ClickZ were at Aviation Festival Europe last week, hearing about how the travel and aviation industries are handling digital disruption. Day 2 kicked off with a keynote panel featuring industry heavyweights from three major airlines – Emirates, JetBlue and Qantas.
The topic on the table was “The next generation of digitized airlines”, as discussed by:
- Sir Tim Clark, President of Emirates
- Eash Sundaram, CIO of JetBlue
- Gareth Evans, CEO of Qantas
Tim Clark, Emirates
Tim began by discussing the scope of digital transformation, emphasizing that for businesses to harness the potential of digital, innovation needs to happen on both the front (“customer-facing”) and back end of businesses. Having the right systems in place is crucial:
“The technology and platforms behind these initiatives are key”
This highlighted a key challenge faced by all the speakers: legacy systems. For large, multinational businesses, a ground-up overhaul of their operational systems is almost unimaginable task. But, said Tim, it’s also an inevitability if businesses want to survive:
“Our business has to move…at the pace of customer expectations. If your businesses can’t keep up…you will perish.”
Eash Sundaram, JetBlue
The next speaker on stage was JetBlue’s CIO Eash Sundaram. He began by sharing JetBlue’s motto: ‘Personal. Helpful. Simple.’
This same principle, he said, applies to innovations in both their physical and digital customer experiences – if it makes the customer journey more personal, helpful and simple, then it stays. If not, it goes.
Eash praised companies like Amazon and Uber for leading the way in “making things simple”. He said that companies in the aviation space had a lot to learn from these businesses, echoing Tim’s sentiment regarding rising customer expectations.
JetBlue are not just an airline, however. They also invest in and incubate technology startups under ‘JetBlue Technology Ventures’ – the first venture capital subsidiary in Silicon Valley backed by a US airline. But why?
“Because the pace at which disruption is happening [means] we simply can’t do it ourselves.”
Their strategy, Eash continued, is to invest in these businesses early, ultimately looking to bring them in house when they have scaled and developed their technical capabilities sufficiently. These new businesses are an effective way to solve problems and deliver that key tenet – simplicity.
“It’s not about money…it’s about improving the customer experience and finding a way to pay for it…if you make that customer experience incredibly simple, customers will be significantly more loyal than just throwing points at them.”
Gareth Evans, Qantas
Gareth appreciated both the technical and customer aspects to digital transformation, but thought there was more to be said about the changes needed:
“[Digital] transformation is a full-business transformation.”
Gareth laid out the three pillars of transformation in aviation as he saw it:
- Cultural transformation (improving employee skills and engagement)
- Customer transformation (improving satisfaction and customer experience)
- Network/fleet transformation (improving operational efficiency and financials)
Rather seeing digital disruption as a negative influence to be alleviated, he spoke of disruption as an opportunity:
“Why should we wait to be disrupted? Why not leverage our brands, our customers and our data to go and disrupt other industries?”
The impact of digital transformation
All the speakers agreed digital transformation would deliver massive benefits to both customers – in the form of a more streamlined, personalized user experience – and to airlines – in improved efficiency and profitability.
The scale of this potential improvement is vast. A report by Accenture estimates that digitalization in aviation will create an additional $305bn of value for the industry over the next decade. Benefits to customers are valued at $700bn, as well as reducing the environmental impact of travel and improving safety, security and cost.
Of course, there are negative effects, too. Digital efficiencies will displace a huge number of jobs in the travel industry, with travel representing as many as one in every 11 jobs worldwide according to some estimates.
However, with new ways of working comes a demand for new skills. While the nature of some jobs will be altered and others will become obsolete altogether, predictions estimate that rising demand for travel will create 270,000 new jobs across hotels, airports and airlines between 2016-2025.
Digital transformation is rarely a smooth process. Over the next 10 years, the aviation industry will face some big hurdles:
The bureaucratic complexities associated with operating in multiple countries are likely to reduce the speed of transformation for the travel industry. Regulatory uncertainty does not encourage rapid investment.
As mentioned by Sundaram, customers approach the travel industry with expectations formed by companies like Amazon and Uber. As other industries continue to make their experiences more seamless and personalized, travel will have to push hard to keep up.
Unfortunately, airlines cannot simply cease to operate as their systems are overhauled from scratch. They need to maintain (and improve) operational efficiency of their business in the short term, while building new capabilities for the long term. But with untold transactions to process and millions of customers to keep happy, and the sheer scale of the task presents a massive challenge.
Countries adopt new technologies at different speeds. Growth areas in the travel industry – such as Asia and Africa – will drive future demand, but developed markets like Europe and North America will likely be on the front line of digital innovation.
- Digital disruption is inevitable, so choose to embrace it rather than fight it
- Sacrifice whatever is necessary to stay ahead – if you don’t, your days are numbered
- The customer experience should be at the center of your strategy.