Business aviation: how digital is changing the service sector

Alcimed, a consulting company specializing in innovation and the development of new markets, provides an update on the arrival of new services that have disrupted the business aviation sector in recent years. Between flight aggregation and integration of optimization services, digital technologies help to optimize operational costs.

After going through a crisis in 2008, the business aviation market is getting a second wind. Beyond the increase in aircraft deliveries, the service sector is experiencing unprecedented growth, allowing the emergence of new opportunities not only for the historical players but also for others.

Services, the new source of value in the business aviation market

Aircraft manufacturers, the first to have understood the potential of MRO[1] services following the 2008 crisis, are seeking to capture value by integrating these services into their activities. Examples include CESSNA, which has purchased MRO centers at several airports including Zürich and Düsseldorf. Similarly, Dassault Falcon services capture 35% of the MRO operations pertaining to its Falcon fleet.[2]

This trend also applies to digital services, which create value for operators of business aircraft fleets. These operators, who have always prioritized passenger satisfaction, are now seeking to reduce operational costs. Digital technology makes this possible through the optimization of flight bookings and therefore aircraft use, but also through the development of services to optimize flight and ground operations.

Coming soon: a “Kayak” dedicated to business aviation?

The business aviation market is inherently very different from that of commercial aviation. The majority of aircrafts are owned either by enterprises or VIPs, both with irregular transport needs. As a result, the rate of use of a business aircraft by its owner is significantly lower than that of a commercial aircraft.

To reduce operational costs, owners are therefore attempting to charter their planes, i. e. place them at the disposal of other customers. To do this, they must use the services of brokers: individuals or SMEs with a large network that can bring owners and customers into contact. For the most part, this process is manual, unlike in commercial aviation where online aggregators have been created (Kayak, Skyscanner, Opodo, Kiwi, etc.). These tools are a great way to offer customers a multitude of flights from different airlines, all in one place.

The trend today is to automate these processes also in business aviation. “The major challenge for digital players is to be the first to offer a fully automated platform that connects customers and flight operators. Actors such as Avinode or Stellar are now well on the way. Such solutions could also allow a democratization of business aviation with flights at more affordable prices.” adds Alexandre Savin, Director of the Toulouse office.

N.B.: The connectivity market in 2025:
Business aviation experienced a severe crisis in 2008 and saw the number of annual deliveries decrease from 1313 in 2008 to just 678 in 2013, meaning a 49% drop over a period of five years. Since 2014, the market has been recovering with an average annual growth in deliveries of 3% which is expected to continue until 2021. This growth is highly dependent on the American market, which now accounts for nearly 50% of the world fleet and, which will capture 60% of the total number of new deliveries until 2025. (Source: Jetcraft, “Ten Year Market Forecast”, 2016)

Service providers position themselves as “On stop shops”

The second trend concerns flight optimization services including software for:

• – flight planning
• – trajectory improvement
• – reduction of fuel consumption
• – ground optimization applications such as performance calculation or operation monitoring applications (flight planning, cost tracking, price optimization, etc.).

These services are experiencing significant growth and suppliers are attempting to aggregate as many of these services as possible in order to position themselves as “one stop shops” on the market by offering a complete and integrated offer. “The main service providers are predominantly American, with the big five represented by Honeywell, Rockwell Collins, Universal Weather, Jeppesen, and Colt Universal but some European players, such as RocketRoute, are starting to stand out.” adds Paul Achkar, a consultant at Alcimed.

Becoming a “one stop shop” is achieved through establishing partnerships. One example is RocketRoute, which saw an investment from BP, in partnership with Avfuel to extend its network of suppliers and thus optimise fuel costs, and Traxall to optimise maintenance. The company has announced its intention to become the “Amazon of Aviation”[3]. Also worth mentioning is Jeppesen, which has recently unveiled its “Jeppesen Operator” platform, in partnership with BoldIQ, a specialist in algorithms and optimization tools. The aviation services market is now being transformed by digital technology. Major changes are underway, and it will be necessary to follow the choices of the various players (aircraft manufacturers, major equipment manufacturers, SMEs and innovative start-ups, etc.) to gain a more accurate picture of the future landscape of business aviation services. Beyond historical markets such as Europe and the United States, it is also necessary to monitor China, a market that is now closed, but has a considerable development potential.

[1] MRO: Maintenance, Repair and Overhaul – aircraft repair services
[2] Source: Les échos, 2016, Dassault installe la maintenance des Falcon à Mérignac
[3] Ainonline, 2016, http://www.ainonline.com/aviation-news/business-aviation/2016-11-04/rocketroute-aims-be-amazonaviation