The Hindu Business Line : IT's in the air

The opportunity is not only from e-ticketing and e-freight. There is a larger pie in the form of aerospace engineering offshoring by global aerospace and defence companies.

Over the last decade, Indian IT professionals have been working on projects all over the world, and, the first brush with the romance of flying has been the `welcome aboard' announcement of global airlines.

But, things are a-changing. It's now time to say, "welcome aboard India" to global airlines and airline manufacturers who are flying down here and looking to Indian software vendors and IT professionals to help them grow the business.

According to an industry watcher, senior officials from global airlines have been camping at India's top IT companies to outsource key initiatives.

India's contribution to the global airline industry through IT is set to increase manifold even as adoption of technology in the sector increases. Factors such as electronic ticketing, electronic freight and aerospace engineering are boosting the need for IT companies and software professionals from India, say industry experts.

Take, for instance, the client list of Tata Consultancy Services, available on the Net. The names include Air India, Austrian Airlines, British Airways, Cathay Pacific, KLM, NorthWest Airlines, Sabena, Singapore Airlines and Taxi Aereo Marilia (TAM Brazilian Carrier).

Other vendors such as Hexaware, Infosys, Wipro and Satyam too have similar client lists - that are only growing.

"We are only on the tip of the iceberg. A lot of action will happen in the next few years," says the industry watcher.

Aerospace engineering

The opportunity for the Indian software industry is not only from e-ticketing and e-freight. There is a larger pie in the form of aerospace engineering offshoring by global aerospace and defence companies, says Subu D. Subramanian, Senior Vice-President and Director, Satyam Computer Services.

The aerospace industry spends around $60 billion on engineering globally. Currently, India Inc accounts for less than 1 per cent of this market as compared to 12 per cent overall offshoring in the engineering services space.

Subramanian cites Nasscom's prediction that by 2020, India's aerospace offshore engineering services market has the potential to reach around $3 billion. The opportunity for Indian companies would come from direct outsourcing to engineering and IT vendors, subcontracted services through Indian manufacturing vendors and public-private participation and collaborative approach.

Global airline metrics

According to K. Narayanan, Senior Vice-President, Hexaware Technologies, two billion people flew last year and International Air Transport Association (IATA) airlines flew over 24 billion km last year. This is the equivalent of 80 journeys to the sun and back. (The IATA is a trade association representing and serving the global airline industry.) The value of air cargo in 2005 was $3.25 trillion, and of this perishable cargo was 15 per cent. Cargo flights represent only 5 per cent of operations, but constitute 35 per cent of accidents.

Further, security measures implemented post September 11, 2001 cost the industry $5.1 billion every year. Airlines want to leverage IT to cut down costs. It is estimated that the global airline industry IT spend is $9.8 billion, and the spending is on software applications (32 per cent), computer (30 per cent), distribution (21 per cent), network (15 per cent) and others (2 per cent.). Similarly, the estimated global airline BPO (business process outsourcing) spend is around $8.9 billion, on reservation (41 per cent), back office (28 per cent), frequent flyer call centre (14 per cent), ticket fulfilment (5 per cent), customer care (5 per cent), cargo sales (3 per cent) and others (4 per cent).

e-Ticketing

"Hold on to your paper tickets, they will be a collector's delight," says Nitin Savant, Project Director, Hexaware. Electronic ticketing or e-ticketing has been one of the biggest drivers of IT usage in the global airline industry. And, this will continue to drive IT spend for the next few years, he says.

The e-ticket initiative started 10 years ago when airline executives and IT specialists planned for the first Internet-based flight booking service. Slowly, a radical change happened, from hand-written paper tickets to printed tickets at the airport, and to tickets issued over the Internet.

Since its inception in early 1990s, over 142 airlines (globally there are over 300 airlines) issue e-ticket, and 100 per cent implementation of e-ticketing worldwide will become mandatory by the end of 2007, he says.

And, 100 per cent e-ticketing will save the industry up to $3 billion per year. IATA processes 300 million paper tickets each year. An e-ticket costs $1 to process compared to paper tickets costing up to $10 to process, he says.

For Hexaware, 14 per cent of its revenue (likely to be $185 million for fiscal 2005-06) comes from aviation. The company has been working on e-ticketing since 2001, and one of its oldest clients includes Air Canada. It develops, supports and implements e-ticketing solutions for various airlines, he says.

