As consumers, we’ve started to take it for granted that we’re surrounded by sensors that are connected to the Internet. Our smartphones are jam-packed with these sensors: motion, orientation, and various environmental conditions are automatically recorded by these sensors. Beyond our smartphones, we’re surrounded by sensors – sports tracking devices, smart home solutions and industrial sensors all pick up on a plethora of different conditions. But one thing we’ve probably not given a lot of thought to is how sensors will change the way the airline industry works.

Sensors have long been found on aircraft – jet engine manufacturers like General Electric and Pratt & Whitney embedded sensors into their equipment. These sensors have been quietly collecting vast quantities of data – as an example, the GEnx jet engine has 5,000 individual data points analyzed per second – but this data, formerly an internal tool used by these companies, will soon become a standalone value-generating business itself.

This move to embedding cheap sensors in every conceivable (and many inconceivable) places is known as the Internet of Things (IoT). There are other names for this trend (GE prefers the “industrial Internet”) but essentially they all refer to the same thing: taking small and generally cheap sensors, inserting them in a variety of different places and harnessing the massive amounts of data they create. This data can then be analyzed to determine trends, anomalies and the best way to build things.

While this notion of the IoT might seem irrelevant to all but the most technologically obsessed airline-watcher, the impact of this move is going to be felt throughout the airline industry. There are new business models at stake here, and lucrative ones at that – GE generated close to $1 billion in incremental income in 2013 simply through performance improvements, less downtime and more flying miles generated directly through IoT insights. These benefits are becoming more and more apparent outside of the companies that embed the sensors and will soon start generating benefits for all travelers. Some examples of how this is happening:

New revenue streams

Pratt & Whitney is now using the IoT to launch an entire services business. The company is adding to its traditional after-market business with service contracts that are directly enabled by the collection and analysis of sensor data. The half-terabyte of data that the company collects per flight is being used via data modeling and statistical analysis to anticipate repairs before an aircraft lands. The enabling of this proactive assessment of component wear is generating more tailored maintenance solutions. Rather than simply using flying-hours maintenance schedules, Pratt & Whitney generates value for its customers by moving to a far more predictive maintenance schedule.

Paul Maritz, the CEO of analytics technology firm Pivotal, had this to say: “By reviewing real-time data, there is no need to break down an engine every 2,000 hours. This will enable [original equipment manufacturers] to profitably change their business model to contracting for hours of operation, not sales of machines.”

Increasing efficiency

The array of sensors that jet engines (and other parts of modern aircraft) now contain are being used, alongside sophisticated analytic tools, to provide real-time flight information. Whereas in the past this data was stored and downloaded on the ground for analysis after the event, the rise of lower cost computing solutions now means that flight data is being tracked, and reacted to, in real time. Maritz notes: “The Internet of Things is all about catching things in progress rather than waiting until after the fact to analyze the data.”

This ability to react to sensor data in real time, and change the way aircraft perform en route is leading to a shift in the way engine manufacturers and their customers think about the business relationship they have. Manufacturers are monetizing their ability to save airlines money.

In explaining Honeywell’s own initiatives to connect more aircraft mechanical systems, such as brakes and APUs, Honeywell VP of marketing and product management Jack Jacobs, says, “I like to look at it as, there is already a lot of data we have on planes. How do you make it useful so that saves people money, saves the maintenance guys money or make the crews’ life easier for getting information?”

GE, meanwhile, has a division called Flight Efficiency Services that is helping airlines reduce their annual fuel bills by up to 2%. Increasingly engine manufacturers commercial relationships with airlines will include efficiency as a core service level and the use of sensor data will become ever more important.

The future is driven by software

Famed entrepreneur and investor Marc Andreessen famously opined that “software is eating the world”. What he meant is that all companies are applying a software layer to what they do in order to drive efficiencies, develop new products and increase customer satisfaction. The airline industry is no exception and the IoT powered by software and data analytics will fundamentally change the way airlines and associated organizations work.

IoT’s impact on the airline passenger experience is already being explored in a variety of ways. Copenhagen airport, for example, can analyze traffic patterns and dwell times through anonymous contact with passengers’ smartphones at access points. But these and other initiatives beg a larger industry discussion about privacy, security and #PaxEx.