• Passenger numbers for airlines are expected to reach 7.8bn within 20 years
• Technology is set to drive change within the airline industry to provide alternative forms of travel and better customer experience
• Virtual and augmented reality, artificial intelligence and drone taxis are just some of the innovations that could transform the industry
• Funding and financing could prove to be the key obstacles in the flight path of disruptive technologies

Another forward-looking report produced by IATA has examined the main drivers of change expected to disrupt the way airlines operate in the future. Technology comes to the fore, and not as the sole major disruptor – societal, economical, environmental and political changes are up there, too. But technological change appears to be the one expected to have the biggest impact, coupled with the most uncertainty over how it’s all going to pan out.

According to PwC’s Global Airline CEO Survey, airline bosses are more likely than those of other sectors to be concerned about how disruption – be it technology, competition, regulation or customer behaviour – will affect their businesses. Fortunately, realistic-looking projections can be made by pulling together many of the different predictions, ranging from the outlandish to the more immediate and practical.

Let’s start with the more outlandish. Can airlines assume a monopoly of long-haul travel in future? High-speed rail is expected to take a greater share of short-distance traffic, while aircraft manufacturers are imagining a world with greater use of on-demand drones and personalised air travel. Airbus presented its concept for a vertical take-off flying taxi at the 2017 Geneva Motor Show.

Or how about Sky-lines – intercontinental tracks made of graphene foam floating above the wind high up in the earth’s stratosphere? This zero-carbon air-travel solution, the brainchild of technology futurist Dr Ian Pearson, is a ‘solar farm’ that could provide direct propulsion to hypersonic gliders, with carbon tethers reaching to ground level to help elevate planes on to the track.

Pearson makes another seemingly less ambitious prediction. With advanced identity biometrics and automated security and travel apps, self-driving cars could deliver passengers straight to their aircraft for more seamless travel. “At least half the agenda for airports is shopping malls, but airlines just need a runway with minimal delay in getting airborne,” he says. “Airports add time and stress to the experience for passengers. Why not cut out the middle man and get delivered straight to the plane? Governments would cooperate with this because a lot of the land that airports currently occupy could be sold off.”

“The aviation industry is just starting to explore the possibilities of AI. Over time it’s likely that its application will become ingrained across every part of airline and airport operations,” says IATA’s assistant director for corporate communications, Chris Goater.

This is a wide area of technology with a lot of variations. If the definition is to be taken simply as technology that can learn, then the possibilities are enormous for smart and predictive aircraft maintenance, as they are for baggage handling and personalised customer services.

So far, use of AI that airlines have made public has been mostly limited to trials of face-recognition and automation of bag-drop and check-in services by American Airlines and Delta, for example. Meanwhile, Lufthansa and Munich Airport have teamed up to pilot an intelligent robot that gives travellers tailored information in response to voiced questions.

“More efficiency at moving people through airports is going to be massively important for airlines,” Goater says. “The majority of the growth in passenger numbers is expected in the Asia Pacific region, but even the more mature markets will increase by half. Opportunity to expand airports is limited, so they have to find innovation to process people as fast as possible. Applying AI and biometrics to check-in and security is a big aim and a welcome area of research.”

Commonly lumped together and described as ‘mixed reality’, AR’s addition of information provided to users through a head-up display or headset is contrasted with VR’s totally synthetic computer-generated environment. Both are heralded as significant – VR for 3D airport and aircraft design and AR for manufacturing and maintenance.

If VR could form the next generation of in-flight entertainment – Air France has experimented with it at least – AR glasses are predicted by some to be the next big shift in personal devices. In a presentation at Facebook’s F8 conference last year, Michael Abrash, chief scientist at VR specialist Oculus, said: “They aren’t here yet, but they’re on their way, and when they do arrive, AR glasses are going to be the great transformational technologies of the next 50 years.”

But if VR offers the opportunity to experience travel without the need to travel, could that have an impact on the industry? Not necessarily, says Pearson. “It could be assumed that VR will provide an alternative travel experience, but VR will not stop people from travelling, just like video conferencing didn’t bring the reduction predicted,” he explains. “Skype, as it became, had the effect of making people more likely to get involved in international projects, and the majority of us still want the level of human interaction that comes with meetings in person. VR will be another technology like TV that will advertise a taste of what people can experience, so will make them want to travel more.”

This ought to be the area of development that really captures the imagination. According to futurist Thomas Frey, drone taxis are “just around the corner”, and Boeing CEO Dennis Muilenberg has said he expects commercial hypersonic flights to become reality “in the next decade or two”.

The resurgence of supersonic flight has been boosted by recent high-profile investments in Denver-based aerospace company Boom Supersonic, including $10m by Japan Airlines with a pre-order of 20 aircraft, and Virgin, which has committed to order up to 10 aircraft. The Chinese online travel agency Ctrip has also announced a strategic investment in the company.

Other observers, however, see the reality as likely to be incremental changes rather than the transformational. “I can see aircraft propulsion slowly changing with different types of jets, but on the whole planes will stay the same, with gradual improvements from new graphene and reinforced aluminium materials,” says Pearson.

Here just about everyone agrees: the digital experience for customers is key, and airlines have to get on top of the interface that now commonly occurs on personal mobile devices between consumer, airline and everyone else. “In a world of comparison shopping and upselling of added extras, airlines have to be able to bundle and unbundle travel packages quickly and have the capability to talk to each other, which we’re trying to help by setting software standards,” warns Goater. “And they’ve got to take the lead before others like Google and Facebook do, which is also already happening.”

Another futurist consultant working in the aviation sector, Rohit Talwar, adds: “Digitalisation is going to be vital for the seamless experience. Face recognition will detect that a consumer is interested in a destination and instantly present travel options, prices and a list of friends keen to join the trip. Blockchain is another technology that’s going to be very important, for allowing airlines to do things differently, to create the killer user experience.

“The aviation sector has got to make much better use of the data it can gather – not necessarily personalised data on a person, but the very likely preference profile of a type of individual. The mindset is not there yet, however. The challenge is getting the digital literacy required to get the most out of it.”

Funding and financing – the obstacle in the flight path?

There are also one or two big financial questions for airlines and airports to consider: How are they going to afford all this? “Some of the smaller airlines will struggle to keep up,” Talwar says. “Apart from a few at the top, many airlines are actually quite small businesses in terms of pure profit, which will limit investment in innovation.”

While the drive behind innovation and digitalisation is clear, how projects will be funded and financed is less so. “The key concern is how these ideas are going to be funded in a sector where there is more focus than ever on cost,” says Andrew Paulson, head of infrastructure finance at RBS/NatWest. “Fully understanding and demonstrating the economics behind the projects will be paramount to mobilise the support of capital markets.”