Airlines have been among the first companies to feel the full economic impact of the September terrorist attacks. The industry is...Airlines have been among the first companies to feel the full economic impact of the September terrorist attacks. The industry is contracting and IT projects - and the staff working on them - will assume a different value to the business
As the crisis in the airline industry deepens IT staff in the sector face a nerve-wracking future. Since the terrorist attacks on the US on 11 September, the major airlines have slashed more than 100,000 jobs worldwide in response to a slump in passenger demand.
And IT staff are not immune to the cuts. Last week it emerged that hundreds of IT staff at British Airways were the latest economic victims of the attacks when the airline announced 7,000 job cuts worldwide.
Other airlines, such as Swissair, have collapsed altogether and their survival is on a knife-edge. The fate of IT staff at Swissair's information technology division, Atraxis, largely hinges on merger talks with the technology division of German airline Lufthansa.
It is difficult to judge whether the industry's contraction is solely the result of the terrorist atrocities, or whether events have simply exacerbated already poor economic conditions, but the result for IT staff may be the same. Industry analysts have warned them to brace themselves for wider change as non-essential projects are mothballed and priorities are reassessed.
On a more upbeat note, however, closer co-operation between airlines for IT development is expected in the drive to reduce costs and streamline operations. The crisis is also likely to accelerate the move towards outsourcing and raise the profile of customer relationship management (CRM) technology. But in the short term the key question is which IT staff will survive the job cuts.
The airlines remain tight-lipped on the question but in a statement Virgin Atlantic said that some areas of its IT budget would be reprioritised after a business-wide review of expenditure.
It added that e-commerce, "process optimisation" and CRM projects were its three main areas of focus.
Industry experts believe that employees with traditional skills, such as knowledge of legacy systems, will be in the strongest position when managers decide who to keep. In the short term, at least for the next year, airlines will be keen to improve efficiency by maintaining and tweaking the performance of core systems, rather than ploughing money into cutting-edge e-business systems.
"Airlines will be dependent on core skills, such as knowledge of existing systems," said Chris Wright, senior manager, for advisory services at KPMG, specialising in the aviation industry. "In the short term airlines will be looking to retain people with mainframe and legacy skills."
"IT staff will be doing more work on maintaining existing systems. For example if airlines are not going down the e-procurement route they may have to develop existing procurement systems."
IT staff who survive the downsizing will also see their departments' budgets cut. E-business projects that fall into the nice-to-have category, rather than must-have, are likely to be ditched first. Staff may also be told to work on other projects that have been given a higher priority. Processes and systems will be relentlessly re-engineered in the drive to strip costs out of the business.
But airlines are going much further than cutting state of the art e-business projects, according to industry insiders. "I know of a number of medium-term data protection projects which have been postponed," said Wright. "I also know of one major SAP project which has been put on hold. I'm helping the client to review the project. Even medium-term essential projects are being put on hold."
There is also likely to be more emphasis placed on information sharing and co-operation between airline IT departments as the main players strive to cut costs. Dubbed "co-sourcing" this could see the airlines co-operating to develop systems such as reservation or revenue accounting systems. While airlines have already formed marketing alliances, notably One World and Star Alliance, there has been relatively little co-operation over technology to benefit all of the industry.
Outsourcing will also take off over the next few nervous years, according to industry analysts, as airlines look to cut costs and concentrate on their core business. A handful of dominant suppliers in the sector, such as Galileo and Amadeus, could run back-end services for airlines. Last year, for example, British Airways outsourced its reservation system to Amadeus. Other suppliers, such as IBM and EDS are well placed to cash in on an outsourcing boom. Electronic tickets will also be a key tool in the drive to cut costs during the slump.
A key challenge here for IT departments is ensure the interoperability of electronic ticketing between airlines. But to retain business airlines will have to make better use of information on their customer databases. CRM technology will allow airlines to sharpen their e-mail marketing campaigns. The technology is well established in the airline industry, dating back 10 years to the push to attract customers in the aftermath of the Gulf War.
"CRM in its purer form will become absolutely essential in the retention of high value and frequent business flyers," said Mark Raskino, e-business research director at analyst firm Gartner Europe.
"The key word will definitely be retention," he said. "[It will] involve using loyalty programme data, with the Web, e-mail and call centres. IT staff within airlines will be redeployed. Most airlines have advanced customer databases that they have been building and running for more than a decade."
IT workers in the airline industry face an uncomfortable year. The job losses are likely to continue and IT staff will not be immune. IT projects, particularly more ambitious e-business initiatives, will be shelved or mothballed. Budgets will be cut.
But the crisis could also breathe new impetus into the state of technology. Industry experts have predicted that the drive to cut costs will encourage more technology joint ventures among carriers and raise the profile of CRM software.
Flexible IT staff should not find themselves grounded.How the changes will affect airline IT
- Traditional skills and experience in legacy systems are likely to be in demand as companies concentrate on making the most of existing kit
- E-business projects may be sidelined but e-business skills will continue to be sought-after. Experience in developing corporate intranet sites will be particularly useful
- Customer relationship management technology is set to dominate marketing strategies. Knowledge of e-mail marketing campaigns and customer databases will be invaluable
- IT staff will need to be prepared to be moved to another project or section of the IT department and expect re-engineering of existing IT systems to cut costs and boost efficiency
- The rise of outsourcing is set to continue in the industry, which could mean transfer to a third party supplier
- Redundant IT staff should consider working for a low-cost airline - they are investing heavily in Web-based technology for sales and marketing.