Current and Future Use of Internet Technologies in Qatar Airways - Essay Example

Analysis of Current and Future Use of Internet Technologies in Qatar Airways By Candi s FACULTY OF BUSINESS ADMINISTRATION Executive Summary Although Qatar Airways is a relatively new airline, it has spared no effort to try to become a global brand. Qatar Airways operates a fleet of 110 aircraft, with planned orders for 200 aircraft, worth US$ 30 billion. The passenger traffic in the Middle East and around the world continues to present projections for a sustained increase, despite the competition and the recent global financial crisis. Thus, it is important that airlines present more value for less and application of Internet technologies to airline operations is not only a technology-induced trend, but also a necessity for enhancing efficiency and performance in a highly competitive business environment. By encouraging passengers to book directly with the airline, substantial savings arise because airlines do not incur payments to travel agents and Global Distribution System Companies. Thus, Qatar Airways has tried to enable maximum interaction with passengers through its website, in addition to providing passengers with Internet and text messaging services on board its more modern aircrafts. Porter’s Five Forces Analysis suggests that competitive rivalry persists among airlines in the Middle East and Qatar Airways must offer the same level of service as Emirates Airlines, the leading airline brand in the region, for less. The infomediary model presented by Professor Michael Rappa assists in understanding the strategy for Qatar Airways, which must use incentive marketing and emphasise presentation of comprehensive information. The Flower of Service Model suggests that Qatar Airways must emphasise support for its core product of transporting passengers with services geared to provide information, consultation, hospitality, billing and payment together with order-taking and the handling of exceptions. Presently, Qatar Airways uses Internet technologies to support the previously mentioned services, but it is likely that in the future further support for passengers and their needs will be available as higher bandwidth networks become available and better interfacing with modern airports, including the new Doha airport, becomes available. Examination and analysis of the Qatar Airways website suggests that this website provides all passenger needs, except for assisting passengers to plan fully their trips. The Qatar Airways website ranks second only to the Emirates Airlines website among all regional airline websites because at present Qatar Airways cannot provide comprehensive service to passengers wanting to plan their trips in detail, possibly because doing this will mean entering into partnership arrangements with many other businesses, including hotels, limousine service operators and tour operators etc. However, because Emirates Airlines is a far older and established airline brand, this airline has established relationships with many business partners and offers comprehensive trip planning support on its website. Qatar Airways must try to improve its social network marketing, including its Facebook presentation and enter into collaborative arrangements with more businesses that support passengers to provide better trip planning facilities to passengers. A portal in collaboration with selected airlines may help to improve load factors by providing passengers with one website for exploring options for their trip. In addition, it is important that Qatar Airways continues to innovate further to interact better with airports because the thrust of leading edge research in the United Kingdom directed towards application of information technology and networks to airports will soon bear fruit to change the way in which airlines interface with modern airports. It is likely that opportunities for further innovation in application of Internet technologies will become available when the new Doha airport becomes operational sometime in the year 2011. Contents Introduction 1 E-Business Background 3 E – Marketing 7 Web Design 9 Business-to-Business 12 The Intelligent Airport 14 Conclusions and Recommendations 16 Appendix A – Categories, Factors and Weights for Airline Web Assessment 18 Appendix B – E-commerce Strategy and Industry Analysis for Qatar Airways 21 Bibliography/ References 26 List of Figures Figure 1: Air Passenger traffic Carried by Various Airlines registered in Regions around the World 4 Figure 2: Average Seat Load Factor, (Percentage of Available Seat Capacity Filled with Passengers), for Airlines Registered in the Middle East 5 List of Tables Table 1: Airline Web Assessment Index for various Middle East Airline Websites 12 Table 2: Categories, Factors and Weights for Airline Web Assessment 21 (This page intentionally left blank) Introduction The advent of information technology has presented opportunities for bringing about useful and constructive change in the management and operation of organisations, including airlines (Buhalis, 2003, Pp. 3 – 4). Because airlines now operate in an environment that presents unprecedented competition with rapid change, they remain under unprecedented pressure to present economic results under conditions of rising fuel costs, cost of necessities and economic crisis (Lock, 2010, Pp. 2 – 3). Thus, it is important for airlines to try to use technology to cut costs, present superior value to customers and adopt new ways of operating their business in an attempt to win more customers and to do more for less (Gasson, 2003, Pp. 239 – 241). Gasson (2003) states further that in addition to helping