Operational Efficiencies from Connected Aircraft

As the search for Malaysia Airlines Flight 370 continues, the debate as to whether its now time to stream real-time black box data has intensified.​​ While there are no technical barriers to ​relay such information to the ground via satellite, the question remains ​whether airlines, already struggling to keep costs down, want to put up the money inv​olve​d.​​ This extended blog from Valour Consultancy focuses on some of the additional operational efficiencies that airlines can achieve if investing in the type of in-flight connectivity (IFC) solution that​​ would enable black box streaming. This article will also be making an appearance in this month’s EMEA and Asia editions of Satellite Evolution​ magazine.

Low Take Rates​
For the last few years, many in the market for IFC have concerned themselves with how much money passengers will hand over for an on-board cellular or Wi-Fi service. Indeed, when I first started covering this subject back in 2011, I was asked this very question in an episode of the PME Interview and replied that I didn’t think airlines were making a great deal of money. What I said then, I stand by today, and this is borne out by some of the take rate figures we have since seen publicly emerge.

Gogo, the leading provider of in-flight Wi-Fi in terms of connected aeroplanes, for example, reported that just 5.9% of passengers on enabled aircraft used its services in the first 9 months of 2013. This was an increase of only 0.7% on the same period in 2012. Likewise, when Row 44 customer, Mango Airlines, was last year told to stop advertising its in-flight Wi-Fi service after passenger complaints about service unavailability, it stopped short of mentioning what take rates had actually been. Instead, a company spokesman would only say that uptake had been “positive” and that usage had exceeded “global uptake averages of 5%”. Mango’s average take rate is actually only 9-10% when not being offered for free.

Clearly then, chief among the numerous factors that affect demand for IFC is price. After JetBlue Airways launched its Fly-Fi service in December 2013, it was reportedly common to see over 100 people using it for a wide array of applications. However, Fly-Fi has a two-tiered pricing structure – a free service and a superfast connection costing $9 an hour. Unsurprisingly, most people have thus far opted for the free service.

As direct ancillary revenues from selling IFC to passengers are low (or are lower than many had originally anticipated), why then are airlines continuing to turn their fleets into flying hotspots?

Undoubtedly, many do so in order to steal a march on the competition. Lest we forget that outside of the United States, connected aircraft penetration is still low and offering IFC could therefore be the difference between attracting an additional customer and not. To this end, airlines use IFC to augment their brand and reputation and at the same time, match the modern day passenger expectation of ubiquitous connectivity – even if the majority don’t want to pay for that connectivity. When you consider that, last year, a carrier like British Airways spent almost £500 million on “selling costs” (the majority of which was most probably marketing and advertising), the outlay to install IFC could, to some extent, be justified as an investment in preventing brand erosion. A brand that has significant commercial value. What’s more, the recent decision by the Federal Aviation Authority (FAA) to lift restrictions on the use of personal electronic devices (PEDs) during take-off and landing will only raise passenger expectation of widespread IFC further.

However, a factor that has not gained nearly enough attention, in my opinion, is the issue of operational benefits. That is, the ways in which an airline can improve business operations by making use of its own IFC system.


Other IoT Examples
Having spent nigh on three years researching many facets of the Internet of Things (IoT) – an oft-hyped trend that, essentially, describes a world where everything is online, I have developed an even greater appreciation for the operational benefits connectivity can bring. Take the humble vending machine as an example. In the past, delivery drivers would visit a vending machine to determine which items were out of stock before bringing the relevant inventory to the site. Using cellular connectivity and vending management software, stock levels can now be monitored remotely, allowing delivery drivers to pre-determine merchandise they need for re-stocking the machine.

Automatic fault detection and diagnostics of HVAC equipment in commercial buildings is another example. The argument goes that, today, the frequency of maintenance tasks are, at best, educated guesses; therefore, preventative maintenance is performed too often or too infrequently. However, equipment failure rarely happens suddenly, it happens over time. By using communicating sensors and cloud-based software to monitor the temperature of a motor inside an air conditioning compressor unit, equipment failure can be predicted and maintenance alerted to act accordingly and at exactly the right time.

In both of these real world examples, greater operational efficiencies are achieved and the company using connectivity has saved money. In the first example, the vending machine operator doesn’t have to send a drivers out to machines that do not need restocking and in the second example, the facility manager has minimised unnecessary and costly preventative maintenance as well as equipment failure. Before I run the risk of going completely off tangent, it is important to state that both examples can be extended to the aeronautical world too.

Air​​line Operational Efficiencies
Unfortunately, it seems that many in the IFC industry are not yet aware of these benefits and if they are, they don’t understand the full implications of having their operations connected to the ground. Rather than concentrate on making money from selling Wi-Fi passes, there is a (slowly) growing realisation that the business case for IFC can be made in a whole host of other areas. Some examples are as follows.

