Shorts must be panicking! The surge in some internet stocks yesterday may have scared the wits out of them.
Here's just one example of the wave sweeping corporations around the world. Article...
Cleared for takeoff
May 18, 1999
PC Week : National Airlines outsources IT for lean and mean flight operations fueled by Web technology
By Stan Gibson
To get a startup airline off the ground, it helps to get a lift from the latest information technology. And for National Airlines, which is ascending into competitive air space, a Web-centric approach and a core four-person IT crew will keep the fares low and, with luck, propel the company to leadership in the Las Vegas market.
Making sure the IT checklist is complete is the job of Tim Stanley, vice president of IS at National. With Las Vegas as its hub, National is slated to launch its first flight May 27. Stanley has spent the last nine months assembling all the pieces on the airline's IT parts list, including reservation, yield management and market analysis systems. And Stanley is banking on Web technologies to connect directly with suppliers through an extranet and to interact closely with customers through a Web site that will handle online ticket purchases.
"We're building the ultimate customer experience. We're business-solutions-focused, powered by IT," said Stanley, who came on-board National last summer, having been a product manager at Intel Corp.
To stay close to customers and keep ticket prices low--National's fare structure for an East Coast traveler will be an average of 25 percent lower than the competition and 40 percent lower for first class--the company couldn't get dragged down with back-end IT functions. Therefore, National is not trying to grow its own IT operations but is leaning heavily on outsourcing partners and contractors, including Internet integrator USWeb/CKS, Stanley said.
The right flight path
By next year, the new carrier will have 12 Boeing Co. 757s on its flight schedule. With the company's goal to compete on low fares and high-quality customer service, the founders, who earned their wings starting America West Airlines in 1981, have good reason to think many people will fly their way: Las Vegas is the destination of 30 million visitors yearly. The city boasts 120,000 hotel rooms, with 16,000 to be added in the next year and a half.
"We started the airline because we found a market niche to exploit. It started because of the growth of southern Nevada," said Mike Conway, chairman, president and CEO of National.
To compete, National must be lean and mean. But even then, National could encounter turbulence, said Hank Ransome, president of Ransome Associates, an airline consultancy in Cinnaminson, N.J. He said Las Vegas is a highly discretionary environment--that's airlinespeak meaning people don't have to go there for business, as they do, say, to New York. "It's price-sensitive. It's a low-yield market. Every dollar gamblers pay the airline is one less dollar they can gamble with," Ransome said. That means National must watch its expenses like a hawk. And competitors won't sit idly by when faced with National's low fares. "Incumbent competitors always match them," he said.
Still, building IT systems from scratch has hidden advantages, Conway said. "We weren't burdened with any existing system, so we started out with a clean slate."
And a good place to start was building a Web site to handle online ticket purchases. National launched its Web site several months ago and gave it a major update last month. The site, www.nationalairlines.com, walks customers through the electronic ticket-purchasing procedure. Customers will also be able to place ticket orders via expedia.com and travelocity.com.
Beyond the basics
The Web site has immediate consumer appeal, but there are many less obvious IT tasks that no airline can do without, and a reservation system is the most essential. National has signed on with Sabre Inc.'s reservation system to take care of that requirement. National will access the Sabre system from Windows PCs.
Moreover, no airline can compete without a frequent traveler program. To keep customers coming back, National has started the National Comps frequent flyer program, which is operated by Rosenbluth International, a travel agency based in Philadelphia. In an unorthodox twist, the plan will be based not on miles traveled, but on dollars spent. Ransome said the key to profitability for any airline is an effective yield management system. Yield management is the practice of calculating the pricing and profitability of each seat ticketed. The cornerstone of this effort at National is a data warehouse constructed with the help of USWeb/CKS and Microsoft Corp. Stanley said the warehouse's operational data store collects booking information from the Sabre system. That data is then matched with a revenue accounting system called PRA (passenger revenue accounting) from PRA Systems.
The data warehouse is built on a Microsoft SQL Server 7.0 database, which comes with Plato tools for online analytical processing. "We do a cube model so that managers can do queries against the data to find out about yield," Stanley said. Expanding on that, National is currently running an application that tracks the ticket sales following promotional campaigns in different geographic areas. "You want to find out what you did right to do more of it as soon as possible," Conway explained.
On the maintenance front, National is connecting to a Boeing Aircraft extranet to track parts and maintenance schedules. And for internal communications, National has built an intranet, called NationalNet, and outsourced its e-mail to USWeb/CKS, which allows Stanley's group to focus on the more strategic parts of the business.
In all of these applications, rapid access to data is key to competitive advantage. "There are hundreds of thousands of transactions that take place every day: tickets, meals, reservations and so on. The airline management that can have the fastest access to that information is way ahead of the game because at many airlines, they don't have that information for weeks," Conway said.
Stanley declined to specify National's IT budget, although he said it's in line with that of most new companies. National has received $50 million in startup financing, including $15 million each from Harrah's and Rio casinos. An arrangement with those establishments will funnel passengers to them, enabling check through of luggage to and from the casinos.
We'll soon know more about whether Stanley made the right preflight preparations. But one thing's for certain: Stanley, Conway and the rest of the National crew are in it for the long haul. |
