IT Services and Telecom Solutions

“EVERYTHING THAT CAN BE CONNECTED, WILL BE CONNECTED”19TH APRIL 2016ASHUTOSH PANDEY

Executive Summary

Air transport is a exponentially growing trade. IoT can play a major part in the improvement of manufacturing services & for travellers convenience. The scenario was selected to illustrate the convergence of these IoT technologies and the issues that arise as a result of this convergence and interoperability. Adoption of of smart technologies and related applications in air travel, such as RFID-enabled passports, electronic boarding passes sent using SMS and displays or check in through flashing of cell phones, etc.

The near-term growth outlook for the aerospace industry is very positive; leading aero manufacturers have billions of dollars’ worth of orders placed by airlines from growth markets as well as those looking at replacing aging fleets. Aero manufacturers are in a dilemma whether to increase their manufacturing footprint, or to focus on operations excellence by extracting more from existing resources. The key to success in this environment is on-time delivery, supported by reliability in operations. To achieve these goals, manufacturers need a high level of collaboration with stakeholders across the integrated value chain extending from suppliers to customers.

This report as a preamble is based on the facts that…….1. Are Aero Manufacturing Companies ready to go Digital2. How Globalization of aircraft manufacturing helping new players to expand new geographies 3. How Airbus ,Boeing & other players are competing to each other4. Will The Internet Of Things Revolutionize The Aircraft Industry

This paper also discusses how the aerospace industry can profitably leverage the convergence of the digital forces of mobility, Big Data and analytics, cloud computing, and social media

Need for Digitization

Source: Oxford Economics (2011): “The New Digital Economy

Aerospace companies typically demonstrate core strengths in innovation, productivity and disciplined execution made possible by intensive quality rigor. Technology also plays a key role in making these reliable and robust systems deliver plane after plane successfully.

Manufacturers need to ensure supplier capacity build up, regulatory certifications, synchronization of supply lines, and readiness of production systems for higher levels of utilization

Aerospace manufacturers can borrow best practices and strategies of other discrete manufacturing industries to visualize the challenges, opportunities and solutions that work well in their context. These includes:

1. Improving productivity in operations by applying lean techniques

2. Implementing supply chain management programs focusing on global sourcing, risk management, procurement transformation, and supplier and partner management programs

3. monitoring of after-sales customer satisfaction factors4. Ensuring business process integration through technical

and functional upgrades

Digital Revolution

The future of aircraft manufacturing is something which has been widely debated in recent years. Using today’s technology to plan the next generation of aircraft is no easy task. The smart airports market is estimated to be at $9,718.07 million in 2014, and is projected to register a CAGR of 5.61% to reach $13,481.17 million by 2020. The Asia-Pacific and the Middle Eastern countries are emerging regions for the smart airports market.

For the airline sector, digitisation offers multiple opportunities to improve operational efficiency and offer increased personalisation to passengers.

Digital capabilities help manufacturing companies to exchange large amounts of data rapidly, store local data centrally without limitations, enrich processes with digital expert knowledge, generate valuable insights from this “big data” and facilitate communication and collaboration through digital channels within their value chain.

“SITA report indicates that only 10% of airline Smartphone apps currently offer location-based services, but expects that figure to grow to 65 % by 2018”

Traditional Manufacturing Value Chain

Digitize Manufacturing Value Chain

Digitization in the Aerospace Manufacturing Industry

"Digital transformation involves the penetration of all aspects of the product value-creation process with new capabilities that go beyond the state of the art, and the result of which can potentially help us redefine our value proposition," Carlo Nizam AIRBUS (DIGITAL LEAD)

Airplane manufacturers are looking forward to continued growth. the industry faces multi-level challenges while seeking to adhere to delivery timelines and budget constraints while meeting the new demand. These include:

1. the complexity of the aircraft business, from time taken to set up plants to establishing supply chain networks, compounded by high capital intensity

2. need for extensive coordination and integration with various stakeholders across the value chain

3. pressure from customer, on time delivery and compliance to terms of contract

4. During the early stages of industry growth, mass manufacturing deployed by large scale assembly plants brought in economies of scale.

5. Lean manufacturing emerged during the middle stage of maturity, and was deployed to great effect by Japanese manufacturers.

