Once IT was used by airlines to improve customer service--now, as budgets tighten, CIOs in the industry are having to cut costs, and are using outsourcing and IP to do so.

Fifty-three per cent of airline IT departments now have cost-cutting as their number one priority, according to a survey commissioned by SITA and Airline Business magazine. Before the terrorist attacks of September 2001, using IT to improve customer service was top of the agenda.

Overall investment levels in IT and telecommunications has dropped for the first time since the research began three years ago, with only 2.3 per cent of total revenue now being put into IT--an amount which sets investment back to below 1999 levels.

Over 60 per cent of airlines remain optimistic about IT budgets increasing next year, but as current programmes have been cut back, a lack of investment in IT was cited by 42 per cent of the respondents as the leading obstacle to achieving IT strategy objectives.

A scarcity of skilled people and a lack of board support were ranked as the next main barriers.

Security is--perhaps surprisingly--not seen as a main priority. However, that is expected to change in the medium term as many of the respondents to the survey said that technology had the potential to improve the safety of passengers.

Almost 90 per cent of airlines have now outsourced all or parts of their IT function and expect to see more in the desktop and data centre areas in the next couple of years.

Within five years, over half of airlines said they will be operating either largely or completely on an IP infrastructure.

John Watson, SITA's director general, said: "Airlines have taken severe actions to tighten control on expenditure and I firmly believe that those carriers leading the usage of IP technologies and those who are strategically outsourcing IT are now in a much stronger position for recovery."

He added: "Over the years airlines have remained optimistic of increased investment in the future, but cost reduction remains fundamental to survival and now IT projects have to demonstrate payback within 12 months rather than two or three years. Meanwhile all airlines still face the challenge of using IT to re-engineer their business processes at the lowest possible cost."

The IT Trends survey was conducted by NSM research between April and June 2002, and was based on responses from over 90 of the top 200 airlines. The sample accounts for around US$200bn of industry revenues.

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