Virtualization of Air Transport 2025+

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1 Virtualization of Air Transport Investigating the growing impact of mobile & virtual information technologies on the future passenger experience

2 Copyright Statement Copyright Technische Universität München, Airbus & Bauhaus Luftfahrt e. V., Study performed by Technische Universität München, Airbus & Bauhaus Luftfahrt e. V. without any commercial interest. Please note that all results, diagrams and pictures documented in this handout are only for internal use. This document shall not be reproduced or disclosed to a third party without the expressed written consent of the Institute of Aircraft Design, Technische Universität München, Airbus and Bauhaus Luftfahrt e. V. Munich & Hamburg, July 2014

3 Project responsibilities Technische Universität München: Felix Will Airbus Operations GmbH: Nicolas Tschechne Axel Becker Bauhaus Luftfahrt e.v.: Paul Langfermann Process design & moderation: Felix Will Nicolas Tschechne Axel Becker

4 Contact Technische Universität München Lehrstuhl für Luftfahrtsysteme Boltzmannstraße Garching Dipl.-Ing. Felix Will Tel: +49/(0) Airbus Operations GmbH Cabin Innovation Strategy & Concepts Kreetslag Hamburg Dipl.-Ing. Axel Becker Nicolas Tschechne, M.Sc. Tel: +49/(0) Tel: +49/(0) Bauhaus Luftfahrt e.v. Lyonel-Feininger-Straße München Paul Langfermann, M.Sc. Tel: +49/(0)

5 Project participants Robert Adam Student TU München Dominik Bauer Student TU München Axel Becker Airbus Operations GmbH Felix Beierke Student TU München Johannes Deckert Student TU München Paul Langfermann Bauhaus Luftfahrt e. V. Thomas Lumpe Student TU München Oliver Malaschewski Student TU München Nils Mohr Student TU München Siro Moreno Martin Student TU München Sandra Muschkorgel Student TU München Michael Olbert Airbus Group Innovations Sebastian Raßmann TrendOne GmbH Murat Cagri Saygin Student TU München Christoph Schneider Flughafen München GmbH Nicolas Tschechne Airbus Operations GmbH Marc Vogtmann Student TU München Felix Will TU München - LLS

6 Overview Institute of Aircraft Design As part of the Institute for Aerospace at the Technische Universität München the Institute of Aircraft Design focuses on the three topics: Scenario Analysis, Future Trends & Technologies Aircraft Design (civil & military) Analysis & Evaluation of Air Transport Systems Final Presentation Virtualization of Air Transport TUM 8/5/2014, slide 0

7 What are the main objectives of the practical course Air Transport Scenarios at TUM? To deepen the insight into the cross impacts within the air transport system on basis of a specific issue Presentation of scenario techniques as a methodology for strategic planning Strengthening of soft skills: structured communication, organization and discussion within groups and plenum, presentation of complex results cross-system thinking within aviation presentation of scenario methodology strengthening of soft skills Final Presentation Virtualization of Air Transport TUM 8/5/2014, slide 1

8 Airbus Cabin Innovation, Strategy & Concepts An industry leading Think Tank for innovative Cabin & Cargo Solutions and Industrial Design Driven by passenger & airline needs and Airbus productivity. Creating cabin & cargo innovations and design solutions as a key differentiator. Maintaining a global cross-industry expert network. Final Presentation Virtualization of Air Transport TUM 8/5/2014, slide 2

9 8 th Scenario Project of Airbus Cabin Innovation & Design with TU München and Bauhaus Luftfahrt Final Presentation Virtualization of Air Transport TUM 8/5/2014, slide 3

10 Virtualisation in Air Transport? Final Presentation Virtualization of Air Transport TUM 8/5/2014, slide 4

11 Know Where We Are Coming From Final Presentation Virtualization of Air Transport TUM 8/5/2014, slide 5

12 Driven By A Mobile Revolution Inauguration of Pope Benedict in 2005 Inauguration of Pope Francis in 2013 Final Presentation Virtualization of Air Transport TUM 8/5/2014, slide 6

