Air Canada and IBM announced Friday a seven-year, $1.4 billion strategic partnership to research business opportunities in the areas of customer service and IT solutions for the airline and travel industries.
Air Canada’s Calin Rovinescu, executive vice-president, corporate development and strategy, said the partnership with IBM will go far beyond management of the airline’s computer systems and will set a new standard in the airline industry.
IBM Canada Ltd. president and CEO Ed Kilroy said the agreement represents a new wave in developing customer relationships for IBM, as the company will be providing Air Canada with not only its services, but its research as well.
The plan is for IBM and Montreal-based Air Canada to share their expertise, and through a marketing alliance offer IT products to the airline and travel industries. The companies plan to have an IBM-Air Canada project management office at Toronto’s Pearson International Airport. Further research will be conducted at IBM’s T. J. Watson research laboratory in Yorktown Heights, NY, and its travel and transportation solutions development centre in Boca Raton, Fla.
The agreement expands on an IT services relationship forged between the two companies in August 1994. Under Air Canada’s direction, IBM will manage all of Air Canada’s computer and IT operations. IBM will also manage Air Canada’s global IT infrastructure, including application development and maintenance, 20,000 workstations, employee help desk services and network and computer server operations.
However, Air Canada’s Rovinescu said that Friday’s announcement is not an extension or renewal of the previous agreement, but a whole new agreement.
“We wanted to scrap the old [outsourcing agreement] and move away from the old standard outsourcing agreement,” Rovinescu said. “We wanted to move away from the relationship of buyer and supplier.”
Rovinescu said the airline is looking at developing new innovations that build on the company’s Express Check-in Kiosks. By working with IBM Air Canada hopes to undertake research and development of future applications, services and products that will leverage the power of the Internet, wireless and self-service applications giving customers better access to Air Canada’s Web services.
Air Canada officials said they will be focusing on developments that improve customer service and the “airport experience” such as: wireless curbside check-in, call centre technology, speech recognition and skills development.
“We expect technology to play an increasing role in our business,” Rovinescu said. “The trend in industry is to look for new revenue streams and we see [this partnership] as added revenue that we could not create with our own internal resources,” Rovinescu said.
IBM’s Kilroy said that partnerships such as this one are necessary for keeping Canada competitive as companies need to constantly improve shareholder value and technology plays a huge role in achieving that objective. Kilroy pointed out that over 1,300 people would be supporting the partnership.
As part of the deal IBM said it would invest in various venture capital and technology projects at Air Canada that will help the airline, enhance customer service and develop future solutions saving the airline $200 million in IT costs, the companies said.
Air Canada officials said there will be no movement of any jobs to IBM nor any job losses anticipated as a result of Friday’s announcement.