Airlines see timid recovery in IT spending

After a grim couple of years, technology investment in airlines appears to be picking up and sector firms are investing in tools to automate processes in the back-end and increase customer satisfaction as well as acquisition.

After a grim couple of years, technology investment in airlines appears to be picking up and sector firms are investing in tools to automate processes in the back-end and increase customer satisfaction as well as acquisition.

According to a survey released by air industry IT provider Sita at its annual congress in Brussels today, 56% of the 129 airlines polled expected technology spend to rise in 2011, while only 10% predicted a decline.

Despite the optimism, the statistics show minimal change in terms of IT operational spend as a proportion of airline revenue, which went from 1.7% for 2009 and this year reached an average 1.8% while capital spend is 1.4%, according to the supplier's figures.

"We see some recovery [in IT spending trends] with little deviation optimism for the coming years," said Juergen Koelle, senior director of portfolio marketing at Sita.

Around the same time last year, the downturn and the consequent collapse in passenger numbers meant technology plans at major European carriers were massively disrupted. For example, the IT budget at British Airways was slashed by 30% and other carriers focused on technology projects geared at cost reduction and efficiency.

"The stabilising budgets and increasing business confidence translates into a change in spending behaviour for airlines away from short-term tactical remedies needed in 2009 and a return towards long-term strategic thinking," said British Airways chief information officer and Sita chair, Paul Coby.


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Key trends for IT in the airline industry

Infrastructure: the study suggests that reducing reliance on physical servers through the use of virtualisation is viewed as a key instrument to meet business requirements as well as reducing cost.

Some 85% of the airlines polled intend to have a full virtual environment by 2013, while 40% already have deployed some virtual infrastructure or will do so in the next couple of years: 73% of respondents are also evaluating the benefits of infrastructure as a service and use of private clouds instead of a public or third-party cloud.

Web: Direct channel sales through the web are expected to jump to 37.9% by 2013, so airlines are investing in improvements in their web set-up.

Web initiatives cited by those surveyed include online shopping tools (61% have already implemented this); change/cancel/rebook (52%); and frequent flyer redemption functionality (51%).

The need to introduce multichannel functionality to increasingly tech-savvy customers in a key motivation for focusing on those areas and airlines want to reduce the number of passengers checked-in through traditional agents from 50.7% to 28.9% by 2013.

Mobile: In order to enable that change, web check-in options will increase from the current 21.6% to 35.5% in 2013 and uptake of mobile check-in, with options such as mobile-based boarding passes and flight notifications, will increase from the current 28% to 70% by 2013.

"Airlines are investing in IT to provide richer functionality to their online customers and creating additional channels to market in order to increase the level of direct sales now that online distribution is almost universal," said Sita chief executive, Francesco Violante.

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