focus on AIRPORT SECURITY
Moving away from
turbulence With rising fuel costs and turbulent economic skies, airlines are realizing that ancillary revenue streams are more important than ever. And RFID can help assure the safety of such streams, improve their efficiency and even improve customer experience
by Prof. David C. Wyld, Southeastern Louisiana University
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W
e business travelers who prefer to sit in the aisle seat know its pluses and minuses all too well. The pilot has just announced that your plane has just reached its cruising altitude, and you ve settled in for your flight. Depending on your travel style, you open the novel that you brought on board, turn on your laptop to work on your presentation (or more likely, to watch a movie), or simply put on those noise-cancelling headphones and begin your side-trip to dreamland. The aisle seat is desired for ‒ at least the feeling of ‒ extra leg and elbow-room.
Global Identification - October 2008
However, it does come with one significant downside, as all too often, one s knee, one s shoulder, or even one s head (if you are one of the lucky ones who promptly falls asleep when in the air) can be in hazardous territory. That is because no matter how careful the flight attendant may be, you may fall victim as he or she pushes a humble airline trolley down the aisle. Your reading, your work, or your sleep can be abruptly ended by a bump from this metal cart. A good nap for you may be ruined, all so your fellow passengers can enjoy soft drinks, snacks and duty-free items. In an industry shaken
by rising fuel costs and lowered demand that threaten the viability of many carriers around the globe, airline trolleys are increasingly being viewed as key elements in most airlines strategies ‒ and perhaps their very survival. Why? In a nutshell, it s because these simple metal carts are the workhorses of airline customer service, which is still not regarded as an oxymoron by airline executives. They are the vehicles through which food, beverages, and a variety of service items are routed through a complex internal and external network to provide in-flight passenger service. However, today they are also
fast becoming the retail floor for the airline industry.
RFID and Airline Trolley Management
In the aisle of the commercial airliner, before a captive audience, airlines know that trolleys represent the future of a changing business model, increasingly dependent on what is referred to in the industry as ancillary revenue. Yet ‒ akin to the problems associated with Unit Load Devices detailed in another article in this issue ‒ airlines often have no idea how many of these critical assets they own, where they are stationed, and what condition they are in. In fact, according to the International Air Transport Association (IATA), airlines typically have to buy three to five chipsets (the quantity of trolleys required to fill all aircraft galley positions) when outfitting a new aircraft, just to ensure that they will have sufficient trolley stock available across their network of operations. Thus, this is an area ripe for the application of auto ID technology, even given the limited financial ability of carriers to make capital expenditures at this moment.
As part of its Simplifying the Business Initiative, the IATA has targeted a wide range of
gard, the IATA believes that maintenance can be made much more proactive than it is at present, as all too often, flight attendants must work with inoperable or damaged
RFID can play a central role in airline management ‒ from baggage to parts to in-flight service trolleys. Furthermore, as trolleys are commonly interlined between air carriers and between catering services supporting airline operations, the improved inventory accuracy and movement-tracking capabilities will provide further savings. The IATA also found that through improved tracking of the food and beverage contents of trolleys (with some long flights requiring upwards of 50 trolleys to service a full flight), airlines could cut costs by reducing the number of wasted meals, while bettering the in-flight experience of customers with special diets and other needs. To date, RFID pilots for
RFID solutions can help airlines optimize the potential of the plane s cabin to generate ancillary revenues
photo by Irishflyguy
airline operations that could be better managed and help achieve cost savings through the application of RFID technology. In a study conducted last year, the organization found that the world s airlines could achieve both immediate and long-term benefits from RFID-based trolley tracking. Airlines would benefit from improved business intelligence to optimize the management of their trolley stock. They would be able to dramatically reduce the number of trolleys in operation, achieving present service levels by eliminating unnecessary safety stock, and have improved capabilities to manage the maintenance of trolleys. In the latter re-
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focus on AIRPORT SECURITY
trolley tracking through passive RFID systems have been ongoing with Air Canada and KLM/Air France and their catering suppliers, with results expected in early 2009.
