Helping Passengers Help ThemselvesBy David F. Carr | Posted 2006-10-02 Print
The struggling airline business sees the merger of US Airways and America West—fueled by enhanced customer-service technology—as a strategy for revenue growth.
Helping Passengers Help Themselves
One of the ways America West has driven down costs is by following the airline industry trend toward passenger self-service, deploying increased numbers of airport kiosks for automated passenger check-in. The carrier has also tried to entice more customers to book travel through its own Web site, rather than through intermediaries or over the phone. Both trends were already underway in 2001, but have accelerated since then.
America West began selling tickets over the Web in 1997, but in recent years online booking has become a more significant sales channel. It rolled out its first self-service kiosks in 2002, using them to speed passenger check-in while lowering labor costs.
The quality of an airline's Web operations and its ability to attract customers to its own Web site has become extremely important, says Robert Goodwin, a Gartner analyst who covers information systems for the travel and transportation industries. "All airlines are trying to drive customers to their own Web sites to make those reservations," he says, because doing so cuts out the need to compensate intermediaries such as travel agencies and ticket distribution services such as Sabre.
In 2005, sales made directly over Americawest.com accounted for 31% of America West sales, while 13% of US Airways sales came in through its own Web site. Overall Internet ticket sales, including those from other travel Web sites, were 57% of total sales for America West and 33% for US Airways. According to a 2005 survey by SITA, an international organization that promotes airline technology standards, North American airlines on average now sell 63% of their tickets through Web channels, with 55% coming through the airline's own Web site.
Beery believes that America West achieved better results by investing in custom development of its Web site and kiosk software. "We thought we could move faster, control our own destiny and manage the costs better by doing it that way," he says.
On the other hand, the pre-merger US Airways had a hard time investing in systems development during its bankruptcies. It had outsourced systems development and maintenance to EDS, according to Beery. And when it came time to decide which Web site and kiosk software to stick with going forward, the America West systems were chosen, he says. The America West Web site was essentially re-branded to power the new USAirways.com.
It wasn't quite that easy, however, because the Web site had to take on added functionality to support existing US Airways customers, unite the frequent-flier programs of the two airlines, and connect to two different reservations systems on the back end—Sabre for the US Airways operations and Shares for America West's. Making the two systems act like one, rather than combining them, adds complexity and acts as a drag on the performance of the Web site and other customer service systems. So, consolidating all reservations onto Shares is Beery's next priority.
Shares is owned by EDS, which remains an important technology partner, Beery says, but the combined airline will pay EDS less for technology hosting than the two airlines did separately.
The combined Web site also caused customer service problems initially, as travelers overwhelmed the call center with complaints about incorrect balances in their frequent-flier accounts. Most of that was because of the need to create new, combined accounts for customers who had flown on both airlines, Beery explains: "It took us multiple weeks to get some of these things done."
America West has been deploying kiosks since 2002, using devices from NCR's Kinetics division. Beery discovered that the America West software could be adapted to run on the IBM kiosk hardware US Airways had deployed, because both platforms used the Windows operating system. "It was mostly a matter of changing the drivers to support different printers and things like that," he says.
America West has also deployed its self-service software to the multi-airline kiosks that are starting to appear in places like Las Vegas and adhere to the International Air Transport Association's Common Use Self-Service standard, which defines a common kiosk hardware and software environment. The opening screen on these devices features the logos of multiple airlines, and the user's selection determines which airline's check-in software will be loaded. That could be another way to save money if enough airports adopt it as a standard because the kiosk hardware would be purchased by the airport rather than the airline, Beery says, although it requires him to invest in more testing to ensure his software conforms to the standard.
So far, it's not a big factor, he says: "We will embrace it where it's the standard and put in our own kiosk hardware where it's not."
America West declined to provide specific return-on-investment figures for the kiosks, but one way they pay off for airlines is by decreasing the number of employees needed to staff passenger check-in counters. The airline industry as a whole has gotten more efficient in terms of being able to bring in greater revenue with fewer employees, although those savings have been offset by an increase in fuel costs.
The number of America West employees dropped from 12,850 in 2000 to 12,100 in 2005, even while the airline increased the volume of its operations, as measured by available seat miles, by more than 90% and its revenue by 7.5%. In other words, though the cost of salaries and benefits rose from $557 million to $701 million over that period, the percentage of revenue required to cover the airline's labor costs dropped from 25% to 21%.
More efficiencies will come as a result of the merger itself, and Beery expects to cut $100 million per year out of the combined $250 million information-technology budget of the two airlines by eliminating redundant services and contracts. That's a significant part of the $600 million in overall expense reductions US Airways Group expects to achieve as a result of the merger.
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