2013

AIR TRANSPORT INDUSTRY INSIGHTS

RLINE AI

15

V SUR EY

ANNIV

SARY ER

THE AIRLINE IT TRENDS SURVEY | SITA 2013

FOREWORD

The Airline IT Trends Survey, co-sponsored by Airline Business and SITA shows an airline IT climate that is cautiously improving. IT budgets are expected to improve at the majority of airlines in 2013, while the global level of IT operational spending should reach an estimated US$10 billion in 2013. Airline IT investment priorities continue to focus on mobilizing the passenger journey, as they have done for the last three years, but airlines are also showing a strong interest in improving business intelligence to better understand their operations and customers. The overall impression from this years survey is one of an industry that is fast adopting the digital world. This is bringing many advantages in the form of automation and new services, but also challenges in making sure these technologies can be widely adopted so that passengers benefit at both ends of their journey. For the last 15 years we have been tracking the key technology trends of airlines. More recently we have complemented this research by publishing surveys on technology trends in the wider air transport industry, including airports and passengers. Taken together, they provide a unique perspective on the way technology is shaping the future of air travel. For this we thank our survey respondents. We appreciate it is only possible to provide such a comprehensive industry view through their continuing support. We hope you will continue to support our research in the years to come. We welcome any feedback or comments on the survey. For more information on all our surveys and accompanying features and analysis, visit www.sita.aero/surveys.

Francesco Violante Chief Executive Officer, SITA

Max Kingsley-Jones Editor, Airline Business

For more information go to: www.sita.aero/surveys www.sita.aero/ittrendshub Or search the App Store for SITA IT Trends Hub

THE AIRLINE IT TRENDS SURVEY | SITA 2013

THE AIRLINE IT TRENDS SURVEY | SITA 2013

CONTENTS

Investment in IT is edging up Mobile and business intelligence are top investment priorities Deeper integration of mobile services Mobile services are transforming operations Direct channels drive ancillary revenues Airlines want deeper insights Check-in landscape is evolving Methodology

6 7 8 9 10 12 13 14

THE AIRLINE IT TRENDS SURVEY | SITA 2013

INVESTMENT IN IT IS EDGING UP

58%

EXPECT IT SPENDING TO INCREASE IN 2013

At the global level, operational IT spending remained stable in 2012 at 1.46% of revenues. On the back of higher industry revenues it meant IT spending in absolute terms stayed at the same level as 2011. This year, airlines are expecting IT spending to pick up slightly to 1.52% of revenues. This will translate into an increase in absolute IT spending, should the anticipated growth of industry revenues for 2013 be confirmed. This optimism for increased IT spend looks set to continue with the majority of airlines anticipating further budget increases in absolute terms in 2014, while less than one in five is expecting a tightening in IT spend.

Operational IT and telecoms spend as a percentage of revenues

Change in available absolute IT spending Change of available IT spend

T spend as % of revenue

1.46%

1.52%
58% 23% 19% 58% 21% 22%
2013
Increase Same Decrease

53% 29% 17%

2014

(ACTUAL)

2012

(PLANNED)

2013

2012

THE AIRLINE IT TRENDS SURVEY | SITA 2013

MOBILE AND BUSINESS INTELLIGENCE ARE TOP INVESTMENT PRIORITIES

100%

OF AIRLINES ARE MAKING BUSINESS INTELLIGENCE INVESTMENTS IN THE NEXT 3 YEARS

Leveraging consumer mobile technology remains the hotspot of IT investment. Offering mobile services to passengers has topped the investment list for the last three years with almost the entire industry now investing, or planning to invest, in this area, of which 66% of airlines will make a significant investment. Another important area of IT investments this year is business intelligence (BI). It was ranked fourth in last years survey, when one in five airlines had no plans to invest. This year, all airlines surveyed are showing interest, with nearly two-thirds running a major investment programme. A third area high on the investment agenda for airlines is customer relationship solutions with 97% of airlines looking at approaches such as personalization that build loyalty and offer customized services to passengers. Almost all airlines (92%) plan to monetize this investment through higher ancillary revenues.

