European transport industry bets on IoT and AI

European transport industry bets on IoT and AI

Thanks to fierce competition and high operating costs, the imperative to evolve is now stronger than ever for European transport operators. Many of them are betting on low-cost tickets to attract customers, which makes margins wafer-thin and means that customer experience will be the deciding factor when choosing a transport operator. Also, as new disruptors are entering the market with Uber-like business models retaining customers and keeping them happy becomes more challenging than ever. On the other hand, there are also major costs involved for the operators, such as those associated with the maintenance of their fleets.

In such environments, companies can struggle to stay profitable, and recent bankruptcies of the likes of Monarch Airlines and Air Berlin in the airline sector, paint the real picture of how competitive this industry really is.

Such market conditions have put transport companies under tremendous pressure to invest in innovation and become more operationally efficient, improve their customer experience, and see how they can expand their topline with additional services and, possibly, new business models.

Therefore transport incumbents across all sub-segments are investing in technology solutions based on IoT and AI to boost their operational efficiency while improving the customer experience at the same time. PAC recently published several reports on the back of its recent projects in the transport segment and recent engagements with the players on both sides of the transport market.

PAC sees IoT as the enabler of smart transport solutions which address challenges that are categorized into one of the following areas:

  • Improvement of operational efficiency
  • Improvement of customer experience
  • Development of new services and business models

A more detailed insight about the benefits of such smart transport IoT based solutions can be found in this PAC report (access to PAC SITSI Research Platform required).

On the vendor side, PAC published its vendor benchmark report "C&SI for IoT Solutions in Europe – Smart Transport Innovation RADAR" which evaluates vendors in IoT consulting and system integration services space in transport segment. The results show that the most advanced offerings and capabilities don’t necessarily come just from global system integrators but also from transport specialist system integrators as well as the ones with the telco background.

On the other side of the market PAC evaluated the state of IoT adoption and developments by surveying over 200 senior decision makers within transport industry from airline, railway, maritime and road transport companies, aiming to explore the strategic directions they are taking with IoT investments and initiatives. The report can be found here.

Results showed that compared to other industries, an appetite for Internet of Things (IoT) based solutions within the transport industry is higher and adoption is well beyond proof of concept stage in some of the transport sectors. For example, 63% of airlines already generate business impacts with IoT, whereas 83% of the companies across all subsectors plan to increase their IoT investments in the near future means as IoT becomes a boardroom topic.

Another important technology topic for European transport industry is Artificial Intelligence (AI). AI can come in different shapes and sizes, and be used to address numerous business challenges while offering an opportunity to redefine internal business processes. PAC sees that use cases could roughly be divided in the categories shown in the figure below, while more details on the use of AI in transport industry can be found in the PAC Report “How AI Redefines Smart Transport?

Finally it is always good to name some of the accounts that are working on innovations with IoT & AI, many of which have already moved ahead of the proof of concept stage and are bearing the fruit of their investments. These include airlines such as easyJet, British Airways, KLM, Lufthansa and Transavia, railway and train operators like Deutsche Bahn, Virgin Trains, SNCF, Trenitalia and VR Group, as well as some of the logistics giants such as DHL and Royal Mail.

PAC believes that IoT and AI will have even stronger momentum in European transport, especially in the mid-term as new projects in Smart Cities grow. AI & IoT based solutions companies will aim to become an important piece of the smart cities ecosystem and will try to unlock new cross-vertical value in the chain.

PAC will explore the state of smart cities initiatives in Europe this year, and evaluate the appetite for such developments in European public and private sectors by surveying more than 250 senior decision makers. If you're interested in supporting this research initiative please contact John Murray at jmurray@cxpgroup.com.