© 2009 Sabre Inc. All rights reserved. wearelistening@sabre.com

2005 Issue No. 2A MAGAZINE FOR AIRLINE EXECUTIVES

T a k i n g y o u r a i r l i n e t o n e w h e i g h t s

Gulf Air’s in-flight servicewins top awards

SAS restructures to better compete

Jet Airways becomes an international carrier

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36

42

I N S I D E

T H E T R A N S F O R M E RA conversation with …

W.Douglas Parker,Chairman,President and CEO,US Airwayspage 44

T he vertical integration trend, whichbegan in the late 1980s when many air-lines enjoyed hefty profits and robust

revenue growth that, in turn, provided abun-dant resources, led to a desire for simplifica-tion. Those were good times for many airlineexecutives who were planning ahead and envi-sioning a great future for their airlines.

What they envisioned was informationtechnology departments fully staffed with ITexperts who would write and manage propri-etary software that would help create and sus-tain a competitive advantage in a cutthroat air-line environment.

The idea was noble, and the executivesthought that if they could successfully managethe core business, they could add and manageseveral other lines of business as well. And tobe fair, not that many reliable, ready-to-use air-line software products existed in the ‘80s. So,vertical integration made a lot of sense.

In the 1990s, when supply of airline ITsoftware improved, airlines began shiftingfrom writing in-house IT applications to pur-chasing them from experienced airline IT ven-dors, which eliminated the need for internaldevelopers but still required an IT shop to sup-port and manage the software.

Fast forward to 2005. The airline market-place has changed, and so have the integrationtrends. Nowadays, airlines seek to minimizetheir losses and stretch diminishing resources.Customer-centric initiatives are hot. So whenmanagers have to choose whether to imple-ment a customer service-related or pure IT pro-ject, the latter tends to have a lower priority.However, airlines cannot provide good cus-tomer service without smart IT systems. Toaddress the need for IT solutions and lack ofresources to acquire them, more and more air-lines have turned to one of the growing trends— an application service provider model.

products

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Airlines around the world are taking advantage of the benefits of an applications service provider model to access vital decision-support technology at a fraction of the cost of an onsite installation.

ASPire to Leading Technology

By Inna Kizenkova | Ascend Contributor

Sabre Airline Solutions’ archives

The eMergo delivery method, which is protected by two firewalls and SSL data encryption, can be accessed remotely via a dedicated network line or the Internet. This distribution method enables airline analysts to access software applications directly from their desktop.

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products

Application functionality Immediate product accessOngoing updates and enhancementsUser community access and collaboration

Infrastructure ProcurementSun and Dell servers with OracledatabaseBEA systems WebLogic applicationserverComputer Associates Unicenter monitoring softwareCisco Web site load balancingRecurring hardware and third-partyrefresh

Data Center Services24-hour-a-day, seven-day-a-weekmonitoring and supportData encryption, intrusion detectionand firewall protectionDaily backup of customer data andweekly off-site backupsSecurity relating to communications,Web site, servers, database andapplications

Maintenance and SupportHistorical application availabilitygreater than 99 percentAround-the-clock help desk accessStandard Sabre Airline Solutions servicesApplication and database monitoringand managementApplication and data access controland administrationSeamless software updates

Beyond SolutionsThe eMergo solutions aremore than a way to access technology. There are alsoseveral standard services that help customers make the most of the applications.

Crew ManagementSabre ® AirCrews ®

Crew ConnectionSabre ® AirCrews ®

Disruption ControlSabre ® AirCrews ®

Leave ManagerSabre ® AirCrews ®

Operations ManagerSabre ® AirCrews ®

Pairing OptimizerSabre ® AirCrews ®

Resource ManagerSabre ® AirCrews ®

Schedule Optimizer

Planning and SchedulingSabre ® AirFlite™

Fleet ManagerSabre ® AirFlite™

Profit ManagerSabre ® AirFlite™

Schedule ManagerSabre ® AirFlite™

SlotManager ™

Sabre ® Planet ®

profitability forecastingsystem

Loyalty ManagementSabre ® Corporate Loyalty SystemSabre ® Traveler Loyalty System

Maintenance, Repair andOverhaul

Maintenix ® MRO SystemRamco MRO System

Cargo ManagementSabre ® CargoMax ™

Accounting ManagerSabre ® CargoMax ™

Revenue Manager

Flight OperationsSabre ® Dispatch ManagerSabre ® Ground ManagerSabre ® Load ManagerSabre ® MovementManagerSabre ® ACARS Manager