&T investments in the next 3 years

Airline investments in IT over the next 3 years

Passenger services via mobile device Business Intelligence solutions Customer relationship management e.g. personalisation Expansion of ancillary services Passenger services via social media Wireless crew services in-flight Wireless passenger services in-flight

66% 61% 60% 49% 41% 35% 19% 36% 36% 44% 53%

32% 39% 37%

3 8% 7%

29% 44%

Major program

R&D/Pilot Program

No plans

THE AIRLINE IT TRENDS SURVEY | SITA 2013

DEEPER INTEGRATION OF MOBILE SERVICES

62%
Passenger Mobile Services

Airlines are making a big commitment to a mobile future for passenger services 97% of airlines are investing in this channel with the intention of mobilizing the entire journey. The initial focus is on services already available via the airline website, such as flight search and check-in. But this is giving way to a new battleground of mobile functionality that offers differentiated services to passengers on the move. The result will be a much deeper integration of mobile services within the passenger experience. Check-in apps, for example, are already available from 61% of airlines, while flight search is higher at 65% of airlines. The focus for these airlines will now shift over the next three years to add new services, such as missing bag reporting (61% of airlines), re-booking (63%), and complaint handling (57%). Mobile boarding passes
Flight search

OF AIRLINES WILL INTEGRATE BOARDING PASSES WITH 3RD PARTY WALLETS BY 2016

Airline adoption of mobile services for passengers by 2016

80

Next Differentiator
Rebooking Customer complaints

Established

% planned by 2016

60

40

Missing baggage Baggage status Geo-location Onboard entertainment

Promotions Boarding Flight notification

Travel sales

NFC for boarding

Check-in

20

Niche Functionality

The replacement of magnetic strip boarding cards with the 2D bar-coded version has been a major industry success story. The mobile variant is fast gaining momentum and looks set to be the de facto boarding pass of the future. However, the best method of storing and displaying the mobile boarding pass on the passengers device is still being debated within the industry. Currently, 53% of airlines provide mobile boarding passes through their own airline application and this will rise to over 80% in 2016, making it the dominant method in the short-term. Third-party travel wallets, such as the Apple Passbook, Samsung Wallet and Google Now, are also starting to feature. Today, only 21% of airlines provide boarding passes through other apps, but it will reach 62% in three years, giving passengers the option to use their preferred method. NFC has also been much talked about but it is still a workin-progress. A lack of standards, low global penetration of enabled phones and the need to deploy new equipment at airports is causing the majority of airlines (59%) to adopt a wait-and-see approach.

20

30

40 % Implemented

50

60

Mobile Boarding Passes

% of airlines offering mobile boarding passes

17% 30% 53%

Airline App 3rd Party Wallet

37% 41% 21%

NFC Enabled

59% 38% 3%

Already implemented

Implemented by 2016

No plans

THE AIRLINE IT TRENDS SURVEY | SITA 2013

MOBILE SERVICES ARE TRANSFORMING OPERATIONS

75%+

This years survey reveals a rapidly growing adoption of mobile solutions not just for passenger services, but also for the airline workforce. The initial focus is on improving productivity in the aircraft by moving from paper to digital processes using tablets and wireless connectivity. Over the next three years around eight out of 10 airlines plan to provide flight crews with electronic flight bags (EFBs) and automate cabin crew services. Passengers should see the benefit in improved onboard service. By using tablets in the cabin, staff can access the airlines customer relationship data to tailor their service to the individual, as well as capture and resolve issues. A second wave of services using tablets for airline workforce will focus on airport operations such as ground operations and aircraft maintenance. Up to now they have been a lower priority, with only a few airlines implementing tablets in these areas but over the next three years that will jump to over 70% of airlines.

OF AIRLINES WILL DEPLOY CREW SERVICES ON TABLETS BY 2016

Airline adoption of tablets for operations by 2016

100

Electronic flight bag

Crew rostering/comms

Cabin crew services

% Implementated by 2016

Aircraft maintainance Flight dispatch Flight planning Ground operations

50

Passenger transfer

Mainstream by 2016 Next Wave Runners-Up

10

20

30 % Implemented

40

50

THE AIRLINE IT TRENDS SURVEY | SITA 2013

DIRECT CHANNELS DRIVE ANCILLARY REVENUES

14%

OF SALES FROM MOBILE, KIOSK, AND SOCIAL MEDIA BY 2016

A recent analysis published by IdeaWorks showed ancillary revenue can exceed 20% of total revenues for some airlines. Ancillary services are now a much more important part of the revenue mix. They not only offer airlines the potential to grow revenue but also, importantly, the opportunity to differentiate. Results from this years Airline IT Trends survey show that today the vast majority of ancillary revenues are earned through direct sales channels, such as the airline website, with the remainder through indirect channels. On average airlines earn nine times more ancillary revenue through direct channels than indirect, even though the indirect channel accounts for nearly half of ticket sales. A large part of the discrepancy is due to the lack of standards and control over what is presented to the end customer, which make ancillaries through indirect channels very challenging. Recent new approaches may change this trend and enable more transparency across all channels. However, for now airlines see direct channels as by far the most significant contributor to ancillary revenues, with 89% of non-ticketing sales expected through this channel by 2016, an increase from 87% today.