6. The globalization of networks and the maturity of tiered supply chains led to shifts in the sources of supply and demand

7. An increasing number of mergers and acquisitions among both manufacturers and suppliers led to the emergence of global multi-brand groups

Source: SITA, The Five Disruptive Waves of the Manufacturing Industry

Market Analysis

Globalization of aircraft manufacturing: New markets, New Players

Technology-rich sector has been so dominated by Europe and the United States as aerospace. Only in recent years has this dominance been eroded – with Canada and Brazil carving out important positions in the regional jet market. The Euro-American dominance of the sector does seem to be slipping.

Asia emerges as the new, dominant region in the global economy it seems likely that production will follow customers.

The main driver of this growth is the economic advance of emerging markets, which has driven an increase in air travel.

‘ All major aircraft manufacturers agree that the fastest-growing regional market is Asia ’

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Middle East

Latin America

CIS Africa

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Source: IATA, AIA

Market Analysis Cont’d

There was another player in this market segment, McDonnell Douglas, which back in 2007 merged with Boeing, contributing to a higher market power of this company.

Aircraft manufacturing is a $300 billion industry that employs nearly a million people globally. The industry is arguably experiencing a “Second Golden Age” as backorders for Boeing and Airbus are at an unprecedented 9000 aircraft

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Airbus

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BAE Systems

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Break-up By Manufacturers

Source: IATA,

Competitor Intelligence & Early Adopters

The aerospace industry is a multi-billion dollar industry and basically it has got two big players (Airbus & Boeing) in the industry that has been competing against each other for such a long time

Airbus is offering its superjumbo A380 in the expectation that airline passenger growth would be concentrated in major global hubs, whereas Boeing forecast a world of smaller aircraft operating on direct routes between a much greater variety of cities

Major manufacturers forecast that over two-thirds of new aircraft deliveries in the next decade will be of small and medium-sized jets and expectation of the dominance of smaller aircraft is evidently shared by emerging market players in Russia, Japan and China, all of which are developing products in the 100–130-seat category.

Large Twin-aisle Single-aisle Regional Jets

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Airplane Production Projection by Type

Source: IATA,

Competitor Intelligence & Early Adopters Cont’d

The airline industry is highly competitive and capital-intensive. Because of its capital-intensive nature, fixed costs and barriers to exit are high.

According he Aerospace Industries Association (AIA), the nature of competition in the airline manufacturing industry:

1. The role of technological innovationa) Innovative Materialsb) Nanotechnologyc) Engine Manufacturing

2. Faa's aircraft certification process

3. Export credit fairness

4. The role of neaten and domestic airspace

Revenue of the worldwide leading aircraft manufacturers and suppliers in 2014

Source: Statista

IoT Technologies

IoT has evolved to the creation of new value propositions and potential revenue streams from new business models:

1. OEMs have started focusing on gearing up their Service programs aimed at helping airlines find efficiencies in reducing fuel costs using real time data analysis

2. New aircraft models like Dreamliners for instance come pre-designed with IP enabled avionics systems that permit real time data to be transmitted to the cockpit and to operations centers on the ground on flying conditions and discrepancies observed during the flight

3. Data generated from OEMs are also being used to do a proactive assessment of aircraft & component operations to generate tailored maintenance programs, thus generating value for customers

4. IoT is being used to analyze passenger traffic patterns at airports to estimate downtimes before aircraft departures

5. Real time location data of aircraft that impact a host of actions ranging from Advertising bill boards to flight information dashboards to deciding on optimized routes

Source: SITA IT Trends Report

IoT Technologies Cont’d

Although data analytics brought a lot of value for the aviation industry, it allowed aircraft manufacturers to capture bulk of it.

For Manufacturers, IoT Means the ‘Internet of Tools’

I believe that the IoT will have two main areas of impact on the current manufacturing landscape.1. The first concerns the organizational structure that is

required to produce truly integrated IoT solutions. i.e. Machine camp + Internet camp will be required to work together

2. The second area where the IoT will have a significant impact on manufacturers is in the area of manufacturing technologies, i.e. connected manufacturing equipment, connected logistic chains, cyber-physical systems, and big-data-based analytics of production processes will help improve the way the physical parts of a connected IoT solution are produced.