13 Cross-Industry Does Not Stop To Push Final Presentation Virtualization of Air Transport TUM 8/5/2014, slide 7

14 We re Already Adapting Final Presentation Virtualization of Air Transport TUM 8/5/2014, slide 8

15 Setting The Scope New Interfaces / Touchpoints Hardware vs Software? New Business Models Next generation real-time services? PEK HAK Virtualization along the entire travel chain New Players / Stakeholders Who s in control? Final Presentation Virtualization of Air Transport TUM 8/5/2014, slide 9

16 Note - It s NOT About How It Looks Final Presentation Virtualization of Air Transport TUM 8/5/2014, slide 10

17 But What These News Mean For Us Etihad Airways partners with Google to make flight search easier Oculus Rift CEO: we want to put 1 billion people in virtual reality Android in everyday lifes at Google I/O How Google Glass steals your PIN Final Presentation Virtualization of Air Transport TUM 8/5/2014, slide 11

18 Thus Core Questions To Be Addressed 1. What are the relevant factors influencing the future virtualisation of air transport 2025? 2. How might the air transport system change in the process of increased virtualization until 2025? 3. Who are the future stakeholders and how is the eco-system set up? 4. How will an increasing virtualisation impact the ability to control the passenger and who will be in the position to do so? 5. What are the strategic consequences for the current major aviation players, airlines and airports in particular? Time: 2025 Region: Global Final Presentation Virtualization of Air Transport TUM 8/5/2014, slide 12

19 Do We Have The Answers Yet? Welcome Scenario Methodology Final Presentation Virtualization of Air Transport TUM 8/5/2014, slide 13

20 Prognoses of declared experts can turn out to be very risky Heavier-than-air flying machines are impossible Lord Kelvin, President Royal Society First powered flight by the Wright brothers December I think there is a world market of maybe five computers Thomas Watson, chairman of IBM Despite all technical improvements, mankind will never fly to the moon Lee de Forest, inventor of the cathode tube First man on the moon Neil Armstrong July Final Presentation Virtualization of Air Transport TUM 8/5/2014, slide 14

21 Scenario techniques help to cope with uncertainty in future developments A scenario is a consistent picture of a comprehensive, future situation and a description of how this situation has emerged Source: Daimler STRG Analyze complex and highly interconnected systems Used in strategic planning and corporate foresight: discover chances and risks that the future might bring The question is not what will happen but what might happen? Final Presentation Virtualization of Air Transport TUM 8/5/2014, slide 15

22 Framework of and participants in the scenario project Virtualization of Air Transport students of Technische Universität München Moderation and concept by TUM & Airbus Industry experts from Bauhaus Luftfahrt, Airbus Operations, Airbus Group, Flughafen München, and TrendOne 3 two-day workshops Homework Workshop I (2 days) Workshop II (2 days) Workshop III (2 days) Final Presentation Kick-off Final Presentation Virtualization of Air Transport TUM 8/5/2014, slide 16

23 Methodical approach of scenario projects at TUM-LLS Scenario transfer Problem definition Implication analysis Environment analysis Scenario storyboards Consistency analysis Scenario frameworks Final Presentation Virtualization of Air Transport TUM 8/5/2014, slide 17

24 Intuitive extension of the scenario frameworks Tool (RAHS) Technische Universität München Combination of model based and intuitive scenario development Development of three alternative raw scenario frameworks based on app. 10 key factors Comparison and discussion to ensure the differentiation of the frameworks Formulation of plausible and consistent storyboards factor 1 factor 2 factor 3 factor factor factor factor factor factor Selected factors projection 1 projection 2 projection 3 Scenario A Scenario B Scenario C Final Presentation Virtualization of Air Transport TUM 8/5/2014, slide 18

25 Factor 1 Projection 1 Projection 2 Projection 3 Technische Universität München Developing scenario framework using RAHS RAHS (Risk Assessment and Horizon Scanning) developed by Bundeswehr: Various methods and online tools for future analysis Development of scenario frameworks Input: Consistency analysis of all selected factors Scenarios clustered in 11 clusters according to similarity Factor 2 Projection Projection Final Presentation Virtualization of Air Transport TUM 8/5/2014, slide 19

26 Process overview and Introduction to students presentation Scenario process To be presented now Environment analysis Virtual Reality - A Reality today 2025 Alliance Arena - Go big or go home Unpopular Virtualization - Back to Basics Structure of the three scenarios presentations: 5 Key statements Scenario description SWOT analysis Final Presentation Virtualization of Air Transport TUM 8/5/2014, slide 20

