Insight | How digital start-ups are disrupting aviation
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Aviation
Over the last decade, digital disruption has completely transformed many traditional industries. Uber has ripped up the taxi rulebook, Skype and WhatsApp have revolutionised the communications sector and the world’s most valuable retailer (Alibaba) has no inventory or retail premises. It simply facilitates the exchange of goods for money.
Add into the mix other notable disruptive companies such as Spotify, Netflix, Google and Apple, and it’s clear that the first wave of digital disruption has already occurred.
Except, perhaps, within aviation. Granted, digitalisation is happening but the fact remains that until now aviation has only paid lip service to the vast potential offered by digital disruption.
Dr Christian Langer, Lufthansa’s Chief Digital Officer, thinks he knows why. Speaking recently at the Skift Global Forum, he explained that innovative start-ups had found airlines notoriously reticent to embrace disruptive technologies because of the asset-heavy commitments of the industry and the complex, long-term contracts and strategic agreements that characterise aviation.
However, noting how airline companies had been disrupted by the low-cost carriers two decades ago, Langer was adamant that Lufthansa wouldn’t make the same mistake again.
“We didn’t take them seriously,” Langer said of the emergence of the low-cost airlines. “We know what disruption feels like and we don’t want to have that feeling again.”
Hence Langer’s boss, Lufthansa CEO, Carsten Spohr, stating in 2017 that his goal was to ensure that the Lufthansa Group became the “most digital aviation group”.
In order to realise this ambition, Lufthansa has sought to control its own digital disruption. Rather than outside forces disturbing its operations, Lufthansa has pursued a path of digital transformation.
"Lufthansa has sought to control its own digital disruption"
This is key, because as Langer also pointed out, its Maintenance, Repair and Operations (MRO) business has been hit by the ability of Original Equipment Manufacturers (OEM) to acquire and use real-time data from aircraft that helps them predict when to undertake the next set of maintenance work on a specific engine. This has left Lufthansa to merely carry out the labour work – which can mean a reduction in maintenance contract revenues.
This rich and meaningful data (the oil of the 21st century according to the World Economic Forum) can equally disrupt the aviation industry. In an era of constant change – seemingly the only predictable thing about the digital age – airlines and their ancillary services need to embrace this disruption. Or, in the lexicon of the times, own it.
And if digital is a new business model – as outlined by Dr Christian Langer at Skift – then airlines need to connect with today’s pioneering entrepreneurs and industries. This is an opportunity to bring together travel technology, including data, personalisation, virtual reality, artificial intelligence, e-commerce and fintech. Fuelled by the latest wave of technology, there can be profound advances in aircraft efficiency, cockpit technology, passenger amenities, supply-chain management and more.
As the tech bible, Wired, pointed out in an article applauding aviation’s overdue recognition of the possibilities offered by inventive technology “The reasons are clear. Silicon Valley’s deep talent pool and seemingly endless ability to generate smart, large-scale, technology-based ideas across industries could help hyper-competitive aviation entities quickly upgrade their offerings and improve their operations.”
As both of the London School of Economics’ reports, commissioned by Inmarsat, reiterate, digital success within aviation is partly predicated upon the emergence and development of a brand new ecosystem of digital providers.
Unsurprisingly, then, one of the most significant trends in this sphere has seen airlines establishing their own accelerator, incubator and innovation hubs.
In October 2016, the International Airlines Group launched its Hangar 51 acceleration programme. Focusing on four key areas (improving airport processes, digitising business processes, data-driven decisions and wildcard ideas that can improve customer experience), it received over 450 applications of interest.
Announcing its five finalists in December that year, Glenn Morgan, IAG's head of digital transformation, said: "Our finalists offer IAG a wide range of disruptive opportunities that could create next generation travel experiences and transform the aviation industry.”
In April last year, IAG invested in two of its finalists, Esplorio and VChain Tech. Esplorio is an app that records passengers’ travel experiences and preferences via their social media updates. The marketing and engagement potential of such an app is certainly of interest to airlines. VChain Tech utilises the blockchain to streamline airport processes, in particular passengers taking connecting flights.
Elsewhere, Lufthansa opened its Innovation Hub in 2014, and began a partnership with Californian start-up investor Plug and Play in 2016. EasyJet, in partnership with incubator Founders Factory, aims to establish two new travel businesses every year until 2021. Its first two start-ups, announced in 2017, were FLIO (an app that enables travellers to navigate airports more efficiently) and Lucky Trip (a holiday destination app).
