Flying into trouble

For instance, both Etihad Airways and Emirates in the UAE have recently signed multimillion dollar financial agreements with a view to expanding their fleets.

Plus, a number of carriers have reported strong financial results recently, such as Kuwait Airways, which reported better-than-expected US$400million in revenue in 2005 — a rise of 6% above target — and Oman Aviation Services and Saudi Arabian Airlines, which both posted reco- rd revenue for the same period.

But the region’s airlines are facing a big problem — they have until December next year to stop issuing paper tickets and start issuing electronic tickets instead following a recent ruling by the International Air Transport Association (IATA).

To date, according to a straw poll carried out by IT Weekly last month, just eight of the region’s 23 airlines have e-ticketing systems in place — Gulf Air, Air Arabia, Emirates, Oman Air, Royal Air Maroc, Tunis Air, Qatar Airways and Royal Jordanian.

For the airlines that don’t hit the deadline there could be serious financial consequences.

They will be affected in a number of ways. For a start, from December 2007 the 60,000 IATA affiliated travel agents across the world will no longer issue paper tickets from airlines that don’t issue electronic tickets.

Many major airports are also expected to overhaul their systems so that they only accept electronic tickets.

But perhaps the most complex and damaging impact this will have — particularly on smaller airlines — will be that it will not be possible for airlines still issuing paper tickets to continue interline agreements.

Interline agreements are whe- re a passenger books an entire journey through one carrier which then liaises with onward carriers for the destinations it does not cover.
For smaller airlines this is a major source of revenue — without which they may not survive.

“If airlines are not capable of having electronic ticketing for their major interline agreements this will be a big obstacle,” said Gero von Götz, senior vice president of sales EMEA at Lufthansa Systems, which is one of the five systems providers chosen by the Arab Air Carriers Organisation (AACO) to implement e-ticketing for the region’s airlines (the others are Sita, Amadeus, Sabre Airline Solutions, and Worldspan).

For those who depend on interlining “it could drive them out of business if they don’t move fast enough,” von Götz said.

Götz believes just two-thirds of the region’s airlines will meet the December 2007 deadline for issuing e-tickets on their own routes and just a third would set up e-ticketing systems to serve their interline agreements with other airlines.

Philippe Bruyére, Simplifying the Business programme director at IATA explained that the consequences of this on airlines in the Middle East could be particularly serious as it is so well positioned for long haul to long haul flight connections.

“We say that if you don’t implement e-ticketing you get marginalised because you get cut-off from the worldwide distribution network. It’s particularly important from a business model point of view that airlines in this region maintain these (interline) relationships,” he added.

While the global average for e-ticket usage is 40%, in the Middle East this figure stands at just 2.7%. So why are the region’s airlines lagging so far behind the rest of the world when it comes to e-ticketing?

For a start, the sheer cost and complexity of setting up e-ticketing systems is blamed by many industry experts for the region’s slow progress.

For smaller carriers in the region, the effort involved in overhauling their entire reservations and ticketing issuing systems is no small feat — nor is it cheap.

Klaus Giesemann, IT manager of Etihad Airways, described the change over to electronic ticketing systems as being both painful and costly.

“For an airline like Lufthansa to have a project that costs one or two million dollars, that’s peanuts,” he said. “But the same amount for medium to small carriers is quite some money,” he went on to add.

Describing the process as “challenging” he explained, “It’s not just the money, it’s changing all the procedures.”

Murray Smythe, senior vice president of Sabre Airline Solutio- ns acknowledged that smaller airlines in the region had been finding the process “quite burdensome” and added “they are finding the cost of putting the services together to be able to participate in this have been quite high.”

A spokesman for Emirates Airlines, who admitted that the company’s own transition to e-ticketing had not been easy, claimed the region lacks the technical infrastructure to support such a complex process.

”Emirates was the first to implement e-ticketing in the Arab World, but as we said before there were quite a few challenges,” he said.

“The slow implementation in the Middle East can also be attributed to the lack of a technical infrastructure and expertise and the mindset to switch from the paper to the virtual world,” the spokesman added.

The complexity of the process is due to the fact that it involves not just the airline changing its systems but all the organisations involved in issuing, checking and verifying airline tickets.

Many different parties are involved in this process, including travel agents, ground staff at airports, immigration authorities and interline partners.

Hazen Hussein, regional director of the Amadeus airline business group for Middle East and Africa described the complexities involved.

“E ticketing involves a lot of system changes within the airlines. They have to cha- nge their customer management systems as well as installing an e-ticketing server so it becomes a whole event,” he said.

“Secondly, electronic ticketing involves a lot of business process change within the airlines — the way they manage the tickets and their revenue, ground handling, airport services and interlining,” he went on to add.

Of course, in order for the system to work there must also be acceptance of the changes on the part of customers and
the authorities.

Some say the region is not ready for a complete transition over to paper ticketing and that this trepidation, particularly on the part of immigration authorities, is stopping smaller airlines from moving forwards.

“One of the hindrances is the governance at airports,” Götz said. “Immigration and customs are used to having paper tickets, the first thing they ask to see is a piece of paper proving the eligibility of the customer,” he added.

“The regulators at airports see themselves not as service partners but as authorities and their interest in supporting this is not that high,” he continued.

Waheb Teffaha, secretary general of the Arab Air Carriers Organisation which is working hard to push the implementation of electronic ticketing in the Middle East, said: “We have issues with the awareness of government agencies dealing with border controls.”

“Sometimes people arrive at an airport and they are asked to produce a paper return ticket. But if their ticket is electronic how can they do that? If airlines are not experiencing that now, then they will at a certain point in time,” she stated.

Hussein believes that a “change of traveler mentality” is required before electronic ticketing takes off in the region.

“Right now one of the reasons the Middle East is not working that fast is that there is a change in traveler mentality that we need to work on,” he said.

“Travel agents, global distribution systems and airlines have to promote electronic ticketing and the benefits of it to customers to help increase their trust in it,” he said.

Whatever the reason behind the Middle East’s delay in introducing electronic ticketing, the clock is ticking. And if airlines don’t take action quickly, they could find themselves facing an uncertain future.
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