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What is the outlook for the aviation sector during this crisis, and how can carriers survive with fewer passengers?

There has been a global slowdown in airline bookings, and the Asia-Pacific region has certainly not escaped this downturn. However, the latest passenger numbers indicate that things are starting to improve. According to Amadeus data, bookings in Asia-Pacific were down by about 20 per cent for the last quarter of 2008, and in the first quarter of 2009, by a slightly improved 15 per cent.

With a downturn in both passenger and cargo volumes, and a particularly strong drop in first- and business-class bookings, airlines are implementing various cost-cutting measures to aid their survival.

Some airlines are reducing frequencies and suspending loss-making routes. Others are downsizing or asking employees to take unpaid leave. Capacity from weak routes is being deployed to stronger markets. For example, Thai Airways recently introduced new flights to the Middle East.

At the same time, airlines are deploying new initiatives to generate additional revenue. Many Asia-Pacific carriers are offering a range of special low-fare programmes that have been successful in stimulating passenger demand.

Some airlines are also attempting to increase revenue by offering a range of new services at an additional cost. These are often referred to as 'ancillary services'. They include, for example, charges for preferred seating or upgraded meal selections. Many of these services are already made available by low-cost carriers [LCCs] to their customers.

Why are airlines stepping into non-core businesses such as hotels, tour packages, insurance and entertainment?

Airlines that have developed a strong core business by effectively managing yield, optimising productivity and maximising core revenues do not necessarily need to step into non-core businesses.

However, in the current economic climate, many airlines are reporting financial losses and are therefore exploring ways to generate additional revenues. One strategy is for airlines to provide customers with the option to purchase add-on products and services, such as hotel accommodation, tour packages and insurance.

LCCs set a trend of offering passengers the choice to pay for flight-related services such as preferred seating, in-flight meals and checked baggage.

The Ancillary Revenues Airline Conference forecast that ancillary revenues would account for up to 35 per cent of airline revenues in the future.

Amadeus's assessment is more conservative, as we predict that ancillary revenues will represent up to 10 per cent of airlines' revenues by 2013, amounting to US$6.5 billion [Bt228 billion]. Overall, it translates to a huge, untapped revenue stream for airlines.

The challenge facing airlines is choosing a model that fits with their brand profile, is technologically feasible, sustainable over the long term, and delivers worthwhile additional revenues. To help airlines overcome this challenge, Amadeus offers technology solutions that help to integrate the sale of ancillary services with existing processes.

How can Amadeus help airlines to reduce operating costs or unnecessary expenses?

As provider of the Global Distribution System [GDS], as well as industry-leading IT systems for airlines, Amadeus offers numerous technologies that help airlines to maximise sales, enhance yield and cut costs through increased efficiency.

The Amadeus Alt?a Customer Management System enables airlines to streamline processes end-to-end. This allows airlines to shorten waiting times at the airport, offering greater options for self-service such as Web, kiosk and mobile check-in, more efficient baggage handling and preferential service for their top customers. By providing an enhanced travel experience, from booking to the flight itself, carriers are better able to attract and retain their customers' loyalty, therefore increasing revenues.

Which Amadeus products and innovations can support airlines?

There are two key areas in which Amadeus' cutting-edge technology can support airlines, particularly through the current downturn.

The first is by enhancing the carriers' distribution channels, both online and offline.

For the online distribution channel, the Amadeus e-Commerce suite powers the websites of many leading airlines, including Thai Airways, Singapore Airlines, Cathay Pacific and Qantas.

This solution allows airlines to sell tickets online and facilitate the shopping and booking stages - the calendar view of best fares - and post-sales servicing, such as rebooking.

Airlines can also use Amadeus solutions to up-sell to different Fare Families - this includes different types of services in the fare ticket - and also cross-sell travel insurance, cars or hotels, once the plane ticket has been sold.

Our current and upcoming airline solutions are designed to optimise sales revenue. Amadeus has three key portfolios designed to help airlines boost and maximise revenues.

Many of the world's leading airlines have already adopted Alt?a and are in the process of migration. Last year, Qantas became the first airline globally to complete the migration to the full system, which includes reservations, inventory and departure control. V Australia is also now using the Alt?a platform for its customer services. Cathay Pacific and Singapore Airlines are among the other airlines that have also chosen to migrate to the Amadeus Alt?a IT solution.

Have any airlines already achieved success in such new ancillary strategic plans, and how many are planning for that?

The Amadeus e-Commerce Airline Suite has proven to be a very successful tool to drive online bookings and ancillary revenues. e-Merchandise, a component of the suite that supports ancillary sales is now used by over 60 airlines worldwide, including leading Asian carriers such as Cathay Pacific, Qantas and Thai Airways.

In addition, some 30 carriers use Amadeus to up-sell third-party services through the TA channel/GDS such as car hire and insurance.

Air Canada is an example of an airline that has achieved significant success in harnessing ancillary services as a revenue stream. Thai Airways is another excellent testament to the effectiveness of the Amadeus e-Commerce Airline Suite to expand an airline's revenue opportunities. Thai Airways experienced a 200-per-cent growth in online domestic bookings in three months, and has since set a target to quadruple online bookings by the end of 2009.

Amadeus is currently working on development of a new solution to support ancillary sales, the Amadeus Airline Ancillary Services, which will enable complete unbundling of the fare and the sale of additional products through the travel agent. This solution will be available at the end of 2009.