27 Stakeholders New technologies People Data availability Laws and Regulations Factors Greying society Oliver Malaschewski, Dominik Bauer

28 Identified factors influencing the virtualization of air transport Social Acceptance of virtualizing technologies Need for information along the travel chain Willingness to release personal data Willingness to pay for virtual products Importance of brand profiles Self determination and control Development of individualization Diversification of passenger distribution Demographic change Influence of social crowd Economic Rentability of aviation companies Influence of internet companies on the aviation industry Number of market participants Influence of new business models on virtualization Business model- vs. technology development Technological Availability of travel relevant information Substitution of real, social interaction with virtual interaction Development of internet of things Level of intermodality Ability of aviation industry to adapt Availability of rare earths (resources) Political Cyber criminality Legislation of data protection Legislation concerning virtual applications

29 cooperation shared personal data Scenario A Virtual Reality A Reality intermodality individual information global data security laws Murat Cagri Saygin, Nils Mohr

30 Scenario framework

31 5 Key Statements People see the benefits of virtual technologies and happily use them without concerns. Very strict international law enforcements are created in order to fight cyber criminality and to secure personal data. Virtual technologies become a necessary part of daily life, leaving no choice of avoiding them. The amount of information is too high to cope with, therefore people are willing to pay for selected information and individual services. High influence of the internet industry on aviation through cooperation between internet and aviation companies.

32 Storyboard Part 1 New virtual technologies having various applications in everyday life are offered to a wide area of people. More and more people experience these technologies. People slowly start to accept and use the technologies, seeing their benefits. Over time, people actively want to use them demanding a stronger integration of individual software applications and services in daily life. Because of this, additional improvements and enhancements of products will be made. Airports and planes are used by a huge variety of people, while the demands of passengers are equally versatile. Passengers demand individual, customer focused services and additional features to improve the overall customer experience along a trip. Sharing data however, is still a problem due to limited trust in the companies receiving the data. The available information grows. Slowly, the amount exceeds the information a single user is still able to browse and sort. As a result, the willingness to pay for selected data of trustful companies rises. People expect customer centered information and only want the information they are interested in. This information has to be distributed on safe and secure channels in order to provide trust in data security. Internet companies boost the enormous possibilities of these technologies anticipating the chance of high profits. Different cooperation between aviation and internet companies arise. Aviation stakeholders, such as airports and airlines, bring in hardware and technological knowledge while internet companies offer software knowhow and additional data about potential passengers.

33 Storyboard Part 2 Customers and companies require official regulations and guidelines for data usage in order to ensure a continuous development. Politics recognize the big potential, but also the danger of virtual technologies and start cooperation between countries concerning virtual technologies and data safety. This leads to stricter and more equal laws around the globe to enforce the protection and security of users everywhere. On this basis technologies gain more and more trust and a even broader acceptance among users. A second important step is the influence and ability for users to have control about their specific data. The user is able to delete any kind of data or block access for specific usage or services, like the Google Forget service introduced in These facts further increase trust of people in data protection which leads to more shared data. The big growth in usage and acceptance in the public drives companies to substitute real services with virtual ones. People use technology more often and get familiar with these devices. For personal use it is also normal to share data and trust in privacy and security. Despite the high acceptance it is difficult to take this step because of the few people refusing these technologies. It is necessary to use these technologies, and refusers are left behind. By sharing these big amounts of data in addition to the cooperation among companies it is possible to make custom-tailored offers to customers. Subsequently, the customers are able to make conscious decisions for their personal requirements. Companies can predict accurately a range of specific services and there is no need for the user to consult other people. Because of this, the influence of the social crowd slows down. The changes offer a whole new range of possible business models.

34 Storyboard Part 3 The new business opportunities form a perfect ground for new startups to push into the market trying to fulfill customers demands. Some of the new companies survive or even get acquired, but other ones die a short time later. Some established companies transform their business models too late and can no longer survive at the market. People appreciate the variety of customer centric services. The attractiveness of the travel chain and improved efficiency increases customer satisfaction. Additionally, customers are willing to pay for new technologies and their benefits. Furthermore, airlines succeed in the monetization of their captive audience. As a result, airlines achieve increasing revenues. With the available data it is also possible to offer synchronized customer processes within the different modes of transportation. Stakeholders are now able to predict and influence the movements of each single customer. With these predictions it is possible to reduce waiting times for the passenger as well as guide him through the airport. This reduction is again only possible because of the shared and available data and different cooperation.

