SITA, the world's leading service provider of integrated IT business solutions and communication services for the air transport industry, celebrates 60 years of its existence this year. In an exclusive interview to INDIAN AVIATION, Francesco Violante, Chief Executive Officer of SITA charts the way ahead for his company.
INDIAN AVIATION (IA): You have taken over the helm of SITA three years ago in 2006, it is said that since then SITA has undergone a dramatic transformation. What steps helped the company in achieving this transformation?
Francesco Violante (FV): This year, as SITA commemorates its 60th anniversary, we are reminded of the vision that led to our creation by the air transport industry in 1949. That vision was to provide the world's airlines with shared communication services — in virtually every corner of the globe. Since then, we have seen many changes. SITA has grown to meet the needs of the wider air transport industry. We have expanded our portfolio to include a full range of IT and infrastructure services, available almost anywhere. And we have been at the forefront of many new transforming technologies that have radically improved the way the industry works.
But one thing that has not changed is our vision.
When I took over as CEO of SITA, I was very confident of huge opportunities across the Air Transport Industry and how SITA is positioned in the market. SITA's strategies are based on cooperation and collaboration for the benefit of the industry, our vision remains intact. More than that, it is as important to the industry as it ever was. It is why today we do business with nearly every airline and airport in the world, touching the lives of almost every passenger who travels by air.
Today, we are clearly a different company — not just focused on legacy communication services. We are increasingly embracing high-value communication and infrastructure business, including areas such as voice and convergence, network integration, communications at airports, mobility, service management and more.
SITA currently manages about 30,000 CUTE (Common Use Terminal Equipment) workstations used by some 285 customers in more than 230 airport locations worldwide. SITA's network of VHF ground stations has expanded steadily since 1984, and currently includes more than 1,100 stations in over 160 countries, which SITA is upgrading to provide ICAO Standard VHF Digital Link service. SITA's Flight Planning module delivered 40,000 flight plans in its first year of operation, 26 years ago. It now delivers over 3.8 million per year or around 10,500 flight plans a day.
Over 3,300 check-in kiosks have been deployed by SITA to date, and there are over 110 million SITA kiosk check-ins a year. We continue to add new functionality and expect to launch soon a self-service kiosk for mishandled baggage which will allow passengers to check the status of their bags online without having to queue to see an agent. This is made possible because SITA provides the world's leading baggage tracking network, WorldTracer, used by over 400 of the world's largest airlines and ground handlers. In use at more than 2,200 airport locations, it tracks millions of mishandled bags worldwide each year.
SITA has deployed IP VPN networks globally for over 660 customers, connecting 13,500 air transport sites around the world. These are few milestones of many more which SITA has achieved over a period of time.
Today, we are ideally positioned in this market. Industry and technology knowledge combined with our community relationships gives us a huge competitive advantage.
(IA): SITA is celebrating its 60th anniversary this year. At its inception, SITA was a non-profit airline association. Today it is a commercial enterprise, how much revenue is it going to earn during this financial year?
(FV): I am very pleased to say that 2008 was a successful year and – at the same time – a year of continued transformation for our organization. This is despite the industry experiencing a global recession unlike any other.
The crisis did begin to impact our volume based business in the last quarter. But, thanks to our balanced and diversified portfolio – and the spread of our revenues across the world – we were able to achieve all our targets. So we ended the year in a positive position – with a strong balance sheet, a healthy cash flow and no bank debt.
For 2008, our revenue reached US$ 1.47 billion. A growth of 3.5 per cent over 2007.
We also maintained our commitment to R&D and innovation — which amounted to a spend of US$ 76 million in 2008. The SITA Lab continues to undertake strategic research, collaborating with customers and driving innovation for the industry.
(IA): As member airlines are stakeholders in SITA, do they get any part of this revenue?
(FV): SITA membership delivers a strong and lasting financial value, particularly through minimizing the costs of network services. Our principle of long-term investment in shared infrastructure continues to help minimize industry costs, save unnecessary duplication of resources and enhance efficiency. Membership ensures a long-term view, rather than a focus on short-term shareholder return. Our mandate is to deliver best value to our Members.
From 2006-08, SITA members benefited from price reductions of US$ 130 million and redistribution of US$ 51 million in network service charges.
In 2008, SITA's operating margin exceeded target as well. It stood at a healthy position of US$ 66.7 million for the year. At the same time as achieving our margin, we delivered benefits to our stakeholders — our members, customers and shareholders.
We delivered overall price reductions of around US$ 50 million and an over-recovery to our members of US$ 16.8 million.
