Is this summer’s baggage crisis an innovation opportunity?
BBC News published an article this summer about the “tech aiming to prevent lost airline luggage”. It was certainly timely given the horror stories at some European airports over the summer, both in mishandled bags and in customer service. The article quotes the SITA report that highlighted 19m mishandled bags and 1.3m lost bags in 2021. We are in 2022, and you still hesitate to check a bag for your next flight? You’re not alone 😉
Have you noticed that new warehouses, like Amazon’s, or new factories, like Tesla’s, are fully automated, also like data centres? What about bag handling at airports today, is it fully automated? No, unfortunately bags are still loaded manually in aircraft today, like 50 years ago… Until we go to “dark airports” and implement automation in bag handling, what options do travelers have when they travel with bags? This paper explores the root causes of the chaotic situation, the alternatives in the short term to avoid issues and in the longer term to fix the problem.
Root causes
Overall the baggage operations for airlines is roughly a zero sum game. The cost of carrying 3 billion bags per year is about $30bn, or $10 per bag. This cost is roughly offset by ancillary bag fees also at around $30bn. The mishandled bags represent roughly an extra $3bn cost. The baggage operation processes are very complex and manual. Large airports use sophisticated sortation systems running on kilometres of belts. Bags are loaded and offloaded from aircraft manually, except for large aircraft with containers.
In this spring in Europe, as the Omicron wave was fading, consumers regained confidence, air traffic resumed and reached almost the levels of 2019 with load factors of 86%. The airport and bag handling staff, who were furloughed during 2020 and 2021, did not return fast enough in their jobs. This shortage was worsened by the Coronavirus still being active and putting staff on sick leave. Overall there were not enough hands for the manual bag processes.
Can tracking bags with electronic tags help?
The bag tags currently provided by airlines are equipped with barcodes which are read only at certain points in the end-to-end process. This means that airlines and airports have a limited view of where the bags are. Adding an electronic tag, either provided by the airline or included by the travelers themselves (like the Apple AirTag), may help locate the baggage beyond the existing tracking points at bag drop and before the carousel.
Tracking the bags may indeed help the travelers to find out where their bags are, for example if a bag is stuck in a warehouse waiting to be picked up by a delivery team. As such it can accelerate the retrieval of the bag and save time looking around 10,000 bags for a needle in a haystack. But these tags don’t make bags travel faster, don’t add hands to load bags in aircraft and don’t deliver bags at home.
Can one remove the baggage bottleneck at the airport?
One approach to tackle the baggage operation issue is to remove some baggage from the sortation systems, or at least at the peak times. This can be done at departure by dropping the bags off-airport or by picking up bags from home and processing them in parallel. At arrival, the airline may offer a home or hotel delivery of the bags.
There are live solutions that exist today, like Airportr quoted in the BBC article. A baggage agent comes to the traveler’s home, seals the bag and loads it into an electric van. The bag is carried safely to the destination. Due to current regulations, the bags travel in the same aircraft as the customers, but in time we can imagine that bags can travel independently. They could also be picked up by drones that can lift 20 kilo payloads.
Is there an alternative to bag sortation systems and manual loading?
The air travel industry still handles every bag individually and manually. Conversely the maritime shipping industry went through a containerization transformation. The maritime organizations got together and set standards for 20-feet and 40-feet containers. Over the past 50 years, lengthy processes were removed and replaced with container ships.
This transformation inspired André Safir with the Squarcle project, whereby travelers drop their bags directly into containerized lockers. There is no need for bag sortation and no manual intervention. Such radical invention has the potential to transform the baggage operations, reducing costs and mishandling, but also avoided future congestions and chaos in case of rapid changes in air traffic.
Conclusion
While bag operations have done a tremendous job at delivering billions of bags per year, they represent relatively high costs and a low resilience to irregular operations. The air travel industry has a major opportunity to learn from this summer’s Europe crisis and to explore new ways of handling bags – more automated, more cost-effective, most resilient and ideally more sustainable.
