Data Warehousing Strategy for Airlines, Banking, and BI

Strategic Information Systems and Airline Frequent Flyer Loyalty

In highly competitive industries such as airlines, where optimization of services, physical assets, and employees' roles and responsibilities must all be synchronized to deliver exceptional service, the use of strategic information systems is essential. For airlines to gain and keep customers, service must become their greatest differentiator. Because there are many aspects to service — from flight attendant performance to on-time delivery, to adherence to aircraft maintenance schedules — the ability to create customer loyalty depends on gaining a process-based view of information and service performance. Strategic information technology must deliver critical data into each customer-facing and customer-supporting process that airlines rely on to meet and exceed customer expectations, requiring information systems, architectures, and frameworks that ensure the data delivered is accurate, relevant, and actionable.

The progression of airlines from strong functional IT system designs, which created information silos, dramatically slowed their ability to fulfill customer requests for exceptions to standard processes. These processes included checking in to connecting flights, creating itineraries that incorporated third-party airlines, managing meal requests across thousands of daily flights, and managing and promoting customer loyalty programs to nurture and strengthen customer loyalty over time. It is important to note that strategic information is not limited to customer-facing initiatives — that is the specific role of Customer Relationship Management (CRM) systems. CRM systems are often used for creating and initiating customer loyalty programs and integrating customer-specific data with marketing strategies to increase customer lifetime loyalty. Delta's Medallion Program, for example, is managed by an enterprise-wide CRM system focused specifically on sustaining and strengthening customer loyalty over the long term. To the extent a CRM system is integrated with legacy and enterprise-wide databases containing customer-specific data, it can provide insightful information that serves as the foundation of loyalty programs. The intent of these programs is to inform, persuade, and reward airline customers to become frequent flyers.

CRM systems in airlines cover the critical business processes involved in attracting, selling to, and serving flyers, and in creating programs that lead customers toward greater loyalty over time. These strategies, however, do not operate in isolation — they require enterprise-wide support for the systems that deliver on the expectations set through advertising, public relations, branding, and prior customer experiences, both positive and negative.

Enterprise-wide systems manage the complex, integrated, and often difficult transactions that form the foundation of reservation and booking systems. For American Airlines, the SABRE system represents this type of enterprise-wide strategic information system. Apollo, from United Airlines, is another example. The role of these strategic information systems is to coordinate the scheduling of aircraft of all types and configurations by passenger load for each leg of a flight schedule. While not directly used in creating loyalty initiatives, these core systems are essential for the entire airline to consistently deliver exceptional service every day. It is through the consistent delivery of that service that the unique value proposition of any airline begins and is strengthened.

Operational Applications Feeding the Airline Data Warehouse

The heavy reliance airlines place on Business Process Management (BPM) and Business Process Reengineering (BPR) illustrates this point clearly. The use of strategic information systems to enable continual process improvement through BPM and BPR has gained prominence across nearly all airlines as they strive to make each process more streamlined, efficient, and focused on the flyer's needs. The continual improvement of these enterprise-wide systems is also critical for flyers to receive the levels of service they expect, based on the many incentive and marketing strategies aimed at converting them into frequent flyers. Ultimately, strategic information systems must create a highly synchronized set of processes, systems, and people for customer loyalty to be created and sustained over time.

Of the many operational applications that feed into an airline's data warehouse, three that are critical to its profitable performance are its Accounting and Financial applications, Customer Relationship Management (CRM) applications and systems, and Reservation and Booking systems and applications.

The Accounting and Financial applications specifically focus on the many costs associated with running the airline — their correct assignment to specific accounts and the updating of costs to manage a company-wide Profit & Loss statement. These systems also carry specific requirements for tracking incremental costs incurred as weather conditions fluctuate across the regions the airline serves. As a result of these variations, Accounting and Financial applications often need to support real-time updates for the most critical cost process workflows while remaining batch-oriented for less time-critical cost elements. This same trade-off between batch and real-time processing also occurs on the revenue side, as specific business segments are managed to individual Profit and Loss statements. The refresh cycles for Accounting and Financial applications are predominantly batch-mode, with real-time exceptions tied to the most costly materials and processes the airline relies on to function. In terms of data load, Accounting and Financial applications generate the majority of load on an airline's data warehouse. Because of their tight integration with Reservation and Booking systems, the data load from the former systems grows in proportion to the transactions completed by the airline — creating a multiplier effect that can cause data load to expand exponentially over time.

Reservation and Booking systems are a second series of applications that feed into a data warehouse. These applications carry data loads second only to Accounting and Financial systems, and are integrated with CRM systems so that frequent flyers can have their mileage awards verified, their travel histories captured for loyalty program planning, and their preferred destinations identified for targeted incentive packages. Just as Accounting and Financial applications serve as the data models for Reservation and Booking applications, these latter systems are also one of the main sources that CRM systems draw upon to gain insights into frequent flyers' histories, preferences, and purchases. Reservation and Booking systems also require intensive integration with supply chain, procurement, and crew planning applications. As a result of all these integration points and the central role they play in the functioning of the airline, the data load is significant — though not as large as that of the Accounting and Financial systems. The refresh cycles for Reservation and Booking systems, however, are the most intensive of the three, as the majority of their automated processes are real-time in nature. Key processes — confirming check-in, verifying safety inspections, ensuring the aircraft is properly stocked and staffed, and addressing the specific needs and preferences of customers — all must be completed in real time.

The Customer Relationship Management (CRM) systems and applications require tight integration with Reservation and Booking systems for loyalty strategies to be created and maintained, for frequent flyer status to be tracked, and for rewards to be offered. For an airline, CRM systems are the vital link to their customers and the primary means of generating loyalty over time. The data load for CRM systems is less significant than that of the Accounting and Financial systems, as customer-specific fields are often compressed into summary activity measures. Even when customized reports are generated from CRM data, the data load remains lighter than in Accounting and Financial systems. The refresh cycles for CRM applications, however, can be quite significant, as customer records must be continually accessed and used for passengers flying each day and those planning future travel. Specific processes requiring real-time access include award travel, free upgrades at check-in, seating and meal preferences, frequent flyer coupon redemption for upgrades and free flights, and automated mobile check-in — a relatively new capability that also demands real-time data availability. Due to all these factors, the refresh cycle for CRM systems is relatively high.