35 Timeline with scenario specific events 2015: Technology is available and first products are presented to the public 2019: Data security laws are made and standards are set up relating to data storage and transfer 2025: Majority of people share and store personal data with the big benefit of very individualized products 2016: Advanced and optimized products are released and cooperation with internet companies start 2023: People are exited in the technologies and trust in data security which leads to a strong acceptance in public

36 SWOT Analysis Munich Airport Lufthansa Strengths Fast implementation of new services possible Cooperation with Lufthansa and Google Image of airport Munich as innovation driver (first to market) With LH Technik and LH Systems knowledge is already available A very good customer database is already available Weaknesses Infrastructure development/inflexibility for new expansions Amount and diversity of stakeholder/different alliances Services and know-how are not as good compared to internet companies All data is limited by the partners in the cooperation Opportunities Automation of airport processes Additional and improved services and business models possible Willingness to pay for services increases Virtualization adds new possibilities to the portfolio of Lufthansa Loyal customers appreciate a dialog about new features Threats Passengers are lost to internet company and non ticket revenues might decline Know-how transfer to partners The brand Lufthansa can lose its image due to many cooperation and partners Low revenues generated by virtual services Too late with virtual services

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38 Bild Powerful alliances Scenario B Alliance Arena Go big or go home! Passive acceptance of new technologies Globally standardized data protection People freely giving out data Partial substitution of personal through virtual interaction Felix Beierke, Siro Moreno Martin

39 Scenario framework

40 5 Key Statements Huge cyber attacks cause declaration of globally standardised data laws protecting private information while allowing necessary information flow (e.g. travel data). Over time, a trustful atmosphere appears to freely release data. Strong alliances are forged through cooperation between air transport and internet companies. Few alliances remain on the market, small companies disappear. Companies have to be careful not to overwork the customers limits of acceptance. Travel chain is partly substituted by cheaper virtual counterparts.

41 Storyboard Part 1 In 2015, criminals gain possession of personal client data of several huge internet retailers (e.g. Amazon and Taobao) in great extent. The economical damage is enormous triggering a worldwide paradigm shift. Guidelines and restrictions for data security are introduced which are then ratified by all UN-member countries. The obedience of those rules yields to a worldwide decrease of cyber criminality, thereby producing a trustful environment in which individuals are less concerned the risks of giving away their data. However, these data restricting laws lead to an inability of the companies to trade with customers data without the explicit allowance (e.g. during booking flights). The positive attitude of the broad public towards receiving and giving out information increases the demand for personalized information along the travel chain and the influence of the social crowd on individual decision making. Although the attitude towards new technologies is positive and despite being able but not willing to live without new technologies, the people are not actively demanding them and feel reluctant to pay for new virtual applications.

42 Storyboard Part 2 The easy accessibility of useful data combined with the increased demand for information of the customers enables the increase of costumer benefits. The expanding market for information and data traffic inflates due to the rapid expansion of the internet of things. This strengthens the influence of the big internet companies while the aviation sector itself does not contain much potential for expansion thus exacerbating competition between airlines. Alliances are forged between air transport companies and internet giants (e.g. Google & Star Alliance) with the aim to offer a seamless experience for the customer, to increase intermodality along the entire travel chain and to gain advantage over competitors, sharpening the brand profile by offering individual and all-encompassing service including specific infrastructure (e.g. airplanes). Furthermore, this is an opportunity to answer the increased diverse passenger structure that is partly induced by the demographic changes of the past years and the expanding importance of new markets in Asia and Africa. The increased intermodality also occurs due to the availability of transport data (e.g. one ticket for the entire travel chain).

