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Uday Kulkarni
Arizona State University
This mini case study is adapted for executive seminar audience from the original full-length case
study: Continental Airlines Flies High with Real-time Business Intelligence, Anderson-Lehman R.,
Watson H. J., Wixom B. H. and Hoffer J. A., Teradata University Network,
www.teradatauniversitynetwork.com
Real-time business intelligence (BI) is taking Continental Airlines to new heights. The company has
dramatically changed all aspects of its business, resulting in industry-leading customer service and
generating a considerable financial lift. Continentals president and COO, Larry Kellner 2, describes
the impact of real-time BI in the following way: Real-time BI is critical to the accomplishment of our
business strategy and has created significant business benefits." Some of the ways that Continental is
using and benefiting from real-time BI are:
Flight attendants, gate agents, and all customer-facing employees know at all times who
Continentals high-value customers are, and they provide outstanding service to these
customers, contributing to Continentals track record of customer service.
The Operations staff at the hubs monitors on-time performance throughout the day and
makes operational decisions about catering, personnel, and gate traffic flow, thus solidifying
Continentals ranking as the most on-time airline.
Pricing specialists track in real-time the impact of price changes on reservations and make
adjustments that optimize revenues.
Continental Airlines was founded in 1934 with a single-engine Lockheed aircraft on dusty runways in
the American Southwest. Over the years, Continental grew and successfully weathered the storms
associated with the highly volatile, competitive airline industry. In 2011, Continental was one of the
top 5 airlines in the USA measured by passengers carried, destinations, passenger-kilometers, etc. It
carries over 100 million passengers a year to five continents (North and South America, Europe, Asia,
and Australia), with over 2,400 daily departures, to more than 262 destinations. 3
An Airline in Trouble
In the early 1990s, Continental was in trouble. There were ten major US airlines, and Continental
ranked tenth in on-time performance, mishandled baggage, customer complaints, and denied
boardings because of overbooking. Not surprisingly, with this kind of service, Continental was in
financial trouble. It had filed for Chapter 11 bankruptcy protection twice in the previous ten years
and was heading for a third, and likely final, bankruptcy. It had also gone through ten CEOs in ten
years. People joked that Continental was a Perfect 10.
The rebirth of Continental began in 1994 when Gordon Bethune took the controls as CEO. He and
Greg Brenneman, who was a consultant at the time, completely revamped the airline with a Go
Forward Plan 4. It had four interrelated parts that formed the cornerstone of Continentals strategy.
Fly to Win. Continental needed to better understand what products customers wanted and
were willing to pay for.
Fund the Future. Continental needed to change its costs and cash flow so that the airline
2004-2009
On August 27, 2010, US regulators approved a planned merger between United and Continental
Airlines. The merger was completed in early 2012, which made the combined airline the second
biggest airline in terms of fleet size.
4 Right Away and All at Once: How We Saved Continental by Greg Brenneman, Harvard Business
Review, Sep-Oct 1998.
2
3
Analytics
Continentals current position is dramatically different compared to those times. A key to this
turnaround, the Go Forward Plan, continues to be Continentals blueprint for success and is
increasingly supported by real-time BI and data warehousing. Currently, the use of real-time
technologies has been critical for Continental in moving from first to favorite among its customers,
especially among its best customers.
Analytical capabilities give Continental a competitive advantage. But, these capabilities need to
continuously evolve to maintain the competitive advantage that they offer. Initial applications in
pricing and revenue management provided a variety of early, big wins for Continental. These were
followed by the integration of customer information, finance, flight information, and security. They
created significant financial lift in all areas of the Go Forward Plan.
This mini case study describes strategically aligned applications of real-time BI in three areas:
revenue management, customer relationship management, and flight operations. They are among the
many that Continental implemented and illustrate how real-time BI is affecting almost all of the areas
that Continental does business in.
Real-time BI Applications
From its main operational systems to the warehouse, Continental moves real-time data (ranging
from to-the-minute to hourly) about customers, reservations, check-ins, operations, and flights. This
has transitioned Continental from analyzing and reporting what happened in the past to influencing
current decisions and business processes.
REVENUE MANAGEMENT
The purpose of revenue management is to maximize revenue given a set of resources. An airline seat
is a perishable good, and an unfilled seat has no value once a plane takes off. The warehouse
integrates multiple data sources - flight schedule data, customer data, inventory data, and more - to
support pricing and revenue management decision-making.
Fare Design
Continental understands how important it is to offer competitive prices for flights to desired places
at convenient times. Continental uses real-time data to optimize airfares (using mathematical
programming models). Once a change is made in price, revenue management immediately begins
tracking the impact of that price on bookings. And, knowing immediately how a fare is selling allows
the group to adjust how many seats should be sold at a given price. Continental has earned an
estimated $10 million annually through fare design activities. Prior to the availability of real-time
data, Continentals pricing was a less effective at filling seats and optimizing fares.
In additional to the traditional CRM applications (such as, customer segmentation and target
marketing, loyalty/retention management, customer acquisition, channel optimization, and
campaign management), marketing has created other innovative CRM applications that leverage the
warehouses real-time capabilities. A customer value model using frequency, recency, and monetary
value gives Continental an understanding of its most profitable customers. Every month, the
customer value analysis is performed using data in the warehouse, and the value is fed back to
Continentals customer database. Although the value is not adjusted real-time, it is provided to
Continentals customerfacing systems so that employees know who their best customers are.
