Contract provides evidence of management and strategic change (418 words)

Published: 7/9/2001

Aeroflot has signed a five-year contract with Sabre for the acquisition of eight airline management applications in a package covering revenue management, pricing, network management, scheduling and operation. Although the value of the deal has not been disclosed, Aeroflot's Commercial Director, Eugeny Bachurin, has said that it is “in the region of ten million dollars”. According to Bachurin, the software “ will reduce our operational costs, give us better management information for decision making and increase revenue from better yield and revenue management control”. The first four Sabre modules will be implemented in 2001. These are as follows: Airline Profitability Model-evaluation of flight schedule profitability; AirMax- automated revenue management system; AirPrice- fares management system; Origin and Destination (O&D) Fleet Assignment and Management (FAM) -fleet assignment model. The new packages will replace a number packages currently used by Aeroflot, including SITA's STRATEGY provided in 1997 jointly by SITA and consultants, SH&E. For Sabre, the sale represents the first major sale in Russia and the CIS, although there have been earlier sales to Belavia and Russia's MTK Sirena Corporation. According to Aeroflot Deputy General Director, Nikolai Egorov, the software represents the culmination of Sabre's work with some of the industry's largest airlines. Egorov said that interface with SITA's GABRIEL passenger reservation system is a similar problem to that experienced by LOT Airlines and should be resolved. Aeroflot has already initiated talks with MTK Sirena over the interface with Sirena-2, -3, and -2000 systems, although Sabre is already close to Sirena through a partnership on Sirena -3. Aeroflot's acquisition of this type of software reflects the enormous changes that are beginning to occur at the airline, as it overhauls its management information structure, which has historically been considered one of the weakest aspects of its business. Part of this involves reducing senior management's dependence on a stratum of middle management regarded as being hostile to the increasingly “commercial “ environment at the airline. It also supports the case that the McKinsey-inspired strategic plans are moving from presentation to implementation and will allow the airline to manage its current top line growth of 20%. Bachurin admits that the use of the software, which will take 6-12 months to implement, along with new technology, will require the restructuring of the airline's commercial management, but the incentive of 4-5% improvements in the bottom line through better management of the airline's assets and routes made it a necessary development.

Article ID: 2631