The Digital Economy: What The Future Means For Airlines

Paul Pessutti

Many experts agree that the digital economy is one of the most pressing issues of our time. According to research conducted by MIT, companies that successfully adapt to the digital world are 26% more profitable than those that don’t. Those that don’t aren’t merely left to underperform in the marketplace. Many—like Kodak and Blackberry—are left wondering whether they fit into this brave new world at all.

The thing that some business leaders fail to realize until it’s far too late is that digital transformations are not a way to support “business as usual”—they’re about redefining what “business as usual” means in the first place. They’re about finding new ways to work smarter, not harder. Many airlines are having great success with this regard in particular.

But what the digital economy really means for airlines can be summed up in a single word: opportunity. Technology has connected people around the world in a way that has no parallel throughout human history. Airline leaders can now use the digital economy to connect to their travelers in powerful and meaningful ways. This helps to create a mutually beneficial situation for all parties.

Intelligent operations: Working smarter

One of the most powerful implications of the digital economy for airlines has to do with the intelligent operations that are now possible. Airlines can now have real-time visibility over their entire infrastructure. This allows them to manage based on instant data and smart algorithms, giving them the power to make better, more informed decisions moving forward.

Consider an unavoidable disruption that is poised to cancel X number of flights across the country. With intelligent operations, leaders can see the impact immediately. They can reschedule passengers more quickly, reorganize flights with better efficiency, and more. This not only preserves their desired business outcome, it improves the passenger experience as well. What would have been a massive, lengthy, and expensive issue ten years ago is now much easier to manage.

This is a huge benefit before you even consider that predictive models can be used to prevent unforeseen disruptions in the first place. Along the same lines, Big Data and mathematical models can help maximize operational efficiency. These models drive costs per flight to the actual flight for maintenance, turnaround, fuel uplift, catering, airport, and flight charges at each airport to maximize operational efficiency and reduce unnecessary spending.

Creating new market opportunities

Another thing that the digital economy means for airlines is that new market opportunities are emerging all the time. Consider online travel planning, something that has become a “new norm” for both business and leisure travelers.

According to Skift, Priceline.com has $1.84 billion in revenue in the first quarter of 2015 alone. They had $13.8 billion in growth bookings during the same period of time. Remember, this is a third-party provider. If airlines used the digital economy to offer the same level of service to their customers, this is a potentially incredible new revenue channel, just waiting to be taken advantage of. Studies already confirm that airlines that offer a larger number of ancillary services—like online booking—have better operating margins than those that don’t.

Proactive safety and maintenance

The digital economy isn’t just about increasing revenue, however. It also makes safety easier to manage than ever. Based on the same type of real-time data airlines are using in other areas, they can move to a predictive model for safety and maintenance.

Sensor data can be used to predict failures before they happen. Maintenance crews can then make decisions faster to mitigate short-term and long-term risk. Maintenance programs themselves can be optimized for maximum safety, while guaranteeing maximum maintenance yield and aircraft availability at the same time.

Customers demand personalized engagement

Finally, the digital economy has big implications for airlines in terms of personalized traveler engagement in particular. Customers want airlines to treat them as individuals. They want services to be offered based on their situational needs: They don’t just want offers—they want relevant offers that actually benefit them on a basic level.

The digital economy and traveler loyalty management allow for all of this. This doesn’t just let airlines offer better services, it also directly impacts their bottom line. According to a study by Collinson Latitude, 61% of travelers look for loyalty programs with a broad range of personalized offers. Additionally, 77% of satisfied travel loyalty program members continue to spend money with that brand long-term.

The digital economy isn’t just creating a situation where airlines are offering a better, safer service to customers. It’s creating a situation where those customers actually want to become loyal brand advocates at the same time.

The connection is real—and powerful

Digital technology has been about connecting people to each other from the beginning. It makes perfect sense that the digital economy is about connecting people to businesses in meaningful new ways. There is a tremendous opportunity for this in the travel industry alone. Airlines are already offering better passenger travel experiences by way of traveler loyalty management and more.

From opening up huge new markets like online travel planning to paving the way for intelligent operations and making gain in safety and maintenance, the digital economy doesn’t just make good business sense. Financials aside, it enables airlines to change the foundation their businesses are built on for the better, and for all time.

For more insight on this digital age of airlines, see “Build a Better Customer Journey for the Digital Traveler.”


Paul Pessutti

About Paul Pessutti

Paul Pessutti is Senior Vice President and General Manager of the Travel, Transportation, and Hospitality Industry Unit at SAP. Applying over 20 years of experience in this area, Paul is responsible for establishing and maintaining key customer relationships, ensuring customer success, enhancing the solution portfolio, growing the partner ecosystem, and acting as the brand ambassador worldwide. The industry consists of nine industry segments including airlines, airports, passenger transport, hospitality, travel service providers, freight forwarding and third parties, rail cargo, liner shipping, and trucking.