Cost of disruption: Can your airline afford a pilots' boycott?

Cost of disruption: Can your airline afford a pilots' boycott?

Google the term "pilot strike" and you can witness a virtual bloodbath on your screen! Of course, no real blood is involved, but the numbers represent a significant amount of money that is bleeding from the affected airline's coffers on account of disruptions to their service. If you are in charge of an airline's P&L, or some key part of operations involving human staff, you should probably ask yourself – Are you fully aware of the impact such a strike (or other disruptive event) could have on your airline? Can your airline survive such a hit?

Disruption: What's at stake for an airline?  

Innovators and entrepreneurs love to throw the word "disruption" around as a means of impressing their investors. But airline business leaders live in constant fear of that word because they know that hundreds of flights, thousands of passengers, millions of dollars of lost business and a whole lot more of lost goodwill are at stake if they are hit by a pilots' strike or other disruptive event. Here are some examples:  

  1. Around 400 flights got cancelled, as a European carrier's quarterly profit dropped by 20% YOY on account of its recent pilot strike
  2. A prominent airline from Central America is estimated to have lost over $150 million in potential profits (difference between adjusted and actual) owing to their pilot strike in 2017
  3. A major national carrier from the Indian subcontinent lost US$110 million when their pilots went on strike for 58 days in 2012 


Evidently, there is a very clear economic reason for airlines to be on guard against such disruptions. While some of the larger airlines may be able to absorb these losses to a certain extent, there are many companies which simply cannot take such a hit. It is a matter of survival for them to mitigate such losses before they actually occur.  

Digital OCC system requirements

The philosophy is not to create a system intelligent enough to replace/eliminate the human element, but to amplify the effect of human decision makers. This is achieved by enabling them with the most relevant information as per their requirements, while giving an assurance that all other workflows are being managed automatically. Anomalies are duly flagged and brought to the attention of the human workforce. 

Such a system would enable an airline's operations leadership to gain visibility over several scenarios based on historic data and predictive models, and estimate the impact of each on their business. Moreover, trial runs can be conducted of each potential solution and the best one be arrived at in consultation with experienced human OCC experts.

These are especially valuable in case of staff union negotiations, where the airline management can assess the impact of each demand made and choose alternative paths to take if these are found unacceptable based on cost-benefit analysis. 


Collaborative disruption management

The problem in Central America was solved by a wet lease of staff from Boeing, which gave rise to a lot of debate but essentially solved the airline's staffing issue for the short term. However, in case of a partnership of multiple airlines, it might be considered a logical business solution if an airline within the group is able to loan some of its resources to another airline within the same group. The key here is information.

Some of the major questions are: 

  1. Which airline is in need of resources and how much/many?
  2. Which airline (or group) can afford to spare these resources?
  3. What is the financial impact of re-assigning a specific set of resources?
  4. What level of risk is the donor airline exposing itself to with such an operation?
  5. What kind of revised schedule would cause minimal disruption to both parties?
  6. What is the optimal solution which the group should target? 


To share the data effectively, without affecting the confidentiality requirements of each individual member of the group, it is vital for all the airlines to be running on a unified platform (or at least totally compatible platforms) that enable collaborative disruption management. But more importantly, each airline should have a certain level of integration within each element of their internal IT system so as to facilitate a seamless transition of the resources, as well as proper change management and resultant risk mitigation. It may sound humorous to imagine a situation where the leadership of an airline agrees to a resource sharing with another airline, but fail to effectively communicate the same to the OCC, Finance and/or HR – but the reality of primitive operations management platforms which are currently deployed in some of airlines today indicate that such a scenario cannot be ruled out!  


Conclusion: When does an airline need an OCC platform? 

Typically, the cost savings brought about by timely and astute deployment of technology becomes evident during active operations management. But the right platform can help an airline make the right foundational decisions and thereby build up an efficient superstructure for the airline. For context, remember that inefficient airline operations management and improper handling of disruptions cause (or worsen) an annual leakage of around $25 billion. And that's apart from the priceless goodwill that your brand enjoys in the market. Can you really afford the risk? 


Daniel Stecher is Vice President of Airline Operations at IBS, and has more than 20 years of experience in the aviation and logistics industries. Prior to joining the IBS family, he was product manager and consultant for the schedule management, operations control and crew management product at Lufthansa Systems. Daniel is perpetually on the move, having raked up literally over a million miles of business travel in his career. He enjoys delicious home cooked food, reading books and the odd round of golf in his spare time.

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Tuesday, 16 October 2018

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