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A MAGAZINE FOR EXECUTIVES OCTOBER 2003

T a k i n g y o u r a i r l i n e t o n e w h e i g h t s

EXTREME AIRLINE MANAGEMEN T A conversation with … David Siegel, CEO, US Airways

INSID E

Traditional carriers launch low-fare subsidiaries

How weathered "the perfect storm"

Cathay Pacific Airways’ crisis management process

© 2009 Inc. All rights reserved. [email protected] regional regional Asia/Pacific

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

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

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