3. 3D models: Airbus uses 3D data to emit laser projections over aircraft bodies in order to guide assembly line workers

Source: SITA IIT Trend Report

IoT Application & Good Practices

Future of IoT in airports: A smart airport is one which

leverages the convergence of three trends:

1. passenger self-service,

2. mobility , and

3. collaborative decision-making to create a smart

ambience.

Beacons for baggage: Beacons at airports provide the

traveller with indoor way finding, and proximity based

promotional offers

You’ll always know where your stuff is : IoT can lessen

the burden of this weighty subject. Bottom line: You’ll be in

control of your luggage, regardless of its size

Boeing's 3D Projects Invigorate IT, manufacturing:

According to Colbert ( CIO ) of Boeing

interview, Boeing sees the future of augmented reality

on the assembly line

Smart Skin: This is a covering applied to the outside

of an aircraft that enables planes to sense their

environment via the use of thousands of tiny

sensors, embedded into plane’s skin

Source: SITA IIT Trend Report

IoT Application & Good Practices Cont’d

Location, location, location: In next three years will be to use location-based information, in many cases from beacons, to solve baggage-related issues and help passengers board on time with notifications based on their location, even before they reach the airport

World’s First IoT airports: London City Airport is the first airport in the world to test how the Internet of Things – a network of machines communicating with each other online can transform operations

Robot car valet: Germany’s Düsseldorf airport introduced robot valets in July 2015. The valet service is booked through their online airport parking portal and passenger’s will include their departure and arrival dates and times

Improved in-flight entertainment: Services on-board flights are also set to improve by 2018 with 66 % airlines offering wireless internet and multi-media services on passenger devices.

United Airlines and GE Make Room for Mobility: Its mobile strategy over the past five years demonstrated how tablets not only help keep pilots connected while on the move, but also can reduce costs and improve services

Business Benefits

There are various benefits, the Internet of Things will make Flying Less of a Hassle:

1. Improved flight operations: Its eestimated cost savings (cumulative) in airline industries over 15 years, propelled by a 1% reduction in fuel, capital expenditures and inefficiencies

2. Airlines Look to IoT to Improve Service, Operations: By 2018, 16 percent of the 200 major airlines surveyed, plan major IoT programs, and a further 41 percent plan to invest in research and development. The Internet of things (IoT) will deliver clear benefits in the next three years, and more than one third (37 %) already have allocated budget for it.

3. The aerospace manufacturing CIO has long been associated with managing new technology implementation, strategic IT planning and keeping tabs on the latest solutions that could boost productivity.

4. Dubai aviation district looks to attract aircraft manufacturers: According to “Tahnoon Saif, the vice

president of aviation at Dubai ”by “2020 to 2025 this is when our original equipment manufacturer [OEM] initiative is going to start.”

IoT will benefit airlines to cut costs across many areas of operations and processes, including maintenance.

Key outcome

1. The civil aerospace sector’s profit pool expanded from $31.9 billion in 2013 to $38.4 billion in 2014—a 20% jump driven by higher deliveries by aircraft OEMs

2. Boeing, projects a boost for its B737 MAX production rate to 52 per month by 2017, and Airbus wants to step up A320neo production to a minimum of 50 and perhaps as much as 60 per month in 2017

3. It's a new passenger out there; airlines will need to build 'social' pace to create brand equity

4. Airlines are buying more aircraft to meet demand: To meet the rising number of passengers, and to replace old units, airlines have been purchasing dozens of new aircraft

5. Big Data and Analytics Offer New Opportunities for Airport Optimization

6. The aviation industry is growing at a very rapid pace. According to renowned aircraft manufacturer Boeing, the aviation industry requires 500,000 new pilots in the next 15 years

Research Methodology

1. The International Air Transport Association (IATA)2. SITA or Société Internationale de Télécommunications

Aéronautiques3. Aerospace Industries Association (AIA) Reports4. TOP Airlines Manufacturer Annula reports5. World Aviation Regulating Authorities6. Airline Social Media Outlook7. Blogs & Third party consulting paper related to

Aerospace Industry8. Airlines Manufacturers CIO Interviews9. The Boeing Company, “787 Dreamliner, Program Fact

Sheet,” 201510. Airbus Group, Global Market Forecast (2014-

2033), September 2014