benefits have been due to rated into passenger name records or global and tracking and tracking allow each partner to maximize its interests provides a net benefit to the carrier whereas a an improved control of bookings by O&D. distribution systems directly perform the rev- operations operations control center control center while also helping alliance partners. fare below bid price represents an opportunity Availability for a market class is tied to the enue sharing functions. Maintenance Maintenance Airline A Airline B value of the request rather than the availability Other issues, such as booking cancella- and inventory and inventory in a bucket of many potential requests. tions and third-party proration agreements, Integrated Scheduling have to be addressed as well. In dynamic pro- Alliance centralized Passenger Seat operations database name records availibility ration, if an alliance member has a special pro- Carrier 1 Leading carriers are moving to ration agreement with an outside airline, rev- Flight Load enue sharing becomes a complex issue. The following planning “an O&D control structure using revenue split between alliance members is not bid prices, which represent the fixed, making it impossible to guarantee a min- imal revenue to a third-party airline. For re-book- Demand Schedule Slot free-market value of a seat on Integrated operations control entails the global alliance maintaining a centralized operations Distribution ings, the entire itinerary must be reevaluated database that contains up-to-date information on flight schedules (times, seat availability), estimation construction management any future flight. ” even if only one leg is cancelled. Undoubtedly, active PNRs and operational data necessary for load planning, flight planning and flight this will have some implication on the revenue following. Individual airlines are responsible for their own operational decisions under accounting systems of partner airlines. normal conditions, while decisions about off-schedule operations are driven by alliance Bid prices can provide an even greater objectives. By sharing a common methodology and decision-making framework, effective Carrier 2 benefit for alliances. They represent an individ- Passenger Service and Operations decisions are made such that the operational integrity of the global alliance is preserved. ual carrier’s view of inventory value. Multiple The market-share premium benefit of alliances carriers using bid prices are able to value their is based on the customer perception that the Integrated scheduling requires that alliance members put all their resources in a pool and own inventory as well as their partners’ inven- alliance’s service is of higher quality and relia- journeys will require improved communica- availability. It also requires that an airline com- develop an alliance schedule, which would be flown by individual members. Demand esti- tory in terms of a common currency, which bility than interline travel. Delivering on this tions and greater sharing of data among carri- municate its recovery process with its partners. mation is done out of an alliance data warehouse, and the demand model calibration is provides significant operational benefits. In promise requires alliance partners to coordi- ers. From the passenger’s view, this means The dependability of an alliance network performed by a single team for the entire alliance. Similarly, the schedule construction, particular, alliance partners don’t need to main- nate their business processes prior to depar- seamless handling among alliance partners and its underlying ability to recover from dis- slot management and schedule distribution are performed by the alliance or teams from tain additional business processes and/or sys- ture, as well as their operations, to provide and transparent re-accommodation during off- ruptions in a minimal amount of time to facili- individual carriers. At this stage of integration, one would envision a downline integration tems to make effective revenue management high service reliability throughout the passen- schedule operations, which requires a high tate the flow of passengers and/or cargo of the alliance’s other business units. decisions. Imbalances in supply and demand ger journey. Prior to departure, customer infor- level of data sharing or common data in terms should be a primary focus. As they grow, between partners on flights with split invento- mation must be coordinated and passenger of flight following, customer information and alliances will face new challenges in the ry can be resolved by trading seats at a fair value — the current bid price. The availability Integrated Revenue Management of booking requests involving multiple alliance Airline 1 Airline 2 partners can be determined based on the THE HIGH LEVEL value to the alliance, which will facilitate the Inventory management sale of long-haul, high-value traffic. News Briefs from Around the Globe Because this approach will maximize vıew Distribution Overbooking Distribution alliance revenue, specific operating rules must be put into place so that no carrier incurs a rev- Who BA Citiexpress, and other carriers in Airline Solutions/Sabre Travel enue penalty on any booking transaction. This Optimization Forecast Optimization the European market. RM Rocade also Network. “In the last four years, this should include a method of dynamic revenue Sabre Airline Solutions proration to ensure that every alliance booking has a significant presence in Asia and has included launching the most suc- transaction is either revenue neutral or rev- What other regions with customers such as cessful Web-based applications Revenue Pricing Scheduling Alliance accounting