UST INSTITUTE OF MANAGEMENT SCIENCES

AIRBLUE: FLYING ON WINGS OF WEB

Foreword
Launched on the June 18th, 2004, airline, Airblue joined in as a new player in the list of Pakistani airline carriers. It is among the countrys third private domestic carrier, other two being Aero Asia and Shaheen Air International, that entered into the competition to improve upon the problems of air traveling because of heavy rush on other carriers, particularly PIA1. With an initial investment of over Rs500 million, Airblue offers business and economy classes and is the first airline in private sector to have Pakistani pilots and engineering staff trained according to international standards. According to an estimate Airblue would help the Pakistani economy by generating over 2,400 jobs (400 direct and 2,000 indirect) for an all Pakistan crew1.

This case was prepared by the MBA student S. Rabbiya Sajjad Hamdani under the supervision of Ms. Ayesha Pervaiz. This case is not intended to serve as an endorsement or as a source of primary data. Copyright 2006 NUST Institute of Management Sciences. No part of this case may be reproduced, stored, used in a spreadsheet, or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwisewithout the permission of NUST Institute of Management Sciences. For any queries write to Ms. Ayesha Pervaiz, NUST Institute of Management Sciences, Tamiz-ud-din Road, Rawalpindi.

http://www.airblue.com/corp/pressroom.asp

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This case looks at the role played by information systems that helped Airblue to differentiate itself visibly from its competitors and also at the various repercussions encountered by the airline. It also examines the near non-existence of anything related to Internet marketing done by the airline. The basic reason for this is that in Pakistan the business world has not started to realize the potential of Internet in terms of promotions and advertising, their main focus on the internet being information provision or at a later stage transaction of products/services through their website. Although we have established previously that websites are a medium of advertising yet they are not a direct intentional promotional tool used by most of the businesses in Pakistan.

Pakistans Airline Industry

The transportation sector is counted among the most important sectors of any economy with the aviation industry forming a major portion. The volume of passenger air traffic is one of the salient indicators of the health of a national economy because it reflects the growth, development, domestic tourism and overall socio-economic realities of a country In Pakistan more than 10% share of the GDP comes from the transportation and communication sector. The aviation industry is an important key player as it has direct effect on tourism and international trade2. Deregulation Till early 1990s state-owned national flag carrier Pakistan International Airlines (PIA) enjoyed the complete monopoly on the local airline scene. But the early 90s saw many new players entering the industry, Bhoja, Hajvery, Raji, Shaheen to name a few. Many of these airlines closed down their operations and at present, the commercial air traffic in Pakistan is shared by four airlines the state-owned PIA and private Shaheen Air International, Aero Asia and Airblue airlines. During the early 90s saw a healthy trend in the industry when in 1993 the Civil aviation Authority opened the aviation sector for private investors in order to boost healthy competition for better traveling services at low price fares. This encouraged many private companies to enter the industry. However most of them have left the arena due to heavy taxes of CAA, which would not sustain the cost structure of their companies.

Airblues Inception
Early in 2003, Tariq Chaudry, a US based Pakistani software engineer and the exchairman of PIA, Shahid Khaqan Abbasi toyed with the idea of launching a private airline in Pakistan. Seeing the potential market, Airblue took off to the skies on 18th June, 20043.

2 3

http://www.google.com/airlineindustry/pakistan http://www.airblue.com/corp/pressroom.asp

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The launch created quite a stir in the Pakistani aviation industry. Airblue did not emerge as just another private carrier. It had an edge over the other carriers as it adopted a leading approach in deploying information technology in its everyday operations. For the first time in the history of Pakistan, Airblue introduced the concept of total e-ticketing and PDI check-ins. The management had no intentions of using their website or other means of promotion over the Internet. E-ticketing and PDI check-ins were their basic innovation over the Internet. This new concept was the brainchild of Mr. Chaudry, Airblues CEO. Having experienced the way the power of technology has been harnessed in the West in terms of e-ticketing, Mr. Cahudry that the Airblue team be the first-mover and take up this challenge.

Flying Made Easier

Led by a team of experienced individuals, Airblue stands as the youngest yet the most advanced and innovative airlines in Pakistans aviation industry. Since its inception the airline has won many popularity polls among the domestic carriers, the reason being its leading approach in deploying Information Technology in its everyday operations. E-ticketing and online flight reservation is a common practice in the modern world, yet before Airblues inception none of Pakistans domestic airline had adopted such practice. The airlines did have an online presence in terms of informational websites but they did not offer the flexibility of creating letting the end user book flights online.

