Business intelligence is moving up the airline priority list, not just to ensure efficient data management but also to drive customer service and personalisation
Business intelligence (BI) sounds so simple and self-evident. Yet you'd be hard pressed to find two words that encapsulate a concept that has so many implications for all areas of business. Around 80% of airlines intend to invest in BI solutions over the next three years according to the Airline Business/SITA Airline IT Trends Survey. At the broadest level, we are talking about the applications and technologies for gathering, storing and providing access to data to help businesses optimise their resources and create value-added opportunities.
However, this does not really get to the heart of its role.
Fuelling the BI machine is data and to be truly powerful, data must have achieved a reasonable level of quality and validity when it enters the BI system. Therefore, much of the discussion and activity around BI gets snagged on the whole issue of accessing data, finding ways to clean it up and sharing it.
These problems with data integrity stem from fragmented and legacy technologies, compounded by a propensity for bespoke end-to-end application systems and thinking, which have dogged the airline industry.
Nevertheless, the BI revolution is under way, with innovative projects now on track at both an individual airline and at a more global level in the industry.
SITA's chief technology officer Jim Peters says the greatest impact from BI is to be had around process optimisation. "Reducing costs through optimisation of business process and better business support - cost saving is a pretty predominant aspect of these projects. And you are looking for a return on the investment within your timeframe."
Stephan Wilde, director sales and business development at route profitability and cost management specialist Airpas, says: "More efficient back-office procedures like digitalisation of invoices or even (standardised) interfaces would allow for lowering administrative cost and gaining a competitive advantage.
"Furthermore, efficient and precise invoicing/billing procedures are not regarded as 'must haves', although the subsequent advantages with regard to budgeting, forecasting and closing procedures are indeed fascinating."
Improving customer services and increasing revenues are also key areas of the business that can really benefit from BI. "Effective use of a revenue management system has been credited with revenue increases of between 3% and 7% resulting in profit increases of 50% or more," says Mignon Buckingham, managing director of loyalty marketing specialist ICLP.
"The goal is really to combine the computer brain with human intelligence, where experienced individuals live and breathe the booking patterns and load factors for a specific route or group of routes and are able to predict booking patterns and load factors with extreme accuracy," Buckingham says.
She adds: "Airlines are also good at applying BI to frequent flyer programme data, which lends itself to analytics as it is generally clean data, and FFPs are very much number-driven entities. They use various off-the-shelf tools and more advanced statistical modelling techniques, such as clustering and regression."
With so much scope for BI to drive improvements, there is a danger projects can lose their way without clear business objectives. "Expectations towards BI tools are usually high and sometimes end in a kind of disappointment," says Wilde.
"Stepwise integration of revenue data in a first step and cost data in a second step (or vice versa) could be one approach to reduce complexity and to guarantee the buy-in of the different stakeholders involved," Wilde adds.
However, good BI implementation not only provides a holistic view, but actually also requires it. "Many airlines also forget the helicopter view, leading to a fragmented analysis and subsequent departmental key performance indicators leading to department optimisation, but not overall business optimisation," says Ursula Silling, chief executive of consultancy XXL Solutions.
"If used properly, performance indicators will cover the enterprise and not only [the] department view, and targets for team members will be set on a cross-departmental basis; in that way BI can help to improve the cross-functional working together for various projects, whether revenue or cost improvement or customer service or operation/punctuality related."
The same focus and systematic approach is needed when it comes to the thorny issue of data integrity. Headaches typically include trying to access data locked in departmental silos and inconsistent data across systems. Getting to grips with data - ensuring it is accurate and sanitised - is a key focus of Westjet's BI strategy.
It has benefited from some early wins around centralising data quality checks, optimising refreshing of the information and recognition that data needs to be federated.
Rather more challenging, says Torry Fischer, data warehouse manager, is recognising the need to identify and manage the data more holistically, plus supporting day-to-day information needs in parallel with developing a corporate view of the data for more strategic and tactical business actions.
Trying to make sense of your data starts at the most fundamental level - making sure everyone across the airline organisation is using the same terminology. Neetan Chopra, vice-president strategy and architecture for Mercator, explains: "Origin and destination - different departments have different definitions of this terminology. The vocabulary and semantics that you use for describing information make it difficult to collate data."
Chopra recommends establishing a BI-competency centre, with a team of people working to clean up the vocabulary before taking the data into a more federated set-up.
An example of this in action is in the safety arena. "This is another data set area where it is increasingly important for the industry to have a common set of terminology and reporting," says Mercator vice-president Duncan Alexander, explaining that Mercator is rebuilding a corporate-wide safety platform and sharing the IPR with IATA to create a better way for the industry to report and analyse data with the authorities and each other. "It is a big area of collegiate, cooperative approach by the industry, where we will get greater traction faster, because it is in everyone's interest."
