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A new report published today by CAPA – Centre for Aviation and air transport IT specialist SITA forecasts that India will become the world’s third largest aviation market by 2020 and examines whether the country has the right investment, infrastructure and regulatory system to enable this growth. Technology and innovative practices will play a key role in meeting the challenge of growth but the report finds that IT is not always considered a tool of strategic importance.
The joint 'CAPA-SITA Report on Innovation and Technology: Opportunities for Transformation in Indian Aviation' builds on a previous report produced in 2010. It provides an update on the IT landscape in India’s air transport industry, highlights some of the challenges in deploying innovative technology across the industry and makes some predictions for the future. The report is based on the findings of a customised research programme involving primary interviews with key stakeholders within airlines, airports, and ground handlers along with those involved in air traffic management, customs and immigration.
Indian aviation has changed hugely since 2000 when just one carrier flew overseas - today there are seven; passenger traffic has increased from 42 million to 150 million; and the country’s fleet has grown from 119 aircraft to 437. The low cost sector has grown massively and now represents 70 percent of the market. The CAPA-SITA report predicts that by 2020, 452 million passengers will fly each year and there will be 1,030 aircraft in the fleet. This will make India the world’s third largest aviation market.
Over the next 10 years, all 6 metropolitan cities (Bangalore, Chennai, Delhi, Hyderabad, Kolkata and Mumbai) are expected to have provisioned for a second airport, and Mumbai will need to start preparing for a third. Several non-metro cities such as Ahmedabad and Pune will also outgrow their existing infrastructure and require new airports.
Total investment in the sector between 2004 and 2020 is expected to reach USD120 billion, of which USD80 billion is represented by aircraft, USD30 billion in airport infrastructure and USD10 billion in ancillary services such as ground handling, maintenance, air traffic management, security and training.
Technology has the potential to play a central role in creating a new transformational business model to viably support this level of growth. This report was initiated in order to assess whether the aviation industry has recognised this. In the past IT was largely internally focused, supporting processes and functionality. However, now it enables closer integration with the customer experience, and the ability to shape and personalise the relationship with the passenger, from the time of planning and booking, through to airport facilitation, in-flight, baggage claim and service recovery. Technology, if deployed correctly, can deliver simplicity and transparency.
Information technology and the use of analytics could be as important for an airline as an aircraft because it can drive a competitive business model by reducing costs, increasing efficiencies, enhancing the customer experience and generating new revenue streams.
According to the report, airline IT spend as a percentage of revenue ranges from one to three percent with 70 percent of those surveyed expecting their IT spend to increase. The key drivers for investment are operational efficiency; enhancing the customer experience; and cost reductions. Mobility is a key focus with 90 percent of respondents expecting to increase investment in this area.
However, the progress of technology implementation across Indian aviation since 2010 has not been encouraging with little that was planned then being delivered by 2012, however there has been increased deployment of the use of websites for sales; implementation of Common Use Terminal Equipment (CUTE) in airports; Common Use Self Service (CUSS); baggage reconciliation systems; flight information display systems; and others.
The slow pace partly reflects the financial difficulties being faced by the industry but in addition, the CAPA-SITA study found that IT is still not considered a tool of strategic importance. Technology in Indian aviation is largely considered to be an operational issue rather than forming an integral component of the company’s key objectives and is not directly linked to profit and loss performance. IT is largely not used for revenue generation, and in the case of cost reduction the approach is quite unstructured, such that there is limited measurement of the efficiencies that are achieved.
In most cases the awareness of technology, and the benefits that it can drive, is limited to the operational workforce or domain head. The study found that Chief Technology/Information Officers (CTOs/CIOS) in the Indian aviation sector are highly skilled and qualified, but the role is not yet part of the most senior decision-making teams that change the direction of organisations.
Until CTOs and CIOs are given greater recognition, industry leadership will by and large fail to recognise the critical strategic role that customer-centric technology can play in transforming financial and operational performance.
The lower priority attached to technology also impacts the speed of decision-making and allocation of budgets which slows down implementation. The study found that Indian aviation today is more focused on catching up with existing global practices rather than establishing new innovative benchmarks. However, over the next few years the report forecasts an increase in mobility solutions including mobile check-in; biometric identification systems; increasing use of the Cloud and social media applications amongst other developments.
The report recommends that the government establish mechanisms which incentivise, recognise and award innovation and then support the sharing of such knowledge across the industry and encourages the sector to recognise that IT can form an integral component of the company’s key objectives, directly driving profit and loss performance.