Fares ManagementSabre ® AirPrice ™ faresmanagement systemSabre ® AirPrice ™

Contract Composer

Dining and Cabin ServicesSabre ® AirServ ®

Billing ManagerSabre ® AirServ ®

Cabin Service ManagerSabre ® AirServ ® CateringReport GeneratorSabre ® AirServ ®

Enhanced SchedulerSabre ® AirServ ®

Equipment BalancerSabre ® AirServ ®

Equipment ForecasterSabre ® AirServ ®

Equipment ManagerSabre ® AirServ ®

Galley ManagerSabre ® AirServ ®

In-flight Data AnalyzerSabre ® AirServ ®

In-flight Sales ManagerSabre ® AirServ ® MealOrdering OptimizerSabre ® AirServ ®

Scheduling OptimizerSabre ® AirServ ®

Specification Manager

Revenue ManagementSabre ® AirMax ®

Essentials ReporterSabre ® AirMax ®

Group ManagerSabre ® AirMax ®

Revenue Manager

Passenger RevenueAccounting

Quasar ™ passenger revenue accounting system

Airline PassengerSolutions

SabreSonic™

Check-in modules:• Kiosk Check-in• Web Check-in• Curbside Check-in• Roving Agent• Gate ReaderSabreSonic™

Res modules:• Command• Revenue Integrity

Resource ManagementSabre ® Streamline™

RosterMaker systemSabre ® Streamline™

StaffAdmin ™ systemSabre ® Streamline™

StaffManager ™ systemSabre ® Streamline™

StaffPlan ™ system

Market Data and AnalysisSabre ® WiseVision ™

Sales EssentialsSabre ® WiseVision ™

Network AnalyzerSabre ® WiseVision ™

Sales Analyzer

Tools of the TradeThere are currently 56 solutions in 14 functional areas available through the Sabre ® eMergo ® Web access environment.

PRODUCT DETAILS PRODUCT DETAILS

An ASP solution provides the best ofboth worlds — leading technology in a simpli-fied IT environment, which enables airlineexecutives to concentrate on their core com-petencies. An ASP model is a form of out-sourcing, but it provides an important benefit— it leaves control of the business decision-making processes and subject expertisesquarely with the client (an airline, caterer orground handling organization).

Expanding on the ASP trend is “soft-ware as a service,” or SaaS, which empha-sizes that with an ASP solution, an airline doesnot only get an application but also an array ofadditional services.

For Sabre Airline Solutions, providing air-lines with options such as an ASP deliverymethod is a top priority. In 2001, the companycreated Sabre ® eMergo ® Web access, an ASPsolution that offers access to best-of-breedtechnology while simplifying operations andreducing the total cost of ownership.

The growing popularity of ASP models is

supported by the views of many IT consultingcompanies and professionals. Research fromInternational Data Corp. indicates that industry-specific, customer relationship managementand human resources applications are themost likely to be delivered via an ASP model.IDC estimated that global spending on ASPsoftware last year totaled US$4.2 billion, con-stituting 39 percent growth compared to 2003.IDC is also forecasting a steady 21 percentincrease in annual ASP spending reaching anestimated US$10.7 billion in 2009. Specificallyto the eMergo distribution method, the num-ber of customers increased by 65 percent in2004 compared to 2003, reflecting the trend ingrowing popularity of an ASP. Today, 84 globalcustomers combine for 169 instances ofaccessing software solutions via the eMergoenvironment.

Airlines are following suit according tothe 2004 Airline IT Trends Survey, adminis-tered by Airline Business magazine and SITA to109 senior IT executives from top airlines. Thesurvey revealed that only 10 percent of partici-pants indicated that their airlines have notmoved any systems to an ASP model.According to the survey, several areas withinan airline’s operations have moved to an ASP

model, including:Reservations (according to 59 percent ofthose surveyed),Departure control/check in (58 percent), Cargo reservations (31 percent), Frequent flyer programs (26 percent).

When asked which areas are planned tobe moved to an ASP model, cargo reservationswas the best candidate with 22 percent, followedby frequent flyer programs with 18 percent.

The ASP model is very simple from anairline perspective because its applications anddata are stored by the ASP provider, which per-forms all necessary application and databaseimplementation, maintenance, and accessadministration work. Thus, its IT efforts andresources can be redirected and applied tounique IT initiatives rather than mundane ITtasks such as procuring and updating hardwareand software, user administration, or databasemaintenance. At the same time, airline busi-ness analysts access applications over theInternet or a dedicated communication line and

get all the necessary information and decision-support tools to maximize the airline’s potential.

An ASP solution is scalable. When an air-line experiences traffic variance, its manage-ment will have the benefit of not worryingabout where to find resources to expand thesystem. As a rule, ASP vendors build amplecapacity into the systems to allow for growingdemand, meeting the scalability needs ofmany airlines. According to the InternationalAir Transport Association, international passen-ger traffic continues to grow — revenue pas-senger kilometers grew 8.8 percent during thefirst half of the year compared to the sameperiod in 2004, increasing the demand placedon applications.