  • Real-time credit card validation: On an unconnected airline, it is necessary to wait until land-based networks are in reach before credit card information can be transmitted and verified. This exposes airlines to fraud as there is less possibility of detecting whether someone is using a cloned card to pay for goods and services on-board. By utilising the plane’s connectivity pipe, card transactions can be verified instantly, thus minimising lost revenue due to fraud. In offline environments, credit card losses have been estimated to be as high as 8%.
  • Telemedicine: By relaying an ill passenger’s medical information to the ground for help with triage, there is a much higher possibility of saving someone’s life should they fall critically ill. Even in non-critical cases, this can save an airline money by obviating the need for costly diversions to reach a medical professional. Such diversions are rumoured to cost $40,000 to $50,000 a time.
  • Better inventory management: With IFC, inventory levels can be relayed to the ground so that necessary items are ready and waiting at the arrival airport without the need to carry out manual stock checks. Connected aircraft can also support the idea of “virtual inventory” which means there is no associated weight penalty as duty free products would not need to be stored on board. Instead, passengers would browse through an online catalogue and have products delivered to the arrival gate at their destination. One should bear in mind that there are complex issues with customs and excise to be ironed out before this scenario becomes a reality. Of course, it should also be noted that this approach would take away the “captive audience” part of the online shopping experience as the entire wares of the likes of Amazon and eBay will be open to perusal.
  • Electronic flight bag (EFB): The EFB contains electronic versions of reference material (operating manuals, navigational charts etc.) that helps a crew perform flight management tasks. Rather than be updated infrequently as is often the case, IFC allows for this information to be updated in real-time. This saves time, aggravation and money. Delta Air Lines has estimated that moving away from heavy paper-based flight-bags to Microsoft’s Surface 2 tablet could save it 1.2 million gallons of fuel each year.
  • Better route management: Using IFC to provide real-time access to weather data can help a Captain avoid discretionary fuel burn by being informed of an impending storm and re-routing as necessary. In the maritime world, connected ships have already profited from doing something similar. “Virtual arrival” – an agreement to reduce a vessel’s speed on voyage to meet a required time of arrival when there is a known delay at the discharge port – has saved British Petroleum more than $1.5 million in bunker fuel costs in 25 test voyages.
  • Aircraft condition monitoring: Engine monitoring systems can plug directly into engine wiring harnesses to take an array of readings such as oil pressure, temperature, revolutions per minute (RPM) and fuel information. With IFC, this critical engine data can be relayed to the ground so that preventative maintenance can be carried out at precisely the right time. A number of companies are in the processing of developing new predictive algorithms to better analyse the data generated in flight, minimise aircraft downtime and even the number of times replacement parts are purchased.
  • ERP/CRM integration: Equipping aircraft with connectivity has the potential to turn them into highly functional remote offices, integrated with corporate networks and other applications. Enterprise Resource Planning (ERP) systems such as Oracle, MySQL and SAP located at the head office can be extended to the vessel via a VPN. So too can Customer Relationship Management (CRM) software like Salesforce or Amdocs CM. Being able to better integrate with shore-based systems in this way means that more data can be collected and communicated between the aircraft and the ground to provide valuable insight into business operations such as matching real demand with real-time supply.

Big Data and Cyber Security
While it may be true to say that operational benefits have often been at the back of airline managers’ minds when opting to install IFC systems, it is doubtful whether many have considered how to most efficiently analyse this big data, let alone the security implications that come with it. Simply put, a connected jet generates a huge amount of data each time it flies. Current estimates vary wildly from between 500 gigabytes to 240 terabytes of data per flight. As is the case in the IoT realm, airlines therefore need to pay close attention to what service providers can offer in the way of machine learning in order to properly analyse this data and get the most value from it. This is especially the case with newer aircraft like the Boeing 787 and Airbus’s next-generation A350 XWB, both of which generate a much larger volume of data than older aircraft.

Airlines also need to be aware of how best to protect themselves from cyber security threats. It is widely considered that mistakes were made with the Internet in that people are now having to retrofit security solutions. With Machine-to-Machine (M2M) communications like IFC, which is perhaps even more exposed, there is a need to deal with this up front. As Thales recently revealed that it has been fielding requests for separate cabin and cockpit IFC systems, there are signs that this is already being dealt with. However, awareness about security and the whole concept of IFC operational benefits needs to increase substantially.

Valour Consultancy’s upcoming report entitled “The Future of Aeronautical Connectivity” will provide the most comprehensive analysis of the IFC market ever undertaken. In addition to quantifying the market for connected aircraft with unparalleled granularity, we will be exploring the cost savings associated with these operational benefits in much more detail. We will also be drawing heavily from our background in M2M communications, the wider IoT phenomenon and the market for personal electronic devices. Click here to download a copy of the report scope and find details about how to get in touch with us.