Airlines see IT as recovery tool

FRAMINGHAM (09/29/2003) - A recent survey of airline carriers shows that while the industry overall remains focused on cutting costs, investment in IT has increased slightly as operators recognize IT as critical to future profitability.

The Airline IT Trend Survey, the results of which were released last week, was conducted during the first half of 2003 and includes responses from 107 carriers. The respondents include airlines in the top 200 mainline carriers, as well as key players in cargo, charter and regional markets. The firth annual survey was conducted by SITA and Airline Business magazine.

Among the results, the survey shows that recovery for the airline industry will almost depend on IT to help companies cut costs. Lack of investment, scarcity of skilled people and a lack of board support are the top obstacles, consistently reported over several years. On the whole investment appears to have held firm, but actions have been taken to tighten control on expenditure with some projects being deferred. The optimism for increased budgets has gone as most respondents feel they will get the same or less in future.

More than 20 percent of respondents said they planned to spend 3 percent of their revenue on IT and telecommunications, and another 32 percent planned to spend just 2 percent. While spending plans are down, respondents agreed that not investing in IT is not an option. And as far as the type of IT projects to invest in, the IT function must help transform airlines -- improving operational efficiencies - with technology and processes. Airlines must change they way they handle IT, the survey says.

The survey shows airlines will continue to outsource airline specific applications; some 50 percent already do, and another 4 percent plan to in the next two years. Web hosting, network management and desktop management are also considered prime IT tasks for outsourcing. Also, 83 percent of the industry using application service providers for applications such as reservations, departure control/check-in and cargo reservations. These areas, plus frequent flyer applications and revenue accounting, will most like grow in the next couple of years, the survey says.

More survey results show that:

- By the end of this year 25 percent of airlines will offer e-mail and 22 percent SMS services to passengers onboard their aircraft.

- More than 4,980 aircraft, about 43 percent of the world's commercial fleet, are flying with some form of In-Flight Entertainment (IFE), and approximately 3,300 aircraft have satellite communications ability.

-Direct ticket sales through airline branded Web sites have doubled in the last 12 months to be worth approximately $50 billion per year and account for around 10 percent of total airline ticket sales.

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