RFID tracking systems for trolleys can bring instant benefits with better visibility and inventory control The IATA has constructed a business case showing that trolley tracking will provide quick ROI for airlines, often in the 12 to 24 month range, and even shorter if RFID trolley tracking investments are combined with an overall RFID strategy involving baggage handling, ULD tracking, and surveillance of parts and safety equipment. Overall, the IATA estimates that while costs and benefits will vary based on the size and route structure of each air carrier, the world s airline industry could achieve almost half a billion dollars in annual savings from RFID-enabled trolley tracking, over and above the almost $50 million in immediate acquisition cost savings from reduced trolley purchases to support their present operations (with trolleys typically ranging between $600-$1000 per unit).
photo by Irishflyguy
The IATA believes that airlines that implement RFIDbased tracking systems for their trolleys would experience immediate benefits from having increased visibility and control over their trolley inventory. This increased business intelli-
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gence would translate into better management of their trolley stock in the field and the contents on-board the trolleys.
Global Identification - October 2008
RFID and the ush for ancillary revenue Beyond the IATA s push for the cost savings that can be achieved through the use of automatic identification technologies, RFID now has the prospect of enhancing the all too bleak financial picture for airlines. Indeed, the business press has been replete with bad news for the airline industry of late. All over the world, from the United States and throughout Europe and Asia, airlines are facing fast-rising costs, as jet fuel becomes their largest expense item by far. They are also flying into a headwind, as demand for travel is falling in the wake of an economic downturn, and due to the greater availability of increasinlgy more technologically advanced tools that enable us to feel ever-more connected with each other and allow us to meet and collaborate as never before. Air carriers have a product that is all-too-often viewed by many jaded consumers as a commodity. And yet, the key here is that air travel has become a commodity.
As reported in an August 2008 report entitled Ancillary Revenue Generation: The New Operational Imperative for Airlines, as pointto-point transportation for passengers becomes regarded as the base service level, all other services ‒ checked baggage, meals, beverages, headsets, etc. ‒ will increasingly be offered only for the additional revenue streams they can generate. As such, more and more airlines worldwide are adopting the business models pioneered by low-cost European carriers, such as Ryanair and Easyjet. While U.S. airlines made headlines this past summer by implementing fees for checked baggage, meals and soft drinks and even certain coach seats, all of these actions may be precursors for a new business model for the airline industry. Advocates point to the fact that last year, the world s airlines generated over $2.5 billion in such ancillary revenue, with growth rates of 20-30% per annum. As the extra becomes the core, new revenue can be generated by not just traditional airline services, but expanded in-flight entertainment and shopping, as well as gambling. In fact, Ryanair CEO Michael O Leary believes so strongly in the possibilities of ancillary revenue that he plans to offer half of the airline s seats for free by 2010. RFID-based trolley tracking will play a central role in this brave new world for the airline industry. With the newfound emphasis on of-
photo by Tim Burts
become commonplace offering an array of food and ferings ‒ everything from beverages for sale, as well as new in-flight entertainment expanded alcohol offerings options, flight attendants to enhanced entertainment will be tasked with being options ‒ such control will sales agents for these ancilbecome essential. lary revenue items. As such, it will become increasingly Testing times important to have properly stocked trolleys with passenClearly, the airline industry ger consumables ready for use. Further, contactless payis being tested as never bement systems will be crucial fore. It will take imaginative for not just enabling fast and leadership to surmount toeasy transactions and reducday s challenges and thrive ing the need for cash hanin tomorrow s marketplace. However, it is clear that RFID dling, but also for ensuring will play a central role in airinventory tracking, accountline management ‒ from ability, and control. Already, the IATA s tests of RFID baggage to parts to in-flight have shown its potential for offerings. As we have seen in reducing shrinkage from this article, the lowly airline today s food and beverage trolley should now be an carts. When, in the very near area of focus for both airline BaltechAnz210x140.qx:Layout 1 03.04.2008 11:41 Uhr vendors. Seite 1 future, higher dollar items executives and RFID
Indeed, applying auto-ID in this one aspect of airline operations could be central to cutting costs and growing the now all-important ancillary revenue. And with the path to ROI relatively clear, it would appear that the next few years will see the advent of smart trolleys across the world s airlines.
In-flight meals may not be to everyone s taste, but for airlines they represent a steady, secure stream of revenue
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