Megabyte Ltd implements locally developed IT system at Cyprus Airways

Cyprus Airways has just gone live with the Megabyte Airline Route Profitability System (MARPS), a system developed in-house by Megabyte's software engineers at the Mosta Technopark.

To mark this achievement, Megabyte invited The Sunday Times to visit the national airline of Cyprus to see the system in operation and speak to the top executives and users at Cyprus Airways offices in Nicosia.

According to Megabyte's founder-director, Carm Galea, winning the contract to implement MARPS at Cyprus Airways, which was first acquired by Air Malta, is a big step forward for the Maltese software company. "The MARPS is generating considerable interest from other airlines," continued Mr Galea.

Cyprus Airways chief financial officer Eleni Kaloyirou said: "Sourcing a new IT system in the area of route profitability is a problem for an airline the size of Cyprus Airways. Most large airlines have their own in-house systems but these systems are not for sale to third parties.

"Not many off-the-shelf systems are available on the market. We had been looking for a system like MARPS for many years."

Describing what every airline looked for in a flight costing/route profitability system, she listed three major elements:

- as a planning tool, enabling the airline to model its revenues, costs and profits in order to decide about the viability of routes;

- as a financial tool, enabling the airline to monitor and achieve the intended results, through proper flight costing and analysis; and

- as an accounting tool, through the maintenance of a central, up-to- date cost register, enabling invoice verification and interface of information into the financial accounting system.

A major selling point of MARPS was that it was being used by another airline. "We felt more confident to invest in a tried and tested system," said Ms Kaloyirou. "We did not want to reinvent the wheel. Embarking on our own in-house system would have been too time consuming and too expensive."

A restructuring exercise that was being undertaken at Cyprus Airways was the final prod that helped the company to acquire the new system. "Last April 70 people from the Finance Department were made redundant," she said. "Before this restructuring we could have waited for such a system, as we had been waiting for a number of years.

"The restructuring justified our investment through the labour savings and efficiencies that came with MARPS." Ms Kaloyirou was full of praise for Megabyte and the excellent relationship developed between the two companies. "The quality checks they have undertaken on the system can be compared with those of a major software house."

In marketing the system there was no sales pitch but only relevant information coming straight from Megabyte's project leader responsible for the MARPS, who knows the product inside out. Additionally, the Megabyte implementation team went to great lengths to understand the business flows at Cyprus Airways and also to help users get familiar with the system.

"With a company the size of Megabyte (current staff complement, 60) we got personal attention and direct contact with the persons who developed the system. Indeed we are only a phone call away in case Cyprus Airways need support."

According to Ms Katia Hadjikyriacou, acting chief information officer, the policy of the airline has always been to acquire ready-made solutions.

We looked at several potential suppliers but MARPS was the only one that met the requirements of the airline's Finance and Airline Planning Departments," she said. "The evaluation process included a visit to Air Malta to make sure that the system was really what we needed.

"Subsequently, Megabyte carried out a scoping exercise to finalise the requirements for the system. This was a vital part of the evaluation process to acquire the system and necessary to avoid serious problems with the implementation." After the scoping exercise Megabyte did the necessary customisation to accommodate the requirements identified through this exercise.

MARPS was implemented at Cyprus Airways in three months. "Similar systems take at least from six months to a number of years to implement," Ms Hadjikyriacou said. "For Cyprus Airways the implementation of MARPS was a big success. There was a good understanding from both sides, an excellent team spirit and there were no hurdles to speak of along the way."

For Ms Andreani Theoclitou, a qualified accountant in the Finance Department, who is responsible for the airline's Financial Accounting Section, MARPS has helped automate manual procedures and save on staff numbers.

She was a member of a three-person team who visited Malta to see MARPS in operation at Air Malta and commented: "We realised that the people at Air Malta were very happy with the system and satisfied with it. It is also user friendly and our people learned how to use it very quickly."

A major benefit of the system is that the airline's top executives can analyse the rich data it provides for better planning and for more effective and timely decision making. "In the past we spent a lot of time collating and inputting information, and not a lot of time analysing the results - rather unproductive," Ms Theoclitou said. "Now we can really concentrate on analysing the data."

