The Airline IT Trends Survey Executive summary
2012 2012
A joint Airline Business and SITA survey
Foreword The Airline IT Trends Survey, co-sponsored by Airline Business and SITA, is now well established as the leading global benchmarking survey for the airline industry. Now in its 14th year, the 2012 survey represents the views and insights of over half of the top 100 carriers, providing a clear insight into IT strategic thinking and developments for the industry. There were mixed results for airlines over the past year, with some markets and sectors remaining robust while others struggled. High fuel prices and an uncertain economic outlook are keeping the pressure firmly on airlines, particularly in Europe. Against this backdrop, the survey shows cautious optimism on the level of IT investment. IT spend as a proportion of revenue is expected to stay stable in 2012, and only half the respondents expect IT spend in 2013 to increase in absolute terms. Airlines are clear on the increasing importance of mobile phones to communicate with passengers and enable them to purchase tickets and ancillary services, track baggage, and a number of other functions. Mobile devices and social media are seen as key enablers in airlines’ drive towards greater personalisation of service. The Airline IT Trends Survey provides a valuable insight into industry strategic thinking on IT and we appreciate it is only possible through your continuing support. We thank all those who participated in this year’s survey and hope you will continue to support it in the years to come. We welcome any feedback or comments on the survey. For more information on our previous surveys and our sister survey on airport IT Trends, together with all our accompanying features and analysis, visit the Airline Business IT zone at flightglobal.com/ITzone
Francesco Violante Chief Executive Officer SITA
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Max Kingsley-Jones Editor Airline Business
Management and Strategic Issues ❯❯
49%
expect IT spending to increase by 2013
Global economic pressures are evident in the airlines spending outlook for 2012 and beyond. For 2012, the Airline IT Trends Survey shows continued, but cautious, optimism, with stable operational IT&T spend (as % of revenue) compared to last year. Airlines are more guarded about their outlook for 2013, taking into account a significant economic downside risk. Almost half of the airlines surveyed are still expecting their absolute IT spend to rise. However, the percentage of airlines anticipating growth in IT spending has decreased over the last three years.
Operational IT&T spend as % of revenue
1.57%
1.65%
Change in available absolute IT spending
Increase
23% 11%
Decrease
The Same
22%
21%
26%
29%
51%
49%
2012
2013
66%
2011 (actual)
2012 (planned)
2011
*Compared to the previous year
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56% of airlines to make R&D investments in passenger services via social media
The top three investment priorities remain unchanged in 2012. The focus continues to be on investments that ‘improve customer service’ and ‘support revenue opportunities’. ‘Reducing cost of business operations’ is also still a top priority, recognising the value of technology in improving operational efficiency. For a second consecutive year, mobile services for passengers tops the list of investment programs for airlines, with six out of ten planning major investments in the next three years. Upgrades to airline core passenger management and customer relationship systems also draws significant investment for the same time period. Passenger services via social media begins to feature on the agenda this year, with almost 60% of airlines making R&D investments.
Priorities in the IT investment decision - investment drivers
IT&T investment programmes in the next three years
Major programme
Passenger services via mobile device
56% 50% 42%
Customer service/passenger experience
Reducing the cost of business operations
Enabling new market/ revenue opportunity
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58%
Upgrade core passenger management system
55%
Improve customer relationship management e.g. service personalisation
55%
Business Intelligence solutions Expansion of ancillary services Passenger services via social media
R&D/pilot
52% 44% 35%
No plans
35% 22% 33% 28% 38% 56%
6%
23% 12%
20% 18% 9%
Travel Distribution ❯❯
70%
Airlines are continuing to expand their ticket distribution through direct channels. Emerging sales channels such as mobile and social media will have a significant impact on future growth in direct sales.
believe that smart phones will be one of the top two dominant sales channels
In the past, selling on an airline’s website has been crucial to driving the transition to direct distribution. Although sales through airline websites will continue to see growth, selling via smart phones is set to become an almost equally important sales channel in the future. In addition, airlines continue to look for alternative ways to increase control over their direct distribution channels. By 2015, 64% of this year’s respondents plan to have direct connections to third party travel agents.
Dominant channels for direct sales beyond 2015
86%
Website
Direct connection with selected travel agents (excl. GDS)
Currently
By end of 2015
70%
Smart phone app
34%
36% Agent/staff
Social media
Kiosk
No plans
21% 13% 6%
30%
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90%
Nine out of ten airlines are planning to sell tickets via mobile phones by 2015, establishing mobile as a mainstream distribution channel for airline tickets. Growing from zero just a few years ago, mobile phones as a distribution channel are expected to generate significant growth in years to come.
of airlines plan to sell via mobile phones by 2015
The survey also shows a significant increase in the number of ancillary services airlines plan to sell via mobile phones in the future. 83% of airlines have the ambition to sell ancillary service on smart phones by 2015. The list of services sold on mobile phones will replicate the airlines’ website sales functionality.