43 Storyboard Part 3 The cutthroat competition leads to an oligopoly more (e.g. Google & Star Alliance vs. Apple & One World vs. Facebook & Emirates) of providers for travel services. Small independent companies are no longer able to survive this economy of scale. Business-to-Business is more in the focus than Business-to-Costumer. New business models are developed by start-ups as a reaction to new technology in virtualisation techniques. These start-ups are then bought by the big travel alliances. The time-to-market of all products involved is reduced significantly by increasingly effective means of production and methods in order compete with other alliances. As time goes on, more and more social interactions along the travel chain are substituted with their cost efficient, virtual counterparts. During this process the companies have to be very careful not to push the limits of the public acceptance of virtual technologies too far, since the inertia of customers accepting virtual technologies is high. Otherwise this passive acceptance could turn into to disagreement.

44 Timeline with scenario specific events 2015: Loss of customers data of several huge internet retailers 2019: strong competition: 5 big travel alliances remain on the market 2025: Door-to-door ticket, highly individual travel experience 2016: International act for data safety and internet security 2023: Installation of a fullautomatic security check

45 SWOT Analysis Munich Airport Lufthansa Strengths Fast implementation of new services possible Ability to handle different customer groups (analog and digital) Cooperation with Lufthansa and Google Leading Star Alliance member, strong brand Good data base (Frequent Flyer Programme), trustful data dealings Individual offers Weaknesses Difficult infrastructure development Big amount of Stakeholder/different alliances Small presence in innovative markets Little control over international HUBs, only Germany Opportunities Improved availability of data and potential of automation Additional and improved Services and business models possible: non-aviation revenues increase Know-how transfer (learning from partners) Implementation of virtual technologies in new, future fleets Use of social crowd in cooperation with internet companies Expansion of Star Alliances with B2B business (i.e. common order) Threats Decrease in non-aviation revenues: better integration of transport modes & fewer touchpoints Limit of acceptance & low willingness to pay for virtual services and products Decrease of brand profile (strong alliances) Lufthansa realizes the potential of a cooperation too late Junior -Partner for internet companies (loss of image and brand profile)

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47 data protection cyber attacks decreasing profitability Scenario C Unpopular Virtualization Back to Basics modified data exchange prevalence of internet companies rejection of new virtual technologies Thomas Lumpe, Johannes Deckert

48 Scenario framework

49 5 Key Statements Global Internet alliance (GIA) enters transport market and offers innovative and individual concepts for holistic travel experience while guaranteeing highest privacy standards Continuous increase in password data and personal credit card theft causing financial loss New technologies are considered to be the cause for the increasing cyber criminality and are therefore declined by the customer Passengers demand highly individualized, safe products, however they want to share less of their data Strong competition at transport market, drop of conventional airline s revenues and profitability while struggling against GIA

50 Storyboard Part 1 In recent years, the growth of the digital economy has prompted politicians from around the world to push for global laws concerning data protection and the regulation of virtual applications. Despite these efforts, political initiatives to set a global standard on data protection have failed, and regulation has thus remained on a regional level. Several countries have avoided overly prescriptive privacy legislation for two reasons: On the one hand, there have been political reasons such as the fight against terrorism or internet pornography. On the other hand, economic considerations and the belief that companies should generally regulate themselves have also prevented tighter regulation. After successes in the field of transportation by the introduction of Google s autonomous driving car in 2014, a global internet alliance (GIA) (e.g. Amazon, Google and Priceline) discovers the aviation industry as a potential growth market. The GIA s core competencies lie in the analysis and use of personal data, including metadata. Thus, the alliance is able to offer an innovative, customized approach to a holistic travel experience, thereby increasing customer loyalty. The individual components of the travel-process-chain are bundled into a comprehensive package.

51 Storyboard Part 2 With progressive virtualization, cyber criminality increases simultaneously. Aviation industry is affected as well as many big companies. Thereby, confidential customer data such as credit card information, passwords and personalized profiles are collected. Many people suffer financial losses due to increasing credit card fraud and identity theft. The result is increasing mistrust, skepticism and anxiety of people towards new technologies, which are considered to be the cause of the current situation. New virtual products are not regarded as a gain, but as an expendable data collector. Thus, passengers also don t see any further advantage in using these technologies along the travel process chain. The willingness to pay for these kinds of products decreases drastically. The complete substitution of face-to-face contact through virtual interaction is rejected. The fear of manipulation, combined with an increasing need for self-determination and control, causes a modified data exchange: people want to share less of their data. At the same time they experience an information overflow, and therefore want to receive only travel-related, individualized information. In order to insure that its new business model will remain safe and reliable in the long term, the GIA is doing its utmost to protect confidential customer data from cyber attacks or global surveillance like in the NSA scandal in 2013.

