Building digital platforms to enable advanced air mobility

Aug 29, 2023

Advanced air mobility (AAM) is expected to take off in the second half of this decade. This new form of transportation uses electric vertical takeoff and landing vehicles (eVTOLs)—small, battery-powered aircraft that can transport passengers and cargo—for a range of urban and regional transportation use cases, including commuting, airport taxi services, and medical transport. Fast, clean, and expected to be comparable in price to black-car taxi services when operating at scale, AAM is poised to transform how people move across and between cities.

As with any new sector, the landscape is evolving rapidly. Investors are intrigued, with total disclosed investment in AAM start-ups exceeding $15 billion through the first ten months of 2022. If governments begin certifying AAM passenger travel starting in 2025 as expected, eVTOL entry into service could occur in the mid to late 2020s. The global AAM market could eventually reach tens or even hundreds of billions of dollars in value.

Until now, the nascent AAM industry has primarily focused on developing and certifying eVTOL vehicles. With entry into service approaching, however, companies across the AAM value chain have begun shifting attention to air mobility operations, including the new digital platforms that will enable this ecosystem. These new platforms will touch all parts of operations and customer experience, and there will be significant value at stake for players, including OEMs and operators, who can use these platforms to play an orchestrator role within the broader AAM ecosystem. This ecosystem will include not just the direct eVTOL flight operations but many other applications, including those for orchestration of intermodal trips, predictive maintenance, and regulatory interactions. Some of these platforms have been publicly announced. For instance, Volocopter, an early entrant to the AAM industry targeting entry into service between 2024 and 2026, has shared details about its VoloIQ platform, which will assist with flight operations, infrastructure management, and fleet service management, among other capabilities.

This article explores how AAM operations will require new digital platforms that differ significantly from those of traditional aviation, as well as the issues that companies must consider when developing these platforms. It also provides a framework to help AAM players decide whether it is best to own specific parts of a digital platform or access them through partners and suppliers.

To put the AAM software opportunity in perspective, consider that commercial airlines spent more than $50 billion on software and information technology in 2020—roughly 5 percent of their total spending. These platforms enable many core functions in commercial and business aviation, from developing complex flight schedules and assigning crew, to determining which aircraft and airport staff need to be at which gates at what time, to allowing customers to book tickets and make changes when weather disrupts the operations. Within AAM, digital platforms will also enable important functions along most of the AAM value chain as well as adjacent areas.

Existing airline solutions will likely be unsuitable for some functions in AAM because the operations involved are often different, especially for new use cases. Exhibit 1 shows more than 50 activities that AAM digital platforms will need to manage, organized into major functional areas.

Based on our previous work mapping the AAM value chain, we believe that technology providers could capture significant value from new software offerings that enable eVTOL operations and related services. Digital platforms could comprise 5 percent of the total spending in the AAM value chain by 2030, similar to that of commercial aviation, and this figure could increase up to 30 percent if mobility services, such as customer interfaces for ordering rides and intermodal integration, are included.

Digital platforms for AAM will need to be built and tested relatively quickly, as they need to be available in time for entry to service of eVTOLs in three to five years. This time frame could be challenging because operators may need to build some of these systems concurrently, from the ground up, and shift some focus from hardware to software. By contrast, traditional aviation software evolved over decades. The platforms must also be flexible enough to support both urban and regional use cases for passengers and cargo, since operators are envisioning flights both within and between cities. Finally, they must be appropriate for different types of aircraft, evolving business models, geographies, and regulatory frameworks.

Other major considerations that could affect AAM platform development include the following:

As with commercial airlines, AAM operators will need software to manage staffing of vertiport ground personnel and ensure that aircraft and crews are routed appropriately. But AAM operations also differ from those of traditional aviation, necessitating new or upgraded platforms to handle some functions.

