IT Remakes British AirwaysBy Jeffrey Rothfeder
During this time, he has completely streamlined the carrier's internal networks, eliminating redundant and inefficient systems, and recreated its ticket distribution and customer service operations.
The payoff: a carrier that seemed on its last legs now has fresh ones again, a situation many other carriers would like to emulate. BA reported an 11.8 percent operating profit margin in the second quarter of fiscal 2005, ended september 2004. Coby talked to cio insight about the challenges he faced in reengineering the airline.
CIO Insight: Describe what you found when you became British Airways' CIO at the end of 2001.
Coby: Too many parts to our network. I likened it to a Victorian city: nice neighborhoods that worked okay and rough neighborhoods that didn't work at all. So we stripped it down. We had to do something to fix our business. This was post-Sept. 11, in the middle of world economic problems and SARSall of which were cutting into airline travel.
How did technology come to play such a big role in repairing BA's fortunes?
CEO Rod Eddington believes as much as I do that the smart use of technology is fundamental to BA. Airlines have lost the plot in regard to using IT.
At the end of the 1990s, most carriers thought IT was a commodity and a lot of us outsourced our brains. But then we realized that our business had become too complex and too expensive to operate to assure consistent profitability. So we decided that we must consider what the simplified model should be and use technology to automate processes as we add back in the complexity that customers demand, such as flexible ticketing, flying into accessible airports, and having back-up aircraft in case of a problem.
Technology is a lever that allows us to be quite often just as price competitive as the low-frills carriers and to meet the demands of our customersand still make money.
Can you give an example of how the new technology has transformed BA?
Our online environment is the most far-reaching of any airline, I believe. We've put our customers in charge of their travel arrangements completelyand we've made our operations transparent to the customer.
When you book a flight on the Web, we'll show you 14 days, plus or minus the day you want to fly, and color code which are the cheapest and which are the most expensive flights. We're exposing the inventory28 days of it.
To do this in Internet time we have to have a very clean inventory and revenue management system. Also, customers can now do on the Web everything that used to be done at airport check-in desks, where employees were typing all kinds of mysterious information into green screens that were out of the customer's control.
If you want to change your meal, seat, upgrade, register for advance passport info, do executive club transactions, you can do all of that online.
Have the changes been just as significant internally?
Yes, the other side of this coin is employee self-service. There is e-pay, where people get their statements online, and online cabin crew rosters, where people can put in bids for specific routes they want to work on.
Employees can't buy anything in the U.K. or the U.S. unless they use the online procurement system, which, of course, controls our spending.
That represents huge savings because our employees are all over the world at any one time and communicating with them via paper or telephone can be extremely expensive and time-consuming.
How do you know you've been successful?
The results speak for themselves, and I think these are numbers that the rest of the large carriers can't match: Sixty percent of our ticket sales for U.K. and point-to-point flights are online.
And we find now that a third of our customers are using our online services before they get to the airport. We reckon we've saved our business about $180 million over the past two years from this. And the savings from the internal network activities are on target to be about $95 million.
The best evidence that it works? We've survived.