In a famous interview in 1995, Bill Gates explained the Internet to Dave Letterman, the host of a TV show. Letterman argued that he could listen to the news on the radio and wasn’t sure why would someone need the Internet. Today, we can listen to the radio on the Internet.
As the metaverse is getting a lot of attention, including in a recent article by Johnny Thorsen, many are wondering if it’s another technology looking for problems to solve, if it’s going to be more successful than Second Life (the first attempt at a virtual world) and if it may have an impact on air travel (you can’t fly virtually, can you?).
Let’s understand first what the metaverse entails then let’s have a look into the current trials and a longer look into the future.
What is the metaverse? How does it relate to Web3?
My personal understanding of the metaverse is a term that covers computer-generated virtual worlds and the tools to navigate them. As such it is more than AR/VR tools, it is really a graphical interface layer on top of the internet, pioneered by developers of video games such as Minecraft and Fortnite.
In a related space, Web3 is the blockchain-based iteration of the Web, which was built originally on the internet. If you consider blockchain as a secured and decentralized evolution of the internet, designed to handle digital assets or tokens, your navigation layer is called Web3.
If you mix the two concepts – metaverse and Web3, you can visit a virtual world and handle digital assets in this virtual world. By digital assets I mean virtual properties, virtual currencies and other virtual goodies. Following this simplistic presentation of the new concepts, where is the link to physical travel and tourism?
Current air travel initiatives with the metaverse
The most recent example of current initiative is the airline Vueling that announced testing the metaverse to support customers will trip planning and to sell (real) tickets. They partnered with NextEarth, a platform in the metaverse, and Iomob, a mobility platform helping with the integration.
Another example is Qatar Airways presenting a virtual cabin crew, inspired by the avatars in the virtual world. This initiative focuses on giving the customers a taste of the inflight experience.
More airlines are exploring the technology based on their priorities: trip planning, product review, etc. Looking at the current initiatives gives us a hint to the future: the metaverse will be a new sales channel for travel and tourism, including air travel – like the internet enabled 25 years ago online sales, and 10 years later mobile phones enable mobile sales. Get ready for “meta sales”!
Looking into the future
The future of “meta sales” is two-fold: 1) reaching customers where they are and 2) showing the product to the customers.
As hundreds of millions of customers spend time in the virtual worlds they will come across people and brands, including travel and tourism brands.
In the case of a virtual world that represents the real world – like a digital twin of our world, think Google maps or Google Earth – the navigation in this world will lead to the digital twin of a hotel or of an airport. Airlines may want to offer a visit of their aircraft.
Next steps
It is difficult to predict how long it will take before we feel that it is normal to pay a virtual visit to a hotel and to an airline before making a purchase, like it is normal today to visit their website.
This exploration of the metaverse may seem to be a stretch as some airlines still need to fix the basic features of their mobile app. History shows us that new technologies don’t wait for everyone to master the old ones.
Most people and companies will probably adopt a “wait & see” attitude, while watching the pioneers who experiment and commenting from the side lines. As we’ve seen above, some players have already adopted the “test & learn” attitude. Indeed, the best way to predict the future is to build it.
Aviation tech innovation in 2022 – time for a new mindset?
As the global travel industry finally is exiting the grips of Covid after 2 long years it is worth taking a step back and evaluate the new landscape we now are living in – because there has been some dramatic change in several areas.
The first development might not be fully visible, but a significant number of airlines have experienced a substantial talent drain in their internal technology department while being faced with severe restrain on capital available for new IT projects and products. This sets the scene for a new mindset where airlines suddenly are strongly motivated to work with external startups who have are agile and nimble and capable of providing new solutions very quickly for a minimum fee as they are prepared to engage in “software as a service” projects with “pay as you consume” business models.
The second development is more obvious, but still worth mentioning – during the last 2 years new technologies such as DLT (aka blockchain), elastic cloud infrastructure, edge computing, NFT and not least Web3 infrastructure have evolved at an incredible pace and are now ready for primetime. The combined potential of these exciting developments is substantial for the aviation industry and will likely result in completely new solutions for distribution, ticketing, payment, capacity planning, yield management, customer service and disruption management to name a few areas.
