Data is gold. Companies that can successfully mine data to manage outcomes will lead the California Gold Rush of the 2020s—or so goes the conventional wisdom and the market capitalizations of data-driven companies, from Alphabet to Zillow.
The aviation industry is no different, with modern aircraft such as the Airbus A350 and Boeing 787 capable of generating terabytes of data per day. Both established players and new entrants have developed a host of offerings to turn aircraft operational and flight data into aftermarket gold. Yet despite these new businesses and the volume of data flowing from new-generation aircraft, where are the “Alphabets of aviation”?
Simply put, such companies do not exist. While the industry abounds with analytical software products, platforms and data-exchange offerings, there is no dominant aftermarket player whose market and financial performance is rooted in data mastery. There are two main reasons for this. First, operators and service providers must settle basic questions regarding data ownership and usage rights. Second, we have yet to define a compelling mechanism to support the industry-level value case of sharing aftermarket data across fleets. Until we answer these questions, the rush to monetize data may just be fool’s gold.
Many operators and aftermarket providers agree on the value of aircraft operational and flight data. Where they differ is on who owns and can monetize those data. Take aircraft operational data, which focus on a given aircraft’s health. My colleagues at Accenture Research recently found that while 46% of OEMs say they should own aircraft operational data, 83% of airline operators assert that those data are theirs. Perhaps being a trusted intermediary could be a competitive edge for aftermarket providers?
Indeed, despite their claim to data ownership, more than 90% of airlines are open to sharing flight data and/or operational data with a third party that can provide a return on that investment. Tellingly, 60% of airlines see managing large amounts of data and complex workflows as their main problem in effectively using and sharing data with other parties. While aftermarket providers seek to differentiate based on their analytical products and platforms, they may be missing a more fundamental opportunity to generate even greater insights through the use of cross-fleet and cross-operator data.
Our research suggests there is space in the market for players that can make trusted, secure data delivery and aggregation a core part of their businesses. Indeed, one could argue that the growth of their analytics businesses is constrained by the lack of a trusted, scalable data pipeline. Yet few, if any, aftermarket providers can claim data engineering, curation and management as a core competency. In the short term, companies may rent these skills in the market to gain advantage, but they must quickly move to embed data engineering within their own organizations.
Building operators’ confidence in data exchange and security is a necessary yet insufficient step toward data monetization. At a minimum, operators need to see the incremental value created by basing analytics on cross-fleet data. More important, operators need to see how they might capture a share of that incremental value rather than letting it accrue to aftermarket providers. This will require MRO providers to change how they use data to create value across their services. For example, if insights from cross-fleet data result in improved ability to predict aircraft availability, aftermarket providers may discount prices on “failure-based” services such as repair and overhaul for their analytics customers. Steps like this can build trust by putting the focus on improving the predictability of operators’ costs and aircraft availability.
Aftermarket providers have taken a significant step in offering packaged software and platform-based analytics. But they must take two more steps to realize the promise of data monetization. The plumbing of trusted cross-fleet data sharing and engineering is within the reach of digitally savvy aftermarket organizations. Step two is harder. The industry has talked about monetizing data for a long time, yet the “Alphabets of aviation” will only rise by challenging our existing industry model to put—and price—data-driven insights ahead of selling spare parts and MRO services. Spare parts and MRO sales will never go away, but can aftermarket providers move to a model of selling premium data insights that increase safety but limit repair and overhaul work, generating more revenue for operators while “pulling through” a smaller volume of lower-priced spare-part and MRO activity? Let’s hope we are close to finding out.