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From build to buy: American Airlines changes modernization course midflight

January 2, 2013 06:00 AM ET

Former CIO Monte Ford initiated and managed the projects until 2011. Ford departed after 11 years as American's CIO for reasons that were not made public, and the airline tapped Leibman, the former president of American's AAdvantage Loyalty program, to fill the role in December 2011. That was a month after the airline filed for Chapter 11 bankruptcy protection.

   Maya Leibman
"The new systems are designed to fundamentally improve both the customer and the employee experience, which will lead to increased loyalty and revenue," says Maya Leibman, American Airlines CIO.

It was Leibman who reversed the initial build versus buy strategy last January -- a move that Harteveldt calls "gutsy."

"It takes a lot for a CIO to go to management and say, 'I think we need to rethink this decision,' " he says. American IT execs won't comment on how far they had gotten, or how much they had spent. But the airline hadn't started coding to replace the Jetstream/PSS yet - that project was still in the business process evaluation stage. On the FOS side, work had already been completed on many programs.

The decision to change focus was driven not just by the need to reexamine priorities as the business reorganized, but by changes in the market that could not have been anticipated when American made its original plans. Initial planning for the projects began with American's outsourcer, EDS, before Hewlett-Packard acquired it in 2008.

But after the projects officially launched in 2010, HP laid off many airline-related programmers, project managers and others associated with the Jetstream project, according to Harteveldt. "That was one of the factors that contributed to the project's problems," he says. "It just became a very frustrating experience for American."

Liebman's response: "I can't comment or speculate on our business partners' internal matters, but HP remains an important and strategic business partner of American Airlines."

It was a good time to take a step back and rethink the strategy, Leibman says. "We questioned whether it made sense to make the tremendous investment of time and resources that go along with building something yourself -- or look for something that others had already built and tested. In this case we made the decision that we wanted to buy," she says.

Jetstream's slow take-off

Jetstream, the new PSS initiative, officially got off the ground in 2010. (Some early work, including the decision to dedicate resources to the project, had started in 2007.) Led by vice president of business technology services Daniel Henry, who reports to Leibman, Jetstream will eventually include modules and sub-modules to handle reservations, passenger itinerary management, shopping, ticketing and pricing, check-in and other functions. "Our ultimate goal is to have a customer-centric passenger services system, which will allow our agents to pull up a customer by name and have all their relevant information at their fingertips," he says.

Henry says American is intentionally taking it slow. "This is not a big bang project. This is the heart of the airline, so we are taking a very methodical approach," he says.

   Daniel Henry
Daniel Henry, in charge of the Jetstream passenger services system, says American wants a "customer-centric" system "that will allow our agents to pull up a customer by name and have all their relevant information at their fingertips."

The sheer size of the Jetstream project makes that necessary. "I am not sure you can get more complex than a PSS," Henry says. "There's a lot of data transfer and transformation that goes on," with more than 100 applications sharing or synchronizing data with the core PSS software on the mainframe. The PSS brokers the sharing of data, as well as data transformation and processing.

The new platform must do all of that and enable rapid change. "Our success will be defined by: Can we change it the next day? That's our number one success factor," he says.

Henry's team has made progress in reviewing and documenting business processes, policies and procedures, but programming plans stalled when American made public its decision to terminate its contract with HP in June.

American would say only that the buy versus build decision was not made at any one moment in time but was made over time as they evaluated different factors. "Thus, we made announcements and decisions about Jetstream as each decision point was reached," a PR spokesperson said.

American Airlines flight attendant
With the new systems based on a service-oriented architecture, applications can subscribe to find out, for instance, the fullness status of specific flights.

American fell into the trap of thinking that it had to build from scratch to get everything it wanted, says Harteveldt. "An airline the size of American will certainly need a lot of tailoring, but I was never convinced that they needed a totally custom-developed product." Changing to a buy strategy was a good move, he adds.

"How you manage an itinerary, that's commodity stuff," Henry explains. "But there's a competitive advantage in implementing different ways of checking in people. We want the flexibility to have [the] ability to modify [that]," he says. American also wants the ability to unbundle fares and offer new options, and has developed a merchandizing application that lets it offer such options as priority boarding.

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