Ailine Industry

Air travel remains a large and growing industry. It facilitates economic growth, world trade, international investment, and tourism and is therefore central to the globalization taking place in many other industries.

Worldwide, IATA, International Air Transport Association, forecasts international air travel to grow by an average 6.6% a year to the end of the decade and over 5% a year from 2000 to 2010. These rates are similar to those of the past ten years.

There’s no question that the rate of change is taking off in the airline industry. In the United States, it started with deregulation in 1978. More recently, the emergence of low-cost carriers and the advent of the Internet have increased the state of flux even more dramatically. Similar factors are influencing airline companies around the world.

The link between business and information technology has evolved to keep pace with these changes. In the past, especially during the regulated environment, prices were basically fixed from a market perspective. If you wanted to increase or decrease a price, you had to get government approval as well as agreement from the airlines. There was very little change, and so it was essentially geared toward maintenance.

But deregulation boosted competition sixfold in North America, and Europe has seen a similar increase since the industry was deregulated there in 1996. This growth in competition has forced airlines to become more flexible in order to stay competitive. In turn, the need for flexibility has driven changes in business models, practices, and processes, along with a fundamental shift in the role of the IT infrastructure.

Since then, airlines have had to recognize the need for radical change to ensure their survival and prosperity. Many have tried to cut costs aggressively, to reduce capacity growth and to increase load factors. At a time of renewed economic growth, such actions have returned the industry as a whole to profitability. To meet the requirements of their increasingly discerning customers, some airlines are having to invest heavily in the quality of service that they offer, both on the ground and in the air. Ticketless travel, new interactive entertainment systems, and more comfortable seating are just some of the product enhancements being introduced to attract and retain customers.

A number of factors are forcing airlines to become more efficient. In Europe, the European Union (EU) has ruled that governments should not be allowed to subsidize their loss-making airlines. Elsewhere too, governments' concerns over their own finances and a recognition of the benefits of privatization have led to a gradual transfer of ownership of airlines from the state to the private sector. In order to appeal to prospective shareholders, the airlines are having to become more efficient and competitive.

The airline industry has