One of the most successful aviation-focused accelerator programmes has been Airbus’s BizLab. Working with technology start-ups and Airbus “intrapreneurs” to develop creative ideas into viable businesses, over the last two years Airbus BizLab has hosted over 50 start-ups and internal projects during the six month acceleration programme run at Toulouse, Hamburg and Bangalore. The company also has a Silicon Valley-based digital and design innovation hub called A3, which already has a number of fascinating new initiatives underway, such as an all-electric, self-piloted VTOL
Ryanair, meanwhile, established its own in-house Labs team in 2014. One of the success stories to already spring from this project is increased ancillary revenues. In 2016, the airline announced that it was raising the proportion of the revenue it seeks to make from ancillaries to 30% (up from 20%).
The strategic importance and benefit of these digital incubators, accelerators and innovation hubs is clear – they can get innovative ideas to market quickly. As Glenn Morgan commented when announcing IAG’s Hangar 51 programme: “We want them [the start-ups] to tell us what we don't know”
And digital innovation isn’t confined to airlines. Rolls-Royce recently launched its own acceleration hub, R2 Data Labs, in an attempt to unlock design, manufacturing and operational efficiencies and also to create new service propositions for customers.
Speaking at its launch, Neil Crockett, Head of R2 Data Labs and Chief Digital Officer for Rolls-Royce, explained the premise behind the hub. “We see huge untapped potential for our customers to achieve better, more efficient operations through collaborating with Rolls-Royce in data innovation projects,” he said. “So we’re building on our data innovation foundations with a new model that will deliver a major step-change in the capability and impact of our data innovation and services.”
Speak to any digital expert and they will evangelise about the potential of things like AI, the blockchain, machine learning and predictive analysis. And it’s not hard to see how these disruptive technologies can be applied to aviation.
Data-driven efficiencies can enhance customer understanding and customer experience. They can lead to better, more contextually relevant, targeted personalisation. The proliferation of inflight connectivity is central to this, and is something Inmarsat has been at the vanguard of with solutions such as the European Aviation Network, GX Aviation and SB-S.
SB-S is a particularly interesting case study. The connectivity revolution has necessitated the advent of a platform that in turn will foster and encourage further innovation – a platform that you can plug apps into, just like an iPhone.
Further confirmation of the importance of disruptive businesses has also arrived with Inmarsat’s Certified Application Provider Programme (CAPP). Created to certify third party commercial apps for use on its SB-S platform, it will enable innovative companies to offer operational efficiency, flexibility and cockpit benefits to all of Inmarsat’s airline partners.
The much-heralded Internet of Things (IOT) is, in particular, having a positive effect on operational efficiencies. Predictive maintenance based on access to insightful real-time data is enabling MRO divisions to keep the time aircraft are on the ground to a minimum. As many scheduled checks result in ‘no fault found’ there is the possibility that remote, automated, connected aircraft systems can further reduce asset downtime.
Pivotal to all of this is information. Unlocking the power of data will allow new ancillary revenue streams to be explored. It’s something Dr Christian Langer recognises. Not least when combined with the ultimate captive audience – a passenger sitting on an aircraft for upwards of two hours.
"Our finalists offer IAG a wide range of disruptive opportunities that could create next generation travel experiences and transform the aviation industry."
“The core thing is data,” he explained at the Skift Global Forum. “What data do we have about your needs and your preferences? We have someone in a seat – legally – for nine hours. We know your favourite wine, your favourite films, but we erase the data when the aircraft lands. We need to get better at using data and understanding preferences.”
Of course, for digital natives – the generation that is defining digital disruption – understanding data, processing it and then using it to create bold and innovative new companies is second nature. Aviation might need to get better at utilising data, but the start-ups that are helping to transform the sector certainly don’t.
That said, it isn’t only fresh-faced tech whiz kids in Berlin, London and San Francisco pushing digital innovation. A number of technological improvements are being delivered by the big avionics companies. For proof, look at the work of Airbus, Lufthansa and, naturally, Inmarsat. But these agile start-ups can help aviation’s big hitters bring ideas to market in a quicker and more efficient manner.
So who are some of the key players?