The number of flights involving smaller aircraft traveling shorter distances will increase. With this shift, the number of people transported on AAM flights may eventually exceed the volumes for commercial and business aviation for large operators. This development will likely increase the complexity of flight planning, demand forecasting, assigning aircraft to different routes, and managing battery life. In commercial aviation, demand is relatively predictable and operators may set flight schedules up to a year in advance. With AAM, by contrast, demand is more uncertain because bookings will occur hours, if not minutes, before a flight.

Digital platforms for AAM must also be better than today's commercial operations platforms at managing irregular operations, including unexpected changes in flight schedules, missed connections, and route diversions. For example, in commercial aviation, a 30-minute delay of a five-hour flight does not typically have a big impact on a journey, and passengers have few alternatives. On a 20-minute flight, the same delay would matter more and providers must offer good recovery options; otherwise customers may choose to avoid AAM and instead opt for point-to-point ground transportation. Many urban vertiports might have space constraints that could present difficulties. If an eVTOL breaks down or its departure is delayed on the only available landing pad at the facility, other vehicles would be unable to use it.

To avoid such problems, AAM platforms must manage demand and capacity in real time—for instance, by quickly rerouting eVTOLs to other vertiports within range. Ensuring that these decisions can be made quickly is particularly important in AAM. While traditional aircraft carry fuel for such diversions and at least 30 minutes of additional circling and holding, that will not be possible for eVTOLs because of tight battery capacity.

Other major operational concerns involve air-traffic management (ATM) for piloted aircraft and unmanned aircraft system traffic management (UTM) for unmanned aircraft. ATM/UTM and operations platforms will need to be integrated, regardless of which entity ends up managing the immediate airspace around vertiports. ATM/UTM standards have not yet been finalized for AAM, however, so there is still some uncertainty about what parties will be involved. Special platforms may also be required if vertiports decide to offer any value-added services, including eVTOL and automotive charging facilities, maintenance, repair, and overhaul services, or e-commerce such as click-and-collect delivery of consumables for eVTOL riders.

For best results, developers will configure operational platforms with AAM's unique features in mind. For instance, handling large and sudden shifts in passenger volume will require platforms with enough compute power to collect and analyze large amounts of data very quickly. Platforms must also be usable in different operating environments because vertiports will come in many shapes and sizes—some will be extensions of current airports, others will be "greenfield," purpose-build vertiports, and still others may be converted parking garages.

As AAM gains scale, customers will want to book seamless, point-to-point travel through ride-hailing platforms such as Uber and Lyft, or platforms developed by AAM operators. Already, many operators envision a world where customers can call a ride-hailing vehicle to their home and travel to a nearby vertiport, where they will board an eVTOL that will take them to a second vertiport near their final destination. If necessary, another ride-hailing vehicle will be waiting at the vertiport to transport customers over the last mile of their trip. This is critical for AAM to gain scale because the process must be easy for customers. Further, time savings must be calculated on a door-to-door level, not just for the flight portion of the journey.

In addition to ensuring a seamless user experience, AAM customer platforms must be fully integrated with operations platforms. Such connections will allow the platforms to optimize routes and passenger scheduling in real time based on potential itineraries, demand, pricing, vertiport availability, and vehicle location. For instance, a platform may use ground and air traffic data to determine whether passengers should take a 20-minute ride-hailing car trip followed by a 20-minute flight, or a 30-minute car trip followed by a ten-minute flight. In other instances, passengers may choose to alter parameters of their trip mid-route. If they were originally scheduled to transition from a ride-hailing vehicle to an eVTOL, for example, they might instead decide to remain in ground transportation for the entire trip. With early AAM use cases, it's unlikely that such complex, mid-trip switching will be possible. As AAM gains scale, however, operators will need to offer solutions that optimize routes.

In the event of irregular operations, AAM operations systems must also communicate in real time with other mobility platforms to ensure that transportation at later stages of the journey are adjusted. For instance, they could be configured to release a ride-hailing driver to take other fares if a flight is delayed by 20 minutes.

