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This essay throws light on the use of ICT in the airline industry and what impacts developments in ICT have made on the said industry. The essay highlights the role of ICTs in enhancing airline’s capability to interact with customers, reducing the operational costs, increasing the convenience for making reservations, managing air traffic, administering the crew and airport staff, improving the passenger’s in-flight experience, maximizing airline’s revenue by variable fares, improving security standards, promoting partnerships and alliances among airlines, integrating value added services. It has been argued that automation increases efficiency but human factor is yet very important in personifying the customer experience.
Introduction to the Airline Industry
An airline provides air transport services for passengers and/or freight. Commercial operations of airlines date back to early 1900s, however, evidence of increase in operations is found after
World War I. Over the years, airline as an industry has grown tremendously. It has facilitated economic growth, world trade, foreign investment, tourism and has played a significant role in globalization of industries.
Full-service airlines have a high level of fixed and operating costs in order to establish and maintain air services: labor, fuel, airplanes, engines, spares and parts, IT services and networks, airport equipment, airport handling services, sales distribution, catering, training, aviation insurance etc. Keeping in view such high costs and complex nature of operations, it is essential for airline companies to take advantage of ICTs to carry out operations smoothly and optimize expenses.
Use of ICT in the Airline Industry
Technology is dramatically and profoundly changing the nature of services. Technology is also profoundly changing how services are delivered, and it is enabling both customers and employees to get and provide better, more efficient, customized services. These changes have significant implications for managing service operations as well as for predicting and managing consumer behavior.
Impact of Developments of ICT on Operations of Airline Industry
In the text below, major operations of the airline and airports have been discussed. It has been analyzed that how the developments in the ICT have impacted the processes of the said industry. The developments in the ICT have significantly influenced the way Airlines interact with customer, develop loyalty programmes and implement customer retention strategies. Few developments to enhance the passengers’ in-flight experience have also been made.
Interaction with Customers
The proliferation of internet and World Wide Web has made it enormously convenient for the organizations to interact with their customers. Internet has provided a very economical way of interacting with customers, has reduced distribution costs, and has increased the profit margin by direct selling. Internet has also served as a purveyor of information about travel. Carriers everywhere have embraced online ticket sales as a means of reducing distribution costs. Travelers now have the opportunity and convenience to compare price and service offerings of all airlines quickly and efficiently, and to act on those comparisons instantly with only a few keystrokes.
McIvor et al. (2003), present analysis of four airline companies and their use of internet to provide innovative interaction and transactional mechanisms with customers. They state that internet has increased the expectations of customers for the services and service delivery. In fact, the internet has become essential to the strategic development of the airline companies. They further argue that the scope and boundaries of the airline industry have become less clear as a result of the adoption of internet technologies at the customer interface. The offering of a range of products and services is creating industry convergence. Exploitation of the internet at the customer interface has become a key catalyst in the transformation of the airline industry.
In the past, airlines have been selling their product (i.e. an airline seat) through travel agents. The travel agent’s competitive position was based on exploiting the information insufficiency at the customer end. However, nowadays, the website of the Airline makes customer autonomous to decide on the fares, routes and various services associated. The internet enables airlines to build a direct and superior relationship with customers.
In this era, the airline’s site support complete automation of the booking process and limits the need for human intervention. Airlines are extensively investing and utilizing the Internet to further undermine the travel agents which has also resulted in improved process efficiency. Furthermore, removal of the travel agent layer has reduced transaction costs and has enhanced the relationship with customer through the provision of more detailed and up-to-date information.
Customer Retention and Airline Loyalty Programmes
The cost of developing a new customer is several times higher than the cost of keeping an existing customer. With the increasingly fierce market competition, companies would like to retain their existing customers as much as possible. Fan (2007), state that “competition has changed gradually from price of products and services to grasping customers”. Only those companies that can more precisely understand customers’ demands, more quickly respond to the changing needs and can improve customer satisfaction and loyalty can win the competition. Customer Relationship Management (CRM) has become particularly important in this age. Data mining technology, as the founding base of CRM, can help the airlines to effectively capture valuable information about passengers from extensive information available in their databases, which is essential for making strategic marketing decisions.
