Russia and the CIS member states are an interesting market for us. With our modern IT-solutions we support Russian airlines on their way into the European and worldwide market.
We introduced our new sales structure towards the end of last year at a client event held in Moscow. Stefan Auerbach, Senior Vice President Sales EMEA/Central, welcomed some 40 guests at an evening event at the Swissotel. Together with Dirk Lauermann, the new local sales representative, he introduced the new Moscow office of Lufthansa Systems.
The Russian aviation market is currently undergoing a significant change. The strong growth in air transportation in the domestic and international markets and the ongoing consolidation of the market has an impact on how companies are being managed. IT is one of the key drivers of managing a more complex airline business efficiently. Many practices which are considered well proven in other parts of the world have not really been applied at Russian airlines in the past. For instance, within an increasingly competitive environment Revenue Management becomes crucial for the airline’s bottom line. Not only that many airlines are missing any kind of experience with Revenue Management tools but the processes also have to be implemented within the organizations. According to proven case studies, a 1% - 3% increase in revenues due to utilisation of a revenue management system without any additional cost is achievable. Also on the cost side, Russian airlines have to remain competitive. Growing fleet sizes need to be managed efficiently with limited resources. The effective use of state-of-the-art tools that support Aircraft Scheduling, Operations Control and Crew Management decisions is key to success in this area. Higher aircraft and crew productivity can readily be translated into cost savings with ease.
According to Lufthansa Systems` experience, there is a great need to upgrade IT systems which will indeed lead to significant IT investments for the airlines. The attributes of the market we have described will require increased expenditures in the very near future. But in how far airlines have to invest in software and hardware, use hosted services or buy services in an ASP-model (Application Service Provider) may be different in each individual case.
There is a compelling need for the Russian airline industry to catch up technology-wise. In order to achieve this, the annual IT costs may well be substantially higher than the industry standard of 2,4% of total cost. We are aware, that in particular airlines with huge fleet investments programs underway may prefer to avoid investments in IT. For these airlines, an ASP structured contract with monthly payments for a service is likely to be more favorable, instead of the classic investment with huge one-off payments in the beginning.