Hurdles in modernization of airline operations management

Hurdles in modernization of airline operations management
  • My airline can spend more than $200 million every year on disruptions due to lack of operational efficiency
  • The global airline industry can afford to write off $25 billion p.a, of which at least 50% can be easily saved!
  • I can forgive my current OCC tools for their inefficiency. I don't care about customer service!

If you agree with the three statements above, then please feel free to stop reading this blog post right now. We understand that we are not providing you much value by saving the operational losses, compensation (EU261) costs, rescheduling expenses, etc. and plugging other leakages. But if those numbers are significant to you, spending two minutes to read this could be greatly valuable to your airline – value that can be demonstrated on your balance sheet! 

 

Defining inefficiency in airline operations 

Inefficiency in airline operations begins with misusing valuable human resources to scrutinize tons and tons of operational data when the right platform can free them up to look at infinitely more important things. Inefficiency persists when you use legacy systems, with no integration of IT systems and when you depend on Excel sheets to handle your data and build a hundred different charts manually before you go through each one of them to ascertain that everything is okay.

Inefficiency pulls you back when human beings have to sit and work out anomalies in those charts, share them manually and take them individually to each stakeholder and discuss with them before each problem has a viable way out. Inefficiency puts the last nail in your OCC's coffin when the plans are to be communicated individually to each division of your airline and their buy-in ensured verbally or documented before you can put the plan into action.

Inefficiency costs money – a lot of money, as depicted above – and is in urgent need of a solution before it swallows up your airline and eats up your revenue margins! But the most painful part of inefficiency in the airline operations domain is that many companies just don't realize that it can be eliminated through deploying the right kind of technology platform! 

Key attributes of the ideal technology platform

The most visible advantage of a good airline operations management platform is the productivity it generates through freeing up valuable human resources; this is achieved through automating the processes which have a high degree of predictability and helping isolate those anomalous incidents which cannot be resolved without human intervention. Even this is enabled in an efficient manner through decision support algorithms that provide the right elements of information that could swing the decision, while keeping away the irrelevant aspects which can be monitored outside the scope of that decision process. The underlying foundation for this is an effective data flow from each part of the system to the others, ensuring that relevant data is available to any stakeholder on demand as well as when strategically required to do so.  

Overall, this delivers better speed of operation and response times, which translates into cost control for the airline. Combining this with a favourable pricing strategy for the platform itself, the impact on the airline's bottom line is two pronged and very much measurable. 


Reasons for organizational lethargy  

Change, especially of the innovative variety, is triggered in an organization in response to one of the below:

   1. Available technology advances, giving rise to new, relevant use cases

   2. Customers demand change in existing scenario (speed, cost, efficiency, etc.)

   3. External stimuli such as regulation or a change in competitive landscape

The larger the size of the organization, it lends itself to assumption that the time and cost of implementing a change effectively also goes up. Smaller companies, being nimble, may be able to manage the change more efficiently. But with the realization of their growth objectives comes a fresh problem of size and lack of agility as is common with large companies. Some of the hurdles to innovation are:

   1. Insufficient focus on digital strategy as part of the overall business strategy

   2. Reluctance to let go of a working system (however inefficient or unsustainable)

   3. Lack of urgency to pursue a change, especially if the company is large enough to absorb losses

   4. Risk in deploying a new system, compared to safe but painful continuity with current system

   5. Lack of executive willpower/leadership to drive the change despite the risk

   6. Lack of a tangible and compelling value proposition to encourage the change 


Solution: Demonstrating real value propositions

The right kind of airline operations management platform will help your airline evolve from the "reactionary" approach of solving problems or compensating for them after they occur. Instead, an integrated digital platform will help you to implement proactive disruption management. However, speaking from experience, I can tell you that technology captains in airline companies often fail to present their case (for a new system) to the business leaders, owing to two specific reasons:

   1. Uncertainty on how to showcase the business value

   2. Inability to predict/measure the cost savings accurately

In other words, the key decision makers in each company demand a clear, tangible and compelling value proposition before they will consider a change, let alone approve an investment on it. This is why platforms need to present a clear value model to airline companies, which is able to predict the investment required for their transaction volumes as well as demonstrate the business value which can be created by deploying the system.

There are multiple metrics to be considered, because in addition to the direct costs (such as fuel burn) arising from disruptions, the airline will also need to spend money on penalties, compensating for missed connections, rebooking passengers, airport closure costs, diversion costs, etc. Accurately estimating these, based on probability of occurrence and actual volumes, requires a very intelligently designed platform. So by neutralizing each of the above mentioned hurdles, and above all, gaining clarity on the nitty gritties like effort required, downtime expectations, etc. we essentially make it easier for technological advantage to be translated into business value! 


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.

Click here for more information on IBS' portfolio of solutions for the airline industry and more 

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Sunday, 19 August 2018

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