The Cloud Imperative for Airlines

The Airlines industry is in the midst of a turn around post pandemic,  driven by sharp rise in both business and personal travels. Between 2020 and 2040, air passenger traffic is expected to increase at an annual rate of 3.3% and the cargo volumes are expected to grow by 50% by 2030. While the demand situation paints a rosy picture for the industry there are significant challenges in front the airlines to be addressed in order meet the demand and to provide seamless travel experience for the customers, managing operations to avoid flight disruptions/delay and focusing on their sustainability goals to meet the targets.

Some of the challenges ahead for the airlines to meet this increase in demand:

  • Providing seamless passenger experience from pre travel to post travel.
  • Avoid flight delays and reschedules due to increase in traffic and operational issues
  • Managing complex operations while addressing scalability
  • Addressing privacy and security concerns of passengers
  • Compliance to industry standards and regulations
  • Attaining sustainability goals

These challenges are amplified by the complexity in the Airlines technology landscape

  • Core Legacy Systems slowing the transformation and innovation efforts
  • Disparate and siloed systems leading to inefficiency and redundancy
  • Data Silos resulting in delayed and inaccurate decision.
  • Legacy business process not keeping pace with the changing digital landscape
  • Aging Infrastructure resulting in risky operations

Cloud Technologies are coming to rescue in addressing these challenges and will play a significant role in scaling up to meet the growth expected in the coming years. Aviation industry is in the forefront of adopting cloud technologies to improve passenger experience, operational reliability and financial performance.

According to a report from SITA, 83% of airlines are currently investing in cloud services, up from 67% in 2016. Also, 67% of airlines plan to migrate their core systems to the cloud by 2025, up from 33% in 2019. A recent Amadeus report , cloud technology is expected to help airlines reduce IT costs by up to 50% and improve time-to-market by up to 70%. In the same report, 62% of airlines cited scalability and flexibility as the top reasons for moving to the cloud, followed by cost savings at 57%.

Cyber Security and Sustainability are other areas where there is going to be increase in investments. By 2024, 94% of Airports investment priority is Cyber Security while 86% plan to invest in Cloud Services ~ SITA. The Global air transport industry has set goal of achieving net-zero carbon emissions by 2050.

The Airlines industry is constantly evolving and adapting to the changing needs and preferences of travelers and guests. The emerging Industry clouds phenomenon also helps in transforming the airlines business and unlock efficiency and innovation for Airlines to meet this growing demand. From strategic planning,  optimizing the supply chain, Integrated resource planning, reducing flight delays, to creating a frictionless travel journey for their customer, cloud is driving several transformations initiatives in this sector.

Some of the key themes in the cloud adoption where Airlines are investing are:

  • Superior Customer Experience :  Airlines investing on 360 degree customer data to provide personalized booking options, seamless travel experience and inflight shopping recommendations to attract new customers and increase in sales.
  • Legacy Modernization: Process and technology revamp are helping in rebuilding the core and modernizing the applications helps to break siloes and enable end to end process automation.
  • Efficiency in Cargo handling : Increase in share of cargo in airlines’ total revenue from 12% in 2019 to 40.3% in 2021 is clear evidence of cargo being a critical source of revenue to the air transport industry. Cargo handling process digitization and automation is going to drive next level of growth to the airlines.
  • Sustainable Practices : A recent McKinsey survey indicates that 40 percent of travelers globally say they are willing to pay at least two percent more for carbon-neutral flight tickets. Airlines are investing in platforms and technologies that help in tracking energy consumption and offering eco-friendly amenities to cater to travelers keen on sustainability.
  • Business Intelligence and Analytics : The global aviation analytics market size grew from $2.7 billion in 2022 to $3.02 billion in 2023 at a compound annual growth rate (CAGR) of 12.0%. Data driven decision making and predictive analytics is going to play huge role in cost optimization and innovative use cases like AI powered pricing.
  • Cloud Platforms : Leveraging Cloud Platforms to adopt standards like NDC (New Distribution Capability ) which will give greater control to the Airlines for their distribution strategy, looking less at cost-savings and more towards revenue generation across channels.
  • Immersive Experiences : A recent McKinsey report suggests that value creation through the metaverse can be a massive $5 trillion by 2030. Airlines cannot afford to miss these technology opportunities to provide differentiated customer experience, enable collaboration among employees, improve efficiency in training and solving complex problems.

It is evident the cloud technologies and platforms are going to drive lot of investment from Airlines in the coming years and help the industry for the next level of growth.

Author Details

Shanmugam Periasamy

Seasoned Digital Strategy and Enterprise Architecture professional, playing diverse leadership roles in building products and platforms, Solution development, Enterprise Architecture, Technology Consulting and implementation leveraging global delivery model. Helped several global clients navigating their digital transformation journey and delivering business benefits. Passionate about working with people and technology in creating deeper impact and values to customers.

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