The airlines industry has been a pioneer in using outsourced services in areas like IT operations, telemarketing and 24/7 helpdesks. In the case of IT operations, large global airlines have traditionally used technology providers such as Accenture, EDS and Unisys. This is now changing with the Indian IT services firms like Wipro, Infosys, Hexaware, Satyam and TCS aggressively targeting the airlines vertical. This week, TCS and Satyam won a $145 million seven-year contract from Qantas Airways.

Today, airlines are not only outsourcing IT operations but also processes such as revenue accounting, reservations, finance and accounting, HR functions and maintenance. Although these processes are ideally suited for outsourcing, airlines have traditionally resisted this, citing their complexity as a reason. Other inhibitors have been the steep learning curve and the long settlement periods – which is why leading global providers such as IBM, ACS and EDS were initially reluctant to offer this service. However, the post 9/11 slump in the travel industry put immense pressure on airline and travel industry margins, and this has helped drive travel outsourcing and offshoring. The surge in oil prices has also been a contributor.

As a result, airlines today are looking at outsourcing very crucial (core) functions traditionally considered too complex to outsource. The table below gives a partial list of major airlines and some of the processes they outsource:

Indian Vendor Space

In IT, the major Indian vendors like TCS, Infosys, Wipro, iGate and Satyam all have significant exposure to airlines, with Kale Consultants being a specialist provider. Interestingly, in the BPO space, the major players in this vertical in India are either progeny of airlines (WNS, AFS, RDM) or are backed by IT services firms (Kale Consultants, Wipro BPO, Caliber Point, InterGlobe Technologies) with experience in the airlines vertical.

Several Indian BPO players have an “airline legacy”, in the sense that they emerged out of captive centers or joint ventures set up by airlines or travel companies. WNS started as a British Airways subsidiary. RDM India a JV of Lufthansa and the Bird Group. Tecnovate was a subsidiary of UK-based travel firm, ebookers. AFS started as a joint venture with Swissair. All these have successfully transitioned from being a captive BPO operation to become third-party providers.

Going Forward...

Vendors such as Infosys, TCS and Kale Consultants will combine IT and BPO in their service offerings, to try and gain a competitive advantage. BPO solutions to airlines are extremely technology oriented, compared to most other verticals. This should provide certain advantages to firms that can offer a BPO solution built on a strong technology framework, coupled with domain knowledge.