data data database enue positive for every participating alliance Acquired Stockholm, Sweden-based Air China and Kuwait Airways. access in the industry through Sabre ® carrier. In this way, the alliance appears to ® make effective revenue management deci- RM Rocade, which develops and sells eMergo Web access, our application sions even without a centralized alliance rev- software solutions to airlines for com- Why service provicer offering, and adding Integrated revenue management involves an alliance team performing all revenue man- enue management group. mercial planning, crew management “Sabre Airline Solutions has made PC-based scheduling and operations agement functions. A forecast server using data from all carriers provides demand data Dynamic proration introduces new chal- to a revenue mix module, which in turn supplies bid prices and gradients for all alliance lenges, such as risk of gaming and determin- and operations control. Currently, it possible for small, medium-size software through the acquisition of flights. The revenue mix module receives input from all carriers, allowing them to set poli- ing bid-prices for carriers that do not use bid- more than 60 airlines use the RM and low-cost carriers to operate David R. Bornemann Associates in cies such as for overbooking, denied boarding or oversales compensation. The inventory price controls in their revenue management. Rocade Integrated Suite, including in new ways through the use of 2001. The RM Rocade integrated suite management module is also centralized and assumes that the alliance members are in For example, it will be necessary to obtain the process of achieving a better integration of their operations. pseudo bid prices from seat availability and FlyDBA, Air Atlanta, MyTravel, Cyprus accessible technology,” said Tom of products is another extension of applicable fares for all carriers within the Airways, Austrian Airlines, Icelandair, Klein, group president for Sabre this strategy and portfolio.” a

68 ascend company company

recovery of irregular operations. The main Alliances are evolving, and in order to challenge comes from each partner having its The dependability of an alliance sustain growth and profitability, it will become own system operations control center with dif- imperative that members share demand and “network and its underlying abili- ferent strategies and methods of functioning. operational information, explore opportunities Riding the RAIL It is imperative that highly coordinated com- ty to recover from disruptions in for sharing resources (e.g., slots at congested munication exists among the various airline a minimal amount of time to airports), and rationalize revenue management operations control centers, or AOCC, to find processes. Standardized planning procedures facilitate the flow of passengers solutions beneficial to the entire alliance system. will bring consistency, even when airlines have Sabre Holdings Labs is working on breakthrough technology to help As airlines expand their joint operations, and/or cargo should be a prima- dissimilar levels of ability, experience and suc- airlines significantly reduce the cost of communicating among alliance pursuing collaborated operational decisions, ry focus. As they grow, alliances cess in the marketplace. The research group especially in the event of a schedule disrup- that supports Sabre Airline Solutions is actively members by using the redundant array of Internet links. will face new challenges in the tion, becomes more important. Day-of-opera- researching the impact of alliances on revenue tions decisions should encompass all aspects recovery of irregular management business processes. In addition, of the business, which will be affected by operations. the schedule recovery decision-support frame- By Gary Potter | Ascend Contributor irregular events such as passenger re-accom- ” work developed by the research group has been modation, aircraft routing, crew tracking and designed specifically to incorporate alliance con- trong alliances require active communica- saved as much as 50 percent a year on its net- wide area network strategies and found that recovery, and ground resource management. siderations in passenger re-accommodation and S tion — not just between people but also work costs by switching from frame to they intended to continue with costly frame In the long term, alliances may develop a cen- airlines to further coordinate their operations schedule changes. The research group is also between systems via high-speed, cost-effec- Internet service provider links. And, roundtrip relay and dedicated links as their primary WAN tralized global AOCC, which would be respon- and decision-making procedures. During the working with planning and scheduling systems tive networks. Until recently, such networks time (entry and response) was reduced by service. Why? Reliability. Of those surveyed, sible for monitoring and coordinating all opera- initial phases of decision-support deployment, to develop new market share models that will were something of a contradiction in terms — almost a third. 