52 Storyboard Part 3 Thus, the GIA managed to ward of attacks without data loss. Their customers continue to use its basic offers like social networks, accounts and maps. Due to the decreased willingness of people to share data, the GIA generates less data than before the increase of cyber criminality. However, the alliance still obtains essential data because of an increase in customer confidence. Due to their experience in data processing, they can still offer popular individualized services along the travel-process-chain. These offers are in high demand by passengers on private and business trips. In 2021, the GIA expands its product range by buying a small airline and offering own flights, which puts even more pressure on existing airlines and intensifies the competition in the transport market. Restricted access to personal data and the inability of making effective use of the few available public data gives conventional airlines a tough time offering similar individual and comprehensive travel services. Through cooperation with means of local transport (trains, buses, etc.), these airlines try to keep up with the GIA. A flexible adaption to the competitive landscape, quickly creating new approaches, is hindered by the inaction of the conventional aviation industry. The superiority of the GIA causes declining profitability of existing airlines.

53 Timeline with scenario specific events 2025: 2015: Progressive virtualization and loose data protection laws 2018: Increasing cyber criminality. Customers mistrust new technologies. Individual, safe product are demanded Prevalence of GIA: While some market participants flourish in the new industry environment, stakeholders such as airlines incur significant losses 2017: GIA enters the transport market, offering individual concepts for a holistic travel experience 2021: GIA takes over smaller airline, leading to even tighter competition among airlines. Increasing customer trust through data security.

54 SWOT Analysis Munich Airport Lufthansa Strengths Ability to handle different customer groups (analog and digital) Image of airport Munich Know-how and infrastructure is available Strong brand in aviation industry German mindset concerning security aspects (rather strict) positive reputation Better knowledge about data security than other airlines (IT- Division) Weaknesses Little knowledge of customers, due to limited customer data available Large infrastructure development not possible No access to personal data of customers German mindset concerning security aspects (rather strict): - low flexibility - disadvantages in other regions Opportunities Customer s demands do not change much so that status quo fulfills all requirements Continuous improvement possible and desired Local cooperation for improved interfaces and services (e.g. local transport) Interpersonal communication promotes customer satisfaction Threats Decrease in non-aviation revenues, due to optimized travel chain Bad economical situation of conventional airlines might lead to a monopoly of GIA weakened negotiating position Loss of customers who demand highly individual services Strong competition with other conventional airlines

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56 STEP Airlines Profiteers Synthesis of Scenario Results Customer View Airport Losers Air Transport Market Sandra Muschkorgel, Robert Adam, Marc Vogtmann

57 STEP-factors Overview Virtual Reality A Reality Alliance Arena Go big or go home Unpopular Virtualization Back to Basics Social Overall acceptance and the willingness to share personal data lead to a virtualized society Passengers passively accept virtual products and services New technologies are seen as the cause of cyber attacks, leading to an increasing rejection Technological Internet companies exert immense influence, thereby pushing forward new technologies Internet companies merge with airlines to form strong alliances Internet companies enter the market by offering safe and individual services Economic Increasing airline revenues due to customer-tailored services Strong competition between alliances causing inhomogeneous profitability Decreasing airline revenues due to customers mistrust and cybercrime Political Globally consistent data protection laws lead to fewer cyber attacks and a trustworthy environment Globally consistent data protection laws lead to a trustworthy environment Partial easing of data protection laws, leading to a series of regional cyber attacks

58 Customer View Virtual Reality A Reality Alliance Arena Go big or go home Unpopular Virtualization Back to Basics Acceptance of virtual technology Proactive Passive Rejection Willingness to release personal data High due to global data safety laws Only if it benefits the customer Low due to cyber attacks Selfdetermination Customers cannot and do not want to avoid virtual products Customers can, but mostly don t want to avoid virtual products Customers can and want to avoid virtual products Need for information Strong need for information, but high demand only for relevant information Customers want more and more individual information Only travel-related information Social/ virtual interaction Complete substitution Companies push for virtual interaction but always with a personal backup Remains unchanged

