How Big Data Helps Today’s Airlines Operate
Companies all over the world have placed a lot of value on getting more insights from big data analytics. That’s not without good reason.
If you can relate to the stress of rushing to the airport, long security lines leading to crowded terminals, boarding passes and IDs, checking and stowing bags, cramped compartments filled with travel weary passengers you probably consider yourself an experienced airline passenger. However, knowing the ins and outs of flying as a passenger doesn’t give the average person insight into the complicated operations side of airlines today. The intense competition within the airline industry leads to innovation as companies seek to save and make money and increase efficiency, with a recent focus on the advantages big data provides.
Examples of airlines creatively using big data to improve performance abounds. United Airlines shifted focus in 2014 and began using the mantra of “collect, detect and analyze” data and saw a 15 percent year-over-year revenue increase in their online sales after offering customers a tailored, big data driven shopping experience. Delta invested in baggage tracking data and then created a baggage tracking app for customers that has been downloaded over 11 million times. Southwest started using a big data platform tracking their Boeing planes’ fuel usage trends, which is saving the airline millions of dollars annually. Japan Airlines recently launched a data collection system that measures temperature on airplane components with IBM Japan. The idea is to collect enough data to predict technical problems and prevent costly flight cancellations.
With total worldwide air traffic predicted to double over the next twenty years, it’s apparent that airlines need to keep innovating with big data. Kenny Jacobs, European airline Ryanair’s chief marketing officer, believes that big data is the key, “This has transformed retail and it’s going to transform retail.” Backing up that statement, Jacobs has initiated hiring 150 IT specialists saying, “Airlines are not good at [big data]. We’re still crap compared to what retailers do.”
One challenge airlines face is that unlike just collecting and storing data, big data means processing and utilizing data almost in real time. This requires updated systems and often an IT transformation so airlines have the ability to process and use data quickly. Due to lack of infrastructure, many airlines are teaming up with third party big data processors to help them access big data benefits immediately. Outdated software can cost airlines millions, as United Continental has discovered with their almost obsolete seating and pricing software, Orion. The system is so dysfunctional it reportedly requires human intervention two-thirds of the time and has cost the airline nearly one billion dollars in revenue. United makes an estimated eight million price forecasts a day and needs a robust system that can handle the volume.
The main categories big data is currently used to improve are cost-saving airplane maintenance, safety measures, customer service, marketing and customer experience. The maintenance trend that’s emerging shows airlines using sensor data from flights and then analyzing it using big data to enhance prevention measures. The hope is preventative maintenance will led to few cancelled flights and lower safety risks. Experts also recommend airlines use big data to tailor both their shopping experience and customer service experience to each customer. As modeled by Amazon, experts argue that personalizing the experience builds loyalty and increases revenue. In the future, flight crews may be able to address you and your fellow passengers by name, as well as know your music and drink preferences using data from loyalty programs, questionnaires and even social media.
With budget airlines fiercely competing for market share, one of the most widely used big data tools is pricing optimization. Some people think airlines still have a long ways to go. John Walton, an aviation journalist, believes that many airlines aren’t using big data’s smart targeting capabilites. “I see few visible signs of European airlines — or indeed other airlines — using the rich data they hold to drive bookings and revenues,” Walton said. Airlines are now able to build profiles of passengers that direct them which pricing and packages to display. Using information such as flying habits, past purchase data, income and more they’re able to determine what you’d likely want to spend on a ticket. Airlines are also focused on earning ancillary revenue, for which big data could also be a helpful tool. Identifying and targeting passengers who need additional services such as in-flight wifi or transport to or from the airport could generate billions of dollars of additional revenue.