American Airlines looks to defer IT spending

American Airlines plans to examine what IT projects it can defer in the current tough economic climate and intends to focus its IT spending on systems that can improve security.

          American Airlines plans to examine what IT projects it can defer in the current tough economic climate and intends to focus its IT spending on systems that can improve security.

          Mary Frances Fagan, a spokeswoman for Fort Worth, Texas-based American Airlines, a subsidiary of AMR, says technology remains important despite the downturn in traffic and revenue in the wake of the September 11 terrorist attacks.

          "But we are taking a look at what can be deferred and what can be done now," Fagan says. She adds that the carrier wants to focus its spending on new IT projects that enhance security.

          Last week United Air Lines, in Oak Brook, Illinois, said it plans to defer any future IT spending.

          IBM's Global Travel and Transportation division, which provides IT support services for a number of airlines, including Montreal-based Air Canada and Cathay Pacific Airways of Hong Kong, has seen a shift toward security in airline IT priorities, says spokeswoman Linda Hanson.

          "Airlines today are obviously focusing on security and cost savings. However, it's really too early to comment on our airline customers' IT spending plans. IBM is working closely with all its airline industry customers to meet all the new security mandates," she says.

          Barbara Gomolski, an analyst at Gartner in Stamford, Connecticut, says that before September 11, she had projected that airlines would spend 7% of their gross revenues on IT. In the case of large carriers with revenue at about $US2 billion a year, that represents spending of about $US140 million a year.

          Carriers seeking to conserve their slim financial resources by deferring IT spending could only cut back spending on new equipment and projects, which amounts to about 25% of the IT budget, or about $US35 million per year, according to Gomolski. The other 75% of any airline's IT budget represents what she called "sunk costs," or spending required to operate and maintain systems, and depreciation.

          American has slowly started to reactivate systems that help customers thread more quickly through long airport lines, including self-service check-in kiosks, Fagan says. The carrier reactivated self-service kiosks at its Chicago hub September 30 and plans to offer that service systemwide in "the near future," Fagan says, although she couldn't provide a specific time frame.

          Despite increased security requirements, Northwest Airlines in Minneapolis remains bullish on alternative check-in technologies, such as wireless and web check-in and self-ticketing kiosks, according to spokeswoman Mary Beth Schubert.

          On Monday, Seattle-based Alaska Airlines started offering web check-in and plans to reactivate wireless check-in next week.

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Tags IT spending

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