Faced with a reliance on business partners for many applications and the need to decentralise its data, JetBlue set up a data governance group plus a team of data stewards. There is also an education programme to tackle some of the data issues. JetBlue is now the central hub for data when working with business partners, developing standard mechanisms for data exchange.
Director of application services Andrea Azzolina says this is part of a four-point strategy, which also includes partnering with the business to define the most critical metrics driving the business; building enterprise BI and integration initiatives into a centralised architecture; plus centralising and extending the internal BI capabilities.
"We are currently working on building out a robust crew and recovery capability that will rely heavily on data and analytics. Key focus areas will be within our systems operations center to deliver operational data to front-line crew members. We will focus on providing web-based and mobile reporting technologies on airline operations," she says.
A critical issue for airlines using BI is to plug the gaps in their real-time knowledge of what's happening in the market, critically in relation to ticket sales. IATA has been working with 43 airlines to pool disparate transaction data.
Launched in June, the Direct Data Service (DDS) is expected to contain 85% of total data for global indirect sales by the end of the year and 90% early in 2013.
A number of airlines are also contributing direct sales into the pool and Aleks Popovich, IATA senior vice-president, industry distribution and financial services, sees opportunities to include other data such as industry ancillary revenues from electronic miscellaneous documents.
IATA is also working on another BI initiative to help airlines to differentiate and personalise product across all channels, including global distribution systems. The challenge will be data and Popovitch envisages the DDS project evolving over time to provide that data.
"One of the things we are learning from other industries like retail is shopping. When you buy products through Amazon, [you see] how tailored the product is to you and me. This organisation has learned about yours and my buying preferences to offer solutions tailored to our needs," he says.
In a not dissimilar move, Amadeus IT Group, with an eye to the achievements of Google and Amazon, is also looking at how to make better use of search and shopping data in travel to drive personalisation. With more than a billion transactions a day going through its system, the GDS is keen to further exploit this information.
"What are people searching [for]?" says Cyril Tetaz, head of marketing, airline distribution marketing at Amadeus. "If we manage to link back from shopping to booking we think we will have a very valuable proposition."
On the not so distant horizon are opportunities for airlines to incorporate new data streams into the mix, which will deliver rich insight about their customers and potential customers. "Traditional customer data sources such as FFP, CRM and reservations data are being supplemented by social media, web and mobile 'footprint' data," says Buckingham. "Therefore any airline that integrates these relatively new data streams with the traditional ones within a single BI platform will take customer insight to an entirely new level."
Spanish carrier Vueling is already looking at incorporating this social data feed into its BI marketing solutions, which are focused on driving loyalty and personalisation for customers. "Social networks are increasingly becoming a part of the relationship between the company and the customer and must be incorporated into information systems," says marketing director Lluís Pons. "Specific BI tools are being tested to analyse available information on social networks, to identify opportunities and analyse detailed customer profiles. It is, however, too early to assess results."
With airlines collecting vast amounts of data from many sources, whether it is structured - in a formal database - or unstructured - Tweets or customer feedback emails - they are approaching the realm of "big data" inhabited by the likes of Google, Amazon and eBay, where specialist algorithms are developed to run through the data and extract information.
Mercator and SITA are among those experimenting with "big data", with projects likely to come to fruition over the next 18 months. The challenge, says Dr Gunter Küchler, member of the executive board at Lufthansa Systems "is to combine all this information into one holistic view which describes the current situation of an airline in a consistent and clear manner. If this is well done, forecasting of future developments is possible using BI."
He adds: "It is not sufficient anymore to ask what happened or why it happened; the most important question now is, what might happen? This approach is more and more important to get ahead of the competition in the global airline industry."
People power and BI
BI implementations are as much about strong, visionary leadership and people skills as they are about technology. When Air Baltic built its passenger data warehouse based on bookings, ticketing and departure control system data some of its key business challenges were people-related, says chief executive Martin Gauss.
The issues included a lack of internal coordination, the involvement of many parties and internal acceptance of the new reports over the existing isolated data sources. These problems were addressed by top management commitment, user training, involving the relevant department heads and channelling communication through project managers/analysts.
The result is that communication has been strengthened by the new role BI plays in the company. By also addressing hurdles such as data quality at the source, testing and documentation, the airline has eliminated duplicate reporting processes in various departments.
Development of the passenger data warehouse is ongoing with the focus on ticketing data. Other BI innovations include a financial data warehouse, with the focus on daily updated route results.
Careful consideration of personnel issues - getting unions involved from the outset, thinking about how to address resistance from people fearing loss of power as data becomes more easily available - is key, says XXL's Ursula Silling. But, you can create big wins on the staffing front. "BI used in a proper way can also lead to more staff empowerment and staff engagement, as well as better customer service."
It's clear the success of BI is wrapped around the issue of making data holistically available. What everyone is wrestling with is how to integrate the data sources and deliver them in a meaningful, timely way. Getting this right will decide which airlines will be the winners.