Impact Of It On Airlines Sector Qantas Group Management Essay

Introduction:

Information technology is currently growing and taking centre stage in the modern world. It has transformed the whole world into a global village with a global economy, which is increasingly dependent on the creative management and sharing of information. This research essay discusses the impact of Information Technology on the Qantas Group and the benefit and risks involved with IT projects.

Air transportation has become increasingly popular in the past decade which has also increased the demand for speed, efficiency, comfort and safety from the airline industry. IT has helped provide many solutions to the Airline Industry to combat the above demands thorough online flight booking, baggage tracking, in-flight entertainment, in-flight animated GPS system for flyers to see the real time positioning of the airplane and the estimated time of arrival of destination, etc.

Qantas is the world’s second oldest airline, founded in Queensland, Australia, in 1920. It is Australia’s largest domestic and international airline employing approximately 35,000 people and offers services across a network spanning 173 destinations in 42 countries (including New Zealand). Qantas Group depends on IT for majority of their day to day activities. They have been investing in IT on average approximately $430.98 million AUD on yearly basis since 2005.

Although investing millions of dollars on IT, most of the projects carried out by Qantas group resulted in to failure. The impact of these failures was catastrophic for Qantas Group, but they still believe in investing in IT. This research essay also investigates the causes of failures of Qantas’s two high-profile IT project (project eQ and Jetsmart) and the impact of these failures on the company. Furthermore the positive impact of IT at Qantas and the risks involved with the improper planning of IT projects.

Qantas Groups long term vision:

The vision of the Qantas Group is to operate both the world’s best premium airline and best low fare carriers. According to the financial review report, Qantas are focusing on five critical goals in order to achieve this. The goals are “safety is our first priority”, “right aircraft right routes”, “customer service excellence”, “operational efficiency” and “two strong complementary brands”.

Impact of IT on the business strategy:

IT has helped the aviation industry prosper. In today’s competitive world IT and Business strategies should be closely aligned to achieve success especially in the airline industry. At Qantas’s it is believed that the IT strategies derive the business strategies.

3.1 Safety is Our First Priority:

To achieve world’s best safety practices in order to give customers feeling of security IT helps to track down flyers who might pose threat others in flight using database systems. Use of high quality scanners for scanning of baggage can also reveal items that could be of potential threat to other flyers. Integral

3.2 Right Aircrafts Right Routes:

Fleet renewal with better navigational system, providing optimal routes for flyers. Online flight booking reveals optimal routes. Knowing that you are in the correct flight by proper scanning of boarding passes via the scanners before boarding the flight.

3.3 Customer Service Excellence:

Qantas regards excellent customer service as the cornerstone of the business. IT helps bring Qantas’s services closer to the user. It allows 24 hours a day and 365 days every year service, for example online flight booking system. It helps information instantly be available for the customers. IT also helps capture customer feedbacks via websites or mobile bookings which help to further improve services.

3.4 Operational Efficiency:

Major IT projects are underway to help increase productivity at Qantas. Private email services and groupware help in better collaboration between departments, employees, customers and suppliers at Qantas. IT helps hastening the development of more open and innovative cultures that can lead to “Operational Efficiency”.

3.5 Two Strong Complementary Brands:

To achieve Qantas and Jetstar to be the best premium and low fare brands, online search of different airlines flight times and fares can help Qantas compete. Due to the rapid expansion of the Airline Industry and the competitive nature of fares and flight deals, investment in IT is important as it can lead to innovation which will give Qantas leading edge.

IT project Failures:

Qantas group suffered many IT project failures. Two of the major projects that failed were the eQ and the Jetsmart project.

4.1 The eQ Project:

The eQ project commenced in 2002 to upgrade Qantas’s legacy payroll, financial, procurement and inventory management systems, using Oracle’s E-Business suite running on the Linux operating system. The eQ is designed to more efficiently deliver information for the airline, which has a complex structure with multiple, segmented internal businesses using different approaches.

4.1.1 eQ Cancelled:

In late 2005, Qantas cancelled its project eQ technology services contract with IBM, four years into a ten-year agreement. The overall program cost was $200 million.

4.1.2 Cause of failure:

According to The Australian Financial Review (1/31/06): The project was understood to have run into trouble early in 2005 after the human resources element of the eQ project was completed. People close to the project said that the deadlines started to slip as attempts were made to map the new finance application against the complex Qantas corporate structure.

4.1.3 Impact of Failure:

There was tremendous loss of revenue on eQ project. Improper planning and management was the culprit. This reflected badly on the engineers, managements and project managers. Some major personnel resigned due to the failure. Higher infrastructure costs and problems with Qantas’s legacy payroll, financial, procurement and inventory management systems still remain. Bad image portrayed in media hence loss of faith from investors and from customers.

4.2 Project Jetsmart:

Qantas had made a large investment in project Jetsmart in early 2004, which was regarded as an important first step in the company’s investment in new information technology systems to drive its maintenance, repair and overhaul operations. The Jetsmart system was an interim phase to hold together Qantas’s existing systems until they decided on a replacement system. Hence Jetsmart will in time be phased out and the new system will replace it.

4.2.1 Jetsmart project cancelled:

In February, 2008, Qantas cancelled Jetsmart, a management system implementation that cost them $40 million.

4.2.2 Causes of failure:

Issues with the project go back to at least 2004, when the union entered a dispute with Qantas, claiming the software unnecessarily increased its members’ workload. It required engineers to carry out additional data entry and accounting work. At that time, the union advised mechanics employed at Qantas to “not assist with the implementation”. Australian Licensed Aircraft Engineers Association federal secretary Steve Purvinas said maintenance workers found Jetsmart unusable. Mr Purvinas blamed the problems with Jetsmart on Qantas management, which he said was not doing enough to promote experienced engineers to senior managerial roles. Purvinas explained the software was poorly designed and difficult to use, and that engineers didn’t receive sufficient training. “Management is not qualified to determine what the software needs. Jetsmart was a white elephant that didn’t work. When you have an airplane holding 400 passengers that needs repair, you fix the plane, not play with software”, said Mr. Purvinas.

