Welcome to the Velocity podcast, brought to you by management consulting firm Oliver Wyman. In this episode, we are joined by Dimitris Kostamis and Konstantinos Varsos and Chris Reed and Omar Santos from Trax USA, where they discuss the emerging technologies and workforce trends that drive MRO (Maintenance, Repair, Overhaul) IT solutions.
Dimitris Kostamis
Welcome to our podcast. I'm Dimitris Kostamis, senior advisor with the Transportation and Services group at Oliver Wyman, and I'm joined today by Kostas Varsos, partner at Oliver Wyman, Transportation and Services group. Also, Chris Reed, managing director at Trax, and Omar Santos, vice president Customer Service, at Trax. Thank you for joining.
Thank you for joining us. So, let us get started with the first question which, in the past year, what have you seen in the market customers, potential leads in terms of trends and challenges, what are the emerging things that you're observing?
Chris Reed
We have had a lot of experience obviously over the last year, a lot of new airlines coming on board, amazingly still startups in in process. Obviously, as we know, the airline market has had a bit of a challenging few years, a lot of airlines did reduce their fleets, so of course they’re running, some of them are running at slightly lower capacity still. So, load factors are very high because the market has really picked up. But then of course yields are high as well, but one of the challenges that we’ve seen with a lot of our clients is resources and personnel. So obviously they got rid of a lot of people during COVID and now they are not able to get a lot of people back again. And I think that’s across the aviation industry through check in airport security, airline operations, et cetera. So, one thing that we’ve seen quite a big trend with our clients is the requirement for more mobile and paperless working. So, they’re getting a lot of efficiency out of that. They can do more work with less people, improve their processes and of course, yes, do more with less people. So, one of our emerging trends really is the popularity of our mobility. Applications and people airlines moving towards a fully paperless operation. Airlines and MROs as well, of course.
Dimitris
Excellent, Chris. So let me ask you this, especially on the mobility piece. Are you happy and satisfied with the progress that your clients are making in terms of mobility adoption and what do you see as the main obstacles in the adoption of that?
Chris
Sure. Thank you. So, clients have been progressing well. I think when we talk, most of them want a paperless and mobile operation. Now of course, getting there can be quite challenging when you've got many years of existing processes based on paper to migrate to a fully digital platform. And that's some of the big challenges, I think in terms of adoption. A lot of airlines now, because of the situation we've had with the pandemic, are bringing on a lot of younger people. Those people are very used to technology, so giving them mobile apps is all very familiar. It is more the aging workforce that can find the tech more challenging to use. Mobility applications rather than paper-based solutions are obviously a little bit more tactile and easier for them to be familiar with. But what we've found is in some of our clients that have adopted the mobile and paperless, the older guys are obviously very experienced on the aircraft, but not so experienced in the technology. Whereas the younger guys are more experienced in technology, but less so on aircraft. So, the young guys have been helping the old guys with the technology and the older guys have been helping the young guys with learning aircraft experience. So, it's been a good sort of marriage, for them to be able to sort of improve the overall process for everybody.
Dimitris
Chris, this is an excellent next point and I'll pick it up. What you just said about the difference? Operations. Do you see that being a driver of your technological road map in the next few years, like trying to basically cater to the needs of those new generations? And what are you doing in that respect?
Chris
Yeah, I think obviously the move towards a very mobile workforce is something that's been coming for many years. We brought our mobile applications out about eight years ago, so it's been coming for quite a period. And like I said, obviously younger guys younger. And that's all they want. They're happy with mobile technology. They use their TikTok and their Facebook, and their Twitter, or whatever they've got. You know, they're always on their mobiles. So, it's not unfamiliar territory for them. So now translating that into the workplace, it's very easy for them to adopt that technology in the workplace. Now you send a 25-year-old fresh out of college to come and work in an airline and they must do some work on paper. And you know that's not familiar territory for them. So, I think the mobility side really is a big advantage with the younger generation for sure.
Omar Santos
The recent trends also the adaptation by the regulatory bodies as well. I think they're accepting the technology. More and more, and I think in the US with our relationship with the FAA (Federal Aviation Administration) and working with them using our products as well, I think in the North American market, it's been a lot easier to adapt. And in Europe as well, they're adopting as well with the requirements for digital signatures and sign offs and digital certificates. And I think that's going to evolve the product even more to have airlines go there and you know, meet their digital strategy for the next couple of years.
Dimitris
Omar, you mentioned a couple of different markets, North America, and Europe. So, let me ask you based on that, are you seeing any significant differences coming from customers in the different areas in the world there?
Omar
Are different requirements coming in around you know solution? Things to make things more efficient. I think in Europe we're seeing a lot of customers looking at the AI (artificial intelligence) part of it, trying to automate processes, trying to automate certain things to be more efficient and the mobile apps for us are behind that platform with our core ERP (enterprise resource planning) but their requirements in the US is more getting rid of paper, getting rid of, you know, the manual processes behind paper and moving the paper around and capturing the paper and the log books and the task cards. And you know it's getting out to North American customers since they outsource a lot of the heavy maintenance. They're also asking the MRO providers to start digitizing their platforms to send data electronically because they don't want to have a back-office person because they can't find their resources to enter data for something that should be or could be automated. And so, we're getting a lot of the requests for that and that's opening the market. For us, especially in the MRO sector, where they're selecting us to provide those digital solutions to satisfy those customer requirements.
