Pearson airport, IBM ink $130M outsourcing deal

The Toronto Pearson Airport has inked a five-year, $130-million deal with IBM Canada Ltd. that will outsource the management of critical operations like ticket kiosks, passenger and baggage check-in, and aircraft gates.

Perhaps the most interesting part of this initiative to streamline IT systems is allowing Pearson’s 60 airlines to be billed on a per usage basis instead of the traditional bundle of landing fees and terminal charges, said Rocco Rao, general manager of IT & telecommunications business programs with the Greater Toronto Airports Authority (GTAA), responsible for the management of Pearson airport.

“(It) provides some benefit to air carriers to get better transparency and to decide on the types of services and the level of the service they want, and the cost of services,” said Rao.

What’s also different is that air carriers will be billed directly by IBM, eliminating the middleman and the additional cost. “It removes us as the intermediary,” said Rao.

IBM will manage the GTAA’s entire IT infrastructure including kiosks, workstations, flight information displays and networking upon which more than 30.4 million passengers rely on annually.

The choice to have the entire IT environment of an airport managed by a third party and subsequently bill air carriers directly on a utilities basis makes the partnership quite unique in the airport business, said Brent Cameron, sales director with IBM Canada.

“This incented the airlines to optimize their behaviours in a fashion that actually reduces the overall IT costs,” said Cameron. “This is where I think the deal will have a lot of impact.”

The new governance model applied means air carriers pay for technology usage based on business metrics like passenger printouts at kiosks, and logon and logoff times at check-in counters.

The utility approach enabled GTAA to manage limited physical assets like airplane gates because multiple airlines could use a check-in counter to handle traffic, said Cameron.

Rao agreed that the visibility offered by the new governance model will motivate air carriers to operate more efficiently. Operating a kiosk is far less costly than staffing a check-in counter, so air carriers might push passengers to use kiosks or check-in online.

The “common use equipment model” – one set of common technology across all air carriers instead of proprietary systems owned by individual tenants – that existed at GTAA prior to the IBM partnership will not be affected, said Rao.

The driver behind the partnership for GTAA, said Rao, stems from the organizations overall strategy to identify the business value of technology in various areas including data risk management and strategic outsourcing.

Follow Kathleen Lau on Twitter: @KathleenLau

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