** Perfect timing. As I was writing my blog, I saw that @mgiovanniello has a post about the airline industry as well. Not necessarily a point / counterpoint blog but this will be more about revenue from the airline’s point of view. **
I will be presenting on Wednesday and I will only have time to cover one portion of the digital advancements in the airline industry. With that in mind, in my presentation, I’ll cover machine learning in the cockpit to reduce workload and reduce mishaps (pilot talk for crashes). In this blog, I’d like to talk about our air traffic control system in America and the increased efficiencies that airlines hold so dear. In-air emergencies are more exciting to talk about so stay tuned for that on Wednesday.
Current state and advancements
In simplistic terms, ATC (air traffic control) is the method that planes fly safely in the sky every hour of every day. It actually starts on the ground where you receive instructions on your altitude and route of flight. ATC Ground will also give you taxi instructions to get to and from the runway in order to avoid collisions. After “Ground,” you’re handed off to “Tower” who has responsibility for take-off and landing clearance and instruction. Their airspace of responsibility is a few mile radius. After take-off, you’re handed off to a ATC controller who continues giving instructions along your route of flight. It can get confusing … and busy (check the 3:00 mark):
ATC uses multiple radars to keep in contact with airplanes and in turn, airplanes (in heavy traffic areas) are required to have transponders that will respond when interrogated by a radar signal. These transponders will let ATC know your ID, altitude, and call sign.
Now this is where the trouble begins. The US has spent billions of dollars to upgrade the software that the controllers use but we are actually behind other countries with our systems. Obviously, busy airspace will have the most up to date systems and software available but I’ve personally been in control rooms where controllers are still looking at analog radar screens. I have also sat in a control tower where they have hand written pucks on a whiteboard with call signs of airplanes scheduled to land. Its effective, but somewhat archaic if you think about it. While these controllers are absolutely amazing at directing traffic, their workload increases every year and an upgrade is much needed.
The NextGen system is what the FAA has invested in. The proposal is to take a radar and voice based control system to a satellite based system. GPS technology will be used to shorten routes, save time and fuel, reduce traffic delays, increase capacity, and permit controllers to monitor and manage aircraft with greater safety margins. Imagine in the future, a pilot would be flying straight and level in their airplane and ATC needs them to climb 2000 ft and turn right 30 degrees. Currently this process would take around 10 seconds of communication over the radio and then another 30 seconds or so to adjust heading and altitude autopilot controls. The NextGen system could eliminate the communication over the radio entirely and your GPS linked autopilot would make the necessary flight control adjustments by itself. The pilot would only be there to confirm the message and proper altitude and heading.
I know this may be a little scary, but did you know that when you’re flying in a commercial airliner, the pilots have no idea where any other planes are in the sky? Some of the other features of the NextGen system will enhance the pilot and air controller’s situational awareness to help reduce mishaps. This GPS system will allow each plane to see an area map of every other plane in the sky that is linked up with the NextGen system and will allow the air controllers to shorten the space in-between controlled aircraft.
Why is this important?
It’s all about becoming leaner and more efficient … $$$. Think about the business model of an airline. They sell a seat in an airplane. That airplane has hundreds of seats. That airplane will fly multiple times per day.
Price of a Seat x Number of Seats x Number of Flights = Revenue
We all know from first-hand experience about price discrimination with airline seats. Even though it seems like airlines are cramming more seats into planes every year, that is a fairly static variable. The major increase in revenue / productivity comes from the number of flights.
There are several variables that determine the max number of flights but decreasing the time spent on the ground in-between flights is seen as a major factor. In 2014, airlines spent $4.3 billion of fuel while planes idled on the ground. GE estimates that a 1% reduction in fuel use could save the industry $30 billion over 15 years. American Airlines is using a NextGen procedure (as the functionality is slowly being rolled out) that is saving the airline $10 – $12 million in annual fuel costs … just from ONE airport. Normally, the FAA requires 3 mile separation between departing aircraft but this NextGen procedure enables aircraft to depart with only 1 mile separation. It doesn’t seem like much when the jets are traveling as fast as they are, but that time adds up throughout the day.
Airlines are also doing as much as possible to decrease “turn times” as within each company. Boarding procedures have changed with some airlines, more efficient scheduling of crew, behind the scenes cleaning of the aircraft in between flights – they all contribute to reducing time on the ground. Even a few minutes can make a huge difference because of the volume of flights each day. Southwest has always been an industry leader and has contributed to their profitable success.
Why do consumers feel the pain?
The airline industry is a great way to trace digital advancement through an industry lifecycle. On the customer side, it often feels like airlines are trying to squeeze every last dollar out of us when flying. And as a consumer you would point out that in 2017, the airline industry posted positive profits at a margin of around 4%. They have done this for the third year in a row. So why do I have to pay $25 to check a bag!?!?
Well, this is the first time EVER that modern airlines posted positive profits three years in a row. Think about that. Most business would consider it normal to have positive profits year after year. And honestly, low fuel prices in the last few years is a major reason for positive profits. From the airline’s point of view, they’re having to adapt to fluctuating fuel prices, congestion, and an extreme amount of competition. Embracing analytics and a digital culture are helping airlines to stay competitive … and hopefully, increase customer experience.