Technology is changing entire industries and the airline industry is no exception. With a recent move from American Airlines Group (NASDAQ:AAL), the world's largest airline is poised to join a broader industry trend toward using technology for cost savings.
The manual approach
A few days ago, American Airlines announced that it would replace the manuals carried by its flight attendants with Samsung tablets. While it may seem buying an airline's supply of tablets would mean more costs, the airline expects to save nearly $1 million annually.
These cost savings are expected to come from a reduction in printing costs saving $300,000 and lower fuel consumption for a $650,000 savings. The fuel savings make sense since these lightweight tablets will be replacing manuals weighing nearly five pounds.
But flight attendants are not the only ones seeing paper being replaced with modern technology. American Airlines has already replaced its pilots' 35 pound flight bags with 1.2 pound Apple iPads in another bid to cut costs. Air Canada (TSX:AC.B) has also chosen iPad replacements for manuals and Delta Air Lines has done likewise, although it chose Microsoft Surface 2 tablets.
Technology for rent and savings
Finding other uses for tablets is already providing a new source of revenue for Air Canada's low cost subsidiary, Air Canada Rouge. For on-board entertainment, passengers are encouraged to bring their own mobile devices and stream video and movies provided by the airline. But since not all passengers have or bring a mobile device, Air Canada Rouge rents iPads for $10 per flight.
But this move by Air Canada Rouge is part of a larger trend. Similar moves have been made at the discount subsidiaries of Singapore Airlines and Qantas Airways. Not only does this strategy boost ancillary revenue for airlines but it puts the planes on a diet as well.
While iPads do add some additional weight, far more is saved by removing the seat back entertainment systems which can sometimes top 13 pounds each. For aircraft with hundreds of seats, these weight savings can really add up and mean fuel use reduction or the ability to take on more cargo.
A personalized experience
Going forward, there is a lot more airlines could do with mobile technology. Besides providing passengers with entertainment, having mobile access to passenger data could help personalize passenger experiences.
Airlines have been focused on generating ancillary revenues from extras such as food and upgrade sales but efforts to sell these products have been broadly targeted. By collecting data on which passengers purchased which extras in the past, airlines will be better able to target the flyers most likely to purchase these extras.
The bottom line
Airlines are realizing the benefits of technology through both cost reduction and new sources of revenue. But unlike so many other situations where airlines make more money, passengers actually come out ahead here since mobile devices are superior to most seat back entertainment systems and airlines will have a better idea for what individuals passengers want to buy.
Over the next few years, expect to see mobile devices play a greater role in your flight experience and make sure to find out if bringing your mobile device will provide you with access to free streaming content.
Alexander MacLennan owns shares of Air Canada, AMERICAN AIRLINES GROUP INC, and Delta Air Lines. Alexander MacLennan has the following options: long January 2015 $22 calls on Delta Air Lines, long January 2015 $25 calls on Delta Air Lines, long January 2015 $30 calls on Delta Air Lines, long January 2015 $17 calls on AMERICAN AIRLINES GROUP INC, long January 2015 $32 calls on AMERICAN AIRLINES GROUP INC, and long January 2015 $40 calls on AMERICAN AIRLINES GROUP INC. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.