E Commerce In The Airline Industry Tourism Essay

E Commerce In The Airline Industry Tourism EssayThe glorioleline industry exemplifies the effectiveness of e-commerce and the way technology ignore re-create the industrial structure. Today a stumbleer from New York can concord a round trip from New York to London, rent a car, and book a hotel room online. The same traveler upon strand so forthing the airport can get his boarding pass, confirmation to his car, and his hotel room chassis from the automated rag elevator car of the airline. If the traveler is a non-smoker and prefers a room on the non-smoking floor, the strategy would have his preference saved and would book the room accordingly. If any changes have to be do in the travel itinerary at any point in his journey, it can be seamlessly made by c in all in alling the respective node portion department. All this is possible, without any human interaction, through the emergence of education technology and the Internet (Doganis, 2006). Research shows that busines s travelers argon al nigh twice as probable to ingestion internet travel agencies to book their tickets as the conventional model because it is faster and more convenient (Travel Weekly, 2005). This forms besides a part of the boilers suit e-commerce model, which is non dependant solely to making reserves. It encompasses the whole process of doing business, interaction between the firm and its suppliers, partners, and customers.The Internet and IT rear immense possibilities for growth for the airlines, and a plethora of reading for the buyers so that they can grab the best available offers. The airline reservation system is a sophisticated computerized system that can predict and determine the pack for tickets over time and set the price accordingly (Economist, 2001). Therefore, e-commerce becomes the interface for doing business between all the service providers and receivers.The airlines industry was one of the early overhe arrs of IT and it has helped in changing the whole structure of the industry. Using IT they have successfully reduced their operating constitutes, marketing and distri merelyion cost. As estimated by the Economist, the management information systems and the Internet unitedly has saved the airlines commissions of up to 5% on ticket sales and cost of printing and sending out tickets and the fees (around $11 per ticket) for the computerized reservation services (Economist, 2001, p. 20). Companies like Southwest, comfortable Jet, and Ryanair have reported that almost 90 part of their tickets were sold online (Economist, 2001). There has been significant growth in the e- booking industry in America and it is not yet limited to passenger e-bookings, but also to cargo bookings. In 2005, 14 percent cargo shipping through airlines was booked online (McKenna, 2005). The advantage of e-commerce is not confine solely to cost reduction and provides opportunity towards improving their operations and customer services. This opus trace s the history of integration of IT and the Internet in the business models of airlines and studies how this has changed the face of the industry. The musical theme volition also discuss the technologies apply by the airlines presently, and the future trend of the industry.HISTORY OF THE AIRLINE INDUSTRY AND E-COMMERCEToday the airline industry can be called one of the best adopters of IT. An interest, therefore lingers to understand the way in which the internet and IT have changed the interface of the airline industry. The beginnings of the innovation and change in the airlines industry to adopt new technology began in the 1940s with American and United Airlines trying to adopt an electronic reservation system to reduce clerical costs (Copeland McKenney, 1988). However, this in short led to the need to keep a track of the customer ticket numbers and another(prenominal) personal details important to control operations, which in shepherds crook led to this information being uti lized for seat allocation, baggage, food, and other operational and service issues. This in turn led to the utilization of the data being hive away for the airlines retail distribution channels for give out marketing. This section will provide a brief history of the development of the airline reservation system and development of e-commerce for airlines industry.The initial categorys of the adoption of the automated reservation call system were dubbed the experimental years (Copeland McKenney, 1988). The first automation was brought forth in the 1940s with the most advanced electromechanical engineering technology available at that time. During the manual era, all the dodging reservation, seat allocation, operations work, was do by reservation clerks who gather customer information manually. Huge resource availability boards placed in all reservation counters that displayed the number of seats available on particular flights which were use to process the booking arrangements . In 1950s, this was replaced by magnetic drum memories that captured the inventories of seats available so that they could be displayed in reservation offices (Copeland McKenney, 1988). In straddle to get along the number of seat available, reservation clerks inserted plates at their desks for the required flight which would then display the number of seats available. The cancelations or change in itinerary were done on the on the plates as advantageously. This system was good for inventory management, but failed to capture passenger seat records. It was not until 1958, through a joint confinement of IBM and American