59 Development of the air transport market Virtual Reality A Reality Alliance Arena Go big or go home Unpopular Virtualization Back to Basics Influence of internet companies Cooperation Cooperation Intense competition Importance Of brands Increasing customer loyalty by strong branding Alliances strengthen customer loyalty by strong branding Companies trying to gain/regain customer loyalty by offering safe, holistic services Airline revenues High due to improved travel experience & willingness to pay for new technologies Cut-throat competition leading to very few profitable airlines Decreasing revenues due to customers mistrust, cyber crime and old business models Number of market participants Market fragmentation remains similar Only a few large companies survival of the fittest Market fragmentation stays the same Ability of aviation Industry to adapt Aviation industry actively adjusts to new, virtual technologies Cooperation with internet companies leads to faster implementation Aviation industry is still slow in adapting to new technology

60 Common factors Common factors All scenarios show a similar characteristic concerning: Individualization Influence of internet companies Exchange of information between different stakeholders Importance of brand profiles/images

61 Most deviating factors Deviating factors The three scenarios reveal very different characteristics concerning: Acceptance of virtualization Willingness to pay for virtual products Influence of social crowd Influence of new business models The way in which the internet companies enter the market

62 Threats Opportunities Technische Universität München Synthesis of Airline and Airport opportunities & threats Virtual Reality A Reality Alliance Arena Go big or go home Unpopular Virtualization Back to Basics Full data access automated processes New business models increasing nonaviation revenues Know-how transfer Discovering new trends offering additional, improved services LH with own technological competences (e.g. LH Technik) faster implementation Improved transportrelated data availability improved potential of automation New business models Know-how transfer Extension of the Star Alliance with B2B Revolution by evolution (continuous improvement programs) Regional cooperation (e.g. local transport network) Strengthen interpersonal communication High-profiled airlines can use their image to preserve trust Loss of influence if passenger is not guided by the airport decreasing revenues Know-how transfer (abuse of knowledge) Customers demand virtual services for free Airlines reacting too late to virtualization decreasing brand image Fewer touchpoints at the airport. Know-how transfer (abuse of knowledge) Limited acceptance Lufthansa as junior partner of internet companies decreasing brand image Germany with a locational disadvantage for Airlines/-ports Holistic door-to-door experience hindered by limited availability of data Displacement of airlines by internet alliance Customers who are still demanding virtual products are put off German privacy standards as locational disadvantage

63 Profiteers and losers of the situation Internet companies Customers Airlines Airports TOP pro against FLOP Virtual Reality A Reality Demanding new technologies in a trustworthy environment Boom of virtual products new product range of existing companies as well as start ups Full data access improve individual products, but it can also lead to an information overflow Customers against virtual products have to participate otherwise they don t travel at all TOP Alliance small FLOP Alliance Arena Go big or go home Prevalence of large alliances Processes are optimized in terms of passenger comfort Passive acceptance Small airlines cannot offer the same product/ service range as the alliances do Small airports are loosing connectivity without alliances Degree of virtualization is only marginal TOP FLOP Unpopular Virtualization Back to Basics Passengers are selfdetermined Right investment at the right time Gaining reputation by offering safe products Competition makes the airport s hardware even more valuable With the prospect that people still want to fly Handling competition Loosing reputation Having less information

64 After all, it s a matter of Limits of virtualization: Seamless travel experience: Is there still potential to improve efficiency? Information overflow: Is it possible to handle such a large amount of data? Is there going to be a point of saturation? Willingness to share data: Will there be a limit? Future role of different market participants: Who is going to initiate the future change? Existing companies or newcomers? Internet companies: Competition or Cooperation? Prevalence: Who retains the control? Are there any dominant stakeholders? Will self-determination still be possible during the entire travel process? Uncertainty of acceptance Affordable virtualization: Who s willing to pay for virtual products and individualization? Is the customer willing to trust the system? Is outsourcing of own competences appropriate?

65 Regulations New Stakeholder Trust Uncertainty Outlook Data availability Passenger control Oliver Malaschewski, Dominik Bauer

66 The future is uncertain but scenarios can help to improve the understanding of developments and impacts to differentiate on alternative developments regarding the field of virtualization generate strategies for each of the scenarios to make the right decision