Dimitris
Thank you. So, I want to switch to a little bit of the macro factors that we have been observing in the last year or so, not only in in Americas but also in Europe and Asia. Have you noticed any significant differences in the conversations you have? With your, with your clients around the globe in terms of their needs or what they're asking you to do, or what their priorities are. For example, asset productivity is, is that the top priority or not agility of the of the product and so on?
Omar
I think the biggest thing is supportability of the current products that they have. And migrating into a newer platform that can allow them to grow and scale. Right now, a lot of them are stuck and especially in Europe, are stuck with systems that don't allow them to scale. And the same thing in North America. I think we are all facing this, they all are facing the same challenges, but the priorities are around what gets done first. I think it's different in North America versus in. In Europe, their focus more on kind of scaling the ERP system, getting it to the new platform and then mobilizing. We're in the US, they want to mobilize first and then scale with the European later. That way they can get their frontline users on mobile devices so they can enter data in real time because everything is about time. Efficiencies and getting the aircraft out. So, we do see different priorities, but ideally more in the US we're seeing that mobilization because of the number of flights that we have here in the North American market where in Europe they have the same capacity but a lot of them fly international. And you know, they want they have a different interest where they want to have the ERP. To the latest version to the latest you know supported versions so they can have a supported system that they can then scale and grow on and mobilize their different technicians. So, this is where I see the differences between the two markets, but I think in the US, everybody is in North America. In general, they're very focused on. Deficiencies because of the lack of ability to get resources, you know they want to make things more efficient on their frontline and in the back office, they want to have things automated a little more.
Konstantinos Varsos
Now you have a lot of folks’ kind of in the older version of Trax that I'm considering, kind of like upgrading, obviously. And would you want to maybe elaborate a little bit of what do you see the benefits, some of the, the also the challenges this year around that upgrade?
Omar
Well, we've done our programming team, which is heaven, Miguel Sosa. They've done a very good job of working with the mobile products, making it backward compatible to Trax 2015 and allowing the bigger customers to meet that digital initiative. Before they get into the newer platform, which is for MRO and we've seen a lot of success with that because we can take care of a good, you know, large portion of the population of airlines, mechanics, warehouse, people get them into the mobile solutions. And then when we get into ER (enterprise resourcing), we're just focusing on the back office. Just a smaller controlled group, and we focus on those groups, and the implementation goes much smoother when we go through that process. So, you know the programming team and the technical teams in the office have done a very good job of trying to make that that record as much as possible, but there's still limitations because with MRO, we're evolving. To do 3D imaging on aircraft. Digital signatures and there's certain things that is not backward compatible because of the technology. So, we're starting to run into those things, but like pushing the customers to do is that let's get the devices on the technician side of it. So, they are at least to be more efficient, better than having nothing and then evolving them. And when they jump into ER, they will just have these nice new features that they can adopt.
Dimitris
Great. Thank you, Omar. So let me switch gears and mention that Trax was recently acquired by AAR (Allen Air Radio), a leading aviation service provider. So, with that acquisition do you feel, or do you expect that it will change in any way the product rules for Trax?
Omar
From the track standpoint, we're going to still be. And independent subsidiary of AAR, our Innovation development and structure of the companies still going to be the same. We will have some new leadership to help with that scaling of Trax. But we're going to continue supporting our customers, continue supporting the MRO customers as well that are in the same sector and providing that innovation and digital innovation strategy that we have. What we had before the acquisition with AR, we will be working with them on doing electronic. Data transfers, EDI (electronic data interchange) transfers with parts and work packages and stuff like that. So, we're looking at for the future, that's our future item that we're going to collaborate with them. But ideally the organization is not going to be independent, and we if we need funding to expand our regional presence around the world or funding to. Expand or fund development projects that we want to do, we will go to AAR to request help, and we get away from the stigma of Trax as a small company. They're independent. We've been an independent company for 25 years and we've done very well by ourselves. But AAR opens a lot of doors for us too in the military government sector and with bigger operators as well, where we have the backing of Big Brother basically to help fund and manage.
Chris
I think. One of the benefits that AI saw with acquiring tractors, you know we're a very sort of entrepreneurial company. You know we started Trax, yeah, 26 or 27 years ago, there were just three of us and we, you know, we grew the company to where it is. Today and a recognize that that's something that they want to maintain. And as Omar mentioned, that's why it's going to be an independent subsidiary. So, we can maintain that on spirit, we can, we can develop things quicker. We don't have to go through a big approval process to do new projects, and they will be funding a lot of those developments. So, you know, they want us to come to them with projects that we want to do additional technology or user based. So that we can continue to develop products and you know, improve, and increase the size of the company, improve the product availability to clients as we've done for the last 27 years. But now, with a lot of good backing and as Omar mentioned, with full-scale ability to bring Trax up to a big public company standard.
