With increasing travel demand and new competitors entering the market, aircraft manufacturers today are under considerable pressure. But each challenge is also a moment for opportunity. That’s why embracing the digital transformation of the aeronautics industry—from engineering, to manufacturing, up to services, and back, is key for growth and survival. Part of that evolution is technological and an equally important part involves implementing agility in all processes, and resilient operations. But digitalization goes beyond incorporating new technologies; it is also about adapting the human mindset to go with them.
Increased air traffic
Over the past 20 years, passenger traffic has steadily increased at a rate of 2-5% per year, resulting in an ever-higher demand for new aircrafts, and also for support and services operations. Despite economics and environmental threats, all market forecasts from main OEMs and analysts converge on a doubling fleet within the next 20 years with more than 40,000 100-seats+ aircrafts in service expected by 2035. Consequently the aftermarket is expected to grow even faster to reach US$ 8.5TR of demands over the next 20 years for commercial aviation services. During this period and with a total amount of US$ 1.5TR, MRO services should represent the biggest service area, followed by Spares, Training and Upgrades services.
This new race to better products and services is progressively reshuffling the deck among traditional OEMs, Operators and Service Providers as everyone is looking for new market segments, leading to new alliances, mergers and partnerships or unexpected rivalries.
As for every other sectors, the new digital opportunities will also accelerate the emergence of new disrupting actors challenging the existing business models and overcoming the traditional material, production and supply chain constraints.
And no doubt the competition will become even stronger with the ineluctable emergence of new OEMs such as Comac in China that will penetrate the market after certification. Some of these new competitors are improving their game when it comes to the industrial process, incorporating new technologies and approaches inspired by companies like SpaceX or Blue Origins. For sure, following 30 years of relative stability, the aerospace manufacturers are now entering a new era. The inventors of the new supersonic aircrafts concepts are not the major installed players but rather startups.
Another major challenge is the demand for greater environmental sustainability. Indeed, making flying greener has climbed as one of the top priorities of manufacturers such as Airbus, which is implementing a 10-year framework to produce ‘more electric’ aircrafts. Unlike technological disruption and increased competition, the pressure for clean flying mostly comes from consumers – young passengers who are concerned about the negative impacts of flying on the environment – although governments in France and Europe have e joined in by talking about increasing taxes on kerosene. In Sweden, the passenger traffic is dropping over the past 12 months and fell by 4.4% in the first quarter of 2019 because of the ‘flygskam’, the shame of flying.
Data and services
In parallel with these profound moves, digital services will increase to US$ 740B by 2035, generating an unpreceded competition in the “data rush” among OEMs, MROs, Carriers and major providers
The aeronautics industry is undergoing a drastic shift from being purely product-based to increasingly incorporating services. Companies are developing new business models around “usable” products, anticipating the lifecycle management, developing advanced maintenance services, offering new upgrade solutions, improving route optimization and fleet performance management, and ultimately improving the passenger experience improvement. Once again manufacturers must redouble their efforts to capture not just more, but better data, in an effort to increase their market shares. Another factor of complexity is that this shift needs to happen in a highly regulated market with a strong data ownership culture.
Companies are developing new business models around “usable” products, anticipating life cycle management, developing advanced maintenance services, offering new upgrade solutions, improving route optimization and fleet performance management, and improving the passenger experience.
4.0 Revolution: opportunities and challenges
A much-discussed trend is the “Industry 4.0” revolution, which is on track to transform not only production processes, but also the whole range of products and services – and even customer relations. It is driven by the development of a wide range of technologies, including Big Data, Artificial Intelligence, Robotics, Cobots, IoT, and also by the combination of all the facilities provided by connected factories and the IT cloud.
The IoT is enabling a lot of data capture—in flight, but also during the manufacturing process—which works wonders when it comes to boosting operational excellence capabilities, but relies heavily on AI to manage and interpret all the additional data. Technologies such as 3D printing will help boost precision manufacturing, and reduce cycle times, while digital mock-ups and augmented reality will help decrease the time spent on certification and safety compliance, for instance by enabling fully simulated (i.e. virtual) flight tests. While this application is still in its very early stages, augmented reality could soon also simulate the entire production process within the plant, and even across the extended supply chain.
