Civil aviation on the brink of radical change

TIMES-A-CHANGIN': James Hanson thinks that the airport industry may be about to leap forward

Aviation is a market that is traditionally slow and resistant to change. This is due to, amongst other things, nation state interests, powerful domestic unions, lengthy aircraft life-cycles and a culture of safety always being prioritised ahead of anything else. So, until now, only incremental changes have occurred to assist in accommodating the steady upward trend of air traffic growth … maybe until now?

Although we have heard phrases like ‘game-changer’ and ‘paradigm shift’ in the past, the speed with which new ideas and new operating models are emerging to market suggests that now really does feel like the industry is experiencing genuine pressure for more radical change. This is being driven by a colourful cocktail of airline cost pressures, rapid and accessible technological developments, emerging technological and safety risks (e.g. cyber security and drones) and the gradual loosening of international competitive market forces (through less restrictive ownership regulations as an example). Let’s take a look at what these key changes are, and why it feels like we’re on the brink of radical change, more so than ever before.

Airline perspective

High costs, strong competition and increasingly cost-conscious passengers have made it difficult for airlines to consistently generate significant returns. As a result, airlines are keen to minimise the time in which aircraft do not earn revenue. Low cost carriers in particular, have led the way in cost cutting, achieving unit cost reductions of 20-40 per cent compared with ‘legacy’ carriers. Any technology that helps them save money on large expenditures such as fuel and maintenance are particularly welcome.

The airline business also operates under volatile market conditions (for example, passenger demand, insurance markets, pandemics, terrorist attacks, oil price and airspace capacity constraints). This means airlines favour investments that deliver guaranteed gains. They also look to invest in technologies that offer a competitive advantage. Since air traffic management technology is highly regulated and offers little competitive advantage in a ‘first-come first-served’ industry – it is perhaps no wonder that airlines are reluctant to invest in it, especially given past experiences where investments were ‘wasted’ because ground technology was unable to take advantage of the more advanced avionics (e.g. 8.33kHz).

Some airlines are now focusing investment on the passenger experience, with key innovations such as in-flight entertainment, in-flight WiFi and electronic boarding passes helping to increase the perceived value of their service. Consideration has also been given to personalised ticket pricing.

Another key issue for airlines is the accessibility of airspace around major airports and certain ‘pinch points’. As this issue grows, being able to optimise route planning and flight trajectory becomes more critical. Airspace is a limited resource and the maximum number of aircraft that can be accommodated is inherently influenced by factors such as airspace structure, tolerable safety margins and controller workload.

Areas of western Europe are already very saturated and fast-growing economies like BRIC states are heading that way too. The more recent emergence of Remotely Piloted Aircraft Systems or drones, looks only set to increase the challenge.

The consequences of congested airspace are longer flight times and delays for passengers, but airlines must rely on others to help solve congestion. For example, ATC, through speed and flight level restrictions or an airspace restriction can impact the airlines’ ability to achieve an optimal route. Ground automation systems, flow management and conflict resolution tools are increasingly helping to alleviate congestion.

Air Navigation Services perspective

In the ANS environment technological changes mean that infrastructure can be increasingly separated from the humans that have traditionally provided services. For example

 – aircraft position will soon be monitored from space rather than by ground-based radars

 – flight data can be processed at central or virtual locations and distributed to controllers; and

 – even airport tower services can be provided from locations that are independent of the airport.

As the aircraft becomes ever more connected whilst in flight, technology is also able to take over the traditional role of the human and the future looks set to rely on highly automated flight deconfliction; where controllers move from ‘micro-managing’ to ‘macro-managing’ aircraft – i.e. spend less time per aircraft, to allow them to handle greater numbers of aircraft overall. As data becomes a more critical component of the ATC environment air navigation service providers (ANSPs) will manage information instead of infrastructure. The higher value services will focus on application solutions, including API (application programming interface) that supports operations by interpreting data and helping with decision making.

Whilst some regions and ANSPs recognise the need to change, and maybe at higher rates, most others believe that change will continue to be incremental due to strong national interests and the argument for safety ahead of anything else. There does however appear to be broad agreement on many of the expected technological transformations, such as remote towers, virtualisation, drones and increasingly rich data and automation. Some ANSPs have an open attitude towards outsourcing and managed services whilst others are more protective, particularly for services around core air traffic control functions such as flight data processing and air traffic management systems.

National interests suggest that ANSPs will have a role for the foreseeable future, but many are already taking steps to assure a longer-term future, developing their own subsidiaries to expand their services into new markets (for example the LFV owned joint venture in Sweden, NATS recent purchase of Searidge, and the 5 ANSPs that have a shareholding in Aireon, to name but a few).