Ancillary services strategy through direct channels
Sales via mobile phone
By end of 2015
Currently
Airline tickets Ticket modifications
51%
39%
27%
On-board services (seat allocation, meals, etc)
23%
Ticket upgrades
22%
Baggage fees 13%
No plans
55% 56% 57% 61%
10%
Currently
By end of 2015
71%
Airline direct website
No plans
22%
8%
18% 21%
Airline - mobile app/web
26%
57%
17%
21% 26%
Retail services (e.g. in-flight, 11% merchandising)
53%
36%
Lounge access
60%
35%
Airline - kiosk
Airline - social media
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23%
15%
42%
57%
35%
28%
Passenger Operations ❯❯
71%
believe that smart phones will be one of two dominant channels for passenger processing
The survey respondents believe that beyond 2015, websites and mobile phones will be the two dominant channels for processing passengers. Kiosks will continue to play a significant role, with ¾ of airlines increasing the number of check-in kiosks. When it comes to new functionality, however, opinions are split. About half of the respondents do not plan to deploy kiosks for flight transfer or lost baggage reporting. Only 39% of airlines believe kiosks will remain one of the dominant channels to process passengers in the future, highlighting that mobile phones and websites are set to play a more important role for passenger operations in the long-term.
Dominant channels for passenger processing beyond 2015
Smart phone
71%
Website
71%
Emerging kiosk functionality
13%
Agent/Staff
Same
Decrease
No plans
24% 10%
39%
Kiosk
Increase
48%
5%
10%
66% 46%
Social media
53%
37%
3% Bag-tag printing
Lost baggage
Flight transfer
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57%
Nine out of ten airlines plan to engage with passengers through mobiles by 2015, and the adoption of new services provided on mobile phones is speeding up. Airlines believe that smart phones can support most, if not all, customer facing interactions including customer service, commerce, in-flight entertainment and passenger processing.
of airlines believe social media provides the greatest value as a marketing channel
Social media will feature most strongly in promoting services and supporting customer service according to the survey respondents. 57% of airlines believe social media will play a more significant role in the “communication and marketing of service offers”, while fewer airlines see its role in passenger processing (13%) or travel searching (19%).
41%
Plans for social media integration 31%
Plans for mobile service
Implemented
By end of 2015
In evaluation
No plans
24%
27%
Check-in
50%
Send mobile boarding passes to mobile phones
46%
Notification about flight status
23%43%
Missing baggage 10% communication
23% 23%
27%
Access to entertainment on-board on passenger’s own device
32% 25%
18% 10% 15% 15% 24%
43%
25%
Re-booking from irregular operations
Utilise NFC technology for passsenger processing
22%
31% 17% 21%
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Communication & marketing of service offers
57%
Customer service communication
39%
10%
22% 33%
High value
Travel planning
19%
Sales transactions
19%
43% 49%
Passenger processing
13%
33%
Personalisation & Business Intelligence
78% already, or plan to, personalise service offers to their passengers
Almost eight out of ten airlines already, or plan to, ‘personalise’ communication and service offers to their passengers. The current focus is personalisation via the direct distribution channels. Websites, smart phones and social media provide great potential for more personalisation in travel. The richness of data from these channels gives significant opportunities to tailor messages to the specific passengers needs. Service personalisation as well as efficient operation, depends on the availability and analysis of data. The sharing of data between stakeholders becomes essential. In recognition of this dependency, around half of the airlines already share or planning to share data with third parties.
Plans to provide ‘Personalisation’ by 2015
Attitude to share data for better business intelligence Curently
19%
78%
By end of 2015
30% 49%
28%
47%
34% 78%
30% Direct channels
Indirect channels
In-house
Ground service providers
28%
25%
25%
23%
Airport Government operators organisation
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Verbatim Responses The statements below have been selected as they reflect issues or projects frequently mentioned by all respondents in this year’s survey. Please note that these statements are directly taken from the survey responses and reflect the opinions/wording of our respondents. Within your airline what do you consider were the major IT successes of the last 12 months? l Reducing costs, ancillary services, mobile services l Crew rescheduling system delivery. E-ticketing database migration. Departure control system migration l Implemented new MRO, flight operation, customer service and e-commerce all together l Baggage reconciliation system; mobile boarding pass; simplified interline settlement l Data collection and integrity Within your airline what do you consider were the major IT failures of the last 12 months? l Using a consulting firm to effect an IT transformation programme l Lack of integration/coordination across silos l Adapting to social media challenges and opportunities l Securing adequate skilled staff. Improving IT staff remuneration. Procrastination in evaluation of business systems l It has taken longer to scale up the IT organisation and to refresh/renew the skill base in line with what is needed for the future What do you see as the biggest future IT challenges facing your airline? l Integration and business intelligence; resourcing and skills; managing a range of vendors in general cloud/outsource space l IT transformation programme (reduce IT costs while not decreasing the value of delivered services) l Too many projects with limited specified field knowledge and resource of project team staff l Consumerisation of corporate IT l Data warehouse, revamp of e-commerce, enterprise resource planning and more
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Methodology & Further Analysis The survey was first launched in 1999 and comparisons are made where appropriate with previous surveys, although the sample may vary between years. Questionnaires were sent to a senior IT executive in each of the top 200 passenger carriers, including low cost operators, together with carriers representing important players in the regional and leisure sectors during spring 2012. The survey objectives are to monitor key IT trends within the airline industry including: l l l l l
Management/Strategic Issues Travel Distribution Passenger Operations Infrastructure Successes & Challenges
The survey covers the following key questions: l l l l l l
Priorities for investment decisions Key technology investment trends and areas in the next three years Long-term strategy for implementing virtualisation technology Strategy for selling products/services via passengers’ mobile phones Strategy for the integration of social networks Evolution of self-service technology (including via passengers’ mobile phones)
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