This has been a very challenging but successful year for Mercator, the IT services division of the Emirates Group. Although it was possible to maintain the momentum of the on-going IT programme, there was inevitably a deferment of new capital expenditure and new developments in the second half of the year as the Group responded to the dramatic downturn in the travel industry. Priorities were changed to focus on tactical opportunities to reduce cost and to support the recovery initiatives of each of the business units. Mercator external business was also seriously impacted with the widespread cutbacks in investment by the airline industry.

There were, however, some significant projects completed during this turbulent year. Most important of these has been the replacement of legacy systems in the Service Departments. Originally designed and built in-house, these systems have delivered the administrative services of payroll, personnel, purchasing, management and financial accounts for more than 15 years. The demand for more direct administration of resources and assets by managers throughout the Group was the key driver for change. Using the latest e-business technology, an integrated suite of Oracle systems was implemented by combined business and IT teams during a period of severe cost and resource constraint. The project was strategic in that it will enable the service departments to continue to provide quality administrative services throughout the increasingly diverse and expanding Group. Using the experience gained from this implementation and also that of a previous implementation at SriLankan Airlines, Mercator is now established as an expert in these ERP solutions. One such opportunity arose in early 2002 with the award of a contract to implement the financial systems at Air Malta.

Other internal developments have been driven by the need to deploy business applications in a web-based environment. Groupworld, the Intranet service of the Company, provides the communication backbone to thousands of staff throughout the organisation. Internal vacancy notices, travel information, staff regulations, executive announcements are all available with a click of a mouse. The new release of this internal Internet service provides for ease of use and improved content. Other Internet portals have been developed for staff to enable them to keep in touch when they are travelling.

Externally, corporate web sites have gone through major upgrades in order to improve content and functionality. Business systems have been improved with a technology step change with web deployment now being a design standard. One such development took place on RAPID, the market leading revenue accounting system. This was greatly enhanced with the launch of a web-based version, FASTRAC, that allows users to customise the application to their needs. This product is competitively priced in the market so that small and medium sized carriers can afford its rich functionality for ticket and airway bill accounting. The first carrier to buy this product is Air Pacific - a medium sized international airline based in Fiji. This implementation is currently in progress and there are several others in the pipeline.

External business for RAPID has continued to grow strongly with a successful implementation in June at Qantas and an extension of contract at Royal Brunei through the licencing of Mercator’s passenger proration system PROFIT. Other extensions of contract have been received from SriLankan Airways for the supply of Emirates’ Skychain services for cargo and from Air Algerie for the supply of the Reservations superagent service.

Recognising that technological innovation is becoming an important business driver, Mercator has sponsored a number of state of the art web based products for implementation within the Group and to meet a growing demand within the airline industry. Notable amongst these has been NOMAD, which provides airlines and airport ground handlers with the means of tracking cargo containers at low cost through Internet access. The metal containers, used in wide-bodied aircraft for baggage and freight, are transported throughout an airline’s network. At each point they are managed and temporarily held by the local freight-handling agents. NOMAD will provide all parties with visibility of location, history of usage, state and current usage. The system has been successfully installed at Dnata for Dubai International Airport, at Emirates Airline and at SriLankan Airlines. There is now significant interest from airports and airlines throughout the world.

The Skywards loyalty programme of Emirates and SriLankan is based on CRIS an advanced frequent flyer and customer relationship management system, which is now being marketed by Mercator. Considerable enhancement of the product during the year will be of benefit to the current users as well as to Philippine Airlines, which is about to cutover a relaunch of their loyalty programme SMILES using this system.

Perhaps the most significant development programme for Mercator was an internal one - to become more effective in the delivery of IT services. This has involved a restructuring of the resources and responsibilities into 4 operating divisions - Business Solutions, Software Services, Technology Services and Sales & Marketing. This will enable the organisation to expand with greater emphasis on strategy, business support and service quality. The programme of transition has also involved the move of the majority of Mercator staff from four locations into a new 100,000 sq. ft building - Al Fattan Plaza - close to the Emirates Group buildings and Dubai International Airport.

With the gradual return to normal trading conditions in the travel industry, Mercator is gearing up to meet the demands of the Emirates Group expansion. With proven strength in financial, frequent flyer and cargo products which are used by airlines in many parts of the world, Mercator will develop new external lines of business and new channel partners in the coming year.

Galileo Emirates today distributes travel solutions, primarily the Galileo Reservation System, in the UAE, Oman, Bahrain, Qatar, Pakistan, Sri Lanka and Iran (launched in September 2001). In addition, we have recently acquired the rights to distribute the system in three new markets - Sudan, Morocco and Tunisia. This allows us for the first time to have a footprint on the African continent and brings the number of market regions under the umbrella of the Galileo Reservation System to 10.

Market growth across all markets has been robust with a segment volume increase of 18% which resulted in Galileo Emirates receiving the Outstanding Achievement Award by Galileo International.

Galileo Emirates developed and in June 2001 launched, SafarEZ, an e-commerce B2B2C solution enabling airlines, travel agents,vendors, consumers and corporates to meet in a common e-marketplace to use Galileo and other travel related services.

Plans are now finalised to build a dedicated TCP/IP network for Galileo travel agencies in the UAE and beyond which will provide an infrastructure in line with advances in technology for the deployment of Galileo International access products