Delta Turns To RFID To Cut Costs 2

Delta Air Lines Inc. is turning to cutting-edge technology in an effort to stem the financial losses that are threatening to plunge the airline into bankruptcy. Under its latest initiative, unveiled Thursday, the carrier plans to automate many of its baggage-tracking functions by 2007 using radio-frequency ID tags.

Misrouted baggage costs Delta about $100 million per year, but airline officials say they believe RFID technology could cut those costs significantly. "We'll be able to provide a much more proactive response" to lost baggage, a Delta spokesman says. As a result, Delta could save money by reducing the need to hire expensive couriers to deliver delayed bags to customers.

Tiny RFID tags deliver radio signals to reader devices that, in tandem with specialized software, generate data that helps businesses better manage everything from logistics and inventory to customer service. Delta will use a form of the technology known as passive RFID, in which the tag bounces back a signal generated from the reader, as opposed to generating its own signal. Passive RFID tags are smaller and less expensive than active tags because they don't require an on-board battery.

Delta officials say the passive tags currently cost about 25 cents each but will drop to about 5 cents apiece by the time the airline is fully ready to implement the project, which could initially cost up to $25 million to set up. The company has yet to choose a vendor.

Under Delta's plan, the tags will be embedded in the familiar luggage labels that airlines use to identify a bag's origin and destination. The labels will be scanned at various points in the check-in, loading, and unloading process, giving supervisors the ability to quickly find the location of any given piece of luggage. Delta's luggage labels currently contain bar-code information, but the airline says bar-code technology isn't as accurate or flexible as RFID. In recently completed tests at Delta stations at airports in Jacksonville, Fla., and Atlanta, an RFID system's accuracy rate was in excess of 95%, and, the spokesman says, "That's much better than we get with bar codes."

Like other airlines, Delta has been weighed down by a combination of high fuel costs and low fares. In the first quarter, the company posted a loss of $383 million. It lost $773 million in 2003. Delta is currently in debt-restructuring talks with creditors and hasn't ruled out a bankruptcy filing.

With little control over fuel prices and market conditions, the company has turned to technology in an effort to shave costs wherever it can. Among other things, it's increasing its use of interactive kiosks that speed passengers through the check-in process. The airline is also testing RFID technology to better manage parts inventories.