Qantas Engineering executive general manager David Cox admitted there were problems with the Jetsmart system. Mr Cox said. “During the development phase some issues arose with the system, training and the management of change.

4.2.3 Impact of Failure:

It became obvious that the IT structure at Qantas is complex. There was again huge loss of revenue and another major IT project failure which again cost loss of shares and investors pulling plug on investments. Attitude towards the engineers that resulted to strike gave the management bad reputation. Media embarrassment for Qantas continued as they had no faith in their engineers and began outsourcing maintenance, repair and overhaul operations.

New projects following the failure of Jetsmart:

Soon after the failure of the Jetsmart project, Qantas board has approved agreements for a new engineering and maintenance platform to replace the $40 million Jetsmart system. The news came soon after Qantas announced its technology and communication costs jumped $49 million in the first half of 2007-2008. Qantas announced an interim net profit of $618 million, more than double the $308 million last time but booked a $49 million lift in IT costs in the same period. Chief financial officer Peter Gregg said that the board has approved the go ahead for the new system called Marlin. Qantas revealed in the first-half results that its computer and communication costs had climbed to $236.3 million, up from $187.3 million in the same period in 2006.Factors fuelling the increase included costs associated with Qantas’s move to source maintenance work for older, “legacy” IT systems to India, Mr Gregg said. He said Qantas had also “ramped up” spending on its eQ project, as well as spending on a project known as Triton, which is designed to deliver the company’s next-generation departure control system.

Benefits and Risks of investing in IT

Qantas’s vision is to have both the world’s best premium airline and low fare. Their aim is related to the importance of customers to Qantas. Qantas needs to provide quality service in order to survive. The more revenue they generate from customers the better their future will be. After conducting a survey on with regular flyers an assumption was drawn that flyers prefer safety, comfort, speed and efficiency from airlines. Even though there were major IT failures, and loss of shares at Qantas, they still managed to run on a profit. This explains that IT has more positive impact at Qantas as long as the customers are satisfied with the services. This is the major reason why Qantas believes in IT investment.

6.1 Benefits: Qantas is surviving in the aviation industry because of IT. IT and IT improvements attracts customers that leads to higher revenue and more investors tends to invest as the returns from the shares are high. The more the revenue the better resources can be obtained. This will allow open and innovative culture which is also one of Qantas’s critical goals. At Qantas IT drives Business strategies as due to the rapid enhancement of the IT in aviation industry the business strategies change to adopt to new IT strategies. Strategic alignment is very important between IT and Business at Qantas, but it is difficult to imply the strategies as it takes time for the alignment to take place. Creating strategies is an ongoing process that needs to be reviewed over and over due to the changing environment in aviation industry as this will help to compete and maintain leading edge status.

6.2 Risks: Qantas has had a lot of IT failures. These failures reflect a bad image on the management and the engineers involved in the projects. Once customers are dissatisfied with a certain technology they might prefer other airlines and it will be very difficult to attract them back if the other airline provides the same technology which is more effective to the customers. A bad experience or small technology failure might lose hundreds of loyal customers.

Qantas as overall:

Upon conducting a SWOT test on Qantas’s situation as overall, it could be vividly seen that the weaknesses and issues tends to be more on the management and planning side. Communication seems to be a major issue at Qantas. The attitude of management towards staff (during the Jetsmart project) was a disgrace as they didn’t trust their own engineers and later began outsourcing maintenance. Major credential issues arise for people controlling projects and bugets. Overspending and timeline issues raises a lot of questions within Qantas and their investors. The IT infrastructure is too complex, with outdated legacy systems. The management dosent understand the IT issues.

However the strengths of Qantas is that they still have many loyal customers. Since the start of Jetstar brand, Qantas Group has built more customers and trust from investors. The IT investments can lead to innovation. Customers want their preferred airlines to invest in to IT so that they get the best premium service possible at low costs, which is also the vision of Qantas.

There are a lot of opportunities from IT investments. Innovation is possible. This will help Qantas retain major monopoly especially in the Australian market. Some investors might have a different view and might want to invest with Qantas as they try hard to be the best airline. Increases customer’s expectations that Qantas will continue to provide good service and technology in future.

Threats and risks needs to be carefully assessed by Qantas. New airlines entering market can be a major threat. Loss of customers, shares and investors can continue if more failures and poor management continues. Major technology failures can hinder a lot of revenue and portray a bad image of Qantas. Other airlines might seek the opportunity to capture the customers lost by Qantas.

7.1 Impact : IT significantly affects strategic options and creates opportunities and issues that management of Qantas need to address. IT strategies derive the Business strategies at Qantas. Hence IT has a greater impact on the business itself. Qantas is still running on a profit, except for their computer and communications cost has increased due to investment into IT. The failure of IT projects is mainly due to poor management, communication and planning. Another factor is the rapid change in IT environment. There are more positive impacts of IT than negative, which is definitely realised by Qantas, therefore they do believe in investing in IT.

7.2 Structure:

Qantas Group has an unstructured management that lacks communication ability and does not understand IT issues. A decentralization of the project management and engineering departments are important in order to increase time and efficiency of projects. Also all departmental managers, investors, project managers and employee representatives needs to be included in strategy planning meetings to improve communication and to share views. More generally speaking, IT has huge impact on aviation industry and airlines needs to be more strategically aligned in order to be successful in the modern world.