Airlines, that an automated system was created that would associate the passenger name to her reservation (Copeland McKenney, 1988).The initial stage of the project was cut ined under the name SABER (Semi-Automatic Business milieu Research) in 1961. SABER comprised of two 7090 mainframe systems by IBM. One was provisioned for the purpose of received time proce ssing and the other for the purposes of data backup and low-priority batch jobs. For real time data transfer capability, IBM specifically anatomyed the 7286 Real Time Channels that would allow controlling, scheduling, and assembling of data between the 7090 and the magnetic drums, disk files, and dialogue lines (Copeland McKenney, 1988, p. 355). Though SABER had some unique capabilities and was a revolutionizing technological innovation in the sixties, IBMs previous experience in the expanse was not sufficient to go through a complex teleprocessing system for commercial purposes (Copeland McKenney, 1988). It took IBM and American Airlines until 1965, when they completed installation of the SABER system to prove that the core problems with passenger reservations for the airlines could be single-minded (Copeland McKenney, 1988). In turn, SABRE became the first global distribution system (GDS) available to the airlines industry.IMPACT OF GLOBAL DISTRIBUTION SYSTEMSIn 1964, IBM announced its organisation/360 that made their computer software compatible with any kind of hardware configurations. This change, along with its experience in the SABER project, allowed IBM to develop the Programmed Airline Reservations System (PARS). This allowed airlines to utilize standardized System/360s for their reservation systems and helped the airline operators to reduce their cost of developing customized reservation systems (Copeland McKenney, 1988). PARS was targeted to the mid-sized airlines, and allowed them to store passenger information along with reservation information, and a specialized operating system called ACP (Airline cut back Program). Copeland McKenney (1988, p. 356) states ACP was designed to handle a large volume of inputs that, although unpredictable, required limited computational functions and flexibility. The software objective was to achieve optimal terminal response, system availability, reliability, and recoverability. This in turn allowed Ea stern Airways, TWA, and American Airlines to come together to cooperate in screening the names and information of their passengers for better understanding of their customer profiles. By the 1970s, all the airlines were utilize information systems to operate their businesses. Information systems were not however a differentiating factor in their businesses because the industry as a whole was regulated by the Federal government which made it impossible for them to offer discounted fares or compete on price differentiation. The Airline Deregulation Act of 1978 changed the landscape for the entire industry, and all competitive advantage was suddenly very important. The major airlines also started facing competition from low cost airlines which added another dimension to the competitive landscape.Airlines started using their information systems to create yield management models in instal to track scheduled reservations, and selectively adjust fares on individual seats. Yield manageme nt is the science using of operational research models to save seats for late bookings that yield higher revenue from customers (Belobaba, 1987). Thus, utilizing information systems, airlines could provide tickets at low costs early on, without change magnitude the risk of foregoing higher revenue closer to the time of flight. This allowed the airlines to target both the price sensitive customers with their low price offerings as well as high-revenue business customers who provided high revenue to the airlines. This yield management technology adopted by the US airlines allowed them to gain much higher revenue than those who did not use them. Therefore, the low cost airlines brought in a trend of discounted tickets, which was soon followed by bigger full-service airlines like American Airlines in order to fill their otherwise leisure seats through heavily discounted tickets. In 1974, an effort was made to integrate and automate all the travel instruments, which was called the Joi nt Industry Computer Reservation System (JICRS). The joint effort was aimed at making a booking system for all the travel agents who could book tickets using a single system for all the airlines. This was the first effort to establish an e-marketing system in the airlines industry. However, the plan was cancelled when United Airlines announced the launch of Apollo, its own customized system, for the travel agents. According to Copeland McKenney (1988) the reason for the take away was as follows During the latter half of 1975, United concluded that the JICRS proposal was going to result in United paying dearly for the industry solution, which would serve only to reduce their advantage by making all airlines equal in their reservations processing capacity (p. 359).This caused all the other airlines that have their own systems to expand their capabilities and install them at the offices of the travel agents. These customized systems allowed travel agents to provide flight informatio n that was biased towards their particular airline. Airline agents demanded access to all the different systems from a single console, which resulted in consolidation of the individual systems and cross system access using a common distribution language. Therefore, GDS was utilized to identify