But beneath all these technologies lies a broader shift, namely the integration of different digitalized blocks into a single networked system to enable a more efficient, flexible, and resilient data-driven manufacturing process and supply chain. As the aeronautics industry is heavily reliant on a large network of suppliers, some very small, improving its flexibility means significantly reducing production costs through better supply chain planning and capacity management. Last but not least, this IT integration will increase the ability of operators and their companions to make micro decisions, as more relevant information will reach them through mobile devices and connected tools.
The business case for new digital capabilities can be very significant. For example in the conformity process: integrating and linking data and documentation from the various engineering, production and quality systems can reduce the inspection time by more than 50% and the overall cycle by at least 30%. In production, there are also examples of specific manufacturing operations that can become at least 80% more efficient when enabled by digital (AR, connected devices, remote assistance).
However there are significant hurdles on the path towards ‘Industry 4.0’. Firstly, it is necessary to change the work culture at the same pace as technology. In other words, we must ensure that people have the space to adapt to these tools and to implement completely new ways of working. That’s why reskilling and (re)training is essential. Equally important is the management’s ability to collaborate and avoid silo behaviors. To do this, greater responsibility will inevitably be assigned to HR departments and managers to ensure that the client’s needs and company’s objectives are met with the right people on board. Of course, it is essential to achieve this without any disruption to the production rate.
Beyond this aspect of work culture, the talent war is already in full swing and is expected to continue in the foreseeable future as it is currently very difficult to find the right data scientists and people who can create the algorithms to effectively test, simulate and analyze the root causes to support these digitalization efforts.
How to transform towards services
The evolution towards services is a natural step in the adoption of what digital technology has to offer. That’s why modeling (meaning organizational, process, and data modeling) is important to understand how the company works (or should work), and to support it through digital continuity—from engineering, to manufacturing, to services – while keeping in mind the final customer needs. This means the ability to integrate during the design and engineering phase the data generated during operation and maintenance to produce better aircrafts. Once established, a solid feedback loop is likely to generate a whole range of new services by correlating traffic data with route, airline, passengers, and maintenance data. We can envision the aircraft manufacturer of the future as an organism, i.e. in constant interaction with external and internal partners, reconfiguring services according to market priorities.
Companies must therefore begin to see themselves as part of a broader value chain. This involves creating partnerships, working closer with suppliers and customers, but also entrusting parts of their algorithms to external partners and startups in order to better manage the overall production process (AI, optimization engines). In other words, the big shift is to realize that they are part of a larger ecosystem. For many companies this consciousness is already there. But they are struggling to make it a reality.
The Platform Enterprise, as we call it at Sopra Steria is all about managing this ecosystem using cloud-based capabilities, such as collaborative design, forecasting, data capabilities, predictive processes, and interconnected platforms. It is about creating convergence through high quality and accurate data, with the ultimate goal of ensuring digital continuity. Companies that are successful in improving their data quality and analytics capabilities as well as closely managing their ecosystem will ultimately improve their operational performance and are also likely to increase their competitive advantage.
Moving into the digital era
With so much at stake, it is essential to manage the increasing complexity of the transformation challenges ahead. This means avoiding the pitfalls of proof of concept without a real business case. Too often, companies take shortcuts: while they increasingly adopt digital technology to change sub-parts of the process, they are reluctant to redesign the entire process. In such movements, data and people need to be at the center. This reengineering effort needs to focus on providing the right data to the right persons so they can make the right decisions. This data-driven disruption must be carefully managed to prevent workers from feeling threatened or replaced.
Yet, to truly embrace this digital era, companies must go beyond process improvement and move towards true transformation. To do so, operational excellence is key, and above all, they must understand who their customers are. This requires thinking about the services that could be provided at an early stage of product design and being resilient enough to adapt these offerings and the related back-office to market signals.
Overall, the shift towards services is about having a holistic view of the company in its ecosystem, understanding technology, and adopting a pragmatic but rigorous approach for implementation and deployment. That transformation will ultimately be enabled by agility and resiliency at the company level. In this digital era, companies must consider their people and information systems as strategic assets. At the same time, a balance must be struck between innovation and the need to ensure that the company’s core DNA and workplace culture are not completely disrupted.
This requires a long-term vision.
Discover our experts insights shared during the Paris Air Show