Marketing Insight
FLIGHT O PERATIONS
The Flight Management Dashboard is an innovative set of interactive graphical displays developed by
the data warehouse group. These displays are intended to help the operations staff quickly identify
issues in the Continental flight network and then manage flights in ways to improve customer
satisfaction and airline profitability.
Some of the dashboards displays help Operations to better serve Continentals high-value customers.
For example, one of the displays is a graphical depiction of a concourse, which is used to assess
where Continentals high-value customers are or will be in a particular airport hub (see Figure 1).
The display shows gates where these customers have potential gate connection problems so that gate
agents, baggage supervisors, and other operations managers can assess where ground transportation
assistance and other services are needed so these customers and their luggage avoid missing flights.
It can be seen that Flight 678 is arriving 21 minutes late at Gate C37 and two high-value customers
(3* and 5*) need assistance in making their connections at Gates C24 and C29, which are 20 and 12
minutes away, resp.
On-time arrival is an important operational measurement at Continental. Therefore, another critical
set of dashboard displays helps Operations keep the arrivals and departures of flights on time. One
display shows the traffic volume between the three Continental hub stations and the rest of their
network (see Figure 2). The line thickness between nodes is used to indicate relative flight volumes
and the number of late flights so that the operations staff can anticipate where services need to be
expedited. The operations staff can click on the lines and drill down to see individual flight
information. Another line graph summarizes flight lateness. Users can drill down to more detailed pie
charts that show degrees of lateness, and then, within each pie, to the individual flights in that
category. In all of these elements of the dashboard, high-level views can be broken down to show the
details on customers or flights that compose different statistics or categories.
Gate
C37
To C24
To C29
Flight
#678
#155
#253
From
SAN
DCA
OKC
Status
21 min late
3*/20 min
5*/12 min
Value Creation
Regardless of how exciting a strategy and the supporting applications are, value is not created until
people act. A key to Continentals success is a service-oriented culture to one another and to
customers. Continentals employees believe that people should be treated with dignity and respect,
and this tenet is a major component of the Go Forward Plan (e.g., Working Together). The
combination of a well thought out business strategy, a service-oriented culture, and real-time
technologies that are consistent with this culture has been responsible for Continentals turnaround
and current success.
Continental invested approximately $30 million into real-time warehousing, of which $20 million
was for hardware and software expenses, and $10 million was for personnel costs. Although this
investment is significant, the quantifiable benefits from real-time warehousing are magnitudes
larger. Specifically, over the first six years iteself, Continental realized over $500 million in increased
revenues and cost savings, resulting in a ROI of over 1,000 percent. Below are some of the benefits
that have been realized.
Marketing:
o
o
o
Corporate
o
Continental was able to identify and prevent over $30 million in Security fraud over the last
three years. This includes more than $7 million in cash collected.
Information Technology
o
The warehouse technology has significantly improved data center management, leading to
cost savings of $20 million in capital and $15 million in recurring data center costs.
Revenue
o
o
o
"Continental Airlines Ranked No. 1 World's Most Admired Airline by FORTUNE Magazine". Reuters.
March 11, 2008. http://www.reuters.com/article/2008/03/11/idUS176168+11-Mar2008+PRN20080311. Retrieved May 7, 2014.
6 "Continental Airlines Again Highest-Ranked U.S. Airline on FORTUNE World's Most Admired List".
Bloomberg, http://www.bloomberg.com/apps/news?pid=newsarchive&sid=amNcVo_udY38,
March 5, 2010. Retrieved May 7, 2014.
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Best Executive/Business Class, OAG Airline of the Year Awards (20032007, 2009);
Best Airline Based in North America, OAG Airline of the Year Awards (2003-2009);
Best U.S Carrier Trans-Atlantic and Trans-Pacific Business Class, Cond Nast Traveler
(19992006)
Best Airline for North American Travel; Business Traveler Magazine (2006-2009)
Best Large Domestic Airline (Premium Seating); Zagat Airline Survey(2008);
Best Value for the Money (International); Zagat Airline Survey (2009)
Highest-Ranked Network Airline; J.D. Power and Associates (2007)
Airline of the Year; OAG (20042005) 8
Business Leadership Recycling Award; American Forest & Paper Association (2010) 9
Best Technology Awards: #1 Airline, #2 of 500 Companies InformationWeek; TDWI 2003
Best Practice Award Enterprise Data Warehouse, TDWI 2003 Leadership Award, CIO
Enterprise Value Award
Discussion Questions
1.
2.
3.
4.
5.
Truong, Alice (July 10, 2009). "Continental Airlines Ranked No. 1 Pet Friendly". The Wall Street
Journal. http://blogs.wsj.com/middleseat/2009/07/10/which-airline-is-the-most-pet-friendly/.
Retrieved May 7, 2014.
8 "OAG Airline Industry Awards Previous AOY". OAG. 2008. Archived from the original on June 15,
2008.
http://web.archive.org/web/20080702174024/http://oagairlineawards.com/pressroom.html
Retrieved May 7, 2014.
9 "2010 Business Leadership Recycling Award Presented to Continental Airlines".
http://www.afandpa.org/docs/default-source/default-document-library/2010-af-amp-pasustainability-report.pdf. Retrieved May 7, 2014.
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