Airlines have been among the first companies to feel the full
economic impact of the September terrorist attacks. The industry is
contracting and IT projects - and the staff working on them - will
assume a different value to the business
As the crisis in the airline industry deepens IT staff in the
sector face a nerve-wracking future. Since the terrorist attacks on
the US on 11 September, the major airlines have slashed more than
100,000 jobs worldwide in response to a slump in passenger demand.
And IT staff are not immune to the cuts. Last week it emerged that
hundreds of IT staff at British Airways were the latest economic
victims of the attacks when the airline announced 7,000 job cuts
worldwide.
Other airlines, such as Swissair, have collapsed altogether and
their survival is on a knife-edge. The fate of IT staff at
Swissair's information technology division, Atraxis, largely hinges
on merger talks with the technology division of German airline
Lufthansa.
It is difficult to judge whether the industry's contraction is
solely the result of the terrorist atrocities, or whether events
have simply exacerbated already poor economic conditions, but the
result for IT staff may be the same. Industry analysts have warned
them to brace themselves for wider change as non-essential projects
are mothballed and priorities are reassessed.
On a more upbeat note, however, closer co-operation between
airlines for IT development is expected in the drive to reduce
costs and streamline operations. The crisis is also likely to
accelerate the move towards outsourcing and raise the profile of
customer relationship management (CRM) technology. But in the short
term the key question is which IT staff will survive the job cuts.
The airlines remain tight-lipped on the question but in a statement
Virgin Atlantic said that some areas of its IT budget would be
reprioritised after a business-wide review of expenditure.
It added that e-commerce, "process optimisation" and CRM projects
were its three main areas of focus.
Industry experts believe that employees with traditional skills,
such as knowledge of legacy systems, will be in the strongest
position when managers decide who to keep. In the short term, at
least for the next year, airlines will be keen to improve
efficiency by maintaining and tweaking the performance of core
systems, rather than ploughing money into cutting-edge e-business
systems.
"Airlines will be dependent on core skills, such as knowledge of
existing systems," said Chris Wright, senior manager, for advisory
services at KPMG, specialising in the aviation industry. "In the
short term airlines will be looking to retain people with mainframe
and legacy skills."
"IT staff will be doing more work on maintaining existing systems.
For example if airlines are not going down the e-procurement route
they may have to develop existing procurement systems."
IT staff who survive the downsizing will also see their
departments' budgets cut.
E-business projects that fall into the nice-to-have category,
rather than must-have, are likely to be ditched first. Staff may
also be told to work on other projects that have been given a
higher priority. Processes and systems will be relentlessly
re-engineered in the drive to strip costs out of the business.
But airlines are going much further than cutting state of the art
e-business projects, according to industry insiders. "I know of a
number of medium-term data protection projects which have been
postponed," said Wright. "I also know of one major SAP project
which has been put on hold. I'm helping the client to review the
project. Even medium-term essential projects are being put on
hold."
There is also likely to be more emphasis placed on information
sharing and co-operation between airline IT departments as the main
players strive to cut costs. Dubbed "co-sourcing" this could see
the airlines co-operating to develop systems such as reservation or
revenue accounting systems. While airlines have already formed
marketing alliances, notably One World and Star Alliance, there has
been relatively little co-operation over technology to benefit all
of the industry.
Outsourcing will also take off over the next few nervous years,
according to industry analysts, as airlines look to cut costs and
concentrate on their core business. A handful of dominant suppliers
in the sector, such as Galileo and Amadeus, could run back-end
services for airlines. Last year, for example, British Airways
outsourced its reservation system to Amadeus. Other suppliers, such
as IBM and EDS are well placed to cash in on an outsourcing boom.
Electronic tickets will also be a key tool in the drive to cut
costs during the slump.
A key challenge here for IT departments is ensure the
interoperability of electronic ticketing between airlines. But to
retain business airlines will have to make better use of
information on their customer databases. CRM technology will allow
airlines to sharpen their e-mail marketing campaigns. The
technology is well established in the airline industry, dating back
10 years to the push to attract customers in the aftermath of the
Gulf War.
"CRM in its purer form will become absolutely essential in the
retention of high value and frequent business flyers," said Mark
Raskino, e-business research director at analyst firm Gartner
Europe.
"The key word will definitely be retention," he said. "[It will]
involve using loyalty programme data, with the Web, e-mail and call
centres. IT staff within airlines will be redeployed. Most airlines
have advanced customer databases that they have been building and
running for more than a decade."
IT workers in the airline industry face an uncomfortable year. The
job losses are likely to continue and IT staff will not be immune.
IT projects, particularly more ambitious e-business initiatives,
will be shelved or mothballed. Budgets will be cut.
But the crisis could also breathe new impetus into the state of
technology. Industry experts have predicted that the drive to cut
costs will encourage more technology joint ventures among carriers
and raise the profile of CRM software.
Flexible IT staff should not find themselves grounded.
How the changes will affect airline IT
- Traditional skills and experience in legacy systems are likely
to be in demand as companies concentrate on making the most of
existing kit
- E-business projects may be sidelined but e-business skills will
continue to be sought-after. Experience in developing corporate
intranet sites will be particularly useful
- Customer relationship management technology is set to dominate
marketing strategies. Knowledge of e-mail marketing campaigns and
customer databases will be invaluable
- IT staff will need to be prepared to be moved to another
project or section of the IT department and expect re-engineering
of existing IT systems to cut costs and boost efficiency
- The rise of outsourcing is set to continue in the industry,
which could mean transfer to a third party supplier
- Redundant IT staff should consider working for a low-cost
airline - they are investing heavily in Web-based technology for
sales and marketing.
nick.huber@rbi.co.uk