Challenges

Some of the challenges in implementing e-ticket include interlining (between airlines) and ground handling. For instance, there is the issue of access and control of e-tickets issued by other airlines; departure handling procedures; sending coupon status updates to the issuing airline and reporting used coupons to the Revenue Accounting System.

Air cargo

Revenue from global air cargo is projected to be around $120 billion by 2017 from around $50 billion in 2005. Cargo contributes to around 20 per cent of a scheduled airline's revenue, says Lakshmi Narasimhan, Assistant Vice-President, Hexaware.

Two decades ago, it took an average of 6.5 days to ship international cargo, and today it still takes six days - one day to fly and five days to wait for the paper process. An average of 38 documents are processed per shipment at a cost of $30, he says.

The amount of paper used in processing shipments every year could fill thirty-nine 747-400 (the cargo capacity of a 747 is 50 tonnes), he says.

Security regulations and common standards to be evolved to reduce cost and increase efficiency will drive the need for IT among airlines. This, in turn, provides a great opportunity to Indian companies.

According to Narasimhan, the annual saving from e-freight is around $1.2 billion for the air cargo industry. The use of technologies such as Radio Frequency Identification (RFID) tags on cargo operations will help make business efficient. Airlines will be forced to automate their business critical functions for quicker and faster turnarounds. Integrated cargo management is complicated since a number of agencies, including carriers, freight forwarders, government and banks, are involved, he points out.

Customer-centric approach

According to the Wipro Web site, profitability is the main challenge for the airline industry in the current economic scenario.

This means more than just filling seats (or cargo) and cutting costs. Airlines need to become more customer-centric and must be able to address the customer's requirement effectively across all the touch points. So much so, that the customers choose an airline as their first choice for travel.

Wipro helps its airline customers create more customer-specific products and services across multiple channels such as phone, Web or through self-service kiosks. Its offer includes e-booking engine (online travel portal solution), corporate/business travel solution, customer loyalty solution, self-service check-in kiosks, customer analytics and customer alert solutions. In the back office management, it offers reservation call centre, Q processing, HR processing, workflow management, document management and contract management.

Making things easy

Though worldover e-ticketing is practised by budget airlines such as Easyjet, Ryan Air or Southwest, in India, Air Deccan was the first to offer this service to all its passengers, according to Vijaya Menon, Head, Corporate Communication, Air Deccan.

Air Deccan launched its operations with a 100 per cent Web-enabled ticketing service and became India's largest e-Commerce site, with Rs 3 crore worth transactions per day. The software used in the Air Deccan Web site was developed by the Delhi-based Inter Globe Technologies.

In rural areas, where PC penetration is low, there are alternate distribution modes, such as travel agents, Reliance Web World outlets, Hughes kiosks, and so on.

The airline has tied up with SBI for ticket generation through Net banking where the ticket amount is directly debited from the SBI account holder's account and one does not have to use a credit card for booking.

e-tickets have made life easier for travel agents, says N.R. Kumaraswamy, Deputy General Manager, Balmer Lawrie's travel agency. Delivery and cancellations can now be done over the phone or e-mail. The hassle of depending on a peon or delivery boy to deliver a ticket is not there now, he says.

Global Travel Distribution Systems such as Amadeus and Galileo indicate in which sectors e-ticketing could be done with an `e'. On sectors where `e' is indicated, if a paper ticket is issued, some international airlines charge Rs 1,000 extra for paper tickets. So agents have to tell those passengers who are uncomfortable with an e-ticket to pay the extra amount, he says.

Since many airlines have not implemented the e-ticket initiative fully, Kumaraswamy says that the difficulty now is that a part of the itinerary for a passenger would be on paper ticket while the other half is an e-ticket.

Similarly, there should be real time interfaces with multiple airlines, computer reservation system and ground handling agencies. "Our software needs to take care of all this," he says.

"You can't put a radial tyre on a bullock cart," says a senior member of the air cargo community. India has been pushed to the third phase of the e-freight initiative, which will be beyond 2010.

The main reason for this is that the physical infrastructure, including financial laws, is just not there to support it, he says.

raja@thehindu.co.in

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