British Airways is coping with a difficult macroeconomic environment by trying to add new revenue-generating services and improving customer service that generates repeat business. “During the first economic crisis in 2008, when every airline was in trouble, we knew that we could attack the cost base but we needed to generate revenue quickly,” Mike Croucher, head of IT architecture and delivery at British Airways told CIO Journal.
High fuel costs have forced airlines to raise fares and analysts expect it to reduce profitability for carriers globally. On Thursday, Southwest will be the first of the largest airlines in the world to report first quarter earnings.
The International Air Transport Association on March 20 downgraded its outlook for the industry as a result of rising fuel prices. The expected average price of oil increased to $115 per barrel, up from the December forecast of $99 per barrel. IATA now expects airlines to turn a global profit of $3 billion in 2012, down $500 million from its earlier forecast.
All regions of the world will experience reduced profitability but European carriers face the most difficult situation, according to IATA. Many European economies are in deep recession, which means fewer passengers will fly and not as many packages will be shipped.
BA, which faced similar circumstances in 2008, is looking to make amends. IT projects that could make a difference to the business, such as online booking once took months or years, and could take more than 9 months before they started generating revenue, said Croucher. So he implemented a new model of agile and lean development that broke projects down into parts, with the goal of bringing new services up in just weeks, and continuing to add features over time. The idea is to start making money quickly to pay for continuing development of the service.
To help the IT department make this major shift in the way it worked, Croucher hired a consulting firm called Emergn that coached the developers on techniques such as how to present the evolution of their work in frequent meetings. “It’s a major cultural change to take introverted IT people and make them stand up and talk about what they’re doing,” said Croucher.
So far, agile development has worked to deliver new services quickly. Last April, the airline wanted to give iPads to 100 cabin crews by the end of June to help attendants identify high-value passengers to give them extra attention. “We hadn’t even bought an iPad at the company yet,” said Croucher. Yet, Croucher and his team met the deadline and created an app that helps cabin crew learn more about passengers. Now more than 1,200 iPads are being used by cabin crew members.
BA continues to look at opportunities to create new services. For example, the airline is examining whether it’s possible to offer non-premium passengers access to the lounges on days when they aren’t busy for an extra fee. Those invitations might be sent to passengers using a mobile phone technology called near field communications.
“The idea is to try new services and if they work, extend them quickly, but if not, then move on,” says Croucher.