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IBM Global Business Services

IBM Institute for Business Value quick read

Aviation 2010Achieving e iciency and di erentiation in turbulent times

Research by IBM, which includedinterviewing 20 leading airlines andairports in the United States, Europeand Asia Paci c, has identi ed the threeattributes with the most potential toenhance the aviation industry’s customer

image and pro tability over the nextthree to ve years. They include cost-e ective solutions that give customersbetter service and more control overtheir journeys, an agile in rastructurethat can be scaled up or down toaccommodate fuctuations in demandand greater collaboration amongpartnering airlines – as well as betweenairlines and airports.

The study shows that although some o

the challenges airlines and airports acedi er, there are some common areas oconcern. These can be clustered intothree broad categories: rising costs,constraints on revenue growth andincreasingly dissatis ed customers(See Figure). Most airlines have madestrenuous e orts to reduce their costs,but soaring uel prices and increasedsecurity requirements have outweighed

these savings. Restrictions on theindustry’s expansion have constrainedgrowth and exacerbated these problems.This results in a level o customersatis action lower than in almost anyother industry.

The traditional network airlines andlow-cost carriers have responded tothese pressures by borrowing rom each

other’s best practices. Most networkairlines have reduced their ares,increased the number o direct fightsand moved toward more uel-e cientaircra t. Conversely, most low-costcarriers have expanded the servicesthey o er to attract business travelersand extend their market reach.

O paramount importance, though, isthe ability to deliver a di erentiatedpassenger experience that is alsooperationally e cient. Three eatures,in particular, are vital: services thatgive customers more control over theirjourneys, an in rastructure that can be

easily changed to cope with variationsin demand and greater collaborationamong travel providers. IBM hasidenti ed ve technological innovations

Airlines and airports ace escalating costs, revenue growth constraints

and an increasingly dissatisfed customer base. To regain lost customer confdence and provide or more operating e fciency, airlines and airports should collaborate to establish a scalable, agile in rastructure that enables a more positive and di erentiated passenger experience.

Travel and

Transportatio

Security costs

Rising fuel costs

Introduction of new aircraft types

Workforce management

Customer self service

Expansion restrictions

Downward pricing pressure

LCC competition

2.0 2.5 3.0 3.5 4.0 4.5 5.0

Average impact of trend (1= no impact, 5= very high impact).

AverageAirlinesAirports

Risingcosts

Customer

satisfaction

Revenueconstraints

Source: IBM Aviation 2010 Survey, November 2006

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that can help the aviation industrydeliver these eatures – innovations thatare practical to implement and able togenerate the higher returns by optimizing

capital resources, reducing costs andenhancing the customer experience.

• Sel -service solutions: Sel servicebegan as a cost-cutting measure,but has now become a way o givingpassengers the choice and controlthey expect. Close cooperation amongtravel providers is essential to deliverend-to-end service – as is a sharedin rastructure to broaden the rangeo sel -service solutions that can be

o ered while reducing the costs oproviding them.

• Integrated baggage handling: Ithe aviation industry is to manageincreasing passenger loads andsecurity requirements while reducingcosts, it must start by reducing theirregularity rate. That, in turn, meansairlines and airports must worktogether more e ectively by mergingtheir IT systems and processes, use

electronic tracking technologies suchas radio requency identi cation (RFID)and re ne their business models byproviding à la carte baggage services.

• Shared services: The aviationindustry has considerable experiencewith outsourcing, but it is muchless accustomed to using sharedservices. There are three levels oservice sharing. The most advancedenables multiple organizations to

share commodity applications anddramatically reduce their in rastructurecosts. The intermediate is commonservice hosting, which allows dedicatedapplications to be used jointly bypartners and other clients. The leastadvanced, and most common today,is traditional application hosting,

which enables multiple clients to usecommodity applications or a per-usecharge. Overall, airlines and airpor tsneed to move toward less ownership

o resources and more sharing,partnering and outsourcing o assetsto increase fexibility and reduce costs.

• Modular, fexible airport operating systems: I airports are to keep upwith the growth in travel, improve thee ciency o air tra c and streamlinepassengers’ transit, they will have toimprove their operating systems. Theywill need to adopt a modular, fexiblearchitecture that can receive and route

operational data to multiple pointswithin the network, such as fightin ormation display systems, groundcrew systems and catering systems.

• New security technologies: Thegrowing threat o terrorism has resultedin the introduction o more rigorousborder controls and sa ety procedures,but the long queues that o tenarise are rustrating or passengers.Fortunately, widespread adoption

o emerging identity managementsolutions will change how passengersare screened and ease the securityprocess. We anticipate that ngerprintrecognition systems, automateddocument identi cation systemsand Web technologies that connectcustoms, airlines and airports will beincreasingly used over the next one totwo years. Wireless technologies thatconnect customs, airlines and airports,

and iris-scanning technologies will beincreasingly used within the next twoto three years. And acial-recognitiontechnologies, closed-circuit TVsurveillance and data analysissystems or pre-screening passengerswill be more widely adopted by theindustry in 2012.

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IBM Global ServicesRoute 100Somers, NY 10589U.S.A.

Produced in the United States o America05-07All Rights Reserved

IBM and the IBM logo are trademarks orregistered trademarks o International BusinessMachines Corporation in the United States, othercountries, or both.

Other company, products and service namesmay be trademarks or service marks o others.

Re erences in this publication to IBM productsand services do not imply that IBM intends tomake them available in all countries in whichIBM operates.

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For more information, please visitibm.com /travel or contact Charles

Vincent at charles.vincent@nl.ibm.com orBrian O'Rourke at beorourk@us.ibm.com

AuthorsCharles Vincent, Travel andTransportation Partner, IBM GlobalBusiness Services, Europe Southwest

Jordan Strik, Business StrategyConsultant, IBM Global BusinessServices

Maureen Stancik Boyce, DistributionSector Team Lead, IBM Institute orBusiness Value

Douglas Polizzi, Strategy and ChangeConsultant, Corporate BusinessStrategy, IBM Marketing