We also made a net YPOA repayment to members of US$ 38 million during 2008. We worked hard to keep our customers happy. We were pleased with the results of our customer satisfaction survey. Over 200 customers responded to our surveys in the year. We found that 91.2 per cent of customers were 'satisfied' or 'very satisfied' with the service they received from SITA in 2008.
(IA): Your vision is to strengthen SITA's position in the air transport industry and to scale new heights in terms of delivering innovation and cost reductions, especially during the current economic slowdown. Can you kindly elaborate what are the measures being taken in this direction?
(FV): As a community of over 600 airlines, airport, aerospace and GDS members, and over 1,800 customers, we operate at the heart of the industry, working closely with industry associations and bodies to drive and shape new advances and standards. We have spearheaded the definition of common-use technologies, for example, as well as hosted solutions, open IT standards, and more.
SITA has worked closely with the community as it has evolved over the last 60 years. Working with, and for, the air transport community, we are helping to drive and shape industry standards. We've spearheaded the definition of common-use technologies, for example, as well as hosted solutions, open IT standards ... and more. In these endeavors, all of our initiatives and solutions aim to ensure interoperability and the cost-effective use of technologies for the industries we serve.
Innovation is key for sustainable growth. SITA Lab is a world-class facility for strategic technology research with a goal to drive innovation for the air transport industry (ATI), working both independently and in partnership with others. The Lab is making good progress in pioneering and prototyping new mobile and wireless developments, cloud computing, virtualization, data mining, Service Oriented Architecture — and more.
IT and Telecommunications operating spend as a percentage of airline revenue is forecast to be just 1.7 per cent this year, the lowest level recorded since 2002, as airlines seek to reduce costs against a backdrop of US$ 10.4 billion in losses last year and an IATA forecast of US$ 9 billion in losses this year. It is important to recognise that IT is also part of the solution to our challenges. Used well and effectively IT will cuts costs and protect revenues.
SITA's 2009 Airline IT Trends survey tells us that IT has already accomplished a great deal in reducing distribution costs and expanding self-service functionality. For the first time cent per cent of survey respondents have said they sell tickets on-line and it is clear that airlines are making web sales their most important distribution channel. Web check-in capability is now at 60 per cent and is expected to reach 92 per cent over the next three years. So the IT driven revolution in the air transport industry is continuing and gaining strength ever since enabled by delivering the first online booking engine in 1995. We continue to drive the self-service revolution by supporting airlines in their exploitation of e-commerce technology, developing new functionality and supporting airlines in their drive for ancillary revenues through their web sites.
(IA): SITA has always been ahead of industry requirement with its solutions for the aviation industry. What are the new technologies that are being taken by it to change air travel in the next decade?
(FV): Oracle and SITA have recently entered into an unique 15-year agreement to develop the most open and agile airline reservations system ever designed, using service oriented architecture (SOA) and extreme computing techniques.
Over the strategic time horizon of the next three years, airlines will focus on areas such as IP telephony, service oriented architecture, software-as-a-service, Web 2.0, cloud computing, data security and biometrics.
After four years of research and development, we are now successfully testing a breakthrough new technology for common use passenger processing in a live airport environment. It allows passengers to be both checked-in and boarded using the CUPPS (Common Use Passenger Processing Systems) technology. CUPPS will save the air transport industry millions of dollars through the introduction of the first-ever, common-use IT application acceptable for use by all airports and airlines.
In support of industry demand for mobile phone applications, SITA is trialling a mobile web application with Malaysia Airlines which could deliver mobile phone check-in and other functionality to the web-enabled smart phones that are now becoming the standard offering of the major providers, including Nokia, Windows Mobile, the i-Phone, Google's Android phone and the Blackberry. The demo application is supported by a rendering engine which provides consistent formatting for the different screen formats of these phones. This research development, combined with the arrival of 100 per cent Bar Coded Boarding Passes next year, could create the necessary impetus to make mobile phones an essential travel tool for flight booking, check-in and boarding.
SITA has recently created a Mobile Workforce Focus Group to examine how we can best adapt mobile to the real-time needs of workers in the airport environment at a reasonable cost. We believe the key to success is contextual information, adapting information delivery dynamically, to transform airport business processes especially for key on-the-ground staff such as turnaround dispatch teams and maintenance engineers. SITA's approach is to deploy a common-use context-aware platform at airports to support multiple mobile application scenarios (including passenger management, baggage processing, aircraft turn-around and airport operations). Working with Appear, the leader in context-aware software infrastructure, SITA has deployed a live pilot of a mobile workforce solution for line maintenance with the Portuguese airline TAP. Other pilots are also getting under way.
(IA): With climate change at the top of agendas worldwide, environmental concerns, and especially global greenhouse gas emissions, have become a major issue confronting the air transport industry as a whole - and airlines in particular. What steps are being taken by SITA in this direction?
