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Tuesday, April 19, 2005

Southwest Airlines & Technology

Airlines are heavy users of technology and the general impression is that most of the airlines use standardised software for their operations - far from true - different airlines use different types of applications - some custom built, some use industry standard software heaviliy customised for their processes - all these result in varying degrees of benefits to airlines and the cost structures are also different.Added to that legacy investments and integration add their flavour to the IT landscape. Zdnet points to an interesting conversation with Garry Kelly, CEO of Southwest airlines about how Southwest leverages technology to be cost effective. Excerpts with edits and comments:

Southwest Airlines,the only U.S. carrier to be profitable every year since 1972,made possible point-to-point flying,alternative airports, unassigned seating, friendly service and low fares its signatures. Gerry Kelly on how southwest uses technology to turning planes around quickly and maintaining its primary advantage: low costs.
- To survive, all carriers are going to have to be at least lower-cost carriers.We're always looking for ways to improve every aspect of our business, from customer service delivery to the efficiency and productivity of our airline operation, so that Southwest can continue to be tops in all categories.
- On lowering distribution costs - southwest became electronic or ticketless back in the mid-1990s, and today its about 90% to 95% ticketless. Today Southwest.com bookings account for about 65% of total revenue and it may touch or surpass 75% this year saving 10% travel agency commission paid, and $10 a booking as against paying somewhere between 50 cents and $1 per booking [for electronic transactions].
- On airport operations technology lagging reservations technology - until 2003, all customers would queue up in the gate area and exchange their boarding passes. Then boarding passes were distributed from multiple points in an airport, later, boarding-pass were generated via Southwest.com. Now there are self-service kiosks with new functionalities added regularly. It has the added advantage of being more cost-effective.
- On efficiency measures - number of employees per aircraft peaked at about 95 employees per aircraft around 2000, today, its down to around 73 or 74 as against a targeted average of 80.The primary areas of improvement have been reservations, fewer reservation agents per aircraft, and the airports, fewer customer service agents per aircraft and all these flow from more customer self-service.
- Technology really spans every area of the company. The challenge for every employee and every work group is to be the best in the airline industry, have the best time performance, have the best customer service satisfaction rankings, have the lowest cost, consistently offer the best fares, have the best information to make decisions. The technology spending is flat for three consecutive years!
- Like standardizing on the the 737’s for aircrafts,SW is trying to do the same thing in technology. Kelly says,"We have a way of constructing the software that all our developers use. We have a single data architecture. We have a standard testing approaches, where we will rarely allow shortcuts. It's not quite as crisp as the airplane approach, because we have three decades of other stuff that we're still supporting, but we've certainly become a lot more disciplined in our choice of technologies" .
-I.T. role in the "10-minute turn" of airplanes at airports -In terms of specific planning for a turn, having all the right information helps us achieve a lot of efficiencies. It's a big priority to make better decisions. One of the things to be done with inbound flights are to make sure you can handle the facilities like 12 wheelchairs, and marshal the right resources to move out again. An excellent insight- who said IT is getting commoditised - in everything from tin plate distribution to cellular gizmo's - the hardware is getting commoditized - either chaeap - or available in standard forms to all interested - the difference is coming out of software and applications - that gives the edge to business.

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