Sourcing Advisory

Transformational IT in the Cockpit: Passenger Service System (PSS) driving operational efficiency and enhancing customer’s experience in Airline

Dr. Pradeep K. Mukherji & Chirag Rawat
Jan 2014

The potential for Passenger Service Systems (PSS) to add business value to the airlines industry is significant. PSS can enhance the airlines’ asset utilization and customer loyalty and thus directly impact the topline. Recent activity suggests that both large airlines and low cost carriers are considering their PSS options seriously. The PSS market is expected to expand, fuelling more IT innovation in the airline industry.

The airline industry profit margins have been among the lowest for the past many years. This at times appears counter intuitive given the global scale of operations of some of the biggest airlines and ever growing demand for air travel. The rising costs and volatility of fuel prices and growing pressures to conform to environment standards are some of the key challenges the sector encounters. This trend will continue to aggravate, providing little operational elbowroom to the airline operators. The operational costs in airlines sector have been increasing 10% every year, over the last five years. To increase profitability and reap the benefit of economies of scale, the airlines industry will have to focus on improving their asset utilization and effectiveness through prudent deployment of IT and leveraging IT to transform their business operations.

Deployment of customized IT applications and non-standardized processes to manage operations has proven to be a bane for the airlines industry. Majority of operating models have many functional siloes making integration a challenge. According to a recent study, of the total software purchased in the airline industry, 60% is customized or made to order compared to less than 40% in other industries. With merger & acquisition activity on the uptick in the sector, integration of disparate IT applications is becoming more complex to manage. Existence of legacy systems in the industry adds to the complexity and hinders the IT and business performance. The current IT initiatives in the airline industry focus on either legacy modernization or replacement of their old IT systems. So far, these have delivered less than expected results and are leading to opportunity losses, which is increasing operational costs and affecting customer service.

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