Cyprus Airways think they have a vested interest in the development of MARPS. "We want to spread the word about how good the system is," Ms Kaloyirou said. "We want to help Megabyte sell the system to more airlines because it would spread the cost of future R&D, ultimately to our benefit."

The process to select a Route Profitability system began in 2003 when the IT Department of Cyprus Airways received a request for the system from the Airline Planning Department. The IT Department immediately realised that it should involve the Finance Department and, according to IT systems engineer Skevi Skordallou, who was assigned by the IT Department to manage the project, "after conducting research, we realised how difficult and complicated the system was".

Following industry best practices, Cyprus Airways then saw what other companies and airlines were doing. Seven companies were asked to demonstrate their systems. The process was frozen for quite a long time and then, because of the restructuring, it was revived.

Ms Skordallou immediately checked with a number of companies whether there had been any updates on their products or whether something new had come onto the market and, when the replies were negative, the airline focused on the Megabyte product.

The scoping exercise was held in August, 2005, enabling Megabyte to give a firm quotation for the total implementation of the system. In particular, this exercise identified the interfaces that were needed for MARPS to import and export data from and to other systems. These included:

• SUN Accounts;

• the passenger revenue system;

• cargo and mail revenue systems;

• the flight operations system; and

• the catering management system.

The decision to acquire MARPS came at the end of last year, with approval from the Cyprus Airways Board being obtained in January.

Customisation of the system was undertaken in Malta, starting in February when Cyprus Airways supplied Megabyte with sample files and samples of reports.

Templates were prepared so that different sections of Cyprus Airways could fill them in with relevant data to ease data migration from existing spreadsheets and other systems to MARPS. This data included:

- contractual agreed rates with suppliers;

- overflying airspace rates;

- airport tax rates

- aircraft types and related operating data;

- the dates and time intervals when rates are applicable; and

- typical block times each flight takes to operate.

The MARPS resides on Ian BM Blade Center server, and runs on an Oracle 10g database and can be accessed by remote users through a CITRIX metaframe. So, for example, while the system is located in Nicosia, the results will be available in all Cyprus Airways' remote offices in Cyprus and in other countries.

Explaining the implementation of MARPS in the Financial Accounting Section, Ms Theoclitou said this included:

1. installation of the Oracle database;

2. installation of MARPS application software and customisation;

3. data verification and migration;

4. training of users;

5. user acceptance testing; and

6. post go-live support.

For example, during user acceptance testing, her section obtained the flight records of a whole month and, from the data, generated the expense provisions for the month and compared them with the results from the previous system.

On July 12, MARPS went live at Cyprus Airways with the following departments and sections fully operational:

• Finance Department;

• Direct Operating Costs Section;

• Fuel Section;

• Airline Planning Department; and

• Management Accounts and Budgeting Section.

Future roll-out plans include, among others:

• Commercial;

• Flight Operations; and

• Marketing.

We will use MARPS as a Management Information System," Ms Theoclitou said. "It will have the statistics of all flights, such as number of revenue passengers carried, freight/mail kilos carried, revenue passenger kilometres (RPKs), available seat kilometres (ASKs), block and flight hours.

"Financial data are also imported into MARPS so the system can calculate all the Key Performance Indicators (KPIs) such as:

- yields per RPK;

- cost per ASK;

-passenger load factors;

- overall load factors; and break-even load factors.

"These indicators are very useful in evaluating historic performance as well as for comparison purposes with those of other European airlines.

"All statistical information now comes from a single source, not as before, from systems that are stand-alone in the different departments, which sometimes duplicated certain statistics.

"A major advantage of MARPS is that now costs can be calculated on a flight-by-flight basis," Ms Theoclitou said. "There were various direct costs which previously we were unable to allocate on a flight or route basis.

"Now, with MARPS these can be calculated accurately on a flight-by-flight basis. For example, the cost of newspapers; VIP Lounge costs; the cost of wheelchairs; the maintenance allowance; and the night stop allowance for crews. In addition, all fixed and indirect costs can now be apportioned and the profitability of each flight can be accurately calculated."