potential itineraries, consider schedule gadget (proximity to desired departure time, number of stops, elapsed time) as well as the carrier(s) providing the service (Smith, Gnther, Rao, Ratliff, 2001, p. 41). The airlines that had the GDS were listed higher up in order of the customers itinerary (Smith, Gnther, Rao, Ratliff, 2001). The first list that appeared in the travel agents screen had an impact on the customers decision. As cited by Smith et al. (2001), seventy percent of the bookings done through travel agents were displayed on the first screen display of the agent. This display bias led to an subjoin in the revenue of American Airlines by an estimated $100 million per year (cited in Smith et al., 2001).Therefore, GDS became the interface between the travel agent and the airline. It provided the agents with all possible information regarding the scheduled flights and their fares for all the available airlines. Initially the bias in the display system was used by many airlines for their own profit. However, it was regulated by the Department of Transportation in 1984 to remove the bias in order to encourage fair competition.IMPACT OF THE INTERNET ON THE AIRLINE INDUSTRYBefore the Internet arrived on the scene, airlines, GDS, and customers interacted through a private network open for the travel agents. With the Internet, the network was open to everyone, and already built out, which for the airline industry which was highly cost sensitive proved to be a put on/win situation because they no longer had to invest in complex and expensive private networks. This resulted in the communication between the travel agents, GDS, and the airlines becoming simpler especi ally because the airlines already had extensive experience with data distribution via a common distribution language. Initially the Internet bookings were restricted to tickets reservations and payment transactions. On completion of the booking procedure, root tickets were mailed to the customer. This made the process complex, as the customers had to purchase the tickets in advance if they wanted the tickets to reach them on time. Once electronic tickets were introduced, this problem was solved, as paper tickets were completely eliminated, thereby reducing the lead time and cost associated with online purchases (Smith et al., 2001, p. 41). This led to a widespread growth of e-ticketing for bookings through the Internet. As cited in Smith et al. (2001) a research conducted by Forester Research in 1999 demonstrated that 9 million households in the US booked their flight tickets through the Internet. In 2003, the number increased to 64 million who used the Internet to gather informati on or book tickets. (Werthner Ricci, 2004).The Internet has increased sales volumes for the airlines industry and has helped it in reaching their customers more efficiently. The primary reason is an efficient distribution system, which is individually customized to meet each travellers requirements. Three forms of distribution are employed by the airlines online travel agents (Business to business), engineer access to the customers (business to customers), and auction and reverse auction outlets (Smith, Gnther, Rao, Ratliff, 2001). The first model provides direct access to GDS by the customers, wherein the travel agents are portals like Travelocity, Expedia, and Orbitz. The customers utilize the system to compare prices and airlines available on their chosen route of travel.As stated by Smith et al. (2001) the Internet has also revived the airline sales agent in electronic form (p. 42). The Internet has allowed many airlines to provide extra services and information to their cu stomers and manage customer loyalty programs. Further, it also allows airlines to provide have vacation packages to their customers. In this model the Internet is used as both a distribution as well as a marketing tool. It is used to promote low fares, special packages, and other offers to potential travelers. Further airlines often use their websites or the online travel agents website to promote their frequent flier miles programs, promotional offers, etc. one such example is that of Delta airlines which provides the more for your mile auctions through which the frequent flier clubs members can redeem their mileage for vacation packages (Smith, Gnther, Rao, Ratliff, 2001). Further, the airline booking systems have extended their offerings beyond just airline ticket booking to car rental, reservation for hotels, etc. therefore the Internet has been used to optimize the design of the GDS to predict the nature of travel and other cross-selling opportunities to the customers (Smith, Gnther, Rao, Ratliff, 2001). In addition, the airline website also helps in capturing the customers navigational path on the web in order to utilize this data to frame promotional campaigns.The Internet is also used to reduce the distribution cost. For example, the Economist has reported that the average reduction in the cost of tickets is around $11 per ticket due to the change in mode of distribution systems (Economist, 2001). Further online travel agents like Travelocity save 19 to 65 percent in transaction costs (Harris, 2010). In 2001, 4% of all airline tickets were sold through the Internet. In 2009, almost 70 percent of the air ticket bookings are done online in the US (Harris, 2010).The Internet has created new opportunities for air travel for customers and increased business opportunities for the airlines. Internet booking systems for the airlines are not restricted to being ticket providers, but rather allow travelers