Flying returns

Specialising in the airline space is paying huge dividends for Kale Consultants, says Chitra Padmanabhan

An effective diversification strategy is Kale Consultants’ success mantra. It forayed into the airline segment at a time when it was dominated by a handful of players and managed to hold its own. In its recently announced results for the quarter ended June 2004, the share of the airline segment has shown a spurt of approximately 15 percent in comparison to last year. Kale acquired four new customers in this quarter. Its business is segregated into passenger, cargo and business intelligence solutions. In 2003-04, the cargo business accounted for about 18 percent of Airlines division’s revenues and about 14.35 percent of Kale’s overall revenues. This percentage is expected to rise. The company’s roster of international customers in the airline vertical, include EVA Air, Asiana Airlines, Aer Lingus and Copa Airlines.

Effective acquisition and divestiture

Last year, the company sold its banking technology division to Onward Technologies with an agreement to transfer IPR, support and marketing rights for its branch automation products. As a consequence of this restructuring, the company has only one division, the Kale Airline Division. “This move has enabled us to position ourselves as a company providing solutions to the airline and travel industry,” says Kashmira Irani, who is the senior vice president for market development at Kale Consultants. Kale’s deal with Onward is part of its divestiture strategy, which has helped the company leverage opportunities in the airline industry.

Similarly, Kale’s activities in the cargo area commenced with the acquisition of Speedwing’s products in September 2000. “We acquired products in the cargo and the revenue accounting space. Kale also acquired Speedwing’s 22 customers. This acquisition not only added to our bottom line but it also helped us create a critical mass in the airline industry,” says Irani. Kale pursued the inorganic route by acquiring products from niche players.

The company’s airline business can be segregated into two sets of clients, those that predominantly focus on cargo and those that deal with passenger traffic. For instance, some airlines such as Asiana and Eva are cargo carriers while others like Air India and Finnair are predominantly passenger carriers. Kale has two products in the cargo space-CSP, which is an end-to-end cargo management system and MERCURY, which is a comprehensive cargo ground handling system that provides information on consignment status, cargo tracking and terminal operations.

Cargo goes places

Airlines have traditionally looked upon the air cargo business as a supplement to their core business of carrying passengers. Investment in cargo IT systems were always low on their list of priorities. In recent times, airlines have begun to recognise that cargo can have a major impact on their bottom lines. “Though we primarily cater to the international market, both Air India and Indian Airlines are actively pursuing a strategy to enhance their revenues from cargo operations,” says Irani.

Airlines which are looking at generating revenue through cargo transportation usually start by investing in IT systems to support their venture. However, most airlines use cargo systems that are either a single system based on old technology or multiple systems. “A majority of our customers look for a system that enables them to quickly adapt to change. We deliver CSP to these customers either as an in-house system or as a hosted service,” says Irani. Currently MERCURY is in use at over six ground handling sites of varied sizes across the Middle East, Africa and Asia,” says Irani. Today, the air cargo industry is worth $40 billion, it accounts for less than 1 percent of the freight transported by weight but represents 40 percent by value. Researchers forecast tripling of revenue within the next twenty years, which means that cargo is growing faster than passenger traffic. With the domestic airline industry showing an upward trend both in passenger and cargo volumes, there is likely to be strong demand for software solutions catering to this space.

chitra@expresscomputeronline.com