Looking ahead, both Francis Grech, head of Financial Reporting in the Finance Department at Air Malta and executives at Cyprus Airways feel that there is plenty of potential for greater use to be made of MARPS. In fact, while I was in Cyprus, several managers were called in to be briefed on the reporting capabilities of the system.

Apart from being easy to learn and quite intuitive, the more people use the system, the more value can be brought out of it. The ultimate benefit will be reaped when the top executives themselves log in and tap into the rich vein of information that MARPS now presents at their fingertips.

Cyprus and its national airline

Like Malta, the history of Cyprus goes back many thousands of years, with the pre-neolithic period dating from as far back as 10,000 BC. The island has been colonised over the centuries, with remains of the Neolithic Age, the Chalcolithic Age and the Bronze Age surviving to this day.

Cyprus was part of the Greek, Phoenician, Assyrian, Egyptian, Persian and Roman empires. It was visited by the apostles Paul and Barnabas, became part of the Byzantine Empire and, between the seventh and tenth centuries AD, suffered continuous Arab raids.

Between 1192 and 1489 the island was ruled by the feudal system, followed by a period of rule by the Venetians (1489-1571). Cyprus fell under Turkish rule up to 1878, achieving autonomy, with the Greek Orthodox Church supplanting the Latin Church.

The British took over the administration of the island in 1878, paying rent to Turkey, but then annexed it after Turkey entered World War I on the German side. Cyprus became independent in 1960, after a four-year struggle for liberation, and in 1974, following a coup against President Makarios, Turkey invaded the island in violation of international law, occupying 37 per cent of the territory.

Since Archbishop Makarios died in 1977, there have been four presidents: Spyros Kyprianou, George Vassiliou, Glafkos Clerides and Tassos Papadopoulos. Cyprus joined the European Union on May 1, 2004.

Cyprus Airways was established in 1947 as the national airline. In 1974, following the Turkish invasion, Cyprus Airways had to cut salaries and relocate from Nicosia International Airport to the newly set up Larnaca International Airport in the south-east of the island.

Because of relations between Cyprus and Turkey, Cyprus Airways was not allowed to overfly the Turkish occupied part of Cyprus and, even Turkey itself, increasing the airline's operating costs. The Gulf war in the Nineties and the many wars that followed, including this year's incursions in Lebanon, affected the operations and survival of Cyprus Airways, which led to a European survival strategic plan which is now being implemented as the last resort for the company to continue operations.

The airline market in Cyprus is divided roughly into three equal segments, with Cyprus Airways having a third, charter airlines another third and other scheduled airlines the other third. No low cost airlines operate to Cyprus.

Ms Kaloyirou described Cyprus Airways as a "hybrid airline". Even on its schedule operations its yields are closer to those of a charter airline, although the airline has to bear the higher costs associated with running a scheduled operation, she said.

Following the departure of 400 employees in the restructuring exercise, Cyprus Airways took a strategic decision to acquire MARPS to enable it to monitor its flight costs in the most cost-effective way possible.

The Air Malta experience

In 1998 the Maltese national airline issued a call for tenders for a system to replace their legacy accounting system and introduce an Enterprise Resource Planning (ERP) system with a route profitability solution. At the time, Air Malta relied on a spreadsheet model to obtain route profitability results.

While searching for products that best suited Air Malta's route profitability requirements, company executives visited some airlines that had implemented a similar system. None of the products evaluated met these requirements completely and Megabyte proposed to develop a bespoke solution. "We convinced Air Malta that we were capable of writing software to their needs," Mr Galea said.

Air Malta accepted this proposal and, in 2001, Megabyte was awarded a contract to implement Oracle Financials and develop a route profitability system.

"Megabyte were the only Oracle distributor at the time and we undertook to deliver the whole project in six months at a fixed price and with a fixed date of completion," Mr Galea said. "The system went live in early August 2002, nine days before the agreed date."

According to Mr Francis Grech, head of Financial Reporting in the Finance Department, the MARPS was developed by Megabyte with essential input from Air Malta.

He said dealing with Megabyte was and continues to be a "positive experience", with Megabyte continually upgrading the system, with constant enhancements and improvements, according to the airline's suggestions.