American Airlines Goes All in on Satellite Connectivity
An American Airlines passenger using Wi-Fi in the business class section of an Airbus A330. Photo courtesy of American Airlines
A New Business Model?
Another major change that American is making within its in-flight internet strategy is the business model it is using with its internet service provider Gogo. The majority of commercial airlines globally use among three different business models for providing passenger access to internet. An example is wholesale model where the airline pays the internet service provider (ISP) to provide access to internet services for passengers with a custom user interface. This wholesale model is either charged with tiered access to certain internet services and speed levels. American is transitioning to a new model that Stache describes as the airline-pricing model. “The model is changing. Until now, it’s been a commissioned-based model, so Gogo provides the service and we generate the revenue,” said Stache. “Now we’re going to what we call an airline pricing model, so we will pay the cost. We pay Gogo for every connection and then we set the pricing.” American has been seeing a steady increase of the use of its in-flight internet by passengers, according to Stache. One of the primary reasons the airline is focused on using satellite versus air-to-ground connectivity is the increased availability of bandwidth from satellite networks. “We’re seeing more and more take rates. Overall, the pricing will come down. A lot of the pricing in the past was because the pipe was so narrow, it could quickly overload,” said Stache. “The beauty about satellite-based is you don’t have that issue, you have bandwidth for everyone on the airplane so we expect take rates to improve.”
WestJet Exec Highlights Changing Cyber Landscape
The cyber threat to airlines is growing as hackers use more and more sophisticated techniques to gain access to valuable customer data. Devon Smibert, director of cybersecurity at Canadian airline WestJet, spoke at the Aviation Festival in London about the cyber challenges facing an airline such as WestJet. It is very relevant to customers in the satellite sector.
Smibert spoke about a baptism of fire he had after joining WestJet in January this year. Smibert joined WestJet Jan. 15 of this year, and on Jan. 21, he already received a call from WestJet’s web operations manager about a denial of service attack targeting WestJet’s rewards platform.
“We were getting hundreds of thousands of attacks against our system,” he explained. “We have about 80,000 passengers a day. The attacks were coming from countries we don’t operate in. We had attacks from India and other countries (Russia, Pakistan). We can just block all of the traffic from those countries. But, what happened after that is that the traffic shifted to Mexico, Canada and the U.S. So, we can’t block those. It created a new set of problems for us to solve.”
These attacks known as “credential stuffing” attacks show the sophisticated threats that airlines such as WestJet are up against as they look to connect their fleets. Hackers are able to harvest details from previous hacks, get real username and password combinations, and then deploy a really sophisticated credential stuffing attack. For airlines working more with the satellite industry, this is an example of the cyber threat they are likely to encounter.
Smibert spoke of the growing sophistication of the hacking threat facing companies in the aerospace sector. He said recent research from a company called Cybersecurity Ventures estimated that revenues from cyber crime have reached $1.5 trillion. Smibert also gave a recent example of a cryptocurrency investor who had $24 million in a single theft drained out of their account.
With annual global revenues for the airline industry at $754 billion, Smibert said, the cyber crime industry is double of the airline industry.
“Hackers are extremely well-funded, and largely act with impunity,” Smibert said. “A lot of these hackers operate in countries where there is tacit compliance. In North Korea, you have a state that has severe economic sanctions against them and using cyber to generate revenues. It is $1.5 trillion business with very low risk. They are investing heavily in research and development. They act more like tech start-ups rather than an organized crime group. They are able to do very sophisticated things on their own. When we dissected the attack in January, they were using advanced automated orchestration against us. They were leveraging pretty intelligent software to leverage their attacks.”
And this is a market that is growing in sophistication and capabilities at a rapid rate. Smibert said there are forecasts that damages from cyber crime could reach $6 trillion by 2021. Smibert cautioned companies in the aerospace sector believe they are unlikely to be targeted by hackers.
“A lot of organizations make the mistake that they don’t have anything of value for hackers,” he said. “People say no one would ever target us. …. They will comb the internet for anything of value.”
