Flying through digital turbulence

Digital and technological innovations have disrupted most industries, modernising their functioning, expanding markets and sometimes even displacing established entities. The pressure is on legacy airlines to own the revolution or be left motionless on the runway. An industry insight from Nick Harvey, MEA Regional Manager at InterSearch Middle East with a track record of helping to build leadership teams with the region’s major Maritime Organisations, Airports and Airline Carriers.

Many traditional industries have been transformed by digital upstarts. Uber has overturned the taxi industry. Netflix and Spotify have dramatically changed the faces of the entertainment and music industries. Skype and WhatsApp have revolutionised communications. Airbnb continues to disrupt the accommodation market through its online booking platform, and some of the most successful retailers such as Amazon have rendered physical shop floors obsolete.

Digitalisation has also disrupted the aviation industry, but the asset heavy investment, long-term complex commitments and strict regulations endemic to the industry, have in some instances caused a slower pace.

The launch of the Boeing 707 in the 1950s, followed by the B747 in the 1960s dramatically reduced flying times and increased both the payload and the range of travel. Supersonic travel took to the skies with the Concorde in the 70s, but it was the introduction of the low cost carriers such as Southwest Airlines, EasyJet and RyanAir in the 70s and 80s that were considered the first serious competitive game changers. Disrupting the established carriers – KLM, British Airways and Air France – RyanAir now flies more passengers annually (120 million) than these national airlines put together.

If the 90s were characterised by the rise in the airline Alliances, the early 2000s were epitomised by the rise of the major Gulf/Middle-Eastern carriers (Emirates, Qatar Airways, Etihad and Turkish Airlines), that lifted the benchmark by offering affordable 5-star service, which however, competitors claimed was only possible through state sponsored subsidies. Nevertheless for years the service, comfort and quality of these airlines attracted customers from all over the world with their global reach positioning them as “super-connectors.” However, the new class of ultra-long-haul aircrafts are increasingly removing the requirement for stop-overs on flights between Europe and Asia, and Middle-Eastern airlines will need to keep innovating to retain their dominance.

Given that aviation has generally been slower than other industries to make the most of big data – the “oil of the 21st century” (WEF), intermediaries such as booking agents have been able to garner ever larger shares of the travel wallet. Savvy airlines without the CRM skills and resources are partnering with those who do to capitalise on analytics gathered through software and data mining.

The rise of the Airline Alliances (i.e. Star Alliance, One World & Sky Team) in the 90s/2000s was a step in the right direction, allowing airlines to strengthen their offering through partnerships that give passengers codeshare and frequent flyer reward loyalty benefits.

Cost savings and operational efficiencies realised through connectivity are propelling the sector forwards. An example is the use of aircraft sensors to detect faults and possible issues in real-time as well as mathematical programs to anticipate when and where spare parts are needed. This will reduce aircraft downtime; saving millions of dollars from these non-revenue earning periods. The application of 3D printing to create the spares is already starting to disrupt the aviation spares market in the same way as the rise of the leasing industry for aircrafts, engines and components resulted in shifts in ownership in the 1990s.

Even more exciting are the predicted advancements that will revolutionise the aviation industry forever, just as the B707 did for transatlantic travel in the late 1950s. Self-piloted aircraft with vertical take-off and landing capabilities that don’t require a runway; electric propulsion, and next generation supersonic crafts that can halve travelling time are on the radar. Most agree that the technology is there but again, the combined factors of cost, safety, infrastructure investment and the complex regulatory framework provide significant barriers-to-entry for these exciting prospects.

In the near future, a more likely evolution will be the Chinese threat to the Airbus-Boeing duopoly, as well as the entrance of innovators such as Uber and Tesla that may indicate further turbulence from newbie disruptors ahead.

With over 7.2 billion annual passengers predicted by 2035, the demand for increased speed, comfort and convenience will continue to fuel developments. The more progressive airline groups are carefully watching this space, or aligning with the visionary inventors to incubate/trial concepts and prepare for electronic take-off.

– by Nicholas Harvey, Regional Director – InterSearch Middle East