Insight | Talking about a revolution


Talking about a revolution


Aviation’s digital transformation stands at a crossroads. Bolder thinking, increased innovation and immediate action is required across the sector for its potential to be fully realised. This is a wake-up call for the industry, says Inmarsat Aviation President Philip Balaam

Every revolution faces its moment of truth. At some point a fork in the road will present itself and a significant choice has to be made.

For aviation’s connectivity revolution, this day of reckoning has arrived. For all the discussion around the digitalisation of this sector, it’s estimated that just 80 airlines across the world offer some version – however elementary – of onboard Wi-Fi. And in a world increasingly dominated by always-on digital natives (Millennials and the next demographic group, Generation Z), this level of adoption clearly falls short.

The value of the connected passenger

Over the last few years the case for high-speed, seamless Wi-Fi in the sky has been made convincingly. In 2017, the London School of Economics published the first chapter of its Sky High Economics study. It calculated the true value of the connected passenger for the first time, forecasting that by 2035, airlines would receive an annual $30bn boost from broadband-enabled ancillary revenue, with a further $100bn available for the supporting industry ecosystem.

The second chapter, published in 2018, revealed that alongside the considerable commercial benefits outlined in chapter one, there were impressive operational efficiencies and cost savings to be made too. By examining the projected impact of connectivity across areas like fuel usage, route optimisation, predictive maintenance, supply chain processes, reductions in delays and air traffic management, the study predicted $15bn in annual savings for the aviation industry.

A wake-up call to the industry

The transformative potential of aviation connectivity has been reinforced this year, with the publication of the LSE’s third and final chapter of Sky High Economics. The report has uncovered a pressing new commercial imperative to implement high-speed, high quality Wi-Fi – that of passenger behaviour and loyalty.

Speaking at APEX 2019 to launch the report, President of Inmarsat Aviation, Philip Balaam said that the authors had identified a global market of close to 450 million passengers who were both uncommitted to any airline loyalty programme and who would therefore be willing to switch whatever carrier allegiance they currently have in favour of those offering high quality inflight connectivity.

Balaam says: “Many of these ‘floating voters’ – and I use this term deliberately, floating voters are the ones that politicians care most about – are Generation Z and Millennial flyers, with different expectations of air travel, for whom the research suggests traditional rewards-based loyalty structures have far less appeal.”

Consequently, one of the most significant takeaways from Sky High Economics 3 is that an annual $33bn market is waiting to be secured by airlines that are willing to offer the Wi-Fi experience these passengers are looking for. Moreover, Balaam revealed this could rise to $45bn in the next 10 years.

This should be a wake-up call to the industry, said Balaam.

“There’s both $33bn to be won, and $33bn to be lost. Those who act now stand to gain a disproportionate share of the prize.”

Connectivity as the great enabler

The next generation of passengers

The next generation of passengers are making their voices – and their choices – heard

It’s clearly a pivotal time for aviation and, in tandem, a time of tremendous opportunity. Over the next 20 years, IATA forecasts that passenger numbers will double to over eight billion. This not only means more aircraft, but also the rise of new technologies (including artificial intelligence and the better use of data), to satisfy the needs of these digitally demanding flyers.

Central to this is connectivity. It’s the great enabler which underpins increased customer satisfaction, reduced costs, operational efficiencies and access to a number of ancillary revenue streams. At APEX, Balaam highlighted that Accenture had forecast that aviation’s ongoing digital transformation will create over $300bn of incremental value by 2029 – and yet the adoption of connected technologies across the industry remains sluggish.

“Despite all the talk of new use cases and passenger service innovations at conferences like these,” he said, “with a few very notable exceptions, there’s not that much actually going on in practice. Wi-Fi is seen as just one more entertainment option to choose from, rather than what it could be – which is the enabler for a whole new cabin experience.”

He continued: “Put simply, the promise of the connected aircraft has yet to be fulfilled. Too much of the conversation is still in the future tense. It’s time to accelerate the pace of change.”

"The promise of the connected aircraft has yet to be fulfilled. It’s time to accelerate the pace of change"

A new vision for aviation

So what needs to be done? First, there needs to be less prevarication when it comes to embracing connectivity. Every player in the aviation sector needs to think digitally, and Balaam suggests that this can only be done by working collaboratively, and with openness and integrity.

“Connecting the aviation industry is an enormous undertaking,” he said. “It demands joined up thinking. And the weight of responsibility lies right across the ecosystem that underpins the connected aircraft.”

Just paying lip service to this transformation isn’t enough. Balaam is adamant that more investment in infrastructure is required alongside new applications that will act as a catalyst for innovation and “new platforms that can harness the unprecedented power of real time data.”

“There is no doubt in my mind that connectivity will play a critical role in the future success of this industry,” he concludes. “We see the value, and are investing in the infrastructure and technology to support this new vision for aviation.”

The connectivity revolution is upon us. The time to act is now.