Airlines Eye Future of Flying, Open Doors to Modernization

(The Boeing Company)

From shrinking computers to the size of fingernails to powering cars with batteries, technology has come a long way in just 10 years. But one multi-billion-dollar industry responsible for transporting millions of people and goods around the world everyday has been slow to evolve.

Airlines have traveled far from the glamour of 1960s Pan Am. Five-course meals and spacious seating have been traded for microwavable sandwiches and cramped cabins.

The sector has been battered for years by high fuel costs and dwindling demand that squeezed margins and forced airlines to heighten their focus on cost management, putting emphasis on things such as ancillary fees for baggage and entertainment over upgrades desired by passengers.

But a new jet stream seems to be clearing some of those turbulent skies, and the desire to modernize is not only resurfacing, but coming back bigger than ever.

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“There’s a cry out from customers saying, ‘Just understand me a little better and give me the right package that caters to the needs for which I’m traveling,’” said Paul D'Alessandro, PricewaterhouseCooper’s global customer impact practice leader.

Every major U.S. airline, including United (NYSE:UAL), Delta (NYSE:DAL) and most recently American Airlines, have been forced into bankruptcy over the last 10 years, enabling them to shed unprofitable assets, renegotiate labor contracts and acquire more fuel-efficient fleets.

With cash freed up, the carriers can now focus on investing in new products, technologies and services that can actually help improve the experience for fliers, instead of alienating them.

Dear Airlines, Understand Me Better

Airlines “need to start looking at ways to improve revenue,” said PwC's U.S. transportation and logistics advisory leader, Jonathan Kletzel. “The ability to differentiate has become very important,” he said, with a particular focus on customer experiences and products.

Many people are willing to pay a premium for certain services, such as leg room, bigger bathrooms, better customer service and advanced entertainment systems that improve the overall travel experience, according to a new PwC study of 6,000 U.S. consumers.

“If there’s a super long line, maybe I’m willing to pony up a few extra bucks for it,” Paul D'Alessandro said. “Maybe I want to have a little more control over the seat I’m in.”

One way to do that is by marrying activity tracked through loyalty programs with customer transaction history. Now often held in separate databases never to be crossed, D'Alessandro called it the “underutilized side of that technology.”

“There’s some cool stuff you can figure out with the way people contribute to loyalty programs,” he said.

For example, if airlines know a passenger often travels with children, they could take precautions such as moving around seating so the family sits together to ensure the experience runs as smoothly as possible. If a business traveler’s last flight was delayed, that flier may be able to get on the next flight ahead of a frequent flier or receive priority in the future.

Today’s consumers are “more sensitive to risk than ever before,” and if airlines cater to certain flier groups by providing extra services that help alleviate some pre-flight anxiety, they may find a niche market with loads of money-making potential.

To be fair, some companies have started making improvements, such as mobile apps and self-serve kiosks that expedite the check-in process and save costs by eliminating excess staff.

Captivating Captive Passengers

Airlines also need to start taking advantage of new technologies in entertainment.

“Passengers being entertained on the aircraft don’t think about the discomfort they’re experiencing by being crammed in a seat,” Kletzel said. They need to create a platform for entertainment on jets that is “modular, expandable and upgradable,” he said.

Some carriers have already updated personal entertainment systems, integrating mini screens that provide DirecTV (NYSE:DTV) and Amazon (NASDAQ:AMZN) shopping into individual seats.

But D’Alessandro says the options are endless, especially when considering there are more than 150 passengers virtually held captive on a jet for an extended period of time.

“There are all kinds of things you can do once you think of putting technology on the aircraft,” he said, including utilizing social media technologies to tap into the various age groups and interests of passengers.

The future of air travel, D’Alessandro said, may even include virtual zones within the aircraft that enable, say, business travelers, retired passengers or teens to socialize within their individual circles.

Gamers, especially, may be willing to pay extra money to duel others on the flight.

However, big changes such as these that call for months of testing with the Federal Aviation Administration and are expensive may still be years out, airline analyst Bob Herbst said.

The New ‘Everything’ Aircraft

Perhaps a change that will come sooner to the industry will be more modern and fuel-efficient jets, such as Boeing’s (NYSE:BA) 787 Dreamliner, which has been called a "game changer" for the sector.

Herbst, who founded AirlineFinancials.com, said the 787 is the first “everything aircraft” since the 747 launched almost 40 years ago.

With a large dome entrance that gives the aircraft a bigger feel, overhead bins that curve up toward the ceiling, LED lighting themes that emulate the sky, air that makes the ride more natural for passengers and noise dampening materials on the plane’s exterior that make the cabin quieter, some say it's the gateway to air travel of the future.

One of the more notable aspects of the 787 is windows that are almost a third bigger and provide more ambient light. Embedded with new technology, they give passengers the power to dim sunlight without ever closing the shade.

“It doesn’t really feel like you’re in an airplane in the same way, feels more like you are in the sky,” said Blake Emery, director of differentiation strategy at Boeing Commercial Airplanes.

For airlines, new jets are especially desirable because their streamlined designs make them more fuel-efficient, important since fuel can take up as much as half of their quarterly bills.

“It would be natural to expect that in the face of difficult economic times, airlines that wanted to upgrade, modernize their fleet, probably put that off because business was tough,” said Emery, who is known as Boeing's "interiors guru" because he helps implement changes to jet cabins to improve the travel experience.

The International Air Transport Association may have downgraded the industry this week -- citing rising fuel costs -- but Kletzel said that even if prices take a turn for the worse, mass changes will still arrive, they'll just be delayed.

“You get to a point where you can’t not modernize because you can’t afford to put gas in the thing,”  Emery said.