How Airlines Should Manage IT Failures and Security Breaches to Improve Operational Stability

A number of Southwest Airlines Boeing 737 MAX aircraft are parked at Southern California Logistics Airport on March 27, 2019 in Victorville, California. Boeing’s global fleet of 737 MAX planes has been grounded since mid-March following two crashes which claimed 346 lives. PHOTO | MARIO TAMA | GETTY IMAGES | AFP

November 28, 2019//-To face up to challenges stemming from digital innovation, airline executives should work to secure technology delivery, manage cyberrisk, and address costs, among other actions.

More than four billion airline passengers will book flights this year, and they expect to reach their destination on time, safely, and securely. Airlines rely ever more on digital technology to manage everything from booking and in-flight entertainment to aircraft maintenance.

Technology outages and cyberincidents around the world have demonstrated that even some of the largest airlines need to upgrade their IT and operational technology systems, including their technology architecture and underlying infrastructure, to reduce risk and build resiliency into their heavily digitized operating model.

In 2019, for example, the United Kingdom imposed a $230 million fine on a European airline for a 2018 breach caused by security vulnerabilities in its website.

Multiple airlines have had problems with their ticketing systems and an important aviation-infrastructure system, causing delayed flights and passenger check-ins.

In 2018, hackers penetrated unpatched servers and access controls of an Asian airline to steal the personal and travel data of as many as 9.4 million customers, including 860,000 passport numbers.

In 2017, a European airline experienced a major IT failure, causing delays and cancellations for more than 1,000 flights.

Digital innovation exposes airlines to growing risk for IT outages and cyberattacks

While the basic concept of flying has not changed since the advent of aviation, the continuous digitization of processes like capacity planning, crew assignment, flight operations, and predictive maintenance expands airlines’ digital footprints and introduces new technical challenges to their operating models.

More airlines are moving to the public cloud, for example, to harness data analytics and optimize customer experience and operations.

As airlines integrate a wider array of ecosystems, such as those facilitated by the International Air Transport Association New Distribution Capability Standard, to personalize their offerings further and exchange more granular information with partners, they may have less control over the security environment and become more prone to digital attacks.

Given the industry’s low margins, airlines also continuously look for cost-cutting opportunities, including in IT. Many try to optimize vendor contracts for unit costs rather than acquire the agility or innovation required to evaluate new business concepts and respond quickly to new threats or opportunities.

Even worse, many airlines lack elementary tools to evaluate or respond to cyberincidents—for example, documentation of central IT systems and networks or information that would help map customer-facing business processes to IT systems affected by an outage during an incident.

As cornerstones of public infrastructure and modern society, airlines are also exposed to a growing number of successful cyberattacks.

The increasing attack surface stemming from digital innovation across the airline value chain combined with the sheer amount of personal customer data, financial data, and location data they possess has made airlines a hot target for cybercriminals.

According to Identity Theft Resource Center statistics for the United States, despite a recent decline in the total number of data breaches to about 1.2 billion, the number of records exposed has grown by about 15 percent per year since 2005 to more than 447 million in 2018.

Airlines are in a difficult position. They need to innovate quickly to keep pace with industry trends and maintain lucrative positions in the changing value chain, but many lack the means to do so.

Therefore, many rely on patches and workarounds in their digital backbones, potentially increasing cyberrisk and driving up IT costs—along with reputational and regulatory costs—in the long run.

How airline leaders can meet the challenges

Given the gravity, complexity, and growing number of risks—in addition to the limits on human and financial resources—that airlines face, airline executives need ways to set priorities and sequence their cybersecurity and digitization investments.

Based on our experience in serving carriers around the world and leaders in industries from consumer lending to national defense, we recommend that senior teams step back and consider their overall situations from a business perspective.

Digitization requires a powerful, reliable backbone that has security and resilience built in, not just what is available at the lowest possible cost. Airline executives should rethink their companies’ approaches in three main areas: securing technology delivery, managing cyberrisk, and addressing costs.

Continue to get foundational protections in place and enable next-generation-technology delivery

An airline should build an IT architecture and IT operating model that best support its growth, digitization, and business model. Many of the airline industry’s recent developments in digital passenger experience as well as optimized operations and maintenance processes rely on modern technology platforms and IT services.