with the presentation of superior value to customers by adding to offerings that enhance pleasure and convenience, application of Internet technologies in airline operations helps cut costs and enhance efficiencies. Internet technologies help present dynamic pricing opportunities for airline tickets, superior supply chain management and coordination with other airlines, with enhanced marketing opportunities and Customer Relationship Management (CRM). In addition, Internet technologies help with training and recruitment, security, and with the presentation of an intelligent airport interface for passengers (IBM, 2010, “Can Aviation Take Off in Turbulent Times?”). Like several other leading airlines from around the world, Qatar Airways too has tried to compete more effectively by trying to use judiciously Internet technologies in its operations. Qatar Airways now provides passengers with inflight Internet and text messaging services on board its Airbus A319, A320 and A321 aircraft as well as other newer aircrafts (Qatar Airways, 2009, “Qatar Airways To Provide Passengers With Inflight the Internet and Text Messaging Services”). In addition, Qatar Airways (2010) suggests that this airline presents mobile check in services for its passengers, and it is now possible for passengers to check their booking and flight status on the Qatar Airways website. Internet technologies now help Qatar Airways to analyse market information to plan for flight/equipment scheduling, and sales and marketing (PR Newswire, 2010, “Qatar Airways Increases Market Planning Capabilities”). Because the application of Internet technologies to airline operations is now critical to maintaining profitability and competitive advantage, it makes sense to try to understand better, how Qatar Airways can use these technologies to compete effectively. This report presents a discussion about the current and future uses of Internet technologies at Qatar Airways, and the next section presents a discussion about the impetus for use of Internet technologies in airlines. E-Business Background Ishutkina (2008, Pp. 1 – 3) suggests that the air passenger traffic carried by airlines in the Middle East has progressively increased over the years, as depicted in Figure 1, but so also has the competition. However, a need has existed for trying to improve the quality and efficiency of the aviation system, which must serve about four times the passengers it serves today (Booze & Company, 2008, Pp. 1 – 5). Booze & Company (2008) goes further to state that the quality and efficiency of aviation systems in the Middle East had remained below international standards. Thus, Qatar Airways, which competes with other regional airlines, including Emirates, Saudi Arabian Airlines, Royal Jordanian and Gulf Air, could capture a larger share of the passenger market only by delivering more value at a lower cost because this airline had to compete with established airlines, especially Emirates. The load factors for various airlines registered in the Middle East region presented in Figure 2 illustrate the previously mentioned point (Booze & Company, 2008, Pp. 5). Figure 1: Air Passenger traffic Carried by Various Airlines registered in Regions around the World, from (Ishutkina, 2008, Pp. 2) Figure 2: Average Seat Load Factor, (Percentage of Available Seat Capacity Filled with Passengers), for Airlines Registered in the Middle East, from (Booze & Company, 2008, Pp. 5) Appendix B presents E-commerce and industry analysis for Qatar Airways. The Porter Five Forces Model clearly demonstrates that Qatar Airways should try to gear up for future expansion in passenger demand while building its brand to compete with Emirates Airlines. Strength, Weakness, Opportunity and Threat analysis for Qatar Airways demonstrates that Qatar Airways has the capacity for building its brand to compete with other leading airlines, including Emirates Airlines and the Abu-Dhabi based Etihad Airways. Rappa (2010) presents a list of business models on the web and the infomediary model suggests that efforts to gain from passenger feedback and statistics will help Qatar Airways develop a superior strategy for building its brand. Lovelock (2004) suggests further that Qatar Airways benefits by supporting its core product for transporting passengers with services designed to provide information, consultation, order-taking, hospitality, billing and payment for passengers. In addition, it is important to try to provide for exceptions for passengers, including meal preferences, special amenities for elderly and children together with facilities for those with special medical needs. Because Internet technologies present opportunities for innovation, value and competition in the airline business, these technologies are important for airlines in the Middle East. The quality of offerings for attracting and retaining customers, ease and security of electronic transactions, application of the Internet for promotion and purchasing, distribution, services together with effectiveness of dynamic pricing are a source of competitive advantage. Thus, Internet technologies are important for Qatar Airways. E - Marketing The Internet presents opportunities for use in marketing of airlines because, firstly, substantial commissions paid to travel agents and marketing intermediaries’ eats into the profits of the airlines and secondly, the costs associated with using Global Distribution System Companies (GDS), including Amadeus, Galileo, Sabre or Worldspan is now substantial (Shaw, 2007, Pp. 71). Thus, if individuals or businesses make direct bookings with airlines on their websites using a personal computer connected to the Internet, substantial