Digital Transformation Programs Accelerate Business Model Innovation in Airlines All Over the World

The digital boom is sending ripples through the global aerospace industry, as airlines are eagerly harnessing the potential of digitization, connectivity and big data create new ancillary revenue streams and spin-off profit centres. Through improved productivity and cost savings, the incremental value of a digital transformation program could range from $5 to $10 per passenger annually. IT vendors that have traditionally served specific departments and airline functions have to redefine their roles to survive the wave of industry consolidation and possible dominance of large IT integrators.

“Large IT integrators such as IBM, SAP and Oracle will evolve to become strategic outsourcing partners of airlines and dictate the future course of IT of airlines, thereby influencing the competitive landscape for IT vendors,” said Frost & Sullivan Aerospace & Defence Director Diogenis Papiomytis. “This new business environment will be challenging for IT vendors that lack partnerships and extensive project references.”

Global Airline Digital Transformation Programmes, 2017, recent research from Frost & Sullivan’s Aerospace Growth Partnership Subscription, analyses the current and future structure of digital transformation programs in the airline industry. The study covers the key work streams of business intelligence, digital marketing, and core airline services in these programs. Industry concepts such as intelligent loyalty platforms and new distribution capability (NDC) have the potential to be disruptive.

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A trend that is becoming increasingly prominent is the shift in power from CIOs to strategy directors in shaping the airline’s IT vision. Airlines are seeking to disaffiliate digital transformation and innovation from IT departments and grant them independent status. Unsurprisingly, airline IT spending will grow rapidly and outpace the projected airline traffic growth and global gross domestic product (GDP) growth over the next 10 years.

“To make the most of the changing industry dynamics, suppliers need to offer an end-to-end disruption and communication management solution, building on the modular solutions in their portfolio,” noted Papiomytis. “They can drive home the advantage by presenting tangible business cases about the direct or indirect impact of effective disruption management on strategy and the bottom line of airlines.”