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Multi-Country Analysis of Strategic Information Management in the Airlines Industry

posted Mar 23, 2015, 3:19 PM by Christopher Furton   [ updated Dec 13, 2015, 10:38 AM ]

Written in part by: Christopher Furton

Introduction

    This project explores how information management is used to help develop strategy within the airline industry today. During collaboration our group researched different trends in the airline industry as a whole, then broke down our findings into specific countries/regions. To address how information management is used we looked at trends in the United States, China, and South Africa where we successfully analyzed our findings.

Multinational Global Industry:
    Today the airline industry is one of the most competitive industries in the world with global revenue of 751 billion US dollars per year. Companies are constantly competing against each other for travelers business and will provide perks such as lower prices, and free checked bags to get it. Small airlines are able to compete at large regional levels due to the fact that they can offer lower prices by making flights “no frills”. Even though the industry in the united states is extremely concentrated where about 65% of revenue comes from the largest four companies Allegiant Airlines is the most profitable airline in the world. This airline is described as a “smaller” carrier that is said to have no competition on about 250 of its direct routes which allows for them to take full advantage of their market segment. Today with the use of social platforms most major airlines are able to “take to the internet” to analyze customer satisfaction data, and communicate with customers about experiences. Security is obviously an issue especially in the digital world we live in today. Most threats or security concerns, affecting 20+ planes in January 2015, are voiced over Twitter or Facebook and are handled by social media teams and the FBI who investigate and take each threat seriously.

United States:
    Within the United States the airline industry has an expected growth rate of 4% over the next few years. Industry drivers include energy prices, interest rates, construction spending, technology innovations, government regulations, and commodity prices. The industry within the US faces human resources challenges due to the dependence on skilled employees, regulatory challenges, and challenges due to the high cost of fuel and the capital-intensive nature of the industry. Business trends include consolidation, growth of low-cost carriers, and marketing alliances with opportunities within the emerging market growth, fuel-efficient fleets, and technology related efficiencies.

China:
    The airline industry within China is seeing accelerated passenger growth rates and exponential growth within domestic flights. Challenges within the airline industry in China include the launching of new airlines, promotion development of low-cost carriers, and competition from the extensive high-speed rail system. Opportunities for the industry in China received a boost from new governmental regulations that encourage private investments for airline related infrastructure, new rules for private capital, and the plan of the Ministry of Commerce to greatly improve access to airports from the current rate of 61% of the population having access to an airport within 100Km to a goal of 82%.

South Africa:
    South Africa has a forecasted growth rate of 5% within the airline industry, with Africa boosting the third fastest growing region for international travel. Industry drives in South Africa include robust economic growth, increasing urbanization, a demographic boom, and an emergence of a middle class. Critical issues and business challenges in this region include disproportional increase of inflation, reduction in passengers, escalating fuel prices, safety/security, and inadequate infrastructure. Opportunity for the airline industry in South Africa are related toaviation promotion and country integration.


PowerPoint Presentation

Multi-Country Analysis of Strategic Information Management in the Airlines Industry


Country Fact Sheets


Conclusion

    Our group’s research into strategic information management within the airlines industry included a comparative analysis between the United States, China, and South Africa. Research on these three countries provided a unique view due to the vast differences in their World Bank reported Gross Domestic Products: $16.77 US Trillion, $9,240 US Trillion, and $350.6 US Billion respectively. In part 1, the global airlines industry was assessed to determine the general business functions and to learn about the role of information systems strategy in this industry. Next, in part 2, the three countries were analyzed to understand the national environment for strategic information management. Lastly, in part 3, analysis was performed synthesizing by means of comparison and contrast each of the three countries’ information strategies and national environments.

    During part 1 of the research, global information was gathered gaining an understanding of the scope of the airlines industry with annual revenue of $751 US Billion dollars (slide 5); however, the average airlines net income is a mere 1.4% or just $5.65 US dollars per passenger (slide 5). Industry-wide, spending on Information Technology (IT) operating costs was 1.4% and investment in IT capital was 0.8% for a total of 2.2% of revenue (slide 7). This depicts an industry where cash flow is limited requiring efficient operations and cost controls. Because of this, low-cost airlines are the most profitable compared to their larger counterparts (slide 9).

    Information Strategy is essential in the airlines industry for many reasons including safety and security, customer satisfaction, efficient operations, and regulatory compliance (slides 14-16, 21). Information systems, such as passenger screening systems, ultimately contribute to safe and secure flights. Customer satisfaction requires ever evolving use of information systems through innovation in mobile, social, e-commerce, and self-service technologies. Because of low profit margins, companies must operate efficiently and avoid the heavy regulatory fines for failure to follow established national policy.

During part 2 of the research, information was gathered about the United States, China, and South Africa gaining an understanding of each country’s demographic and economic situation. Significant data from this research included the number of paved-road airports in each country (5054, 483, and 144 respectively) which helps gauge the depth of significant air travel market penetration (slides 17, 24, 29). Other important economic information includes the direct correlation between economic downturns and passenger travel across all three studied countries (slides 19, 26, 32).

    The Information Strategy for each country was further assessed by identifying the leading airline companies in each country: United Airlines in the United States, China Airlines in China, and South African Airways in South Africa. Based off earlier identified IS strategy growth topics, a comparative analysis was performed on mobile service offerings, e-commerce and customer relationship management, and self-service capabilities (slides 33-34). It was determined that the three studied companies had a standard level of service that includes ticket sales through primary and third-party websites as well as mobile applications. However, airlines from the more developed nations had increased capabilities not seen in lesser developed nations such as self luggage tagging, in flight Internet access, and social media integration (slides 34). Also worth noting is the impact of national policy nearly eliminating China Airlines’ social media presence (slide 36).

    Lastly, part 3 of the research included synthesizing the findings and gaining an understanding of how national policy, consumer preferences, communication infrastructures, and cultural factors shape the IS strategy in the studied countries and the industry as a whole (slide 39). It is concluded that global information management is critical in the airlines industry. Information strategy solves some of the crucial industry issues and improves the customer experience. Finally, innovation with the strategic use of information systems can create a competitive advantage, although that advantage is short lived, and must consider Porter’s five forces framework (slide 40).

About the Author

Christopher Furton author bio picture
Christopher Furton

is an Information Technology Professional with over 12 years in the industry.  He attended The University of Michigan earning a B.S. in Computer Science and recently completed a M.S. in Information Management from Syracuse University.  His career includes managing small to medium size IT infrastructures, service desks, and IT operations.  Over the years, Christopher has specialized in Cyber Security while working within the Department of the Defense and the United States Marine Corps. His research topics include vulnerability management, cyber security governance, privacy, and cyber risk management.  He holds active IT Certifications including the CISSP, CEH, ITIL Foundations, Security+CE and Network+CE.  He can be found on , , and .  

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Mar 23, 2015, 4:07 PM
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