Competitive Advantage
With e-ticketing and PDI check-ins Airblue not only provided convenience to passengers in terms of saving time but has also helped eradicate the back-dating system associated with manual ticketing that costs airlines, including its competitors, millions in losses every year. Airblue has integrated unique innovations to ensure security and affordability. Purchasing an Airblue ticket online is even easier and requires four simple steps4: 1. 2. 3. 4. 5. Log on to www.airblue.com Search for available flights; Make a reservation by selecting the desired flight; Enter credit card information; Printing the e-ticket out-right at home.

The absence of manual ticketing and the introduction of computerized check-ins by hand-held computers helps Airblue offer quality-conscious travelers value for their money by offering quality product and consistent scheduling5.
4 5

http://www.airblue.com/corp/pressroom.asp Telephonic interview with Mr. Taimor Hasan, Head of IT department at Airblue

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Promotions and Advertising in Focus:

Air blue had one of the biggest challenge in terms of promoting itself so that it could generate the initial drive for sales. Here is the main focus of the case, Air Blue just like any other business did not make use of the potential that Internet has to offer in terms of advertising and promotions. The common means of promotions were used by the air carrier, which included promotional Brochures and Ads over TV and radio. The western world calls these the traditional means of communication as they have realized the potential of Internet in this regard. There are a number of reasons why Internet marketing is not used in most businesses in Pakistan. Lack of Awareness - Businesses: One of the most daunting reasons is the lack of awareness of businesses in terms of its potential. Managers of today in Pakistan have not completely understood how they can target and attract their customers over the Internet. Customer Response Rate: Another important factor is that though Internet usage has expanded tremendously in the country yet mostly people use it for information gathering purposes. Customers or users of Internet have not accepted this medium as a means of advertising or purchasing goods. They still prefer the traditional means of communication thus the response rate of customers is higher to the traditional advertising mediums. In terms of purchasing goods online though airline industry has an opportunity as their customers are looking for convenience and any carrier that provides them that is favored. Yet the concept of advertising over the Internet is not considered viable6. Consumer Mindset: As mentioned earlier consumers in Pakistan do not consider Internet as a means of advertising as they distrust and have not completely incorporated it in their live. People believe that any promotions offered over the Internet are fake and generally have a negative attitude towards them.

Working of the Online System

Infrastructure The IT set up interconnects Airblue's 4 offices via DXX circuits. The main hub is located in Islamabad, which provides links to Forum, and Airport offices. Data communication takes places between Airblue Limited - Karachi and Los Angeles via Islamabad office through a secure VPN tunnel. All Airblue offices within airport are interlinked via optical Fiber that provides high-speed data transfer7.
6 7

Telephonic interview with Mr. Taimor Hasan, Head of IT department at Airblue Telephonic interview with Mr. Taimor Hasan, Head of IT department at Airblue

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Software The web based software has been written in the Microsoft environment using ASP.net. The backend database is SQL server. The database is centralized and hosted in the US. Airblue also avails the services of Sabre8, a company having vast experience with traveling and reservations systems. Airblue has bought the seat allocation module from Sabre, called the SabreSonic. The ticketing and departure programs have been implemented in-house. When a customer requests a reservation, Sabre allocates seat(s) in the passengers name. later when a payment is made, ticket(s) is/are allocated from Airblues database for that passenger. The features included in the SaberSonic suite include: SabreSonic Res -- offering advanced reservations management capabilities for airlines of all sizes around the world. This capability provides Air Blue the ability to grow revenue efficiently and manage every channel of distribution. The offering includes the industry's leading online booking engine, along with shopping, ticketing and codeshare capabilities all managed from a single, easy-touse graphical user interface (GUI). SabreSonic Check-In -- enabling both efficient passenger processing and a customer-centric focus both on and off airport. This suite helps Air Blue streamline operations and enhance the customer travel experience. Capabilities in this suite include check-in, re-accommodation and automated fee collection capabilities, all managed from a single, easy-to-use GUI. SabreSonic Inventory -- offering advanced inventory management capabilities such as serial, virtual and continuous nesting to enable the industry's only origin-destination based inventory management. SabreSonic Command -- the only Web-based tool available in the industry that offers flexible options for an airline to easily and quickly configure and manage its passenger solution system from one central location based on the carrier's profile.

Payment Gateway The system uses the Citibank Payment Gateway, which enables the customers to purchase tickets online. This is a major enhancement because previously Airblues customers were forced to use the dollar based reservation system that caused problems and complaint due to the fluctuating dollar rate. Now Citibank's Payment Gateway enables organizations to use a Rupee-based Internet Merchant Service facility to accept Visa/MasterCard transactions online. This has increased customer satisfaction to a larger extent.