An ASP delivery method also simplifiesan airline’s financial operations because soft-ware costs are easy to forecast since they con-sist of a one-time implementation and monthlyfees that can be either metric-based or flat.Metric-based fees can be tied to passengersboarded, aircraft, departure, employee num-bers, etc. With metric-based fees, an airlinepays exactly for what it uses and does notoverpay for extra capacity.

Another benefit of a centrally hostedASP solution is the ease of application admin-

products

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To address the need for IT solutions and lack of resources to acquirethem, more and more airlines have turned to one of the growing trends— an application service provider model.

HIGH l i gh t

Acceptance by Region

Airlines around the world are adopting the application service provider model.Companies using the eMergo deliverymethod come from every region of the globe.

20%

LatinAmerica

Europe, MiddleEast and Asia

Asia/Pacific

NorthAmerica

34%

17%

29%

20052001Timeline

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rap

plic

atio

ns

200

160

120

80

40

0

Growth of the eMergo Solution

Average of 2 applications

Accounts Applications

After realizing the value of the eMergoenvironment from their initial experience,more than 30 percent of those using thesolution have selected additional applica-tions. In 2001, the sales ratio for theeMergo solution was one application percustomer, but this has increased dramati-cally in the last four years.

istration. When an airline has several branches,synching, updating, and loading data and busi-ness rules has to be repeated at each individ-ual location. With an ASP solution, everythingis kept in a single hosted database so all thoseoperations are performed once and everyoneaccesses the same information.

In addition to simplifying operations,ASP applications come with a slew of otherimportant benefits. Low total cost of ownershipis one of them. The total cost of ownership ofa licensed application consists of vendor’s fees(implementation, license and maintenance)plus the cost of hardware and third-party soft-ware to run such applications. The total cost ofownership of an ASP application consists ofimplementation and monthly fees. Since anASP vendor has greater bargaining power withhardware and third-party software providers, itcan buy the necessary infrastructure at deeperdiscounts that are passed onto airlines. In gen-eral, accessing a Sabre Airline Solutions appli-cation via the eMergo environment can savean airline between 40 percent and 70 percentin total cost of ownership.

The ASP model is here to stay. Observing

growing popularity of ASP solutions, many ITvendors began offering hosting services totheir airline clients. Based on the breadth ofthe ASP portfolio and number of clients, SabreAirline Solutions is the leading provider of airline software products via an ASP model.Currently, the eMergo environment consists of56 applications.

An airline deciding whether to go withan ASP offering or an on-site installation has toconsider several factors such as its need forcash conservation, length of payback period,pricing/budgeting predictability, ability to scale,IT department efficiency, etc. Because eachairline’s situation is unique, there is no easyway to tell which delivery method is more ben-eficial to a particular airline without a compre-hensive analysis. But it pays off knowing andcomparing different delivery options to arriveat one that will help airlines simplify and maxi-mize their potential.

Inna Kizenkova is a marketing analyst forSabre Airline Solutions. She can be

contacted at inna.kizenkova@sabre.com.

a

+count it up15 — Number of separate flights a

traveler would take from Mt. Pleasant

in the Falkland Islands to Wasu, Papua-

New Guinea, which is thought of as

the world’s most difficult air route.

250 — Number of direct flights from

Paris, France, to other cities around the

world, making it the top global city for non-

stop flights. Paris is followed by London

with 242, Frankfurt with 237, Amsterdam

with 192 and Moscow with 185.

2.2 million — Number of

passengers estimated to travel across

the Tasman this year, a significant

increase compared to 1,461 passengers

traveling the same route in 1940.

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1 billion — Increase to the

industry’s costs, in U.S. dollars, for

every US$1 increase in the price of oil.

2,100 — Range in nautical miles of

the ERJ-195, the largest aircraft in Embraer’s

E-Jets family, which has the capacity for

118 seats.

238,000 — Number of square

feet in Bombardier’s new, high-volume

aircraft parts distribution warehouse,

located at the Chicago O’Hare

International Airport.

Based on the breadth of the ASP portfolio and number of clients, Sabre Airline Solutions is the leading provider of airline software products via an ASP model.

HIGH l i gh t

Customer Segments

Originally, the eMergo solution was creat-ed to help smaller airlines gain access totechnology that was only available to larg-er airlines. However, airlines and otherindustry-related companies of all sizeshave chosen the eMergo solution.

8%4%Non-airlines

Very small

Medium

Small

35%21%

30%

2%Large

Mega