Proportion of ancillary revenue for 2016 by channel

Ancillary sales

89%
Direct Channel
% of ancillary revenue by 2016

11%
Indirect Channel

IdeaWorks press release dated 05 June 2013. Available at www. ideaworkscompany.com/category/press-releases

10

THE AIRLINE IT TRENDS SURVEY | SITA 2013

US$70B

Using new sales channels saves distribution costs and boosts ancillary opportunities Airlines are aiming to use new direct sales channels to strengthen their grip on ticket sales at the expense of indirect channels. New channels via mobile phones, kiosks and social media will represent nearly 14% of ticket sales by 2016, while indirect sales through GDSs will reduce further in the same time period. Investment in mobile services is one of the main IT priorities with nine out of ten airlines planning to sell tickets via mobile phones by 2016. Airlines expect to be rewarded with a leap in mobile sales, estimated to reach over $70 billion by 2016, or 10.3% of total sales, up from just below 3% today. Sales through kiosks more than doubled over last year as airlines enhance their capabilities beyond check-in. Today kiosk sales accounts for over 1% of sales and survey respondents expect this to double again by 2016.
2.0% 1.6%

OF SALES THROUGH MOBILE BY 2016

Percentage of total sales through new channels

10.3%
mobile

kiosk social

2012

2013

PLANNED

2016

Social media as an alternative sales channel remains behind expectations with only 1.6% of ticket sales generated this way despite 22% of airlines having invested in social media embedded apps for ticketing. The volumes through social media have not visibly increased from last year, indicating non-sales activities, such as marketing and customer service, offer the most beneficial use of this channel. Mobile apps for ancillary sales to become mainstream Airlines expect mobiles to contribute 9.9% of ancillary revenue by 2016, more than seven times the figure of today. But the ability of airlines to boost non-ticketing revenues through mobile apps depends on multiple developments in many airlines. Today, 58% of airlines can sell tickets through a mobile app but only 30% of airlines can currently sell any kind of ancillary service via this channel. However, airlines are starting to ramp up their mobile capabilities. For example, only 12% of airlines today can collect baggage fees through this channel, but by 2016 this will have increased to 84%, while 90% of airlines will be able to offer priority boarding, lounge access and seat booking.

Percentage of airlines with sales capabilities via mobile devices

Established Emerging

95%

90%

84%

74%

Mainstream adoption

Tickets

Airline Services e.g. Seats, Priority Already implemented

Baggage Fee

Other travel services e.g. car hire, parking

Implemented by 2016

THE AIRLINE IT TRENDS SURVEY | SITA 2013

11

AIRLINES WANT DEEPER INSIGHTS

72%

OF AIRLINES RATE SALES AND MARKETING AS THE HIGHEST PRIORITY AREA FOR BUSINESS INTELLIGENCE INVESTMENTS

This years survey shows business intelligence (BI) has moved up the IT agenda. Airlines want to know more about their customers and have better information for decision making in their operations. 72% of airlines rate Sales and Marketing as the highest priority area for BI investments, indicating a strong desire by airlines to drive revenues higher using techniques borrowed from the retail industry such as personalization, which depends on having access to customer interactions. Using BI for improving operational awareness is another area getting serious attention. 88% of airlines rate it a high, or moderately high, priority over the coming years. Having a clearer picture of operations will allow airlines to optimize performance across their route network and enable them to proactively mitigate disruption. Underlying BI systems is the need for timely and accurate data. Achieving this remains a common issue across the industry with only 9% of airlines rating data quality as meeting all their requirements, while only 7% of airlines have achieved all the necessary integration of different data sources from across their company.

Areas of priority for business intelligence investments

Areas of priority for business intelligence investments

1st
Sales & Marketing

2nd

3rd

Operational Awareness

Passenger Experience

12

THE AIRLINE IT TRENDS SURVEY | SITA 2013

CHECK IN LANDSCAPE IS EVOLVING

8%

OF PASSENGERS WILL USE AUTOMATIC CHECK IN BY 2016

While the majority of passengers still check-in with an agent at the airport, self-service continues to become more popular with passengers. However, the landscape for self-service check-in is shifting as mobile phones become a serious option for passengers and airlines explore the possibility of eliminating the check-in process altogether. Since 2009, the rate of growth of passengers using web check-in, as well as kiosk check-in, has slowed. Today, mobile represents only 3% of check-ins, but by 2016 it is expected to climb five-fold to 15% and in doing so will have taken just three years to exceed the number of passengers using kiosk check-in today. Airlines still see passenger demand for kiosk check-in, with usage expected to increase to 18% of passengers by 2016 from 14% today. Early adopters are focusing attention on alternative approaches such as automatic check-in systems that can give passengers a passive role in the check-in process with seats allocated automatically based on pre-defined preferences. By 2016, 8% of passengers plan to use automatic check-in. Kiosks will offer more options The role of kiosks is evolving with airlines packing in additional functionality to make them a far more versatile tool. While check-in is the primary purpose, passengers can now purchase a range of airline services and complete a number of tasks.

