A British Airways hiccup earlier this month was merely the latest tech outage at a number of airlines. Why does the industry suffer from so many glitches? Experts point to some deeper reasons beyond the commonly heard "old tech" explanation.
On August 6 and 7, some of British Airways check-in systems at London airports crashed. The carrier canceled more than 100 flights, inconveniencing thousands of flyers.
British Airways hasn’t revealed the cause. “No additional information is available at this time,” a spokesperson said this week.
In July, U.K. regulators threatened to slap the carrier with a $220 million (£183 million) fine for inadequate data security. In 2017, hackers robbed British Airways data on more than 500,000 passengers. The airline will appeal the fine. But it continues to face a possible financial hit.
Consider, too, that in May 2017, British Airways faced a power outage. Its failure to have an effective back-up plan downed many of its systems. The carrier canceled 726 flights, stranding tens of thousands of passengers. The hiccup cost about $100 million (£80 million), the airline said.
British Airways isn’t the only network carrier to suffer tech glitches that have led to many cancelations. Airlines and their tech providers have suffered outages once a month on average during the past three years, a U.S. government study found in June.
What’s the Bigger Problem?
Why do airlines face so many IT problems? Skift asked many industry veterans for answers. The experts asked to speak anonymously because of the work they do for carriers and their tech providers. Troubles in intricate systems rarely have one cause. But some causes of airline IT failure are more likely than others, experts said.
A common hot-take when an airline has an IT failure is this: Most airlines have outdated tech.
But that isn’t always true. British Airways, like more than 100 other carriers, uses a passenger service system from Amadeus to help take bookings on their websites, help its agents board passengers, and handle other operational tasks. The carrier overlays that system with some of its in-house tech. But the tech isn’t particularly old.
The core tech at EasyJet appears to be older despite the carrier being younger. In the early 2000s, the budget airline asked a vendor called BulletProof to build a system for it. But tech firm Navitaire sued the vendor for copyright infringement. The airline has been reluctant to touch the core system since, according to sources.
Another hot-take from analysts is that airline IT problems are overblown. Airlines attract extra eyes when their computing systems fail because stranded passengers are noisy on social media.
The flaw with this claims is that the sector sees outages about once a month. That’s a higher failure rate than comparable systems at banks, utilities, and global retailers — all of whose customers are also vocal on social media.
Another hot-take is that airlines have under-invested in their tech stacks. Unlike many other industries, aviation has suffered severe bouts of boom and bust. That has led to a historic under-investment in on-the-ground tech systems unrelated to plane safety.
Maybe, maybe not. British Airways doesn’t break out its tech expenditure. But between 2017 and 2018 it hiked its annual tech investment by 48 percent to $236 million (€195 million), according to an estimate by investment research firm Redburn.
That means the airline spent about 15 percent of its $16.6 billion (£13 billion) annual revenue last year on technology. That is within the tech spending average of many travel companies.
Frequent mergers are often blamed for tech problems, too. Mergers have often prompted complicated integrations of varied computing systems. On the other hand, banks, utilities, and retailers often merge, too, yet apparently without a comparable frequency of failure.
Common Points of Failure
Notably, large network airline may have dozens of peripheral systems that integrate with the passenger service system, adding many points of potential failure.
For example, the BBC reported that British Airways’s problems arose in systems for checking in passengers and for handling flight departures.
Basic communication between systems can be sluggish. If you’re an airline hosted on one passenger service system and you need to talk to an airline on a different one, you typically have to exchange data via pathways that are slow and costly, experts said. You also have to use a messaging standard called Edifact, which is decades-old and not as flexible and real-time as the standards most e-commerce companies use today.
Large airlines have pushed for five years for more modern messaging standards. An airline lobbying group, the International Air Transport Association, hopes that airlines will communicate about 20 percent of their content by the newer standard by the end of 2020. (Paying subscribers to Skift Research can learn more about the issues involved in The State of Airline Distribution report.)
In the past several years, another cause of disruption has been the modernization of how airlines and vendors store data. Airlines and vendors are moving many of their systems from data centers to private and public clouds. While the migrations will bring benefits, they can cause disruptions.
Inattention to tech by executives in any market can lead to problems.
A subtler point is that some airlines may have outsourced too much of their knowledge. Airline tech isn’t often old as much as airline developers are too young.
In other words, airlines have outsourced so many components they sometimes don’t understand how their tech stacks work. Executives defer instead to what third parties and consultants say about what can or can’t be fixed.
