Sharp decline in new IT investment as airline losses mount

Airline investment in IT is set to reach a new low this year as aircraft operators cope with unprecedented financial losses.

This is according to the 2009 Airline IT Trends Survey co-sponsored by SITA and Airline Business, recently launched at the annual SITA Air Transport IT Summit in Cannes, France. This survey is an independent poll of senior IT personnel working within the top 200 passenger carriers.

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"IT and Telecommunications operating spend as a percentage of airline revenue is forecast to be just 1.7 per cent, the lowest level recorded since 2002, as airlines seek to reduce costs against a backdrop of US$10.4 billion in losses last year and an IATA forecast of US$9 billion in losses this year," notes the survey.

Airlines are in survival mode

The SITA survey points out that many airlines are in survival mode--72 per cent of survey respondents intend to renegotiate IT supplier contracts and 70 per cent will invest in solutions that lower overall enterprise costs.

"Most airlines have already put in place measures such as rationalisation of IT suppliers, IT infrastructure consolidation, reduced head count and outsourcing," the survey says.

"The drop in IT investment by airlines is a direct response to the US$80 billion in revenue that is expected to disappear this year due to falling passenger demand in our industry," said Paul Coby, SITA chairman and British Airways CIO. "For the first time in several years, there will be a year-on-year decline in IT spending. The focus everywhere is on doing even more with even less."

"But it is important to recognise that IT is also part of the solution to our challenges," he added. "Used well and effectively, IT will cut costs and protect revenues. The survey tells us that IT has already accomplished a great deal in reducing distribution costs and expanding self-service functionality. For the first time, 100 per cent of survey respondents have said they sell tickets online and it is clear that airlines are making Web sales their most important distribution channel. Web check-in capability is now at 60 per cent and is expected to reach 92 per cent over the next three years. So the IT-driven revolution in the air transport industry is continuing."

"It is important to note that over the strategic time horizon of the next three years, airlines are still prioritising investment in many areas, including IP telephony, service-oriented architecture, software-as-a-service, Web 2.0, cloud computing, data security and biometrics," said Coby.