by Giles Nelson

Technology innovation and efficiency is taking off at airlines

Apr 07, 2010
IT StrategyTelecommunications IndustryTransportation and Logistics Industry

For the last 10 years, the airline industry seems to have been under constant and intense pressure. Terrorism, oil prices, recession, restrictive regulation and industrial relations have all taken their toll. In addition, traditional airlines have had to transform their businesses because of competition from low-cost carriers.

Information technology has multiple roles in helping airlines. IT is leading to greater operational efficiencies in, for example, the case of self-service check-in which effectively outsources this function to customers themselves thereby reducing staffing costs (check-in is seen by many to be a superfluous process which will disappear altogether shortly). Margins can be increased by more intelligent and responsive ways of pricing tickets to match market demand – so-called revenue management.

Perhaps most interestingly, IT is crucial to the carriers providing extra peripheral services targeted and personalised for the individual customer. More and more of these involve mobile technology with applications which go way beyond a customer being sent a text message when online check-in is open.

An interesting project I’ve recently been involved with is the launch of the airline industry’s first real-time, location and interest-based social networking service. Launched by Lufthansa, MemberScout enables its users, who are members of Lufthansa’s loyalty programme, to receive personalised information from the airline as well as to share and exchange information with other MemberScout users. The mobile application has been designed to support Lufthansa’s customer relationship strategy, but as well as using it to better communicate with its customers, it has been designed as a ‘member-helps-member’ service. The vision is to help frequent flyers connect with each other and benefit from peer-group advice. A few examples may help illustrate this. Let’s say I’m in the airport longue waiting for a delayed flight. I can use MemberScout to identify other people in the same location who share some of my interests – perhaps they also work in the software industry or share an interest in sailing. After I land I may be want to see if there’s anyone travelling to approximately the same destination as me and is currently standing in the taxi queue, so we can share. Perhaps I lost track of the time and am at risk of not catching my flight – the airline can send me a message warning me or, alternatively, use my location to send someone to find me. This not only benefits the passenger but operationally can help avoid delays by preventing the removal of the passenger’s bags from the aircraft. The possibilities are many. The application, available for iPhones and Blackberry mobile devices, was developed by a partner organisation, match2blue.

As I’ve said before in this column, I do believe that this year will see location based services become mainstream. It is good to see an organisation such as Lufthansa embracing them and, already since its launch in March, MemberScout has been downloaded 10,000 times.

There are other applications of event based technology – this time to drive both operational efficiencies as well as improving customer service. A partnership involving Airbus and EADS is looking at using radio frequency identification technology (RFID) to make the process of airline meal ordering more efficient and more personalised. Delivering, for example, up to 800 meals to 15 kitchens on an Airbus A380 is a complex task. If the meal creation and delivery process can be shortened and delivery made more accurate then a wider range of meal options can be given and customers can select these as they check-in. In principle, even àl a carte options could be given. RFID equipped equipment enables far more accurate identification of where equipment is and what meals a particular trolley has on it. Operational staff can be given a continual view of the supply chain resulting in shorter times from preparation to aircraft, more accuracy about galley placement and less waste.

Other examples are to do with operations. One example is handling the transfer of passengers and baggage from one flight to another. By tying together information from multiple different systems, immediate insight can be gained into where this process becomes delayed. Flight movements, data on customers (for example knowing who the platinum card holders are) and baggage movement data can be combined to give an integrated view. In this way, high value passengers can be targeted for help and transfer delays can be detected and predicted leading to problems being tackled immediately they become apparent.

Many airlines are continually looking at the ways in which they use IT better, not just to drive out costs, but how it can be used to provide more personalised information to customers. IT is becoming a strategic lynchpin upon which airlines can understand their operations better, keep margins higher and communicate better with their customers. In short, technology is helping the airline industry survive through this very tough period.