Konstantinos
Are there any kind of sort of immediate investments that you are expecting from them or?
Omar
Yeah, I mean, of course.
Chris
Very soon. As we know, resources have been challenging. You know everybody. So, you know they're putting a lot of effort into being a secure those resources as well. And we we've been using internal resources at AAR already. So that's helping us you know on the scalability side. As I mentioned, yeah, we got a couple of guys to come over from AAR to help us on that, on that scaling of the business. So, you know they're doing a great job already. And we've, we've already seen the impact within the last month. And obviously it is a transition process. That's, you know, it's going to take us a year to settle down, understand how each other works, what the priorities are. You know, we've got short term goals that we're working towards, and you know we've been safe. We've had a month. It's been successful so far. It's a lot of work. We you know, we think we both recognize it's going to be quite a bit of work to get things where we want it to. But you know the goal of AAR is to get Trax to a, you know, $100 million plus company within two to three years.,
Dimitris
Meaning, that's their goal. Very good. Thank you, Omar, and thank you Chris, for this insight. You've been successful at growing the customer base obviously. You have ambitious goals for the future. Now, at the same time, you're faced with a tight labor market, so how do you accomplish all of these? You know, additional growth, supporting your current customer base. And obviously, employing new people, are you more excited or frightened about the future?
Chris
Obviously, there's always elements of fear in in the unknown in that sense. You know, now that we are with AAR, it’s opening so many new doors for us and on top of that, they recognize that there are areas where perhaps Trax has been a little bit more in isolation in some things and we should be perhaps reaching out and working with partners more. But you know other integrators and outsourcing something, some things that traditionally you know we may have struggled with you know we can. Counsel some of those things to other more specific companies have got better, better skill and more established. And take advantage of you know where they are in, in, in terms of their company development. So, I think you know we're looking a lot more at spreading the load you know throughout other organizations as well. Obviously, you know carefully chosen partners. But you know I think that's really one of the ways that we're going to scale the company without. And to necessarily grow our resource in Miami as such.
Dimitris
Sounds good. I would like to go back to the broader market for a moment. If you look ahead three to five, or more years down the road, what are the things that really excites you in the tech operations space?
Omar
I mean I work primarily in sales. So, you know from my perspective, you know I'm dealing with clients you know they either have existing systems that want to change or new clients, new startups and what's obvious with the with both of those categories is that you know resort there are resource constraints. So, you know they're wanting systems to do. Far much more for the. So you know we we've been looking at a lot more automation now you know we have you know robot process automation for example within the system we have elements of automation in terms of like creating you know line work orders this type of thing you know if you've got a large fleet of 1000 aircraft you know you want a lot of this stuff to be automated so you know. Saving man, you know, getting those efficiencies up. So, I think as I say in in both categories with new startups and existing clients, you know they want far more automation than perhaps they've got currently. You know we've got the decision-making capabilities we're getting; you know with the mobile apps; we're getting the real time data coming into the core system. So, you know anyone can sort of access that data. You know, building dashboards, building the analysis is obviously very important for people to be able to use that data in in an effective way. But yeah, so, I mean, I think that that's sort of one of the main things really is they want to do more with less people.
Konstantinos
In terms of future functionalities. What is your Research & Development guys working on?
Chris
There's a lot on the road map and since AAR, you know, acquired the company, they've got some other projects that they'd like us to do as well, cause some of them we you know, we need to keep a little bit quiet about. But I mean in general, you know, we're looking at incorporating, you know AI into the functionality of the product itself rather than. Developing an AI platform that sits outside or a product that sits outside of the core systems. We're looking at integrating AI into the specific functions that are being carried out throughout the system yourself. So, for example, you know if a technician needs to make a transaction on the line you know, currently he'll be selecting the programs he'll be selecting you know the fields needs to enter and the data. But you know if we can incorporate AI into that actual application, you know the engineer could speak to the device. For example, say I want to raise a defect on. The tail number I'm working on, you know the machine already knows who he's working, what he's working on, what he can do. You know, it can then bring up the relevant information for him that he needs to see. He can say, you know, I need to inspect, you know, the flap. Area or whatever it is. The system then brings up the documentation for in the task card you can say OK I've inspected it; I've not had any findings. The system then is going to close that task for him, do everything it needs to do in the background, but without him yet performing a transaction itself. So, making the technicians life a lot easier. You know they can just do it in a natural, you know, natural language processing. Way, rather than trying to, you know, remember to do all these different transactions, training is a challenge. You know, with these are complex systems, you know, and it can take, you know, days, weeks and sometimes even months depending on the role that you're training somebody for. So, if we're introducing this sort of AI NLP (natural language processing) type technology, you know it's going to make everybody's life so much. Easier, but at the same time keeping all the regulatory records. You know that the FAA or the authorities will require. So, I think that's quite an exciting thing. We're not there yet, but that's something that is on our horizon.
Dimitris
Omar, Chris, thank you so much for today.
Omar
You're welcome. Thank you again for the invite.
This transcript has been edited for clarity.
