The following interview of René Fourel, Group Director, Business Solutions and Sector Marketing, SITA, took place shortly after the Fiftieth Anniversary celebrations of the founding of SITA which were scheduled in Geneva for June 1999. My thanks to Tracey Gillespie of SITA for organising the telephone meeting.
SITA: from networking to integrated services
In what way does SITA plan to embrace Internet use more widely?
Our customers, in particular the airline industry, see the Internet as a new distribution channel for their travel services. Airlines are very keen on reducing distribution cost which today represent more than 10% of their overall costs. They are very interested in going for direct sales. Using the Internet as a new distribution channel is seen as a very promising area to explore for them.
Does that imply that traditional travel agents will be pushed out of the market?
It is an interesting question. It is a little difficult to answer. If you asked the airlines themselves they'd probably feel that a considerable part of their business is going to be done over the Internet. However, today they rely a lot on travel agencies and CRSs (big reservation centres like SABRE, AMADEUS, GALILEO created by a consortium of airlines). Travel agents connect to CRSs to book tickets and hotels and make car reservations. They have different perspectives from airlines. They are certainly strong players today. It is true that there is a risk that travel agents will be disintermediated , but on the other hand they still have a shop on the street and they have a key relationship to the customer.
Is this move to sell ticket directly to customers going to be extended to other services as well?
Today, travel agents not only book the flight segment but also the hotel, the car and other specific travel services. There is a tendency of airlines to promote their own flights and services. The position taken by travel agents and CRSs is that they are still the best players to integrate the flight segment with the other reservation systems. So airlines will be promoting their own websites to sell their own services directly and there will be other players developing travel and tourism specific web sites.
What are the main challenges for SITA in this change?
The main impact on SITA's business is very similar to the impact the Internet has on most of the IT industry. There is an ongoing migration to IP (Internet Protocols) networking. Over the last two or three years there has been a major design and planning exercise and now airlines are in the deployment phase of IP networking. A lot of our customers are still using legacy protocols like X25 or IBM's SNA. So they are not necessarily looking at the Internet as the networking solution, but rather looking at IP networks to support mission critical applications. The quality of service you find today on the Internet is not sufficient for such applications as reservations, departure control systems, flight planing and so on. SITA has been deploying IP network capabilities and services on our network over the last four years. We see supporting IP requirements of our customers as the key driver for our networking business.
So the Internet is only a small part of what migration to IP means for SITA.
The use of the Internet, as in booking for example, is only one side of it. The major driver is not to use the Internet for networking but to enable most of the existing applications and communications means to function using IP. Migrating to IP is not just a question of embracing IP and following the trend, but of enabling the deployment of new applications such as e-mail, GroupWare, intranet and client server applications for which they need a new global IP infrastructure.
To what extent do airlines have to be coached to make the move to e-business?
One of the key priorities of airlines is in reducing costs and improving time-to-market of services. We have completed a couple of projects with airlines which automate the way they do business with their suppliers (for instance caterers). A lot of this work is about data automation, and moving from the EDI world to the web-EDI world. That again is a question of cost reduction and doing business more efficiently. There is an element of coaching necssary. Their highest priority is on the Internet booking and online ticketing services and second in priorities is the automation of some of the business procedures with their own suppliers and partners.
What role does SITA play?
Our role is to be a partner to airlines in developing and deploying integrative IT solutions. To bring our technical and business expertise, to help them in designing and planning and to provide them with end-to-end solutions in moving into this new IT / IP environment. Our initial core business was networking services and that is still a considerable part of our business, but now we are moving into the solution integration business, for instance, proposing a package solution for our airline customers to integrate online booking with web-hosting and Internet access,. Our role is to provide technical solutions, but also to work with our customers to design new solutions fitting their business requirements.
In the move from providing the network to more integrative solutions, you find yourself in competition with other companies who have been providing those solutions to airlines...
To some extent, yes. However, a lot of these solutions are new. We are new in delivering them but then everybody else is new in delivering them too. Instead of facing the telcos and network services providers, who were our traditional competitors, we are increasingly confronting new competitors like IBM or EDS.
What exactly is the status of SITA?
SITA is a cooperative registered in Belgium. It was created by airlines to federate their network services. The recent conference in Geneva celebrated the fiftieth anniversary of its foundation. SITA belongs to some 700 airlines and air transport industry members. They are SITA's shareholders. We are in a privileged position to help them and to do business with them.
You both belong to and are at the services of airlines which obviously gives you an enormous advantage over competitors...
It is a specific situation which we have been very successful in establishing and leveraging to help our customers and shareholders improve the way they do business. The fact that we belong to the airline industry means that we know their business well which is a key advantage. Creating EQUANT was another way of leveraging our position. SITA shares the same network structure with EQUANT, a spin-off from SITA designed to offer the networking services outside the air transport industry. This move opened up the network, increased its value and created additional economies of scale.
Are there not some disadvantages in being owned by such a large number of airlines compared with commercial entities that don't depend on so many partners?
You are probably right. The existing structure was very well adapted to the network services business, but we feel it may not be fully appropriate to the business of developing Internet solutions. Despite our efforts to be more flexible and customer centric, the existing organization does not give us the full flexibility needed to move into the new business areas we are developing today. For this reason, to better meet customer requirements, SITA will restructure and make an annoncement in September to this effect.
René Fourel, Group Director, Business Solutions and Sector Marketing, SITA
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