Analysts urge USAir to resist IT cutbacks

Plans by US Airways Group to file for Chapter 11 bankruptcy protection could jeapordise IT investment that is vital to enable the...

Plans by US Airways Group to file for Chapter 11 bankruptcy protection could jeapordise IT investment that is vital to enable the company to increase revenues, according to analysts.

Officials at the company said the airline is not involved in any significant IT projects that would place a financial drain on the company. However by doing so the company is losing the opportunity to cut costs or increase revenues.

"The reality is that the impact [of the airline industry's financial downturn] is like a cold shower. I can't imagine any major airlines making any significant investments in IT right now, let alone other areas of their organisations," said Philip Wolf, president and chief executive of travel strategy and research firm PhoCusWright.

USAir does "need to invest in key IT programs aimed at helping them reduce their costs," said Henry Harteveldt, an analyst at Forrester Research. For instance, USAir is one of the few major carriers that does not send wireless electronic flight alerts to passengers notifying them about departure or arrival delays. Such a system could save USAir up to $500,000 (£325,191) annually in costs, Harteveldt said..

In addition, USAir and other carriers would be wise to consider Orbitz LLC's upcoming Web-based service, Harteveldt said. The service would provide a conduit for travel agents to book flights directly and prevent airlines from having to use more expensive global distribution systems (GDS) such as that of Sabre Holdings, he said.

According to Harteveldt, the top nine carriers in the USA last year collectively spent $1.4 billion to $1.7 billion in booking fees through GDSs - paying $12 to $17 per transaction, in addition to fees they have to pay GDSs for cancelled flights.

Harteveldt estimates that USAir spent $225 million to $250 million in booking fees to GDSs last year. Chicago-based Orbitz, which has yet to announce when its system will launch, expects to have three to five major carriers using the system by year's end, he said.

"Academically, one could argue that this is the perfect time to automate and upgrade," said Wolf. "But I think long term it is very difficult for many airlines right now. They have to focus on their customers, keeping their costs down and managing their yields."

It is for those very reasons that Harteveldt said he believes USAir needs to ensure that it has the right revenue management, yield management and customer relationship management systems in place to properly segment its customers and offer flight packages based on their travel histories.

"It's imperative for the bean counters to resist cutting back on spending for IT," Harteveldt said, "since it can lead to a more efficient airline."

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