Arthur D. Little (ADL) published a major new report on the future of the commercial aviation market. It predicts the sector will change more in the years between now and 2035 than in its entire previous 80 years. This will impact airlines, aircraft providers and infrastructure providers in terms of their business and operating models, driven by demand evolution, technological breakthroughs and changes in regulation.
Based on analysis of 15 megatrends, including mass customization, new OEM competition, providing aircraft as a service and modes of aviation such as short haul drones and hypervelocity, ADL’s Aviation 2035 report outlines five potential scenarios for the sector:
1. Base scenario – lean through automation. The whole industry improves margins through technologies such as data analytics, AI and 3D printing that enable greater automation.
2. Aviation as oligopolies. The industry is structured around a set of global champions in each sector of the ecosystem, with consolidation enabling them to monetize scarce resources.
3. Aviation as utilities. Regional champions dominate, but are limited by factors around regulated demand, pricing and ownership, in a similar way to the utility sector. Strong environmental regulation limits total industry revenue, but contains competition.
4. Aviation as a service. Airlines are weakened, becoming white-label operators with downstream and upstream operators able to capture value by integrating vertically, controlling access to clients or by managing scarce resources.
5. Aviation as a department store. Airlines retain control of customers, but their brands disappear as aircraft cabins are monetized to third parties. Fleets are managed by aircraft-as-a-service providers.
Mathieu Blondel, Partner at Arthur D. Little, explains: “By 2035 our analysis predicts that we will see a fundamentally different commercial aviation industry, impacting the position, revenues and margins of airlines, aircraft providers and infrastructure providers. The five scenarios set out in our report show the flight may be bumpy, so companies need to take action now if they want a safe landing by seizing opportunities and mitigating potential risks.”
The report also highlights that technology, such as connectivity, cyber-security, blockchain, artificial intelligence and automation will have a major impact at ecosystem level, enabling moves along the value chain and the reinvention of operating and revenue generation models.