Proportion of passengers using check-in channel

Airline adoption of kiosk functionality by 2016

100
Bag tag printing

The priority today for most airlines is adding baggage functionality to bring self-service to those passengers with more than hand luggage. Almost eight out of 10 airlines will offer bag tag printing in 2016, up from 29% today. A quarter of airlines have kiosks that provide important information, such as flight status and gate direction, and nearly half of airlines expect to introduce this functionality in the next three years. As their functionalities broaden, kiosk will provide a greater opportunity to upsell services by offering upgrades, priority boarding, lounge access and enable passengers to add additional baggage.

% Implementated by 2016

Info services kiosk Rebooking services Ancillary service sales Lost baggage reporting Ticket sales

50
Flight transfer

Mainstream by 2016 Next Wave Runners-Up

10 % Implemented

20

30

THE AIRLINE IT TRENDS SURVEY | SITA 2013

13

METHODOLOGY

ABOUT SITAS AIRLINE SURVEY

The Airline IT Trends Survey, co-sponsored by Airline Business and SITA, is a well established as the global benchmarking survey for the airline industry. The SITA surveys (www.sita.aero/surveys) investigate emerging trends and technologies that are set to transform the industry in the years to come. Business Intelligence, Mobile Travel and Passenger Management are at the forefront of this change, and tracking their evolution is an important element in this survey. Many other emerging and established trends will be Title tracked, and, as every year, we benchmarked the industry IT spending in 2013 and beyond. The survey was first produced in 1999, and was designed to offer all air transport industry stakeholders the latest facts, figures and trends related to technology adoption and spending. Comparisons to previous surveys are made where appropriate, although the respondent sample may vary between years.

RESPONDENTS PROFILE
The respondents this year are passenger airlines including low cost operators, together with carriers representing important players in the regional and leisure sector. The Survey is truly a global one, and we received a significant response from major carriers in every geographical region.

Total passengers carried by respondents

1,500

1,000
Millions

500 Questionnaires were sent to a senior IT executive in each of the top 200 passenger carriers, including low cost operators, together with carriers representing important players in the regional and leisure sectors during spring this year. The 2010 2011 2012 2013 survey represents the views and insights of over half of the Total passengers carried by respondents top 100 carriers, providing a clear insight into IT strategic thinking and developments for the industry. The response to Title this survey is confidential, and the responses are received by Split of respondents an independent research company. The data analysis is based on the aggregated response of all airlines.
Americas

For more information go to: www.sita.aero/surveys www.sita.aero/ittrendshub Title Or search the App Store for SITA IT Trends Hub
Americas Africa/ Middle East Europe

15%
Regions

23%

Africa/ Middle East

10 19.9

Million

21%
Passenger carried

20+

26%

Million

30% 32%
Asia-Pacific

5 9.9

15%

Million

38%

< 4.9

Million

10 19.9

15%
Regions

Million

23%

21%
Passenger carried

20+

26%

Million

Europe

30% 32%
Asia-Pacific

5 9.9

15%

Million

38%

< 4.9

Million

14

THE AIRLINE IT TRENDS SURVEY | SITA 2013

SITA AT A GLANCE The air transport industry is the most dynamic and exciting community on earth and SITA is its heart. Our vision is to be the chosen technology partner of the industry, a position we will attain through flawless customer service and a unique portfolio of IT and communications solutions that covers the industrys every need 24/7. We are the innovators of the industry. Our experts and developers keep it fuelled with a constant stream of ground-breaking products and solutions. We are the ones who see the potential in the latest technology and put it to work. Our customers include airlines, airports, GDSs and governments. We work with around 500 air transport industry members and 2,800 customers in over 200 countries and territories. We are open, energetic and committed. We work in collaboration with our partners and customers to ensure we are always delivering the most effective, most efficient solutions. We own and operate the worlds most extensive communications network. Its the vital asset that keeps the global air transport industry connected. We are 100% owned by the air transport industry a unique status that enables us to understand and respond to its needs better than anyone. Our annual IT surveys for airlines, airports and passenger self-service are industry-renowned and the only ones of their kind. We sponsor .aero, the top-level internet domain reserved exclusively for aviation. In 2011, we had consolidated revenues of US$1.517 billion (1.09 billion). For further information, please visit www.sita.aero For further information, please contact SITA by telephone or e-mail: Americas +1 770 850 4500 info.amer@ sita.aero Asia Pacific +65 6545 3711 info.apac @ sita.aero Europe +41 22 747 6111 info.euro @ sita.aero Middle East, India & Africa +961 1 637300 info.meia @ sita.aero

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SITA 2013 All trademarks acknowledged. Specifications subject to change without prior notice. This literature provides outline information only and (unless specifically agreed to the contrary by SITA in writing) is not part of any order or contract.