Lufthansa’s Third Way
Lufthansa is an airline similar in size to British Airways. But it has had fewer airline IT outages in recent years. It has been more hands on with its tech, too.
In March, Lufthansa, which has long used Amadeus’ Altéa system for reservation, inventory, and departure control, said it would expand the deal by adding Amadeus’s tools for operations, merchandising, flight disruption management, and other needs.
At the same time, Lufthansa has partnered with third-party tech firms like Farelogix and Travelfusion. It taps these companies to provide connections that reduce the role of Amadeus, Sabre, and Travelport in distributing its fares.
So far, distribution systems like Farelogix’s and Travelfusion’s are separate from passenger service systems. So they’re unrelated to IT glitches.
But as airlines try to personalize offers to passengers, the computing systems will interact more. More of the so-called offers that airlines make to flyers will be generated in the passenger service system rather than the distribution systems. That trend may create complexity and more glitches.
To Fly, To Serve
The recent expensive mistakes at British airlines come with a backstory. In recent years, the carrier has taken a “good enough” approach to its on-the-ground tech, experts claimed. For years it decided to tolerate a certain number of glitches as the price of having a patchwork of systems.
British Airways faced a choice. Should it build most of its tech in-house? Outsource it to inexpensive consultants? Or hire a premium-priced specialist like Sabre with its SabreSonic system or Amadeus with its Altéa system?
The carrier did a bit of all three. Its core passenger service system is Amadeus’ Altéa. It use it for reservations, inventory, and departure control. It has added some tech to it, and it has outsourced some process work to Tata Consultancy Services.
Amadeus and Sabre lead as premium-priced, airline tech specialists, accounting for roughly three-quarters of last year’s $5 billion in airline IT sales. Amadeus led significantly, boarding about 1.85 billion passengers via its systems last year. Over three decades, Amadeus has moved more than 100 airlines to its Altéa system.
In 2015, Amadeus bought its fastest-growing rival, Navitaire, for $830 million.
The airline industry owns an organization, SITA (Société Internationale de Télécommunications Aéronautiques), that attempted to build an updated passenger service system over the past decade. But only a couple dozens small carriers have adopted SITA’s Horizon passenger management and distribution product.
Emirates has built a passenger service system, but it has few outside takers. Delta built its AIR4 system, which only Virgin Atlantic has adopted. HP used to provide the core systems for a significant number of airlines. But it has pulled back given its more significant troubles.
TravelSky, a tech company backed by the Chinese state, has built a system used in China and some parts of Asia.
Smaller players include IBS Software (used by TruJet and others), Radixx (used by FlyDubai and others), and AeroCRS (used by AirKenya and others), and assorted others.
Any of these passenger service systems can be vulnerable to failures as much as in-house airline ones. In April, a Sabre reservation system used by JetBlue, American, and other carriers suffered a hiccup that caused many delays. Earlier this year, watchdogs exposed security vulnerabilities in some Amadeus systems. In 2017, Amadeus’s booking systems stuttered worldwide, leading to flight cancellations.
Airline Questions Come First
Another factor worth noting: All airline technology questions are about airline strategy, rather than tech. Airlines need software, but the questions that matter to their executives are traditional business strategy questions, not tech questions. (This idea paraphrases an analysis from Benedict Evans of Andreessen Horowitz, a venture-capital firm.)
Airline executives see their futures determined by choices of routes, plane configurations, basic economy seats, and stealing lucrative corporate travel passengers away from rivals. They care less about artificial intelligence, cloud computing, or programming interfaces.
Take Lufthansa for example. It has invested much more in direct distribution tech than its counterparts in the U.S. Why? Because its market needs are different, not because it is savvier.
“The cost of distribution for direct and indirect have kind of converged in the U.S.,” said Douglas Barnett, Sabre’s executive vice president and chief financial officer, at an investor conference earlier this month. “Some of that is because of industry consolidation, agency consolidation, and whatnot.”
In other words, U.S. airlines have less market incentive to focus on direct booking tech than European airlines like Lufthansa do. So airline questions about how much to invest in tech and which types of tech are worth the money are really airline industry questions about pricing and market share rather than tech.
Given all the complex factors, the era of airline IT glitches and passenger disruption has no end in sight.
Photo credit: A British Airways airplane comes into land at Terminal 5 at Heathrow airport in London. The carrier faced an IT glitch at London in early August, extending a string of tech troubles. Jason Alden / Bloomberg