Airlines look to defer IT spending

American Airlines Inc. plans to examine what IT projects it can defer in the current tough economic climate and intends to focus its IT spending on systems that can improve security.

Mary Frances Fagan, a spokeswoman for Fort Worth, Tex.-based American Airlines, a subsidiary of AMR Corp., said technology remains important despite the downturn in traffic and revenue in the wake of the Sept. 11 terrorist attacks.

“But we are taking a look at what can be deferred and what can be done now,” Fagan said. She added that the carrier wants to focus its spending on new IT projects that enhance security.

On Tuesday, United Air Lines, in Oak Brook, Ill., said it plans to defer any future IT spending.

IBM Corp.’s global travel and transportation division, which provides IT support services for a number of airlines, including Montreal-based Air Canada and Cathay Pacific Airways Ltd. of Hong Kong, has seen a shift toward security in airline IT priorities, said spokeswoman Linda Hanson.

“Airlines today are obviously focusing on security and cost savings. However, it’s really too early to comment on our airline customers’ IT spending plans. IBM is working closely with all its airline industry customers to meet all the new security mandates,” she said.

Barbara Gomolski, an analyst at Gartner Inc. in Stamford, Conn., said that before Sept.11, she had projected that airlines would spend 7 per cent of their gross revenues on IT. In the case of large carriers with revenue at about US$2 billion a year, that represents spending of about US$140 million a year.

Carriers seeking to conserve their slim financial resources by deferring IT spending could only cut back spending on new equipment and projects, which amounts to about 25 per cent of the IT budget, or about US$35 million per year, according to Gomolski. The other 75 per cent of any airline’s IT budget represents what she called “sunk costs,” or spending required to operate and maintain systems, and depreciation.

American has slowly started to reactivate systems that help customers thread more quickly through long airport lines, including self-service check-in kiosks, Fagan said. The carrier reactivated self-service kiosks at its Chicago hub Sept. 30 and plans to offer that service systemwide in “the near future,” Fagan said, although she couldn’t provide a specific time frame.

Despite increased security requirements, Northwest Airlines Corp. in Minneapolis remains bullish on alternative check-in technologies, such as wireless and Web check-in and self-ticketing kiosks, according to spokeswoman Mary Beth Schubert.

On Monday, Seattle-based Alaska Airlines Inc. started offering Web check-in and plans to reactivate wireless check-in next week.