47 percent had no plans to change. Of those, tional decisions within the alliance. airlines will continue to make decisions inde- leverage online shopping capabilities and help it was difficult for a network to achieve high 33 percent did not consider the Internet as a Alternatively, each AOCC should be able to pendently, but they will use the same data determine true O&D market demands. a speed at a reasonable cost. But, new enabling suitable replacement for a WAN — 17 percent handle decisions related both to its own fleet across the entire alliance. Unilateral decision technologies becoming available today are … a migration strategy that considered the technology too new and risky, and that of its partners. There may also be sig- making would be transmitted within the Michael Clarke and Abdoul Sylla helping resolve the performance dilemma. and another 17 percent said moving to the “moves an airline off of a nificant benefits of collaborating during the alliance using the established channels of are principal research scientists in One exciting development involves the Internet wasn’t necessary. strategic phase of operations, including such communications. The ultimate alliance AOCC the Sabre Holdings technology office. redundant array of Internet links, or RAIL, wide area network in favor Two years ago, very few businesses issues as joint maintenance planning. would be responsible for making real-time They can be contacted at which connects an end point via multiple net- of the RAIL would result in were making the leap to route control — tech- The introduction of advanced decision- decisions for all airlines that are part of the [email protected] and works. New technology tools are being devel- nology that searches the Internet and makes a 40 percent to 50 percent support systems within the AOCC will drive global alliance. [email protected]. oped and deployed to manage routing of mes- routing decisions based on either performance sages over the RAIL, enabling airlines to com- annual savings … or price based upon message priority. Most municate more cheaply or rapidly. ” resisted the change, citing the uncertainties of Research indicates that a migration new technologies. THE HIGH LEVEL strategy that moves an airline off of a wide When asked about multi-homing (con- area network in favor of the RAIL would result The development of RAIL technology necting one location via multiple providers for News Briefs from Around the Globe in a 40 percent to 50 percent annual savings during the past two years has caused many greater reliability), approximately half of the vıew on network costs while maintaining reliability. information technology officials to rethink their IT directors questioned said they used or Qualcomm, the inventor of the code division position on networks. planned to use it, but most still had no plans to multiple access wireless telephone standard, As recently as late 2002, Forrester replace their existing WAN with the Internet. Who Why Marc Cavaliere, vice president of and an early adopter of RAIL technology, Research spoke with IT directors about their As one participant in the study said, “Who are sales and distribution for Spirit Frontier, Spirit Airlines, Aeroméxico, “Frontier is focused on providing the Airlines, said, “Spirit Airlines has Japan Airlines and Qantas right mix of price and flexibility to quickly emerged as an affordable THE HIGH LEVEL What both leisure and business travelers,” option and maintains a high level News Briefs from Around the Globe Made special business travel discounts said Sean Menke, senior vice president of quality and flexibility, which is vıew available through Travelocity Business, of marketing for Frontier Airlines. attractive to budget-conscious busi- the first Internet full-service corporate “Travelocity has always been an ness travelers. Travelocity Business Who automation of the airline’s flight Round, manager network systems and communication for Qantas. travel agency to offer all of its customers excellent partner, and now working continues to focus on offering the Qantas Airways scheduling and route evaluation “As the first airline to go live with business travel discounts on the airline. with Travelocity Business, we are able most complete range of options to processes. What the new system version, we were The discounts are designed specifically to enhance our reach into the business business travelers, including discount- Why expecting some initial problems, for business travelers, including dis- travel market, offering even more ed fares that offer them the flexibility Has gone live with release “I have been very pleased with the but we have been impressed with 10 of Sabre ® AirFlite ™ Schedule counts on refundable and non-refund- flexibility to complement the wide to deal with changes in travel, and smooth introduction that Sabre the system and support we have ® ™ able tickets, without the restrictions of range of value-added programs we Spirit Airlines is an excellent addition Manager and Sabre AirFlite Airline Solutions has achieved with received from the staff at Sabre leisure discounts, such as Web fares. currently offer the business traveler.” to this program.” a Profit Manager, providing Schedule Manager,” said David Airline Solutions.” a company

you going to call when there’s a problem, sufficient reliability. Multi-homing solved the measurements are used to establish trans- 1 800 INTERNET?” reliability challenge presented on open/public port delay or behavior of low-level protocols. making In 2002, Forrester Research concluded networks, offering performance comparable When these measurements are applied to a contact that companies would remain on their private to WAN. series of metrics, the models can determine WANs. With concerns about privacy and relia- The tools combine routing objectives the correct path for network application traf- bility, very few companies were ready to make (price vs. speed) and policies (priority of mes- fic. And via a series of ongoing iterations, the To suggest a topic for a possible future the move to multi-homing, although the study sage) with live data taken from probes on the models are continuously verified until adjust- article, change your address or add did find such technology was gaining wider Internet. The probes, small applications ments are necessary due to business-rule smart someone’s name to the mailing list, acceptance as companies hedged their posi- deployed on Internet routers, collect end-to- violation. please send an e-mail message to the tions by relying on multiple network providers. end network measurements such as bit rates, Control points for adjustments are Ascend staff at [email protected]. Yet, while interested in route control, not latencies, etc. in real time through a combina- usually the edge routers — they connect the many companies were willing to leave the tion of endpoint flow collection and trace prob- WAN links. Adjustments are sometimes nec- solutions. For more information about products and services featured in this issue of

