Information Technology Transformation - Airline Industry
Introduction
Information Technology has changed the way airlines sell their products and services over the last decade. No longer does one have to engage a travel agent to book a flight. Airline branded websites now allow consumers to book a flight online while travel portals such as Expedia, Priceline and Orbitz enable travelers to search airlines’ databases for the lowest fares. This paper will examine how the airline industry is using cost leadership, differentiation, innovation, operational effectiveness, and customer orientation strategies to effectively sell products and services by leveraging information technology.
Priceline.com® uses a cost leadership strategy that allows airlines to offer the lowest available fare to consumers through a reverse auction process. For example, a person needs a round trip flight from Atlanta, Georgia to Dallas, Texas departing on November 5, 2010 and returning on November 7, 2010. She is willing to pay $200.00 for the ticket. This information is entered online at Priceline’s website. Priceline searches its database of participating airlines for available seats in this price range and displays them back to the customer. Priceline.com® broadened their low-cost leadership position by eliminating booking fees on airline tickets and offering “Pricedrop Protection on its published-price airfares” (Ek, 2009).
In 2003 Delta Airlines launched Song, a low-cost airline that leveraged innovations in information technology to differentiate itself from others in the market. Song installed personal video screens on the back of every seat on their planes. These screens allowed passengers to enjoy inflight entertainment such as movies and video games, satellite television, and online shopping. Song’s website was an example of the airline’s customer orientation strategy. “The Web site lets passengers vote services and products on and off the airline. During the flights, Song will leverage its seat-back screens to gather and analyze data on its passengers” (Gareiss, 2003). Other information technology innovations used by Song were a voice-recognizable ticket purchasing system and real-time flight information displays on plasma television screens at their gates (Gareiss, 2003).
Inflight internet service is yet another innovation airlines are offering to gain customer loyalty from business travelers. Andrew Froehlich explains the technology Aircell’s Gogo Inflight Wi-Fi product:
Aircell, I was told by a representative, had erected a national network of cellular towers throughout the continental United States to transmit broadband Internet connectivity to Gogo‐equipped aircraft. Three small antennas installed on the outside of the aircraft (two ATG antennas under the aircraft and one GPS antenna on top of the aircraft) receive the signal and convey it to the Gogo system in the aircraft. Gogo then transmits a Wi‐Fi signal inside the cabin for passenger use. (Froehlich, 2009)
Hitachi Data Systems’ Director of Sales/Southeast uses this service to stay in touch with his administrative assistant and sales team during his weekly flights to customer meetings. Southwest Airlines continued as an industry leader in operational effectiveness through information technology when they installed GE Aviation’s SDS-6000 large area display suite in their Boeing 737 airplanes. “The integrated large area display suite and flight management system controls the aircraft track to an accuracy of 10 meters and the time of arrival to within 10 seconds to any point in the flight plan” (Villarreal, 2008). This enables planes to fly shorter flight paths which save on fuel costs. Controlling the cost of doing business is key to Southwest Airlines’ success as a low-cost carrier. Although information technology has made it easier for travelers to use websites such as Orbitz or Expedia to shop for the lowest airfares, a recent trend by airlines is to offer some of the cheapest fares exclusively on their own branded websites. Operational effectiveness is the strategy behind this. Airlines have to pay commissions to online or offline travel agencies. In these challenging economic times, cutting costs is critical to any industry’s bottom line (McGee, 2008).
Conclusion
In conclusion, information technology has indeed transformed the airlines industry. While the biggest innovation leveraged has been the Internet that makes airline services and products easily accessible to consumers, other advances such as inflight management and onboard Wi-Fi technology have also allowed the industry to change the way they do business in the areas cost leadership, differentiation, innovation, operational effectiveness, and customer orientation.

References
Ek, B. (2009, March 19). Priceline.com Promotion Offers New Pricedrop Protection For Airline Tickets And Vacation Packages . Retrieved October 9, 2010, from Business Wire: http://www.businesswire.com/portal/site/home/permalink/?ndmViewId=news_view&newsId=20090319005144&newsLang=en
Froehlich, A. (2009, June 24). Surfing the Air for Business and Pleasure; Inflight Wireless at your Airline Seat. Retrieved October 10, 2010, from CIO.com: http://advice.cio.com/froehlic1/gogo_in_flight_wi_fi_at_your_airline_seat
Gareiss, R. (2003, April 21). Technology Takes To The Air . Retrieved October 10, 2010, from InformationWeek.com: http://www.informationweek.com/news/software/showArticle.jhtml?articleID=8800337&pgno=1&queryText=&isPrev=
McGee, B. (2008, June 3). Are Airlines Saving the Best Deals for their own Website? Retrieved October 10, 2010, from USA Today: http://www.usatoday.com/travel/columnist/mcgee/2008-06-03-branded-sites_N.htm
Villarreal, J. (2008, December 22). Southwest Airlines awards GE $40 million large area display system contract for Boeing 737. Retrieved October 10, 2010, from GE Aviation: http://geaviationsystems.com/News/Archive/2008/Southwest-/index.asp