Salient Features and Benefits of the Website

Round the Clock Booking
8

www.airblue.com.pk

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The system provides the user with the flexibility of booking their flights 24 hours a day, 7 days a week and 365 days a year from the website as well as from the telephone lines available. Without the hassle of having to go all the way to the booking office, flights can be booked within minutes and tickets printed thus enhancing customer satisfaction. In short the customers travel decisions are made possible by just a click. User Friendly The system is very user friendly and even for someone who is not well versed with the ways of the Internet can easily handle it and make a reservation. The group carried out a mock exercise of making a temporary reservation and was successful in creating an itinerary smoothly. Plan Ahead and Save The online flight reservations system automatically retrieves all available flights and presents the lowest fares matching the users requirements. The customers get 25% off the total fare every time they purchase tickets online. This is a good incentive for the Pakistani customers to use the online system.

Paperless Environment Tensions of not receiving tickets in time and then making sure its not misplaced are the woes of the bygone days. There isnt any need to carry paper coupons, which means the tension of misplacing a ticket is gone. An Identity card/credit card/a passport is enough for identification. Checkin becomes fast (there are even self-service check-in options in the UK/US). Whats more important here is, since the travelers are given a reference number they need not worry about the loss of their tickets as it is stored electronically in the airlines system and there are no charges for a reprint of the ticket in case of loss, even if he/she loses the number or needs any alteration in the reservation it can be retrieved from the electronic airline system by any travel counselor. This very easily diminishes the hassle of visiting the travel agent or the airline office as the UAN no. is easily accessible. Cost Saving E-ticketing creates a win-win situation for everybody. The airlines get their benefit in terms of saving time and cost in terms of managing manual tickets by using simple A-4 size sheets out of any printer. Travel agents too get their share of benefit as they save on their overhead cost and time in terms of delivering tickets. Investment in deploying eticketing is justified by the potential cost savings it can provide because of less administrative work and less documentation. Travel agents can now focus on their core

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competence, which is travel consultancy and research, rather than on ticket issuance and delivery. According to an estimate, Airblue with IT investments in excess of US $ 2 million, savings of 40% over standard paper based ticketing systems are being achieved, with a corresponding improvement in efficiency--9. Seamless Check in Process The check in process works on state of the art hand held computers that operate on wireless communication. This wireless technology provides convenience to the passenger, as customer service agent is able to serve the passenger without having him/her stand in the queue. The hand held computer has bar code reader that scans passenger's e-ticket and retrieves passenger details. After verification of passenger data, passenger is issued with a boarding pass and bag tags through small zebra printer that is directly attached to hand held devices. Advantage for Travel Agents E-ticketing has proved to be very beneficial for travel agents. Every agent has his own account and email. Each sale is recorded and the system also generates sales and payments reports. In this way the agents get their fair commission with no financial disputes. -Online Sales Statistics Initially, following its launch, Airblue expected to capture 5-10% of its sales through eticketing owing to the fact that its a new concept and people are still reluctant to use their credit cards on the internet especially on a Pakistani website12. However according to the company at present approximately 51% of their total sales are through the website. This shows the future potential that web advertising has in the country. People todays have slowly accepted Internet to be an important part of their lives and convenience. Thus Airblue although at the time only uses indirect promotion through its website there are a lot of opportunities for it to increase the scope of internet advertising in the future. This would be most profitable if a great percentage of its customers are frequent internet users like the business class etc.

Effect on Competitors
Modern approach used by Airblue created quite a stir in the domestic airline industry and a number of its competitors, including PIA and Aero Asia followed suite by overhauling their systems in terms of IT.

Issues and Concerns in Pakistan

9

Telephonic interview with Mr. Taimor Hasan, Head of IT department at Airblue

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Reliability on the Net 24-hour internet connectivity in a country like Pakistan can be a big problem. During 2005s internet crash the airline suffered a lot and had to switch to manual ticketing. They do have a manual ticketing procedure to fall back on in case of such crisis. General Mindset Technology playing a key role in the successful implementation of e-ticketing, it is just the mindset of both the travel agents as well as the traveler that needs to be changed. Educating people plays a pivotal role in clearing pre-set notions and any ambiguity created by lesser acknowledged clients and agents. With high affinity towards technology within the country people shall opt for an electronic ticket instead of the traditional paper ticket. Some people feel confident only when they have something tangible in their hands. Once they realize that an e-ticket is just as legally valid document as the current paper ticket and is packed with added features, conveniences and benefits, this perception will quickly fade out. Security Concerns Apart from lack of awareness among passengers, the disadvantage lies in the concern for security. There are certain security questions involved while giving away credit card details on the internet as you place a requisition for ticket. Passengers will be less than enthusiastic about e-tickets unless the systems are secure and robust enough to withstand hacking and other cyber-crimes. Ignorance on end-users part According to the airline official, there is a lack of awareness in the end users who access the system from home. At times people use pirated software or their PCs are not configured properly due to which airblues website does not open properly. The airline does educate the customers by providing assistance on phone however this is a common everyday problem13.

