Transportation-as-a-Service: Welcome to the new and improved commute

As Australia’s population increases, so too does pressure on

Commuters across Sydney, Melbourne and Brisbane spend an average of one hour and 15 minutes in transit from their homes to work and back each day. By 2031, it’s predicted this commute will equate to roughly two hours each day.

Solutions are emerging to make commuting sufferable, cheaper, better for the environment and even productive. And millions of people the world over are getting on board.

Enter Transportation-as-a-Service.

Ride sharing, car sharing and car subscriptions have become increasingly popular because of their reduced costs, lower environmental impact (however minimal) and other benefits.

Why own a car when you can summon one to take you wherever and whenever you need to go? Why buy when you can subscribe to a car that allows you frequent access to upgrades without taking a depreciation hit. With major automotive companies such as Volvo, BMW, Audi and others soon to offer vehicle subscriptions, it’s clear this broadening concept of Mobility-as-a-Service is taking hold.

In fact, NRMA predicts with future mobility “private ownership of a car will become unnecessary for many”, as transportation morphs into an evolving and efficient service supported by interconnected modes of transport.

Dollar, dollar bills

Practical consumers have now realised they do not have to own something to enjoy its benefits. As the cost of car ownership rises in Australia, where owners have already paid significantly more than they would in the US or the UK, it is little wonder that people are looking for alternatives. Australian motorists currently pay luxury taxes, import duties and GST when purchasing new cars — not to mention they pay more for the added ‘luxury’ modification of right-hand driving.

In 2014, Ford chief executive Mark Fields asked: “How do we disrupt our industry before other people do it for us?”

At a time when local vehicle manufacturers exit Australia en masse, and with automotive industry revenue expected to decline by 0.5% annually, it seems he was right on the money.

Ford is currently re-inventing itself not just as a car manufacturer, but also as a holistic transport provider. In recent years, the company has invested in a bike-sharing program and now offers its customers a seamless automotive experience through its FordPass app. FordPass users can find nearby parking spots and petrol stations, make mobile payments, start their engines remotely and schedule car services.

The “Uber of the air”

And it’s not just cars. The airline industry is also undergoing major disruption too. Airlines now charge for everything from luggage to booking fees, in-flight snacks, entertainment and seat selection. Travellers are routinely penalised for buying last-minute plane tickets or having to change their travel plans.

This is the result of a product mindset that prioritises add-ons and price increases rather than customer satisfaction, according to Tien Tzuo, chief executive officer and co-founder of Zuora and author of Subscribed: Why the Subscription Model Will Be Your Company’s Future – and What to Do About It?

Tien argues in the subscription economy, where consumers favour flexibility over everything else, the traditional model of fare pricing will eventually collapse in favour of a more personalised experience.

Heralded as the ‘Netflix of aviation’, Surf Air promises consumer-focused modern air travel. A subscription-based private airline in the US and Europe, Surf Air gives members access to unlimited flights for a flat monthly fee. Closer to home, Uber plans to trial pilotless planes and ‘flying taxis’ in Australia by 2020 with plans to expand into commercial operation by 2023.

Traditional airlines and frequent flyer loyalty programs have survived for one reason: they work. But a subscription model offers the added benefits of predictive revenue.

Air carriers can predict exactly how much revenue they are going to generate at the beginning of the year based on user data and their number of renewed subscriptions. Air travel is one of the most capital-intensive businesses, but a subscription model means air carriers can scale their operations more effectively, as they know ahead of time how many seats still need to be sold in order to make a flight profitable. This type of critical insight will allow airlines to offer more flexible bookings to consumers and remove unnecessary fees without operating at a loss.

It’s all about the journey

Consumers are already accustomed to using public transport, taxis, walking and riding bikes as part of their daily commute. Travelling is commonly seen as a negative experience, involving a series of mind-numbing transactions: wait at the bus stop, tap on your ticket, get off the bus, wait at the train station, tap on your ticket, get off the train, wait at the airport, and so on.

But state governments such as NSW have already cottoned on to this, creating ease of access by allowing riders to tap on and off with their bank cards instead of having to purchase prepaid transport tickets like Opal cards.

The growth of automation, AI and the IoT have significantly disrupted and redefined the transportation industry.

Automotive companies and airlines must adapt their business models to a new generation of consumer or risk losing market share to savvier competitors. They are competing for long-term customer loyalty in a fluid market that demands speed, flexibility and fully customisable travel — not just a way of getting from A to B, but a personalised journey.

The goal is to make that journey as simple as possible.

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