Based on responses from 109 airline CIOs polled for the industry-owned IT services provider SITA, it appears that the persistent industry trend is one of cost-cutting and efficiency gains. By the end of 2004 over two-thirds of airlines said they expect the majority of their systems and sites to be Internet Protocol-enabled.

The airline sector is one area where the much-maligned application service provider model has taken off. Nearly 60% already use ASP for reservations and departure control/check-in, 30% for cargo, and 27% for frequent flyer. SITA said the flexibility that airlines could get from renting their software on a monthly basis rather than implementing and managing it internally, will see greater adoption of the ASP model.

SITA’s survey found that outsourcing continues to be seen by many airlines as a way to reduce IT operating costs, and 45% of respondents intend to have outsourced airline-specific applications, web hosting, and network management within the next two years.

The number of airlines outsourcing the majority of their IT systems will double by 2006 to over 20%, SITA said, adding that half of all respondents believe that the majority of IT systems are core and will remain in-house.

Airlines have high fixed costs of equipment, labor, facilities and fuel. Most have high debt-to-equity levels. The high levels of capital expenditure and a relatively inflexible infrastructure means a high proportion of short-term costs are fixed.

Competition in the industry has led to falling yields and razor-thin margins of only about 3% globally. However, translated into hard cash, global IT spending among businesses in this sector is estimated at around $10bn.

Over 60% of airlines are now using e-commerce, notably for spare parts purchases and engine and airframe maintenance. SITA said it found that respondents expect to make cost savings of 10% using such e-business systems. Online ticketing is also well established. Counted together all web ticketing channels were found to account for 21% of airline ticket sales worldwide.