Without a modern IT infrastructure that serves as a platform to facilitate those digital services and processes, airlines risk falling behind in the race to attract new generations of travelers or to increase operational efficiencies further.

It is therefore important to reconsider the current setup and find ways to modernize it. Many airlines will need to rebuild internal capabilities that they neglected during times of heavy outsourcing.

A widespread example is the secure integration of cloud technology with existing networks, often involving a switch from a hub-and-spoke infrastructure to a distributed-infrastructure concept, where traditional perimeter-security models no longer work. In addition, airlines should strongly focus on continuing to get foundational protections in place.

Build security into digital products and processes and perform a detailed quantitative risk analysis

Cybersecurity should be central to every strategic decision and an essential component of every IT product in the organization. Cybersecurity initiatives should be prioritized based on business-risk scenarios.

By looking across the business through a cybersecurity lens, airlines can transform their decision making and make wiser investments based on risk.

Reviewing potential attack vectors from a risk perspective and evaluating the effectiveness of current cybersecurity activities could help identify areas that put the airline at risk but are not yet covered by running cyberactivities.

Additionally, some in-flight cyberactivities might reduce risk in areas where the airline might not be exposed to significant threat.

Improve cost effectiveness

Airlines need to find ways to cover the rising costs of IT to meet innovation and cybersecurity requirements, help fund the modernization of the IT backbone, and lay the foundation for innovation.

To generate true cost savings, the operating model needs to be adjusted. In the case of public cloud, standardizing and automating IT-infrastructure operations can significantly reduce costs.

For example, automatic provisioning of ready-to-run environments for applications, fully defined in code, including all required security and network settings (without requiring manual interaction), reduces time to market while also ensuring cybersecurity.

Defining functional platforms and driving standardization within and across those platforms also is a key enabler for “the platform play,” an approach on how to structure IT to operate more like a tech company.

To keep airlines on track and make the right investments, executive teams should ask two sets of questions:

  • Cybersecurity. How do we focus on the right topics and spend the right amount of money? How do we measure effectiveness (or, how much do our cyberefforts reduce our actual cyberrisks)? How do we know that we have the right team setup and can meet the cybersecurity challenge?
  • IT infrastructure. What is our future IT-infrastructure strategy, and what are its implications for the business areas? Which benefits can the business expect from modernization? Are we set up to meet these expectations? What is our long-term plan for the areas not covered by modernization activities?

This helps to create transparency on the initial IT baseline, for example, to optimize overlaps for scarce resources, such as in architecture, and drive the negotiation (or renegotiation) of supplier contracts.

Finding the right talent to strengthen the organization and drive these activities can make a decisive difference in the success of a transformation. For a case study of how one company approached the challenge, see sidebar, “How a leading airline modernized its IT infrastructure and increased its cyberresilience.”

The time to act is now

More than four billion airline passengers will take cybersecurity for granted when they book flights this year. Additionally, they will expect to reach their destinations with few delays and with their luggage, resting assured that their payment and identity data are not for sale somewhere on the “darknet.”

Complex, global IT systems that rely heavily on legacy components will remain vulnerable to breaches and failures. A range of attackers, including bad actors from outside the industry, will continue to look for ways in.

The resiliency of airline business will depend on how well—and how quickly—the industry addresses shifting cyberrisks and modernizes IT applications and infrastructure in an increasingly digital world.

New hardware and software, innovative suppliers, and top talent can all help airlines harness the benefits of digitization and minimize the risks.

But as the landscape continues to shift, IT needs to change structurally. Airlines need to anchor cybersecurity as a protector and IT infrastructure as an enabler of innovation on top of the chief information officer’s agenda.

Otherwise, powerful new technologies will not be harnessed to deliver maximum value, acquisition of IT talent will become more difficult, reliance on current legacy suppliers will increase, and ultimately, business opportunities, balance sheets, and corporate and personal reputations will be put at severe risk.

About the authors

Thomas Elsner is a partner in McKinsey’s Munich office, where Christoph Fuchs is an associate partner; Benjamin Klein is a consultant in the Berlin office, where Wolf Richter is a partner.

 

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