Sita aims to land $500m worth IT solutions market
The technology needed to support the inflight use of mobile phones and internet is expected to grow to a $500 million (Dh1,836m) industry within five years.
Sita (formerly known as Société Internationale de Télécommunications Aéronautiques) , the global aviation sector’s IT service provider, has entered the Middle East market with a memoranda of understanding with two Gulf airlines for its OnAir product. The company is also in discussion with Emirates and may become the first to install the technology on the region’s largest carrier.
Sita provides complex communication solutions for its air transport customers worldwide, advises them on the design aspect and offers integration of communication services. It also provides, among other things, common-use services to airports and air-to-ground communication services to various airlines.
Franscesco Violante (pictrued above), Chief Executive of Sita, told Emirates Business with an investment of $110million (Dh404m) in research and development for 2008, the firm is looking at using technology to transform and speed up reservations and check-in procedures at airports.
With an expected turnover of $1.5bn this year, Sita is specifically targeting lengthy queuing times at airports in the GCC, he said. Sita also plans to use its technology to boost efforts of the airlines industry to tackle terrorism threats in the sky.
At what stage is Sita with the implementation of internet and mobile telephony on board aircraft?
We have invested $100m over the past three years in our OnAir product, which is a joint venture between Sita and Airbus, where Sita has the majority stake. It provides GSM connectivity for SMS and BlackBerry, as well as voice. This technology has been tested and certified already for Airbus A318 and used in a commercial flight test with Air France in December. We are testing SMS and BlackBerry capability, as well as internet access at present. It’s a six-month trial in which we also want to adopt voice capability.
This is an unknown market, so it’s difficult to project revenues. It will depend on the penetration we will have. However, in the next five years it could be worth $500m.
Explain your discussions with the Middle East airlines about OnAir.
We are speaking with some of the region’s airlines. We have signed two Memoranda of Understanding with Gulf airlines and a letter of intent with Ryanair. We have also signed some MoUs in Asia and are talking with Emirates and Etihad. It’s part of our strategy to get Emirates on board.
The level of revenues that will be achieved from OnAir is based on utilisation of the service. It’s like entering a market that’s theoretically untapped, but it depends on how people use it. The first information we have after one month of service in Air France is that people like to use it. And I can see this technology coming to the Middle East by the the year-end or early next year.
Where is Sita planning the biggest investments?
We will invest more than $120m on a reservation system, which will facilitate better passenger booking and handling of products as well as smart pricing of fares. This will also allow airlines to be more competitive with more dynamic pricing. Border management and passenger profiling will form another fundamental part of our investments.
What is your R&D spend for 2008?
We will invest $110m this year in research and development. This represents seven or eight per cent of Sita’s $1.5bn turnover, which is a real significant amount for R&D and innovation.
What are the latest trends seen in the booming Middle East aviation industry?
The industry is growing fast and is taking advantage of globalisation. It’s going through a transformation period in the way it serves travellers – both causal holidaymakers and business travellers, who require specific facilities.
There is a need for many more airports in the Middle East, because when you look at the traffic that’s crossing this region, it’s huge, and is a problem. When you have numerous airbuses arriving at the airports with capacity passengers, the existing system proves insufficient. You must have a flexible system to handle huge volumes of travellers.
You have to look at the front line services, which includes checking and reservation systems. Technology should simplify this area. One trend we are seeing here is e-ticketing. International Air Transport Association (IATA) plans to ensure all airports here will use this system by May. In fact, it will soon become a standard in the Middle East.
How is Sita’s technology supporting front-line services?
Border management in the UAE needs to be upgraded. For instance, in Europe, people don’t need to stand in queues at the passport check-in counters and visa counters. Long queues at these counters cause delays at airports here. You need a system to simplify this to allow passengers to go through fast-tracks at airports.
Sita provides solutions so travellers can receive visas electronically when they book their tickets online, which will help simplify the procedures and save time. I see this happening soon in the UAE.
Similarly, there is a need to improve security. We already have a system in place to verify the list of passengers on board an aircraft against a black list by the government and other authorities. For instance, if the airport receives a list of alleged terrorists or criminals, the system allows them to check that list against the list of passengers on board a specific flight. This helps improve the safety of all travellers. I see a lot of growth in this area, too.
What is the revenue you expect in 2008?
Sita offers two components – one is telecommunications and the other value-added services. We are seeing the communications component is shrinking because the industry is becoming IP. They are moving from legacy to IP offering, which has an impact on the revenues of all telecommunications providers. We are going through this as well. We have to reduce costs for our customers and shareholders, which means less revenue for the company. But it doesn’t mean losing market share; it’s simply the market that is changing. Our market share keeps growing but overall revenue in the telecommunications component is reducing.
In the service and application component we see a growth of 10 per cent and in the telecommunications part, a decrease of seven to eight per cent. Overall, our plan is to achieve 2.7 per cent growth for the company in 2008. Which, given the fact that more than 50 per cent of the business is the telecommunications component, is a significant achievement. We’ve been able to shift our growth to the value-added services, as well.
Chief Executive, Sita
Franscesco Violante was made CEO of Sita in July 2006 after serving three years as its Managing Director. The Italian has overseen the growth of Sita’s two subsidiaries, OnAir and Champ Cargosystems – the world’s only IT company solely dedicated to air cargo. He is chairman of both operations.
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