When looking at the customer journey as a whole, operators must decide whether they want to own certain parts or simply enter agreements with mobility platforms that will manage them. Consider the process by which a customer books an eVTOL flight through a ride-hailing platform. Will the AAM operator own any part of the digital experience, and if so, where will the handoff between systems occur in the customer journey? Questions may also arise about the best user experience to offer. If a ride-hailing app is offering access to flights from multiple eVTOL operators, would customers want the option to choose among operators, or would most prefer to simply be routed through the most efficient route?

AAM relies on innovative technologies, and operators will need sophisticated platforms to support their use. Consider the following examples to see why.

Battery life cycle management. Batteries are a cost driver and will largely determine whether operators can make a profit—and that means companies will need to build battery-management systems or find a partner that can help them track and optimize battery usage.

Operators must integrate battery-management software into their digital platforms for AAM to make better decisions about battery replacements or swaps. For instance, all batteries deteriorate over time, and operators may choose to actively assign aircraft with the most depleted batteries to shorter missions to prolong their use in service while directing new batteries to aircraft with longer missions. A platform that helps them monitor battery depletion and connects with the software that manages second-life applications would be very useful. The platforms could inform them when a battery has reached its minimum capacity and might be sent to a recycling program, allowing them to recoup a portion of their costs.

Safety management for autonomous flights. While most eVTOLs will have a pilot in the aircraft during entry into service, many operators envision a world in which flights are highly autonomous in an effort to reduce costs to the point where a trip is comparable to existing ground transportation options today.

While autonomous flight would require multiple platforms, those related to safety are paramount. Any operator of autonomous eVTOLs would need the ability to take control of an aircraft remotely in the event of an emergency and land it safely—and that would require integrating systems for ATM/UTM with those for vertiport operations. Both systems would also have to link to those of public-sector police, fire, and ambulance agencies to allow for a coordinated response if a vehicle makes an unplanned landing outside of a vertiport.

Players in AAM must identify which parts of the value chain are core strategic priorities and what digital platforms they should own, because they provide the greatest opportunity for differentiation.

Identifying priorities may be difficult, partly because the best choice may change over time as the industry evolves or as organizations develop new capabilities. As a first step, AAM players could determine which platforms will generate direct revenue streams as stand-alone businesses, especially for control-points in the value chain that are difficult to commoditize (Exhibit 2). For example, operators might determine that battery management is a core platform that will generate significant direct revenue as a stand-alone business. Developing greater competencies in this area could also allow them to increase efficiency within their core operations because batteries account for a high portion of their total cost of ownership.

A second group of software applications may not directly generate revenue but instead produce value-added synergies. These could include loyalty programs, which may reveal valuable customer data that could eventually inform demand planning and customer-experience design. For OEMs, an equipment-health-tracking tool or predictive-maintenance platform might improve reporting about general wear and tear, equipment problems, and necessary repairs and, in turn, provide valuable data to regulators that could help reduce reserve requirements for aircraft over time.

The third group of applications are market enablers. They are essential for operations but are unlikely to generate significant synergies or help operators and manufacturers with differentiation. Nonetheless, in the early stages of AAM, there may be a need for players to build these offerings themselves if no other options are yet available in the market. Examples include billing and invoicing software, weather tracking, and crew scheduling. In time, these tasks may become commoditized, and many companies may choose to procure them from third parties if they are not the long-term natural owner.

AAM has the potential to transform how we move within and between cities and regions, and there is tremendous value at stake for those who build the digital platforms that will enable and direct this ecosystem. This will not be easy, however, since many of these platforms must be built from the ground up and scaled before the end of the decade to enable commercial operations of eVTOLs. Winners can start by determining which of these platforms are core strategic priorities and should be owned by their business to increase opportunities for differentiation. Winners may also initially focus on the core capabilities needed to launch a business before addressing other, less mission-critical parts of the value chain.

Adam Mitchell is an associate partner in McKinsey's Toronto office, and Robin Riedel is a partner in the Bay Area office.

This article was edited by Eileen Hannigan, a senior editor in the Waltham, Massachusetts, office.