Invulnerable Technology – A success mantra for Low Cost Carriers Growth

The growth of no-frills, low cost carriers (LCCs) has radically changed the nature of competition within the airline industry, especially on short-haul routes. The LCC has been the industry phenomenon of the 90’s. By taking a new look at the traditional industry model for passenger and experimenting with new strategies; LCCs have grown into a significant industry force. They have achieved their triumph by pursuing three clear business values:

§         Simplicity — Provide only those services to the passengers which adds value to their trip.

§         Adoption of new technology to the maximum, and exploit it wherever it can reduce the costs, apply process change, and delivery on the simplicity goal

§         Implementation of an open business model and sharing the gains with customers which this model delivers.

LCCs are empowered with the new technologies and have ability to quickly respond to the competitions. This  white paper aims at  few widespread  and  emerging  technology   trends   that   have   helped   LCCs   sustain   and   build  operations  by  improving  on  the  low  margins  peculiar  to  this  segment;   at   the   same   time   facilitating   optimal   utilisation   of  resources and capital.

Technology driving the airline business model

The effective use of technology in sales and distribution can have a considerable impact on both cost reduction and revenue improvement, through effective revenue management and enhanced customer loyalty programmes which is proven fact by the LCCs in the industry. During a period when average fares and passenger yield is demonstrating the downward trend, it is important to assess the role and impact of information technology on airlines distribution strategies. In order to distribute their inventory in cost-effective manner, all airlines - whether Low Cost or Full Service – utilise technology on which the airlines incurs lowest possible operational costs.

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The business model of low-cost airlines utilise the online booking extensively due to which travel is more directly available to the direct consumers, circumventing the involvement of the traditional distribution channels of tour operators and travel agents. The direct and efficient communication line between the provider and consumer offers new opportunities for information flow and flexibility in both production and consumption. The technology, therefore, facilitates speedy communication at a negligible cost.

IT has helped the airline industry widely:

• to reduce overall costs from operations to distribution
• to drive efficiencies in the process and procedure
• to create value for customer
• to generate new revenue opportunities through different sources
• and to improve customer service by enhancing the serving platform

IT is a critical to the transformation of the way the business is done and is an integral part to all aspects of the airline business model.

The e-commerce potential for all airlines is enormous. The focus on the power of the airline's own website is intense, as it becomes the first destination for any potential traveller. 

In India, InterGlobe Technologies (IGT) pioneered in developing a solution — FreeRez that provides standard XML based interfaces to other sales channels like banks, travel portals etc. FreeRez is an application framework which enables seamless integration between and amongst its Point of Sales (POS) and crucial modules like Airline Control Manger (ACM), Revenue Management System (RMS), and Departure Control System (DCS) etc and this high cost-efficient solution proved to be a high success factor for the clients.

Upcoming Trends in LCC Technology

Technology growth appears to be the driver in building a mutually satisfying air travel experience, from departure to arrival. For the airline, it means reduced or non-existent distribution costs.

Within the next two years, key systems upgrading will be implemented, with a majority of airlines replacing processes across the board – from revenue management to operations control.

In India alone, the online travel market is expected to grow an average of 46% a year from 2007 to 2011. This is an overwhelming figure and IT will further play a crucial role in achieving these fast growing figures.

Simplification based on Self-Service

The  most  exciting  facet  of  Internet  based  LCC  Distribution  framework  is  that  it  offers  simple  Web  and  self-service  technologies  that  allow  travellers  and  LCCs  to