(FV): The air transport industry (ATI) is already challenged with cutting costs and streamlining operations. At the same time, companies are faced with increasing environmental regulations and reporting requirements. These will create a significant impact on business practices. SITA's approach leverages the industry's proposed action for Aviation and Climate change.
SITA's products and solutions all have a direct or indirect role to help the industry deal with the challenges it faces. Our approach to environmental concerns and constraints comprises four components.
Firstly, using IT and industry leverage to enable operational improvements An example is enabling collaborative decision-making between airport airside operations, air traffic management and airlines, which will be pivotal in reducing the 6-12 per cent of fuel which is currently wasted on the ground or in the air.
Secondly, providing green IT-compliant services through the application service provisioning (ASP) model, where single applications are shared across the entire industry and operated in our data centre.
Thirdly, helping our customers cope with new regulatory burdens by using the community approach to set up an information hub for emissions trading — to fulfill monitoring, reporting and verification obligations and fourthly amending our current services to deliver carbon footprint information to consumers and consumer groups.
In addition, SITA has set up a dedicated Environmental Programme Working Group. One of the drivers for the SITA Working Group on Environmental Regulation was to understand how information technology systems can help airlines demonstrate their compliance, and control their environmental data, without suffering undue economic consequences. This has now been achieved and we have a solution that will reduce the costs of verification and also the chances of litigation between airlines and regulators by ensuring competitive fairness amongst stakeholders.
We are delighted to share that four airlines from the Middle East, the United States and Europe are testing SITA's Aircraft Emissions Manager, the world's first Monitoring, Reporting and Verification (MRV) software tool to measure accurately carbon emissions from aircraft operators. One test has been completed satisfactorily, and three more are getting underway, as airlines finalize their plans for monitoring and reporting carbon dioxide emissions to the EU in order to meet the deadline of August 31, 2009.
We also try to innovate in an environmentally friendly way wherever we can. A good example is SITA's new AirportConnect S3 Kiosk which is a 64-kg full-function check-in kiosk with the smallest carbon footprint in the industry and a printer that can issue up to 5,300 boarding passes from a single roll. It can also print bag tags for self-tagging to speed up the bag drop process. Two S3 kiosks take up the same space as one conventional model.
(IA): With time aircraft are becoming modern. SITA has a future aircraft management programme. Can you tell us about it?
(FV): We are trialling a new AIRCOM GateLink service which will provide global broadband wireless connectivity to new generation aircraft like the Airbus A380, Boeing 787 and new variants of the Boeing 777 while they are on the ground during turnarounds and layovers. In the future this will allow airlines and airports to take full advantage of the operational benefits of these new aircraft types by automating labour intensive and time-consuming processes to manually retrieve and load large volumes of data from various aircraft systems. These data cannot be transmitted cost-efficiently using traditional data link services such as ACARS (Aircraft Communication Addressing and Reporting System).
(IA): SITA has been present in the Indian market for sometime now. How does SITA perceive the Indian market and what are the new initiatives being taken by it for India?
(FV): We are directly investing in India through an increase in manpower and indirectly through partners. SITA's current and future strategies are aligned with our commitment to play a critical role in the development of the Indian aviation sector. SITA's presence in India for the last four decades is testimony to our commitment to extend best-in-class IT solutions and services to Airports, Airlines and Government in India where we have been witnessing exponential business growth.
The journey has been very enriching and gives each of us in SITA, a great sense of pride. SITA has all along been providing its communication and application services to almost all airlines operating in India. On the airports front, SITA has pioneered almost all airport IT system automation in India namely in areas of Common User Terminal Equipment (CUTE) for agent check-in; Common Use Self Service (CUSS) Kiosks for passenger self-service check-in on a range of airlines; Baggage Reconciliation System (BRS) which ensure the right bag always gets on the right plane; and Airport Management Systems (AMS) and other key technology at various Indian airports including Delhi, Mumbai, Chennai, Bangalore, Hyderabad and Cochin. Of late we have also been awarded the CUTE check-in project at the 13 non-metro airports by the Airports Authority of India which is now being implemented.
In the Government solutions domain, recently SITA has had the distinction of providing our Advance Passenger Information System (APIS) services to more than 50 international and domestic airlines operating in India to ensure their compliance to the Indian Government APIS requirement. SITA also sees huge potential in modernization of the Air traffic management space in India with the introduction of advanced data link applications.
With the prospect of several greenfield airport projects in the offing, SITA in India is poised to play a critical role in development/modernization of these airports by providing Master Systems Integration as we do in many other locations around the world.
We are committed to support the growth in air transport here in India right across the full spectrum of air transport.