savings arise to add to the income generated by the airlines. Clearly, promoting the airline website that permits passengers to interact more fully with the airline now makes sense because passengers can book and check in, access useful information about the airline, gain an experience of services offered and obtain other useful information for their trip from the website. Having regional websites serves as a special attraction for regional customers and Qatar Airways recently opened a Chinese portal to attract passengers in the Chinese speaking regions of the world, in addition to maintaining portals for several major languages and many countries (Marketing – Interactive.com, 2010, “Qatar Airways launches Chinese portal”). The disintermediation model of e-business that Qatar Airways has tried to follow in its e marketing has clear advantages because this model presents an opportunity to passengers to deal directly with the airline (Smith, 2005, Pp. 80 – 90). However, when using this model, it is important to impress to convert a prospect into a paying passenger. Thus, the use of audio, video and virtual reality tours presented on Qatar Airways website is a creative use of Internet technologies that tries to win customers at a lower cost compared to operating advertising campaigns in traditional media that are also unlikely to present the information that virtual reality tours using Internet technologies do present. However, it is important to ensure that e-marketing is supported by campaigns in the traditional media, including the print and electronic media to ensure that prospective passengers do know about the Qatar Airways website (Marketing – Interactive.com, 2010, “Qatar Airways Related Stories”). An important advantage of using Internet technologies for directly dealing with passengers is that after a transaction, or if desired by a customer, individual details are stored on a database maintained by the airline, rather than the travel agent (Van Soldt, 2007, Pp. 1 – 5). Privacy laws make it difficult for airlines to seek information about passengers from travel agents and this means that airlines cannot deal effectively with Customer Relationship Management (CRM) or plan future strategies based on complete data about passengers. However, by direct interaction with customers, it is possible for airlines to engage in CRM and plan future strategy for operations and marketing by analysing customer data. Social networks are useful for marketing of products, but airlines have reacted slowly to incorporate social marketing tools in their e-marketing strategy (Field, 2008, “Social Networking for Airlines”). Thus, although Qatar Airways has maintained a presence on Facebook, it is possible to improve this and Qantas offers a superior presentation, even better than British Airways. Web Design According to Alwahaishi (2009), the Qatar Airways website presents the second best web assessment index rating of 91 out of a 100, second only to the website for Emirates Airlines, which presents a rating of 93 out of a 100. Alwahaishi (2009) states that important considerations associated with website evaluation include the following that needs consideration with appropriate weighting: Transactional Content: This includes measures associated with searching for ticket by date and price, ability to search, modify or cancel a ticket online and payment methods available together with facilities for delivery of an online or paper tickets and boarding pass. In addition, a capability for searching for flights within a range of time, multicity bookings and ability to choose a city name instead of airport code is also important for transactional content rating for a website. Informational Content: Destination services, flight details, information about destination, information for business travellers and in-flight services and entertainment are important considerations for an airline website from the informational content perspective. Passenger Enjoyment / Support: Features for joining and accessing frequent flyer services online on a website together with the capacity for handling customer queries and feedback are important for customer support. Special offers and deals, information about offices and contacts also add to the utility of an airline website. In addition, alliance and codeshare flight details and information about any on-board merchandise help to add to passenger enjoyment / support perspectives. Website Design: Availability of site search, secure protocol Internet access capabilities for a website, availability of a site in several languages, company and employment information and other features that add to the popularity of a website present additional perspectives for assessing a website. A table illustrating categories, factors and weights for airline web assessment for the purpose of this discussion is in Appendix A. Qatar Airways rates equally with Emirates Airlines in terms of informational content and passenger enjoyment / support (Alwahaishi, 2009, Pp. 218 - 219). Scores for website transactional content are also equal for Qatar Airways and Emirates Airlines, but Emirates Airlines scores marginally better for measures related to website design involving planning by passengers. The results of the website assessment are summarised in the table below. Table 1: Airline Web Assessment Index for various Middle East Airline Websites, from (Alwahaishi, 2009, Pp. 218 - 219) Business –to- Business A capability of enhancing and automating Business –to- Business (B2B) transactions add to the benefits presented by Internet technologies for improving airline operations and supply chain management. According to Chan (2007), it is possible for airlines to improve interactions with other businesses by permitting online bidding for goods or services, for evaluation by decision support systems. Hansman (2005) states that information sharing between operational databases accessible by the Internet to those who support airline operations help with airline maintenance, passenger processing, airport baggage handling and customs inspections. Teo (2009) states that electronic procurement serves to reduce operation costs, enable volume purchase, allow a wider choice of buyers and suppliers, improve delivery and eliminate manual order processing costs. Internet technologies have the capacity for improving internal efficiencies, managerial coordination and costs associated with purchasing to deliver financial performance improvement (Teo, 2009, Pp. 134 – 135). However, electronic procurement is most applicable to manufacturing industries. Headrick (2007) suggests that Internet technologies play an important role in cargo operations that require moving a large number of packages from a wide variety of business and other customers to many destinations. Tracking and consigning RFID coded baggage and cargo items using databases accessible to a number of partner companies, including airlines and logistics companies, allows for optimal management of goods over available air carriers. In addition, just like for passengers, Internet technologies enable competitive and supply / demand based pricing for cargo movement that is better for both airlines and logistic companies. Internet technologies enable more collaborative B2B relationships to do away with adversarial relationships because it makes sense for airlines to try to improve passenger and cargo load factors. Because web servers are online and immediate, with around the clock availability, it is easier to overcome time differences when doing business with aircraft manufacturers, fuel companies, component suppliers, cargo companies and a plethora of other businesses that airlines deal with, including food contractors. Granados (2004) suggests that it will be possible for airline groups to present jointly a competitive marketplace by collaborating on web portals, such as Orbit, to present dynamically the best possible far price to passengers to benefit all involved in collaboration. It is important to remember that empty planes flying around do not benefit anyone, and it is belter for an alliance to deliver to retain passengers than to say that they cannot fulfil a passenger’s needs. The Intelligent Airport In the future, airlines will need to interact efficiently with intelligent airport terminals that use ubiquitous computing systems with a high level of intelligent data processing capability to present ease, safety, security and utility to passengers and aviation service companies using the airport (Intelligentairport.org, 2010, “Aims of the Project”). The airport of the future will permit real time tracking of passengers and cargo, display a wealth of information to assist airlines, passengers and other actors to stay connected in real time, security and access after identification using eye scanning and ease. Gigabit networks together with complex applications of Internet technologies on ubiquitous devices will provide the needed computing and communications technologies. IBM (2010) suggests that as the number of passengers using various airport increases, a need will persist to deploy sophisticated technology to manage efficiently the larger volume of passengers. Presently, Qatar Airways information technology systems drive mobile check in and baggage-tracking systems for airports located at Doha and in other parts of the world. Doha airport offers free Wi-Fi Internet service to passengers. However, with the opening of the new Doha international airport in the year 2011, greater sophistication will be possible because this airport will have a fibre-optic backbone and an operational database for the airport, which can interact with other databases (Airport-Technology.com, 2010, “New Doha International Airport, Qatar”). Automated check-in kiosks, RFID tracking, improved security-screening systems, sophisticated access systems based on iris screening and an information sharing system that shares information with cleaning, catering and cargo delivery firms will then be gradually possible to present ease and superior performance. Conclusions and Recommendations Based on the previous discussion, it is possible to conclude that Qatar Airways has emphasised the application of information and Internet technology systems in its operations to gain from savings and efficiency enhancements that such applications present. Qatar Airways has tried to equal, if not better Emirates Airlines, while trying to price lower. However, it will take a sustained effort to equal or to exceed the brand image that Emirates Airlines has built because Qatar Airways commenced operations later than Emirates Airlines. Thus, although Qatar Airways has presented superb efforts, it will take some time for these efforts to realize practical results. The following recommendations will probably help with improving Qatar Airways e-commerce and efforts directed towards application of Internet technologies to its operations: Qatar Airways should try to lift its marketing efforts on social media, including Facebook. Although Qatar Airways Facebook presence is impressive, this should be among the best and examining Qantas on Facebook should present ideas for improvement. It is important to try to present passengers using Qatar Airways website with better interaction for planning their trip. The website for Emirates Airlines helps