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Airline merger could land big savings

Airline merger could land big savings

A deal could lead to write-downs and the cancellation of major projects.

Information technology savings reaped from a merger of Qantas and British Airways could run into tens of millions of dollars as the

carriers renegotiate contracts and consolidate computer systems.

The merger could also lead to the cancellation of major capital

projects - including investments in business software at BA - and

bring write-downs of recently built platforms that are no longer

needed.

While the full extent of IT savings is unclear because BA does not

provide a detailed breakdown of technology costs, analysts have

suggested information system synergies would be notable, as they have

been in the merger of Air France and KLM.

One BA supplier said the British carrier spends about £250 million

($576 million) on information technology, while Qantas has said it

pumped $382 million into IT during 2008 and would invest a similar

amount in 2009. Areas where savings could be made include the

renegotiation of procurement and services contracts to take advantage

of new economies of scale, as well as the elimination of duplicated

hardware, software and data centres.

The carriers are already closely aligned in a number of areas, which

could diminish savings but would reduce integration risks.

Importantly, Qantas and BA have long used the same software to run the

parts of their operations most visible to customers.

Both use the Amadeus Altea platform for functions such as sales,

reservations, inventory management, and check-in and boarding. The

common platform means Qantas and BA are able to directly allocate

seats to passengers in each other's aircraft.

The airlines also have some service providers in common, and both use

India's Tata Consultancy Services for software support.

However, they differ significantly in other areas.

BA is committed to SAP software for its maintenance system while

Qantas is installing a $120 million maintenance platform, known as

Marlin, which uses technology from Mxi Technologies.

Marlin may prove to have advantages over BA's technology because it is

already configured to handle maintenance for the A380 superjumbo,

whereas the British airline does not expect to take delivery of its

first A380 until 2012.

Any merger would also have implications for the enterprise software

platforms used to manage the airlines' finances, human resources and

payroll.

Qantas recently upgraded to a financial system from Oracle, while BA

runs Oracle and SAP enterprise resource planning technology.

BA said in June it was considering moving to a single enterprise

resource planning system and a merger with Qantas could put that work

on hold.

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