Smibert said having real-time access to data and having collaboration with partners will be absolutely vital. He said this will realize cost savings, leveraging connectivity into IoT devices. But, he said, companies need to understand where the data is going and who has access to it. “You need to make sure you are not opening up access to confidential data,” he added.
Buying technology is also getting more complicated and Smibert cautioned airlines when making buying decisions on technology.
“The first thing you need to do is engage with your cybersecurity team early on,” he said. “Even with WestJet, someone buys technology and then goes to IT and asks to hook this up and make this work. That is not the right approach. For example, we have actually hit a point terminate a project after six months of effort because the product that this vendor built, if we were to go to market with it, we would be violating GDPR regulations.”
Houman Goudarzi, innovation manager at IATA, also spoke at the festival and cautioned airlines regarding how they view AI technology. He said airlines need to have a digital resilience strategy. “Running behind technology is a non-stop battle,” he said. “Being able to adapt to change, rather than running behind the next big thing is the way to go. Airlines need to adopt AI capabilities faster than others. We are seeing from hackathons how easy it is to get access to customer information from airlines.”
EasyJet, JetBlue CEOs Look to AI, IFC
The Aviation Festival kicked off day two in London with three CEOs from major airlines talking about the future of the industry. Although the CEOs did not directly address in-flight connectivity (IFC), airlines admitted that connectivity is key as they look to improve operational efficiency and the passenger experience.
EasyJet is one of the world’s leading low-cost airlines, and CEO Johan Lundgren mentioned that the airline aims to be the leading data-driven airline in the world. He also pointed to the fact that airlines could use Amazon as a great example of how to use data effectively. While easyJet is still deciding whether to use satellite or other technologies for IFC, it is clear that airlines will increasingly use connectivity services.
“We believe data science will be at the core of our airline,” Lundgrun said. “We need to find out what the new technology is. Artificial intelligence (AI) is about the automated experience. It will be key.”
For airlines, generating ancillary revenues is vital. However, Lundgren pointed to the fact that airlines often go about this the wrong way. “The goal of offering a hotel to someone who has flown to the same location 20 times and never booked a hotel with us is probably not a good idea,” he said.
EasyJet is also evaluating the possibility of loyalty programs and looking for ways it can reward customers. “Every company needs something where you reward your customers,” Lundgren said. “For us, it is to find ways that are the easyJet way. We need to bring something that has clear benefits for customers. We can certainly do much more before we look at crypto currencies (in this way).”
One of the other speakers was Robin Hayes, CEO of JetBlue, a company that has been known for its IFC strategy and has worked with the likes of Viasat to bring a premium IFC service to customers. While JetBlue is known for flying routes across the East Coast of the U.S., the possibility of it becoming a transatlantic long-haul airline seems to be an intriguing possibility.
“When we look at Europe, the business class fares are obscene. We can do it for a lot cheaper,” Hayes said. “We have 85 NEOs on order. We have the ability to upgrade those to long-range versions if we want. There is a notice period if we want to upgrade. We haven’t taken a final decision on whether we will [expand internationally].”
Hayes said it is key for airlines like JetBlue to try and transform the buying experience for customers, as it does with its Digital 2020 project. The company also invests significantly in technology, as it has in setting up a subsidiary called Tech Ventures.
“A lot of people are hiring data scientists. Does blockchain have a role to play in loyalty programs, for example? We have so much data,” Hayes said. “How do we take that and use it in an appropriate way? What is a data lake? We are at the beginning of that. We have built up our data science teams. It is still very early on.”
Wow Air CEO Skuli Mogensen said airlines can learn from the gaming industry, in terms of how they deal with simultaneous users, for example. He also talked about how to use connectivity going forward. “We have $57 from customers from ancillary revenue,” he added. “We would like to get that up to $100. We want to empower our passengers to become our brand ambassadors.”
While airlines look to modernize, IFC will be at the heart of this engagement. JetBlue is already one of the leaders in IFC, and easyJet has been conducting a trial this year. It remains to be seen how quickly airlines will transform themselves and what role satellite powered IFC will have in this transformation. It will be a key question for many going forward.
