Self-disruption at Airbus: doubling down on flying cars with digital ridesharing platform
Airbus controls 45% of the global helicopter market. Low industry growth and the development of Urban Air Mobility or flying cars represent an important long-term threat to the survival of the helicopter industry as we know it. Airbus is trying to disrupt itself, before somebody else does by taking an all-encompassing approach to look at Urban Air Mobility. Airbus is investing in the entire ecosystem, including the on-demand helicopter ridesharing platform, voom.flights.
Facing disruption
Airbus controls 45% of the global helicopter market [1]. The drop in oil prices and the introduction of drone technology for O&G (and other industrial/business) missions has translated in helicopter overcapacity, fleet underutilization and overall, low industry growth [2]. Moreover, the development of electric vertical take-off and landing vehicles (eVTOL) and Urban Air Mobility (UAM) initiatives represent an important long-term threat to the survival of the helicopter industry as we know it.
Urban Air Mobility (UAM) became a mainstream topic, fueled in part by ambitious strategies made public by companies like Uber [3], which outline visions for intracity air travel as a viable alternative to ground transportation. The articulated strategies present 5-10 year development paths, and focus on the technological and regulatory innovation required to make urban air travel a future mass market transit solution.
The big four helicopter OEMs, Airbus, Bell Textron, Leonardo and Sikorsky are all taking a different approach to UAM. While Leonardo and Sikorsky are pursuing a wait-and-see strategy, Airbus and Bell Textron included UAM as a strategic initiative in their agenda, making sizable investments in this space. Bell Textron has focused on developing the vehicle itself [4], while Airbus has taken an all-encompassing approach [5] to look at UAM. Airbus is investing in the entire UAM ecosystem, including next generation vehicles, unmanned air traffic solutions, city infrastructure and on-demand ridesharing platforms.
Venturing into digital platforms
Airbus developed voom.flights [6], an on-demand service for helicopters operating in traffic-congested cities like São Paulo, Mexico City and, most recently, San Francisco Bay Area (the average traffic speed in Mexico City can be as low as 6km per hour [7]). The platform is accessible through a mobile app, which connects passengers with helicopter operators, and provide transport services to-and-from helipads in a seamless transaction. With this service, Airbus has made helicopters accessible to a broader base of consumers by offering flights for around $200 us, a tenth of the price of a traditional air-taxi service.
In order to offer affordable prices, voom.flights function as a dynamic, routed service with rush pricing. To maximize helicopter utilization the platform has been designed so that the lead time for journey bookings is a minimum of 30 minutes to enable passengers to be pooled in a journey, thus maximizing utilization. In order to minimize deadhead time (flying without passengers), the helicopter is routed to maximize the number of revenue generating segments per journey. In addition, in order to maximize fulfillment during times of peak demand, the price surges until the market reaches equilibrium.
Voom.flights is increasing the capacity utilization of the current helicopter installed base. Helicopter operators who offer air-taxi services through the platform are doubling and, in some instances, tripling their total annual flight hours. Such increase drives growth in aftermarket revenues (spare parts, maintenance and repair services) for Airbus.
Airbus is also using voom.flights as a testing lab for designing the new generation of vehicles. The development program of an aircraft is a massive investment. For example, the cost of developing the Airbus H160 (helicopter) was of $1.1 billion us [8]. Currently, there is no data about UAM, so perhaps the most valuable attribute of voom.flights is that it delivers granular data to Airbus on passenger and operator behaviors, for example. preferred platforms, load factor, optimal cost points for new designs, detailed fleet flight hours for improved aftermarket services, etc.
Winners in an uncertain future
I think it will take at least a decade for us to see UAM at scale. Regulation and vehicle certification will take years, people need to start think differently about helicopters/eVTOL and technology needs to keep evolving. There are many questions surrounding UAM. What will be the actual demand? What part of the value chain will capture more value? Who will capture this value? The OEMs like Airbus or Bell Textron? The digital platforms like voom.flights or Uber? Despite the uncertainty, I think Airbus is positioning itself to be a winner in the UAM space because of the comprehensive approach of its strategy. Airbus is developing the technology and is learning what they are doing. They are looking at the entire ecosystem doing in-house testing, exploration and engineering development.
It will be exciting to see how companies like airbus transform our urban reality into a scene from the Jetsons.
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Sources
[1] Airbus. (2020). Helicopters. [online] Available at: https://www.airbus.com/us/en/helicopters.html [Accessed 11 Feb. 2020].
[2] U.S. (2020). Airbus Helicopters deliveries up, sees no quick oil recovery. [online] Available at: https://www.reuters.com/article/us-airbus-helicopters/airbus-helicopters-deliveries-up-sees-no-quick-oil-recovery-idUSKBN15B0O2 [Accessed 11 Feb. 2020].
[3] Uber. (2020). Uber Elevate | Uber Air. [online] Available at: https://www.uber.com/us/en/elevate/uberair/ [Accessed 11 Feb. 2020].
[4] Bell Flight. (2020). Bell Nexus. [online] Available at: https://www.bellflight.com/products/bell-nexus [Accessed 11 Feb. 2020].
[5] Airbus. (2020). Airbus Urban Mobility. [online] Available at: https://www.airbus.com/innovation/urban-air-mobility.html [Accessed 11 Feb. 2020].
[6] Voom – Helicopter flights for everyone. (2020). Helicopter Flights. [online] Available at: https://www.voom.flights/en [Accessed 11 Feb. 2020].
[7] Global Fleet. (2020). Mexico trends: Hybrids, Carsharing, Safety Improvements, Telematics.
[8] Airbus. (2020). H160. [online] Available at: https://www.airbus.com/helicopters/civil-helicopters/medium/h160.html [Accessed 11 Feb. 2020].
Thank you RLT! A very interesting look at a market being disrupted by a number of trends. I very much agree that investing in UAM platforms is a critical step to gaining insight into the consumer trends that will drive the OEM’s design considerations. I would be fascinated to learn more about how Airbus sees it business model developing in the future. Will the market move in the direction forecast by many automotive analysts: a world in which OEMs may shift towards owning the hardware and selling journeys directly to consumers? Or will Airbus remain focussed on design, manufacture and servicing?
Really insightful post! As you mentioned, it’s very interesting that Airbus is already finding a way to monetize urban air mobility and at the same time generating the expertise needed to run these operations in the future and adjust their product development initiatives. I agree that an integrated approach could be extremely helpful during the early beginnings of this space (which, as you described, will need several years of infrastructure and regulatory coordination to be deployed), but I think Airbus will be better off if they focus on the vehicle production and the monetization of its products with an innovative per-ride fee pricing model, leaving the operation of the platform for better-suited mobility platform players, who have access to the customers by offering a broader and optimal set of mobility services. It will also be very interesting to understand if simpler solutions could continue to shake this industry and limit more complex and capital intensive sectors to serve a super niche customer segment.
Thanks for the article! This definitely seems like an uphill battle trying to create a new market for UAM, and I am skeptical that the business model will be sustainable without a significant user base. There is a lot of headline risk that any incident will damage their reputation and willingness to try it out significantly, including the recent death of Kobe Bryant on a helicopter. There is likely a small audience of wealthy people who want to commute into or between big cities, who may prefer the flexibility of a subscription service to reserve spaces on helicopters. A subscription service may provide more stable revenues for now, while they see if a broader market exists.