passengers to find hotels, tours and limousine services, but Qatar Airways is presently lacking in this. However, because interactions for planning a trip require the airline to establish close relations with other service providers, this is likely to take some time. It is important that Qatar Airways continue to innovate to present leading edge systems after the opening of the new Doha airport, which serves as the airlines home base. It is likely to help if Qatar Airways were to collaborate with other airlines with similar service standards to offer portal based dynamic pricing to improve load factors. Appendix A – Categories, Factors and Weights for Airline Web Assessment The table below presents categories, factors and weights for airline web assessment based on (Alwahaishi, 2009, Pp. 216). Table 2: Categories, Factors and Weights for Airline Web Assessment, from (Alwahaishi, 2009, Pp. 216) Appendix B – E-commerce Strategy and Industry Analysis for Qatar Airways Porter’s Five Forces Analysis It is possible to refine further the industry analysis for the Middle East airline industry using Porter’s Five Forces model as presented below (Investopedia, 2010, “The Airline Industry”). Threat of New Entrants: Although, it is not possible to rule out a new entrant in a region flush with money, it is safe to say that the Middle East has enough airlines, and it is unlikely that new entrants will want to enter the market. In addition, most of the world’s major airlines serve the Middle East, and this means that new competition is unlikely. Most airlines already have websites and use Internet technologies in their operations with varying degrees of success. Power of Suppliers: Competition persists in the airline business in the Middle East, and it is possible to sustain this competition because the load factors, (percentage of available seat capacity filled with passengers), demonstrate that unutilised capacity is available for competition. Thus, it is possible to compete on price, but quality and value are also important in a region flush with funds where certain customers want the best. Established airline brand names, including Emirates, are constantly innovating and have implemented sophisticated Internet technology systems for adding to convenience and value (Emirates, 2010, “Emirates Online booking and Planning”). Power of Buyers: Because seats are available, passengers wanting to fly constantly look for bargains or value, but preferences may exist for national carriers among citizens or passengers working in a country. However, the most innovative of airline offerings at the best price do count. Availability of Substitutes: No frills cheap airlines, including Air Arabia, among others, present price competition that attracts certain passengers (Attitude Travels, 2010, “Middle East Low Cost Airlines”). Thus, affordability and passenger lifestyle influences their decision to avail themselves of the cheaper options. Competitive Rivalry: Clearly competitive rivalry persists among airlines in the Middle East. At present, Qatar Airways is trying to compete by offering the same as Emirates Airlines at a lower cost. Innovation in offerings by airlines will continue to influence passengers who intend to fly. Strength, Weakness, Opportunity and Threat (SWOT) Analysis Strength, Weakness, Opportunity and Threat (SWOT) analysis for Qatar Airways presents the following: Strength: Qatar Airways benefits from the support of Qatar and has the funds available to build its brand, despite being a relatively recent starter compared to Emirates Airlines. Qatar Airways has so far benefitted from leading managers and it is unlikely that this airline will face infrastructure bottlenecks. Low charges at the home airport further support Qatar Airways, which will benefit from the new Doha airport, a leading edge technology airport financed by the government of Qatar. The low tax regime prevailing in the Gulf States also benefits Qatar Airways and generous immigration laws will facilitate passengers to travel to Qatar and the surrounding region. In addition, Qatar Airways has been able to present excellence in service since its inception. Weakness: Although not many weaknesses are apparent, because Qatar Airways entered the market relatively late, after Emirates, it is important for Qatar Airways to work harder to build collaborative partnership arrangements with other businesses that support passenger travel in the region and around the globe. Opportunity: Qatar and the surrounding region presents a most favourable location and the real estate boom in the region presents opportunities to attract passengers who want to visit to benefit from the new Gulf. Qatar Airways has been able to acquire the latest aircraft and this will help the airline to compete on slot-constrained airports in Europe and around the world. Using available funds to integrate judiciously technology presents opportunities to support the Qatar Airways brand. Threat: Competition and perceived political instability of the Middle East region may limit passenger interest in the region and it is important to manage the new attractions and development boom in the Gulf judiciously to continue to attract passenger traffic. It is important to remember that passengers must be interested to visit and regional airlines carry most passengers to a region that is their home base. (This page intentionally left blank) Bibliography / References Airport-Technology.com 2010, New Doha International Airport, Qatar, Airport-Technology.com, retrieved: November 16, 2010, from: http://www.airport-technology.com/projects/doha/ Alwahaishi, Saleh. 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