Conclusion
Marketing over the Internet in Pakistan initially might have some impedance considering the above discussion, but the pros evidently overshadow the cons in case of favorable conditions. In spite of deviating from the conventional system, Airblue has made its place among the best carriers in Pakistan in just two years because of the convenience it provides through the use of its website. The combined implementation of technologies will define a new era for the travel experience. Airblue is well on its way achieving greater efficiency, security and convenience throughout a passenger's journey. The airline industry has decided on a direction and will make this change happen in the most successful way. Internet Marketing has quite a lot of potential for the airline industry as there are few service providers and the market share for each is huge. Thus investing

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over

the

Internet

is

well

worth

every

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spent.

Exhibit 1
Airblue is a private limited company and started with three new-generation aircraft Airbus A320, each of which has 20 Business Class seats and 126 Economy class seats, offers travel services to the following cities within Pakistan:

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Islamabad Lahore Karachi Peshawar Quetta Nawabshah

The international routes include:

Dubai

Airblues offices are located in the above mentioned cities with the operations head quarter based at Karachi and the Customer Support head office in Islamabad. The airline strives to provide customer comfort and has trained its employees through foreign experts. Moreover the airline is the first one to provide in-flight entertainment facilities like movies, games etc.

Exhibit 2
About Sabre Airline Solutions Sabre Airline Solutions, a Sabre Holdings company, is the world's largest provider of software products, reservations and departure control systems and other passenger management systems, and consulting services that help airlines simplify operations and lower costs. Sabre Airline Solutions' proven leadership is demonstrated by the growing number of airlines that leverage the technology and services: More than 200 airlines worldwide use Sabre Airline Solutions' broad portfolio of smart solutions for decisionsupport tools to increase revenues and improve operations. More than 100 airlines worldwide rely on Sabre Airline Solutions for passenger management solutions, with 15 new carriers added and nine carrier renewals for SabreSonic Res advanced reservations in 2003. In addition, more than 100 clients worldwide have turned to Sabre Airline Solutions consulting group for strategic, commercial and operational consulting. More than 500 contracts worldwide were signed in 2003 within Sabre Airline Solutions. Sabre Holdings Corporation (NYSE:TSG) is a world leader in travel commerce, retailing travel products and providing distribution and technology solutions for the travel industry. More information about Sabre Holdings is available at http://www.Sabreholdings.com. Sabre Airline Solutions, the Sabre Airline Solutions logo and SabreSonic, and AirOps are trademarks and/or service marks of an affiliate of Sabre Holdings Corporation. All other trademarks, service marks, and trade names are the property of their respective owners.

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http://www.corporate-ir.net/ireye/ir_site.zhtml?ticker=TSG&script=410&layout=-6&item_id=579618

Exhibit 3 Airlines rating

SKYTRAX World Airline Star Ranking represents the Quality rating of standards applied across each airline's front-line Product & Service standards - for both ground and onboard operations. Airline standards are graded between 1 Star and 5 Star.

4 Star Airlines
A seal of Approval, awarded to airlines supplying a good Quality performance across the range of Product and Service delivery rating areas. A 4 Star ranking signifies airlines providing a good standard of Product across all travel categories - and a good standard of Staff Service delivery in Onboard and Airport environment.

3 Star Airlines
The 3 Star ranking signifies a "satisfactory" standard of core Product across most travel categories - but reflects poor or less consistent standards of Staff Service / Product quality in selected Onboard or Airport features for the airline listed. Pakistan International Airlines (3 star)

2 Star Airlines
Star rating for a poor Quality performance - falling below the industry average in the different competitive rankings of Product and Service standards. The 2 Star ranking represents a poor standard of Product and / or poor and inconsistent standards of Staff Service delivery in Onboard or Airport environments.

Bibliography
1. 2. http://www.pakistantimes.net/2004/06/16/metro.htm http://www.pakistaniaviation.com/Competition-In-Open-Blue-Skies.htm 135

3. 4. 5. 6. 7.

http://www.corporate-ir.net/ireye/ir_site.zhtml http://bluechipmag.com/pi/0704/art11.html www.airblue.com www.piac.com.pk dawn.com

http://www.pseb.org.pk/page.php?page_id=79

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