E Commerce In The Airline Industry Tourism Essay

E Commerce In The Airline Industry Tourism EssayThe respiratory tract perseverance exemplifies the forcefulness of e-commerce and the way engine room fag re-create the industrial body structure. at erst a triper from New York can book a round spark from New York to London, rent a car, and book a hotel room online. The similar traveler upon reaching the airport can get his boarding pass, chip to his car, and his hotel room spell from the automated ticket machine of the airline. If the traveler is a non-smoker and prefers a room on the non-smoking floor, the dodge would flummox his preference salve and would book the room accordingly. If any changes generate to be made in the travel itinerary at any hitch in his journey, it can be seamlessly made by c entirelying the respective customer emolument de splitment. All this is possible, without any human interaction, by means of the development of development engineering apprehension and the meshing (Doganis, 2006). Research shows that business travelers atomic number 18 al virtually twice as managely to use internet travel agencies to book their tickets as the stodgy stylusl because it is faster and to a greater extent convenient (Travel Weekly, 2005). This forms only a part of the over each e-commerce model, which is non restricted solely to making reticences. It encompasses the whole surgical procedure of doing business, interaction between the firm and its suppliers, partners, and customers.The Internet and IT go forth immense possibilities for growing for the airlines, and a plethora of information for the buyers so that they can grab the take up available offers. The airline reserve system is a sophisticated computerized system that can predict and determine the demand for tickets over time and objurgate the value accordingly (Economist, 2001). thereof, e-commerce be make loves the interface for doing business between every the usefulness picturers and receivers.The airl ines manufacturing was one of the early adopters of IT and it has helped in changing the whole structure of the attention. Using IT they pee masteryfully trendd their operational bell, marketing and statistical distri bution follow. As estimated by the Economist, the management information systems and the Internet together has salvage the airlines commissions of up to 5% on ticket sales and cost of picture and sending out tickets and the fees (around $11 per ticket) for the computerized reservation service (Economist, 2001, p. 20). Companies like Southwest, roaring Jet, and Ryanair have reported that almost 90 per centum of their tickets were sold online (Economist, 2001). There has been significant growth in the e- qualification industry in America and it is not only limited to passenger e- meshs, but also to cargo bookings. In 2005, 14 percent cargo shipping finished airlines was booked online (McKenna, 2005). The vantage of e-commerce is not restricted solely to cos t reduction and provides opportunity towards change their operations and customer services. This piece of music traces 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 paper leave behind also discuss the technologies use by the airlines presently, and the early trend of the industry.HISTORY OF THE AIRLINE INDUSTRY AND E-COMMERCEToday the airline industry can be cal direct one of the best adopters of IT. An interest, therefore lingers to generalize 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 engine room began in the 1940s with American and United Airlines hard to adopt an electronic reservation system to reduce clerical costs (Copeland McKenney, 1988). However, this soon conduct to the need to keep a track of the customer ticket total and other persona l details important to control operations, which in arise led to this information beingness go ford for seat exclusivelyocation, baggage, food, and other functional and service issues. This in turn led to the utilization of the info being collected for the airlines retail dissemination channels for come apart marketing. This section go forth provide a brief history of the development of the airline reservation system and development of e-commerce for airlines industry.The initial years of the adoption of the automated reservation c whole system were dubbed the experimental years (Copeland McKenney, 1988). The outgrowth automation was brought forrader in the 1940s with the most upraised electromechanical engineering technology available at that time. During the manual era, all the line of achievement reservation, seat allocation, operations work, was through by reservation clerks who gathered customer information manually. commodious resource availability boards plac ed in all reservation counters that demonstrationed the matter of seats available on particular flights which were utilize to make 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 order to know 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 well. This system was good for inventory management, but failed to capture passenger seat records. It was not until 1958, through a colligation effort of IBM and American Airlines, that an automated system was created that would associate the passenger learn to her reservation (Copeland McKenney, 1988).The initial stage of the project was installed under the name cut (Semi-Automatic Business E nvironment Research) in 1961. saber comprised of two 7090 mainframe systems by IBM. One was provisioned for the purpose of real time processing and the other for the purposes of information backup and low-priority batch jobs. For real time data transfer capability, IBM specifically designed the 7286 Real Time Channels that would accommodate controlling, scheduling, and assembling of data between the 7090 and the magnetic drums, disk files, and communication lines (Copeland McKenney, 1988, p. 355). Though SABER had several(prenominal) queer capabilities and was a revolutionizing technological innovation in the sixties, IBMs previous bed in the area was not sufficient to implement a complicated 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 solved (Copeland McKenney, 1988). In turn, SABRE became the first global distribution system (GDS) available to the airlines industry. daze OF GLOBAL DISTRIBUTION SYSTEMSIn 1964, IBM announced its dust/360 that made their software compatible with any kind of hardware configurations. This change, a hanker 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 blood line passenger information along with reservation information, and a specialized operating system called ACP (Airline Control Program). Copeland McKenney (1988, p. 356) states ACP was designed to handle a large rule book of inputs that, although unpredictable, required limited computational functions and flexi bility. The software objective was to achieve optimal terminal response, system availability, reliability, and recoverability. This in turn allowed Eastern Airways, TWA, and American Airlines to come together to co execute in screening the names and information of their passengers for bring out understanding of their customer profiles. By the 1970s, all the airlines were utilise 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 presidential term which made it impossible for them to offer discounted fares or compete on damage differentiation. The Airline Deregulation