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European Air Travel Crisis Could Precipitate Further Cost Cutting At Airlines

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NIIT Technologies
: 21 April, 2010  (Technical Article)
As Airlines tighten the belt further following massive losses due to the cloud of volcanic ash over Europe, NIIT Technologies is predicting a wave of cost saving projects including the outsourcing of IT services
As the air travel and transport industry continues to count the cost impact of the volcanic ash on the sector, many experts predict more pain and consolidation could follow, with a renewed focus on cost-saving.

The ATTL sector had already become one of the biggest corporate victims from the recent financial crisis. The pressure to cut costs further and drive through greater efficiencies in order to survive is more intense now than ever before.

More and more airlines, travel, cargo, transport and logistics companies are turning to new technology models such as managed services to help them survive and grow in tough economic conditions.

Independent industry analysts such as Forrester Research predict that in addition to the recent crisis, macro-economic factors, including rapid technology evolutions, a coming investment wave in information technology, and market constraints on capital, managed services is expected to have a bigger take up for companies operating in airlines, travel, transport and logistics sector. Almost 20 per cent of IT professionals were purchasing more managed services as a result of tougher economic conditions, six months ago, according to the research with the number expected to rise significantly throughout 2010. Leading IT analysts at Gartner are forecasting that worldwide IT services funding will see a 4.5% increase from 2009 with managed services set to be a strong recipient of this increase.

Ravi Pandey, Senior Vice President and UK Head of NIIT Technologies says: “Companies are rapidly becoming aware of the commercial empowerment offered by the opportunity to release the cost burden of managing their IT operations internally, the headache of investing in equipment and facilities, and the pressure of managing these rapidly evolving capabilities.” Companies are using managed services to manage their risks more efficiently and cost-effectively to safeguard against these rapid changes.The focus is on agreeing beforehand with the supply partner the efficiencies required for a smooth functioning of the business and then devising a contract to ensure those efficiencies are delivered. There is evidence that the nature of contracts is moving towards ‘transaction based pricing’ models with a greater share of ‘risk-reward’ element in the contract itself.

Pandey predicts: “We are sitting on the cusp of a technological investment cycle; despite the current economic crisis, as the IT industry enters a growth and innovation cycle, the challenges faced by the sector will place serious capital constraints on companies, which could potentially inhibit growth. Managed services allow businesses to concentrate on their core operations and focus on increasing revenue, not on IT management. Companies using managed services are reporting simplified operational management, improved quality and reliability, cost reductions and greater efficiency.”
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