comfort of their private networks and make ing. Specific Internet protocol addresses are essary to increase availability, improve per- an affiliate of Sabre Holdings Corporation. ©2004 Sabre Inc. All rights reserved. the leap to the new technology. identified and verified as valid for the business formance or reduce costs by measuring cur- Ascend, please visit our Web site at Now, fast forward to 2004, multi-hom- goals of meshing message priority with its cor- rent performance and comparing it against www.sabreairlinesolutions.com or contact ing has gained acceptance as well as intro- responding price and speed of delivery. continually validated metrics. one of the following Sabre Airline Solutions duced new challenges. Companies have And finally, today’s tools include some Sabre Airline Solutions and the Sabre Airline Solutions logo are trademarks and/or service marks of regional representatives: bought into the idea that using multiple carri- sort of reporting mechanism. Reports include Asia/Pacific ers at varying price points makes a lot of Sabre Holdings Labs, which avoided networks, selected network including sense. Unfortunately, in a multi-homing sce- latency statistics as well as status and log Chris Vasiliou “uses applied technology to create nario, border gateway protocol, or BGP, the messages, measurements that show how Senior Vice President basic routing mechanism for directing Internet business opportunities through well each network serves the various applica- Level 9, Phillips Building 15 Blue Street traffic to its destination via the shortest route, innovation, is working … to tions, and a utilization summary for billing. does not balance price with speed. When Sabre Holdings Labs, which uses North Sydney NSW 2060 define a strategy for deploying everything runs smoothly, traffic is sent via applied technology to create business oppor- Australia natural routing. But when bottlenecks appear RAIL solutions in the airline tunities through innovation, is working with Phone: 61 2 8923 5230 E-mail: [email protected] as throughput increases and routing changes environment. Sabre Airline Solutions to define a strategy for are made, low-priority traffic is likely routed ” deploying RAIL solutions in the airline environ- over high-cost circuits because BGP is unable ment. The Labs team, which holds nine patents Europe, Middle East and Africa to determine whether it is more important for with 20 pending, is continuing to explore ways Vinay Dube the message to be sent quickly or less expen- Once IP addresses are verified, raw to deploy these networking tools. a Vice President sively. This continues until the bottleneck measurement data are collected from the 23-59 Staines Road clears or throughput decreases. probes and analyzed at the enterprise level. Gary Potter is senior director for research Somerville House But the new tools available to manage Network paths are measured to show laten- and development projects for Sabre Hounslow, Middlesex routing over the RAIL are addressing the cy, which can impact response time, and Holdings Labs. He can be contacted at TW3 3HE, United Kingdom cost/speed equation while still providing loss, which affects data integrity. These raw [email protected]. What makes a solution “smart”? Patented algorithms? Phone: 44 20 8814 4540 E-mail: [email protected] Intuitive interfaces? Open-systems architecture? Absolutely. But what’s really smart are solutions that North America help you overcome your challenges and deliver results. Graham Whitmarsh THE HIGH LEVEL Vice President 3150 Sabre Drive By working closely with carriers worldwide, we’ve News Briefs from Around the Globe Southlake, Texas 76092 developed a portfolio of flexible, integrated solutions United States vıew Phone: +1 682 605 5769 that can optimize operations for all airlines — any size, any business model, anywhere in the world. E-mail: [email protected] Who Why Latin America Cathay Pacific Airways “We recently expanded our Cathay Pacific Airways. “Sabre Learn how we can work together to create smart Marcela Lizárraga What commitment to the region by resuming Airline Solutions’ technology plays solutions for your airline. Call us at 682 605 1000. Vice President flights to the Chinese mainland, so an integral role in our daily business Or visit www.sabreairlinesolutions.com. 3150 Sabre Drive Renewed its contract for two key Southlake, Texas 76092 products — Sabre ® Dispatch Manager now more than ever, we need reliable, operations and provides the proven United States and Sabre ® Movement Manager — to cutting-edge IT solutions that will foundation we need to maximize Phone: +1 682 605 5333 E-mail: [email protected] help strengthen the airline’s position as enable us to maintain superior ser- organizational success.” a smart. proven. bankable. a leading global hub and the gateway vice,” said Capt. John McCormick, to mainland China. general manager of operations for 2004 Issue No. 2 www.sabreairlinesolutions.com