Airlines Report Hike In IT Spend

Airlines carrying 57% of the world’s passenger traffic have reported a real increase in IT and Telecommunications (IT&T) expenditure and are ready to spend big on passenger mobile services and other transformative technology, according to results of the 13th annual SITA/Airline Business Airline IT Trends Survey.

Overall, operational IT&T spending has remained stable at 1.8% but this represents a significant increase in actual expenditure following a return to profitability in the last 12 months after two years of recession.

Compared with 2010, 50% of airlines are reporting an increase in total IT&T spend while 32% report no change and 18% state there has been a decrease.

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Despite concerns about market conditions and fuel prices, the outlook for 2012 is also positive with 54% of survey respondents expecting budgets to increase, and 29% expecting them to remain the same. 91% of airlines plan to invest in passenger mobile services and 93% are prioritising virtualisation technology.

Paul Coby, Chair of the Board, SITA, said: “I see IT spend as the barometer of overall air transport industry confidence. Passenger numbers and revenues are picking up, so we are seeing airlines focus precious investment funds on the areas that really make a strategic difference - like IT. Airline IT departments are delivering major transformational initiatives using advanced applications for areas like revenue management and optimising load factors.”

Virtualisation and cloud computing are going to be critical for both IT efficiency and managing cost. 93% of this year’s survey respondents plan to implement virtualisation technologies. Survey respondents are also telling us of their success in pushing more traffic and sales through their websites with corresponding improvements in ancillary sales and up-selling.

“Airlines continue to increase the proportion of tickets sold via their directly controlled distribution channels and I predict that 2011 will see them overtake indirect distribution for the first time. If you extrapolate the trend, by 2014 58% of tickets will be sold directly. This channel shift will reduce the share sold through GDSs and online travel agents.”

Passenger mobile service offerings from airlines are set to explode in the next three years with 91% of responding airlines planning to invest in mobile device-based services for passengers over the next three years.

The priority is on mobile services which support check-in, flight status notifications, electronic boarding passes and travel distribution. Airlines anticipate that by 2014, 15% of all passengers will use mobile phones to check-in.

85% of airlines either already sell (33%) or plan to sell (52%) tickets through mobile phones by 2014, and most plan to extend mobile functionality to include ticket modification/upgrades and sales of onboard services.

This year’s survey underlines how travel distribution has become a multi-channel environment with kiosks and social networks joining mobile phones as important emerging sales channels; 70% of airlines already sell, or plan to sell, tickets through kiosks and social networks by 2014. At present, 19% sell tickets through kiosks, and 16% through social networks.

Francesco Violante, SITA CEO, speaking today at the Air Transport IT Summit, hosted by SITA, said: “The air transport industry has been quick to capitalise on the mobile computing revolution which started three years ago with the arrival of the first 3G-enabled smartphones. The number of airlines actively selling tickets on mobile phones has almost doubled from last year and we see clear plans now to offer richer functionality in the form of ticket upgrades and modifications.

“The survey confirms increasing interest in social networks as distribution channels. With the increase in channels, travel offers need to be delivered to passengers in a far more targeted and personalised way based on traveller preferences and the context of the channel used. This fits with the airline strategy of taking more control over distribution with more tickets being sold directly via airline websites and call centres.”

Today, 80% of airlines either already have or plan to have some presence on social networks and using social networks for “Promotion of products and services” has the highest level of implementation to date (41%).

The survey also reveals a strong shift towards the adoption of alternative usage of self-service kiosks. For example, the number of airlines with flight transfer kiosks has quadrupled since last year’s survey; 11% have already implemented it, and 39% plan to do so by 2014.

The Airline IT Trends Survey is an independent poll of senior IT personnel working within the top 200 passenger carriers.