The third development is the new operational environment with limited workforce in multiple critical areas combined with high fuel cost and shortage of products in the global supply chain combined with short notice traveler behavior change in terms of preferred destinations as well as advance booking window and price sensitivity. These changes are making it much harder for airlines to plan ahead and implement a traditional schedule and pricing forecast model and therefore require more flexible automated software to analyse the latest information and provide the right recommendations.
The fourth and final development is the sustainability wave crashing over the global travel industry – gone are the days where airlines could focus on selling seats based on the best price, best cabin class service or on-time performance. Today’s airline customers – both corporate and leisure, are increasingly focused on the sustainability performance of the airline resulting in new demands for transparent operational data such as fuel consumption, SAF blend, carbon offsets, load factor, flight path efficiency and even on the ground tarmac movement energy efficiency.
When the 4 developments listed above are added together it becomes very clear that airlines must implement a new strategy for deployment of and usage of technology services – and it is highly unlikely the internal IT department will be able to adjust accordingly and start delivering new services and solutions on a few months – or perhaps just a few weeks – notice. The good news is that the majority of the travel tech startup community actually has strengthened during the Covid hiatus and the startups who have survived now appear to be stronger, leaner and better equipped to help the airlines embark on a rapid innovation journey.
See a few of the most interesting new solution providers
Obviously it is not possible to mention all the relevant startups in this article, but here are a few of the most interesting new solution providers with a short description of the service they provide.
Pat (www.pat.ai) : Provides a AI chat based virtual agent solution designed to replace a substantial amount of the work performed in a traditional airline call center including support for complex products such as “round the world” tickets
Vendia (www.vendia.com) : Provides a blockchain based data engine designed to enable real-time access to and usage of data located in legacy systems or in different cloud environments – all without compromising data privacy and security
3Victors (www.3victors.com) : Provides a real-time analysis of global travel search data designed to provide airlines with instant alerts when search pattern changes in order to optimize yield management, capacity and schedule planning
Envest Global (www.envestglobal.com) : Provides a detailed benchmark analysis of the sustainability performance of 50+ airlines designed to provide airlines with a better understanding of their own operations compared to their competitors while also providing the investment community with better insights to the carbon resilience level of each airline
Tryp (www.tryp.com) : Provides a new type of “inspirational search engine” for leisure travel designed to generate complex package offers in seconds without asking for a fixed destination to start the search which can help an airline sell more seats on to low load factor destinations
BlackBook (https://blackbookapp.co/) : Provides a super app designed to be a digital concierge for the traveler before, during and after the trip for both corporate and leisure travel which can help airlines provide a richer service and generate increment revenue
Medical Travel Companions (www.medicaltravelcompanions.com) : Provides a human assistance concierge service for travelers who are unable to travel alone due to medical conditions which enables airlines to service this 100M+ global passenger segment better
Kyte (www.gokyte.com) : Provides a modern JSON API service designed to sit on top of the legacy airline tech stack without going through the complex and time-consuming NDC development process which enable an airline to offer true digital retailing capabilities to any online travel or ecommerce solution
Aeropaye (www.aeropaye.com) : Provides a blockchain based smart contract engine designed to automate and optimize the cancel and refund process which can reduce the overall cost of payment for airlines as well as provide a way to service travelers who don’t have credit cards and bank accounts
Spotnana (www.spotnana.com) : Provides an open innovation platform for the travel industry designed to unite suppliers, agencies and technology providers through a single cloud-based tech stack using open API’s and unbiased content to provide personalized offers directly to the traveler
These are just some examples of startups who have survived the Covid crisis and are well positioned to help the airlines around the world become more agile and take advantage of new solutions faster without having to develop them internally – hopefully we be able to look back at 2022 in the future and view this year as the beginning of a new chapter in the aviation tech world where airlines work closely together with startups to accelerate innovation and modernize the tech stack rapidly.