Alongside this there is the emergence of private providers, such as the Swedish provider ACR, offering services at supposedly 30-40% lower cost than the national ANSP. In the meantime, industry players could threaten existing models more radically, such as aircraft manufacturer Airbus’ project Vahana to develop an aircraft that doesn’t need a runway, is self-piloted, and can automatically detect and avoid obstacles and other aircraft – a full-size prototype is due to be built by the end of this year.1

Airport perspective

Whilst ACI reports healthy profit margins for airports handling more than 1 million passengers, the vast majority (80 per cent) of airports actually fall into the smaller category of below 1 million passengers, and require subsidy as their average net profit margin is -6 per cent. Almost 70 per cent of all airports operate at a loss.

Growth in the airport market is shifting to the emerging markets of Asia Pacific, Middle East and Latin America where aviation growth is outpacing planned infrastructure development. Total expenditure on new Airport projects is currently estimated at €300bn, with more than 350 new airports planned across Asia-Pacific alone.2

In mature countries, new airports are being built at a slow pace, and many of those already built are struggling to align capacity with demand. Environmental and local community concerns are a particularly hot topic here with the increased use of Performance Based Navigation (ie RNAV) now concentrating noise in many areas and raising issues about how the industry should respond.

At various stages of the passenger journey airports are limiting factors in passenger flow (e.g. in getting passengers and cargo onto aircraft, getting aircraft into or out of the air and to the gate). Automation is seen as one of the solutions:

·         Self-service check-in desks are predicted to be at 92 per cent of airports within the next 3 years;3

·         Self-service bag drops enable passengers to print baggage tags at home – several airports have already introduced this (e.g. Hamburg);

·         E-passport readers are already a common sight at many airports and will only grow as more passengers receive electronic passports;

·         Mobile boarding passes & scanners help to smooth the flow of passengers from landside to airside and also have positive impacts for security and the environment;

·         Mobile/data investments help to inform passengers about flight status, queues and waiting times;

·         Robotics are not yet widely used but could offer improvements in baggage handling;

·         Automated taxi systems, e.g. with electronic aircraft tugs could help to automate ground movement.

However, the downsides of automation hit the headlines in May this year, when IT failures experienced by BA led to travel chaos for 75,000 passengers worldwide over the course of one weekend.

The many actors involved in airport operations means that information management and decision-making is a key part of optimising operations for the future. Several airports are now operating Collaborative Decision Making (CDM) which formalises the decision-making process, but this is typically limited to the operational ‘airside’ processes. Extending this to ‘total airport management’ could offer further benefits to improve the efficiency of security, passenger boarding and baggage loading processes.

Security is another major cost for airports and it is difficult optimise staff numbers to match passenger demand. Techniques such as passenger profiling and better screening allow the airport to reduce the cost and time required for these security procedures. The barrier here is fitting in with relevant regulations.

Other improvements in the passenger experience are currently focused on technological advances that ‘personalise’ the experience. Smartphones are at the forefront of experience enhancement. Data collection can also optimise quality of service, for example by attendants knowing a passenger’s travel history and preferences. This can also be used by the airport to monitor general passenger flows and decide when to increase staff, for example at check-in queues. Airport retailers can also use geo-location technologies, such as Bluetooth, WiFi and Near Field Communications to enhance passengers’ retail experiences. Digital tags and ‘iBeacons’ can also be used to provide passengers with information on where their bags are and when they will arrive at baggage reclaim.

Seismic challenges

We can see that every stakeholder in the aviation industry is faced with an array of change. For some, like airlines, it is the new ‘normal’ whilst for others, like ANSPs, it is unprecedented in its scale and impact. So, what makes it feel especially radical? Aside from the pace of change itself, it’s that this pace is being driven by external factors and new organisations that perhaps do not accept aviation’s historic ‘status quo’ and who want to disrupt the industry…and maybe for the better! It is up to the traditionalists to adapt.

James Hanson is an experienced aviation consultant focused on improving global air traffic management (ATM). James heads a team at Helios providing technical, strategic and regulatory support to ANSPs, industry suppliers and investors in the ATM sector. He has helped clients to solve a range of aviation challenges and improve operational and business performance. James has analysed and implemented change at all levels, from procurement of equipment, to setting future strategy. His knowledge of the ATM industry has also led to him supporting governments and institutions as well as many private sector clients looking to provide services and investment into the ATM sector. This work has included market liberalisation studies, competition analysis, due diligence, and commercial strategy development. James has a particular expertise in the deployment of innovative new ATM technologies including: Remote Towers, Space based ADS-B and Airborne Surveillance.

1https://vahana.aero/welcome-to-vahana-edfa689f2b75
2Source: http://www.scmp.com/news/asia/article/1562931/more-350-new-airports-planned-across-asia-pacific-tourism-booms
3https://www.sita.aero/air-transport-it-review/articles/the-future-proof-airport—how-to-create-one?CatId=10864