Airlines ripe for IT dogfight

Australia's airline industry is set for a shakeout as newer players rapidly gain ground in the efficiency stakes at the expense of their legacy-bound competitors, IT managers and analysts predict.

And the competitive climate which saw a struggling Compass fail has passed, IT managers say. The new entrants are much more likely to have the advantage over industry incumbents.

"The state of airline technology is very cumbersome," said an IT manager at new entrant Impulse Airlines. "It's ugly."

He added that it wasn't simply competitive pressures that drove Compass out of the industry, but IT-related problems.

"With Compass, a major part of the problem was that it was using Ansett's booking system, and it was not getting the help it needed [with that system]," he told Computerworld.

"You need a major training course to purchase a ticket using [Ansett's] system."

The new Australian airlines are confident they are ahead of the game with no legacy systems to integrate and a clean slate to implement cost-saving technology such as e-ticketing.

"We can come in and set up our systems from scratch," said John Hughes, strategic project manager at Virgin Blue, Australia's newest entrant.

Impulse Airlines uses Hewlett-Packard's Open Skies product, which the carrier's IT manager describes as "much more logical and usable than proprietary systems". Virgin Blue is also using Open Skies.

"Open Skies is targeted at lower-fare carriers; it is ticket-less which affords us major efficiency gains," Hughes said.

"A ticket is handled 10 to 12 times before it makes its way back to the airline," he said. "By reducing that handling, we can realise huge cost savings."

And analysts agree the airline industry will experience a shakeout with new systems that can streamline ticketing, sell directly to customers online, tailor travel to a customer's specific needs and eliminate waste within ticket costs. Nawal Taneja, chairman of Ohio State University's aerospace and aviation program, said: "You don't even know how much power is shifting to the customer because of this."

"The margins are going to come down like the industry won't believe." Taneja said IT leaders in the industry will find ways to provide more convenient methods for passengers to interact with the airlines.

Hughes agreed and predicted the airline industry will see margins plummet. He added the industry will also standardise to TCP/IP before long, saying "it has become the standard communications protocol.

"IT gives airlines the ability to communicate more effectively both internally and externally," he said.

Impulse's IT manger agreed, saying: "IT is super-critical. We were already taking 20 per cent of our bookings via the Internet from the day we started operating."

Virgin Blue will also use QSI Payments technology for integrated e-payments with the flight booking system.

"The secure payment architecture that can scale as volumes increase will let Virgin Blue offer customers a variety of payment methods and ease of payment when booking flights," Hughes said.

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More about AnsettHewlett-Packard AustraliaImpulse AirlinesLogicalQSI PaymentsVirgin Blue

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