From revolutionising duty free shopping to predicting the weather, by way of intuitive seat booking and modernising stock logistics optimisation, these are some of the disruptive start-ups looking to transform aviation.
"We have someone in a seat – legally – for nine hours. We know your favourite wine, your favourite films, but we erase the data when the aircraft lands."
With 80% of an aircraft’s costs coming from operation and maintenance, OBUU believes that a good maintenance strategy is key to success. OBUU’s unique mathematical programmes aim to provide savings on maintenance and improve fleet availability. The company states: “Every time an aircraft is on ground, it turns from a money maker to a money pit, therefore a good maintenance strategy is vital for fleet performance. OBUU's ability to predict when and where spare parts are going to be needed is essential.”
By using data from aircraft sensors, it will be possible to detect faults and impending problems in almost real-time. Anticipating these faults will reduce operating costs and increase safety and reliability. One of the key parts of Innovation Binaries’ offering is this predictive maintenance. As it says: “Conventional reporting is superseded by the predictions of likely activities during downtimes, reducing the unknown and unscheduled tasks, parts and skills requests.”
Recently bought by GE Aviation, AirVault provides secure aviation records management across the ecosystem by connecting all the suppliers, manufacturers, owner/operators and lessors. It states: “Aviation, a highly regulated environment, requires a connected ecosystem of providers and sectors in order to control risk, reduce costs and operate efficiently, all while maintaining passenger safety, proving compliance and satisfying airworthiness directives. Connecting this ecosystem is AirVault's job number one.”
Founded in 2015 by a team from the Harvard Business School and the MIT Sloan School of Business, ClimaCell aims to help the aviation industry make better decisions by more accurately predicting the weather, thus leading to enhanced operational efficiencies. It generates minute-by-minute, short-term predictions which, it claims, nearly doubles the reliability of radars. This allows ClimaCell to classify precipitation type and issue alerts before the onset of hail, snow or sleet.
Developed at Lufthansa’s Innovation Hub, Mission Control is a digital travel assistant for business travellers. Think of it as a travel buddy that takes all the stress out of all travel-related tasks – from flight and car rental reservations to booking conference rooms and accounting expenses.
SkyBuys is an online-to-offline mobile commerce app and platform that enhances the duty-free shopping experience for passengers, airlines, concessionaires and brands. Alec Kemmery, SkyBuys’ founder, believes connectivity provides an ideal opportunity for a new marketplace.
He says: “Rather than restrict our focus to inflight and creating a limited marketplace, our focus is to create a conduit or direct channel to the concessionaire's (inflight & in-store) inventory in a specific location (which is what differentiates duty free shopping to retail shopping).
By using FlightSwipe (another app developed at Lufthansa’s Innovation Hub), and being armed with the information that matters most to them – leg room, Wi-Fi availability, inflight entertainment options and the like – passengers can find the right flight.
It might have been a long time coming, but aviation’s major players have fast become attuned to the possibilities that digital disruption offers. Quicker boarding times, real-time planning and enhanced security measures are just some areas where truly innovative thinking will propel the sector forward.
Connectivity is the catalyst for much of this, offering increased ancillary possibilities and some seriously impressive operational efficiencies and economic benefits.
Subsequently, connectivity fills in the gap that previously prevented passengers’ journeys from being seamless. Avianca’s Senior Vice President of Strategic Relations and Customer Experience, Maria Paula Duque, expanded upon this when she spoke to Inmarsat.
“If you have the connectivity,” she pointed out, “I should be able to send you an alert saying this is your flight, this is what is happening, select your seat, find the gate and get there without any paper.”
She added: “To achieve the expectations of our customers in the digital journey map, you need to believe, think and design for digital. We need our processes to be born digitally. And if you believe that is true, then you need to have connectivity on board.”
No wonder Duque’s boss, Hernan Rincon, has proclaimed that he wants Avianca to be a “digital company that flies aircraft.”
Lufthansa’s Dr Christian Langer’s vision of the future includes merging identity, payment and loyalty. SkyBuys’ Alec Kemmery talks of “passengers being more comfortable searching, booking and paying for travel related experiences via smartphones and connected devices”. And Nicolas Hornillos, co-founder of OBUU, is of the belief that aviation is “really betting for technology disruption.”
The first wave of digital disruption within aviation was only the beginning. The second wave is when things will start to get really interesting.
