Lufthansa Systems sees potential in Chinese growth market.
An interview with Norbert Müller, Senior Vice President Sales Asia & Pacific at Lufthansa Systems as published by China Civil Aviation Magazine, March 2009 issue.
Mr. Müller, the current worldwide economic crisis affects airlines just as much as other industries. What impact does this have on your business?
- Norbert Müller: Airlines need IT solutions. IT is relevant to the entire process chain of every airline. Lufthansa Systems’ NetLine suite, for instance, covers the planning process from the first day of planning up to the day of departure. NetLine/Plan for long- and medium-term network planning, NetLine/Sched for schedule management and NetLine/Ops for operations control address all related aspects and form the basis for economically viable flight operations. Codeshare management, passenger and aircraft ground handling as well as the entire navigation process are just a few of the complex tasks that can, in today’s environment, only be managed with appropriate IT solutions. We have a number of Chinese and Asian airlines using our products.
What about winning new business?
- Norbert Müller: A new IT system is always a significant decision for an airline, and it requires a comprehensive approach. A CIO looks at the requirements from a technical side and evaluates various solutions, while the CFO will try to minimize the cash-out and increase revenues. The key is for both, CIO and CFO, to see that there are many ways for an airline to benefit from a solution: We offer systems that directly reduce costs, like the flight planning solution Lido OC, and we provide solutions that can increase revenue shortly after implementation, such as our Sirax AirFinance Platform. Depending on the operating concept chosen, you can have these advantages without a big up-front investment. Whatever amount is invested will be amortized quickly. We have innovative and flexible concepts that keep the airline’s cash-out low while migrating to a new solution.
How does the situation in Asia and especially China differ from other markets?
- Norbert Müller: Asia, and especially China, is still a market with tremendous opportunities. Overall, China is one of the most rapidly growing aviation markets. As the economy keeps growing and Chinese companies are intensifying their business ties with counterparts around the world, Chinese airlines are upgrading their international network. And in domestic traffic, airlines are steadily catching up with other modes of transport. Prospects for Chinese commercial aviation are very good in the long term, which in turn opens a wide range of opportunities for providers.
What does this mean for the area of IT? Will more traffic require different solutions than we have today?
- Norbert Müller: It requires a different approach. Any airline needs IT to do even the most basic tasks. However, if your airline wants to grow, it requires more than just getting the basic work right. You need to fine-tune processes, speed up individual tasks and look intensively at the cost side. Competition is tremendous in the airline industry, and especially now there are two things that sophisticated IT solutions can do for an airline within a very short timeframe: They can lower costs directly, and they can increase revenues. Both are vital for a carrier’s success.
What kind of solution can actually do that – increase revenue and lower costs?
- Norbert Müller: Let me give you just two examples. In today’s challenging environment, maximizing revenues is paramount. You cannot survive without a strong revenue accounting system that keeps track of your receivables. Airlines still forego a substantial amount of revenues because of incorrect accounting of transactions with travel agencies, interline partners and the like. Our Sirax AirFinance Platform can rectify that. It streamlines all financial invoicing and bookkeeping processes. That means the user has a real-time understanding of the company’s profitability, even down to individual routes. Sirax covers the entire financial management of an airline, from revenue accounting to cost controlling. This has a direct and positive impact on a carrier’s balance sheet. As a result, actual revenues increase. Internally, the solution also saves process costs: One of our customers was able to realise operational cost reductions in the finance division of 45 percent with Sirax. On the other hand, we have Lido OC, which is probably the industry’s most advanced and efficient route planning solution. Lido OC can save up to 5 percent of fuel. Calculate that across an entire fleet, for a whole year, and you will arrive at substantial savings, in money as well as in emissions. That explains why Lido OC is in use with many leading global carriers.
Why does Lido OC calculate more efficient routes than other solutions?
- Norbert Müller: Lido OC can be tailored to an airline’s needs. A smaller carrier may just require a modern flight planning system. Larger airlines, on the other hand, can take advantage of additional modules for Lido OC. One module for instance, Traffic Flow Restrictions, or TFR, draws from more than the usual pool of flight routes. As ATC closes certain route sectors at certain flight levels to manage the overall traffic situation, most IT solutions drop the corresponding airways altogether and suggest deviations that may lead to longer flight times. Lido OC TFR, however, blocks only the closed bit and considers the rest of that airway anyway. The dispatcher therefore has more route options and a higher chance to find the best possible route, depending on what parameter he has set before: fastest flight time, shortest route, or lowest fuel consumption.
Which products are nowadays especially in demand in the Chinese market?
- Norbert Müller: We see a growing demand in the areas of electronic flight bags (EFB) and route charting. Take our Lido eFlightBag, which is the leading solution for the paperless cockpit. On the electronic platform, the flight crew can download the complete set of documents as part of their flight preparation. Even in flight it is more convenient to use. Pilots can exchange information on their individual displays, make notes and check data. Another hot topic is electronic route charting. Our Lido/eRouteManual can be used as part of the Lido eFlightBag, and we are getting very positive feedback from pilots for its easy legibility and the clear structure.
There is a lot of competition in the market. How do you stay ahead of the pack?
- Norbert Müller: Lufthansa Systems is the only provider to cover the entire process chain of commercial aviation, including planning, passenger and cargo management, finance, flight operations, and aircraft maintenance. In addition, we have one important advantage in the market: We have not only been in the industry for many years, we also have an airline background. Our staff members come from the IT sector as well as from airlines themselves, so we do understand what the airlines need.
How can you transfer your business model and success from Europe to Asia? Is China not a totally different case?
- Norbert Müller: While the aviation industry is a global one, there are local distinctions. We know that and we act accordingly. Our regional head office for Asia/Pacific, for instance, is located in Singapore. This guarantees the proximity our customers require while constantly observing the market. Furthermore, we have representatives in all the important markets. Our special focus is on Greater China, where we just added the new position of Vice President Business Development. My experienced colleague Olivier Krüger has taken over this task. This shows our dedication to the market, because it is important for us to be close to the customer rather than to steer everything from a corporate center.
But why should airlines invest just now? Would it not make more sense for them to hold on to their funds and wait until after the crisis?
- Norbert Müller: That sounds sensible at first glance, but the crisis will be over, hopefully, sooner rather than later. It is important to be prepared when that moment arrives. Those who have worked to get started as soon as business picks up will emerge stronger from this crisis. The others, who start thinking about the new situation when it has come, will be the losers of this game. A crisis is always a chance to leave trodden paths. That may mean evaluating new products as well as new operator models such as ASP and SaaS.
What will the future hold for Chinese aviation, in your opinion?
- Norbert Müller: Once the economic situation is back to normal, we will most probably see China gaining an increasingly important role with growing traffic, infrastructure construction and the exciting aircraft manufacturing projects underway. Aviation has a long tradition in China, and I am sure it will have a great future.