to plan their entire itinerary from air travel to hot el stay. The corporate websites also provide opportunities for special customer services through unique customer web activity tracking mechanisms that can be utilized for customized offerings based on individual customers. Therefore, e-commerce has changed the way airlines do business and created additional opportunities for growth.CURRENT TECHNOLOGIES INVOLVED IN THE AIRLINE RESERVATION SYSTEMAirlines have adopted new technologies to improve operations, lower costs, increase profits, and to provide better customer service through systems integration and improved data mining tools from all their points of interaction. Branding and communication of principles are also critical for airlines at the strategic level. Managing communications with all stakeholders, including investors, press, employees and customers, is of paramount importance. ICTs Integrated Communication Tools -enabled communications assist airlines to interact with all their stakeholders and to update them with regard s to their initiatives and developments. (Buhalis, 2004, p. 812) Further, the ICT helps in airline operations like sign in tracking, seat allocation, flight status, and also generating reports regarding flight path, weather, etc. In addition, it will aid in inventory planning, and reservation management systems.THE CURRENT STATE OF E-COMMERCE IN THE TRAVEL INDUSTRYCurrently a lot of money is being spent by the airline industry in order to develop better information gathering tools, especially about their customers in order to customize their offerings and to provide tailored information. In addition customer convenience is another area that is a major focal point for the airlines. For this reason, airlines have rolled out automated ticketing machines that allow customers to avoid long queues and do their hitch-in formality using unman kiosks at the airports (Schrage, 2005). These machines allow travellers to swipe their frequent flier card or credit card to pull up the customers travel itinerary and process their check in requests. Check-in can also be done over the phone or the web prior to arriving at the airport if the passenger believes that they will be late for the flight. This system is also being used to upsell passengers for additional services as a part of the check in process, as well as to collect any necessary fees for baggage, etc.THE FUTURE OF E-COMMERCE IN THE TRAVEL INDUSTRYAs consumers become more technically savvy, additional technologies are offered to them in order to provide a better customer service experience. Consumers are also becoming more demanding while travelling. They are looking for additional services at every point in their trip, including additional details about every medical prognosis of their travel, such as travel time, weather information, flight status, online access etc. The next generation technology in the airline industry will aim at better communications, not only with the customers, but also among the interna l employees i.e. the ground force, and the airborne crew. Therefore, tools such as the GPS (Global Positioning System) can become even more important than it is today for both technology and in communication. In addition, airlines have plans to go completely wireless in future (Wilson, 2001). Wireless and mobile technology is being integrated into every aspect of airline operations to improve communication as well as allowing remote ticketing and baggage check-in through wireless devices (Wilson, 2001).The airlines are trying to increase their customer focus by reducing the hassles faced by travellers at the airport and during air travel. According to research conducted by IBM, most of the delays in air travel worldwide after flight delays in 2008 occurred due to baggage mishandling (49 percent), failure to load the luggage(16 percent), and ticketing error or security (14 percent), and other issues (21 percent)(IBM, 2010). Therefore, the airlines have to focus on trying to reduce th ese issues by utilizing technologies like RFID and SOA (Service Oriented Architecture) in order eliminate the causes associated with these problems.The airline industry is trying to expand the e-ticketing concept to make the other everyday passenger interactions easy. For instance, US airports now allow anyone with e-tickets to check in without seeing a ticketing agent. They also allow the traveler to check in their baggage using a similar process. The one major limiting factor is security, and once the airlines solve the issue of identity, I am certain that other services will be offered on a self-help basis to the traveller who chooses to do it themselves.The next big e-commerce opportunity for the airlines is to exploit the possibility of mobile e-commerce (Wilson, 2001). Others opportunities that are being explored include trying to use Bluetooth or RF that allows transmitting of data for short distances to transmit flight related information to the customer in the waiting area (Wilson, 2001). They are also trying to understand how this technology can be used to market to their captive customers who have little extract but to wait in the designated waiting areas in airports, and perhaps even onboard the aircrafts.In short, the use of e-commerce has only exposed a small tip of the overall airline industry, and they have been on this journey for more than eight decades. It is however very clear that the future success of the industry is very much pendant on the successful deployment of additional e-commerce opportunities for their customers and partners.