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Software firms offer cost-cutting solutions to anxious carriers

Software firms offer cost-cutting solutions to anxious carriers
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First Published: Sun, Jul 13 2008. 06 28 PM IST
Updated: Mon, Jul 14 2008. 12 50 AM IST
Mumbai: As India’s ailing airlines run out of options to cut costs, technology firms are pulling out travel software that could help these carriers save some more.
Air transport technology services firm SITA says mobile phones can be used as passenger tracking devices to cut flight delays, saving about $600 million (Rs2,580 crore) collectively, for airlines globally. Mumbai-based travel software firm Kale Consultants Ltd says it can help airlines cut 30% of their revenue accounting costs with effective use of technology.
Because nearly 80% of their operational costs are fixed, airlines are seeking other options to save on costs.
Domestic airlines are expected to post a combined loss of $2 billion in fiscal 2009 because of spiralling aviation fuel costs that have almost doubled in a year, while international carriers are facing an estimated loss of $6.1 billion for the year.
“We are willing to experiment with IT (information technology) if it helps us,” said Partha Sarathi Basu, chief financial officer of low-fare carrier SpiceJet Ltd. “IT is the backbone of any airline, and can help minimize costs to a decent level,” he added.
SpiceJet recently implemented a monitoring software to arrest credit-card fraud, cutting down on staffing, and is now looking for cargo management software as well.
The UK’s second largest carrier, British Midland Airways Ltd, which does business as bmi, has reduced at least 30% of its revenue accounting costs by outsourcing to Kale Consultants, said bmi chief financial officer Robert Palmer.
“According to our old revenue accounting system, we had to have at least 150 people to manage our airline’s revenue management system and revenue leakage monitoring. Now we save all that personnel cost by outsourcing,” said Palmer, who was in India to meet Kale Consultants executives.
India’s largest private airline Jet Airways (India) Ltd recently said the industry is losing at least $20 per passenger, signifying a 20% oversupply, or imbalance.
“The estimated fuel cost per passenger carried is $85 while average yield per passenger is only $150,” it said.
Globally, airlines are increasingly relying on technology to streamline operations and save costs in the process. In June, airlines all over the world stopped issuing paper tickets with multiple layers and colours in favour of e-ticketing.
“The IT revolution is well on the way to saving airlines $6.5 billion annually,” Giovanni Bisignani, director general and chief executive of the International Air Transport Association (IATA), an international body for airlines, said on its website. “On 1 June, we delivered 100% e-ticketing. Alone, that will save $3 billion.”
Mint could not independently ascertain the total potential cost savings for airlines from using new travel software.
Travel software firm the Bird Group’s executive director Ankur Bhatia said airlines can use software to manage seat occupancy and departure control systems.
Bird Group controls Spain-based Amadeus IT Group SA’s Indian operations.
SITA has also suggested using mobile phones to hold boarding passes, baggage tracking information and payment data.
Advances in mobile technology open the door to new cost-saving avenues as 90% of airline passengers use mobile phones, SITA said on its website.
“These ‘digital travellers’ will have on-demand access to a range of mobile-enabled services such as real-time flight updates, self-service booking, check-in and boarding, as well as mobile payments,” said Jim Peters, chief technology officer at SITA.
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First Published: Sun, Jul 13 2008. 06 28 PM IST