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Lufthansa IT services arm transforms to meet customer demands
IT supplier Lufthansa Systems is changing its business model as its airline customers invest in digital technologies
IT services supplier Lufthansa Systems is transforming its business and delivery model to meet the changing needs of its airline customers.
IT investments in the airline industry were traditionally made in core operational systems, but the arrival of digital technology such as mobile is changing IT priorities in the industry.
Lufthansa Systems, the IT services subsidiary of German carrier Lufthansa, is increasingly supporting the digital journeys of its 300-plus customers and in the process is transforming its own business model.
Set up in 1995 Lufthansa Systems traditionally supplies the systems required for airlines to operate. These include management systems that model demand, ticketing and schedule management systems.
Lufthansa Systems CEO Stefan Auerbach tells Computer Weekly that while operational systems will stay relevant for decades, particularly as airline groups standardise them across their different businesses, growth is coming from demand for digital services.
“All the airlines we are working with are thinking about their digital strategy without exception, but there is a varied degree of understanding of it,” he says. “Lufthansa [the airline] has invested a lot in these digital systems and there are others that also have, such as Delta and KLM. Ryanair is also doing a lot in-house."
Auerbach adds that the digital part of Lufthansa Systems’ business is developing much more rapidly than the traditional part and will eventually become bigger. “The digitisation of certain airline internal processes by using technology like mobile is happening across the board,” he says.
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But it goes beyond improving operations through digital with airlines investing in new services being driven by customer demand such as the connected aircraft. “Most of the customers have at least one mobile device and they want to stay connected,” says Auerbach. “Services being developed by Lufthansa Systems include apps providing customers with content such as video, audio and gaming content.”
For example, BoardConnect is a wireless service for customers that enables them to use their own devices to access entertainment, rather than the inferior devices on the aircraft. “This is the first example of us targeting the customer and moving into a business to consumer model from our traditional business to business model,” says Auerbach.
Other developments include an individual flight planning app which will come to market soon when testing is finished. This enables passengers to make better use of their time when travelling by providing real-time information about things such as airport traffic and how busy security is.
But perhaps more appealing to cost-conscious airlines is the work Lufthansa Systems is doing around predictive analytics, through its Zero-G subsidiary. The huge volumes of data being produced by aircraft can be used by operators to be more efficient and safer. “For example, the global [Boeing] 787 fleet is producing 40 petabytes of data every hour,” says Auerbach.
The Zero-G arm can use the data to predict delays and shortages of airspace. This can help airlines optimise their routes and save money on fuel, which is the biggest overhead for an airline. “Airlines can save multimillions of pounds by cutting fuel by a small percentage,” says Auerbach.
But to offer digital services such as these, Lufthansa Systems needed a new approach. It decided to outsource development of this type of application and access agile development resources, and it agreed a strategic partnership with India-based Nagarro.
This was an effective way of increasing its digital work without hindering its traditional airline operating systems business. “We are not looking for the classical Indian outsourcing model, but we need specific skills,” says Auerbach.
Nagarro was set up in Silicon Valley in 1996. Although it has grown to more than 3,500 people globally, Lufthansa was attracted by its startup mindset.