McIvor (2003), state that through sophisticated Information Systems available now, it has become possible to automatically inform staff about customer preferences such as aisle seats or in-flight entertainment. Previously, such information may have been collected but not used to enhance the needs of their most profitable customers.
CRM and Data Mining allow companies to target groups effectively, and allocate marketing resources to best effect. As is shown in 80/20 rule, 80% of sales of a company come from 20% of its clients, it is essential to conduct customer segmentation and find those 20% of high-value customers. Zhang and Chen (2009), state that in order to better ensure continued profitability it is necessary to keep customer satisfied. Through a lot of accumulation of data on passenger satisfaction surveys, using data mining technology such as principal component analysis, factor analysis to identify the main influencing factors of passenger satisfaction, as well as the relative importance of various factors can help airlines make improvements, enhance the overall customer service levels and the competitiveness of companies.
McIvor et al. (2003), further state that Airline loyalty programmes have been the major means of keeping customers to a particular airline. Airline loyalty programmes provide significant value to customers. Airlines are now associating their Loyalty Programmes with the complementary products and services such as car rentals and hotel accommodations. In fact, the airlines are attempting to create a one-stop shopping experience for the customer with all the required travel products and services available on-line. With the provision of these complementary services, airlines have enhanced value of the core service.
It is, therefore, very important to take full advantage of the data mining and other modern information technology to identify the valuable information about the customers buying pattern and choices and address them in timely fashion to provide more personalized service which will ultimately improve passenger satisfaction and loyalty.
Operations and Business Intelligence
Negash and Gray (2008), discuss the case of “Continental Airlines”. They state it as the seventh largest airline in the world with 2300 daily flights to over 200 destinations. An airline, as big as this, and requiring decisions about each take-off and landing, each passenger’s fare, ground operations, detecting fraud, security and customer relations, need for a ICT based intelligent business model was indispensable.
In 1998 they implemented a real-time data warehouse and began their climb to being a top airline. For example, they integrated customer information, finance, flight information, seat inventory, and security to improve revenue. The warehouse data also allowed them to spot travel agent fraud.
They moved forward from there to real-time applications. For example, they began using optimization techniques to design fares based on current demand; they gave their gate agents and flight attendants details on customer experiences on previous flight segments and flights; if a connecting flight was late, they used dashboard displays so their high-value customers would be helped in making connections for themselves and for their baggage.
To make all this work, Continental built an 8 terabyte real-time data warehouse (called an operational data store or ODS) that coordinated 25 internal and two external operational systems. These systems include both Web and desktop BI.
The advancement in technology has enabled Airlines to enhance the passenger’s travelling experience. Back in early 1920s, Aeromarine Airways pioneered in the digital entertainment of passengers by showing a movie during the flight. Since then, digital technologies have evolved from single shared screen to individual screens offering variety of infotainment stuff such as movies, games, news, flight information, weather information etc.
Furthermore, as reported by Nelson (2010), in-flight WiFi internet access was made available to passenger in 2008 by American Airlines after the test in 2005. The capability of providing internet facility during the flight has phenomenal impacts and lets the passenger stay in touch with the world even on the go.
As discussed in essay, opportunity for in-flight WiFi access still exists. Few major airlines, like
American Airlines, have already provided this facility on certain airlines. Provision of the internet and staying in touch during the longer hours travel will have considerable implications and will be great source of providing competitive edge.
Furthermore, reported by HotHardware, BlueBox Avionics is aiming to integrate iPad into their next in-flight entertainment solution. Whether or not they integrate the iPad to the back of the passenger’s seat, distributing the iPad among the passengers during a long flight will certainly enhance the passenger’s experience. iPad certainly provides a much richer entertainment as compared to currently installed display screens.
The evidence presented in this article has illustrated how the Internet represents a powerful technology for commerce and communication between customers and airline companies. The Internet clearly enables the customer to move from being a passive participant to that of being proactive and more sophisticated in their relationship with airlines.
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