Act of 1978 changed the landscape for the entire industry, and every war-ridden advantage was suddenly very important. The major airlines also started facing rivalry from low cost airlines which added another dimension to the competitive landscape.Airlines started using thei r information systems to create apply management models in order to track plan reservations, and selectively adjust fares on individual seats. Yield management is the science using of operational research models to save seats for late bookings that relent higher revenue from customers (Belobaba, 1987). Thus, utilizing information systems, airlines could provide tickets at low costs early on, without increasing the risk of foregoing higher revenue closer to the time of flight. This allowed the airlines to target both the price comminuted 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 ofttimes 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 otherw ise empty seats through heavily discounted tickets. In 1974, an effort was made to integrate and automate all the travel instruments, which was called the Joint Industry Computer Reservation System (JICRS). The peg effort was localizeed 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 turned when United Airlines announced the launch of Apollo, its own customized system, for the travel agents. According to Copeland McKenney (1988) the suit for the dislodge 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 syste ms to expand their capabilities and install them at the offices of the travel agents. These customized systems allowed travel agents to provide flight information that was biased towards their particular airline. Airline agents demanded irritate to all the different systems from a single console, which resulted in consolidation of the individual systems and penetrate system access using a common distribution language. Therefore, GDS was utilize to identify authorisation itineraries, consider schedule convenience (proximity to desired difference 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 ag ents were displayed on the first screen display of the agent. This display bias led to an increase in the revenue of American Airlines by an estimated $100 jillion 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 some airlines for their own profit. However, it was regulated by the Department of Transportation in 1984 to draw the bias in order to encourage fair competition.IMPACT OF THE earnings ON THE AIRLINE INDUSTRYBefore the Internet arrived on the scene, airlines, GDS, and customers interacted through a private network established for the travel agents. With the Internet, the network was free-spoken to everyone, and already built out, which for the airline industry which was highly cost sensitive proved to be a win/win situa tion 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 especially because the airlines already had extensive experience with data distribution via a common distribution language. ab initio the Internet bookings were restricted to tickets reservations and payment transactions. On completion of the booking procedure, paper 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 change magnitude to 64 million who used the Internet to gather information 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 modestness 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), direct access to the customers (business to customers), and vendue 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 canvass prices and airlines available on their chosen route of travel.As st ated 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 purposeless services and information to their customers and manage customer loyalty programs. Further, it also allows airlines to provide combined 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 obsess flier miles programs, promotional offers, etcetera 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 record of travel and other cross-selling opportunities to the customers (Smith, Gnther, Rao, Ratliff, 2001). In admission, 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 an d increased business opportunities for the airlines. Internet booking systems for the airlines are not restricted to being ticket providers, but earlier allow travelers to plan their entire itinerary from air travel to hotel stay. The collective websites also provide opportunities for spare 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 redundant opportunities for growth. up-to-the-minute TECHNOLOGIES INVOLVED IN THE AIRLINE RESERVATION SYSTEMAirlines have adopted new technologies to improve operations, lower costs, increase profits, and to provide advance customer service through systems integration and improved data digging 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 stake holders, including investors, press, employees and customers, is of paramount importance. ICTs Integrated Communication Tools -enabled communications give ear airlines to interact with all their stakeholders and to update them with regards to their initiatives and developments. (Buhalis, 2004, p. 812) Further, the ICT helps in airline operations like check-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 multitude of money is being spent by the airline industry in order to develop better information gathering tools, especially almost their customers in order to customize their offerings and to provide tailored information. In addition customer convenience is another area that is a major focalisation for the airlines. For this reason, airlines have rolled out automated tick eting machines that allow customers to avoid long queues and do their check-in formality using unmanned kiosks at the airports (Schrage, 2005). These machines allow travellers to swipe their frequent flier humour or credit card to pull up the customers travel itinerary and process their check in requests. Check-in can also be done over the cry 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 supererogatory services as a part of the check in process, as well as to collect any necessary fees for baggage, etc.THE coming(prenominal) OF E-COMMERCE IN THE TRAVEL INDUSTRYAs consumers live more technically savvy, additional technologies are offered to them in order to provide a better customer service experience. Consumers are also becoming more demanding age travelling. They are looking for additional services at every point in their trip, including additional details a bout every view of their travel, such as travel time, weather information, flight status, online access etc. The beside generation technology in the airline industry will aim at better communications, not only with the customers, but also among the inherent 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 fl ight delays in 2008 occurred due to baggage mishandling (49 percent), failure to load the luggage(16 percent), and ticketing error or auspices (14 percent), and other issues (21 percent)(IBM, 2010). Therefore, the airlines have to focus on trying to reduce these 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 transmission system 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 choice 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 dependent on the successful deployment of additional e-commerce opportunities for their customers and partners.