Tuesday, 12 September 2017

Optimized or Maximized?

When we talk about optimisation we often think of maximising the use of aircraft, airports, passenger loads, revenue, competitiveness. This kind of action stresses the system and makes it dysfunctional in many ways, including the overall performance and people involved in it.

In his post ‘Optimized or maximized?’ Seth Godin inspires us to see the cracks in our professional (and private) lives when keep pushing things to the maximum:

I once drove home from college at 100 miles an hour. It saved two hours. My old car barely made it, and I was hardly able to speak once I peeled myself out of the car.

That was maximum speed, but it wasn't optimum.

Systems have an optimum level of performance. It's the output that permits the elements (including the humans) to do their best work, to persist at it, to avoid disasters, bad decisions and burnout. 

One definition of maximization is: A short-term output level of high stress, where parts degrade but short-term performance is high.

Capitalism sometimes seeks competitive maximization instead. Who cares if you burn out, I'll just replace the part...

That's not a good way to treat people we care about, or systems that we rely on.

As a valuable contributor seeking to build a career, you benefit when you develop a unique asset, because that asset gives you the leverage to choose a niche in a system that respects optimization instead. 

Thursday, 20 July 2017

Is Airline Hubbing At Low-Fare-Low-Quality Sustainable? Are easyJet and British Airways Testing the Limits of Passenger Tolerance?

When a low fare airline chose to set its main base at one of the most congested world airports, and a major legacy airline based at one of the most congested world airports starts offering low-fare services to its customers, it doesn’t need think tanks to say that they have chosen a very risky path ahead. These are the paths of two major carriers: the low fare easyJet ('big@Gatwick'), and a legacy, Heathrow based British Airways, aspiring to bring lower fares to its customers. 

These strategies came from a desperate need to ensure growth and stay competitive, while trapped in a capacity constrained environment. Unable to strike the right balance, they put the expansionist strategies and short term profit before quality. After all, the elements of quality require more time and effort to measure, and are not officially recognised as a performance metrics.

To get closer to reality, let’s briefly examine some of the consequences of submerged quality issues that strongly impact operational and business performance, and learn some lessons from the most valued passengers who are near to becoming very disloyal to their once most favoured airline. 

easyJet

EasyJet shows its pride in being a major Gatwick carrier, which is their biggest base airport. Its share in departure seat capacity has grown quite rapidly between 2010 and 2015 - from 26.1% to 42.1%. This has inevitably resulted in an unprecedented drop in service quality, especially punctuality (shown below), with deeper implications on easyJet’s overall performance.  




This didn’t come as surprise. It is a notorious fact that short turn times, load factors above 90%, high aircraft utilisation, and low fares cannot fit well into the schedule of the world’s busiest single runway airport which has no slacks to absorb even the smallest disruptions, disrupting the travel of millions of passengers annually. Not only does the company disregard most of its passengers’ complaints, but it expects them to bear the high costs of disruptive travel. It looks as the attitude of ignoring passengers experiencing delays and cancellations is deeply ingrained in company culture and encouraged by the following strategy mission:



No wonder that the mainstream and social media are flooded with unflattering stories about easyJet customer experience, complaints, and airline refusal to compensate delayed passengers. easyJet has been named as ‘airline that is difficult to deal with’, ‘the most complained about airline’ and often listed as one of the ‘world’s worst airlines’.

The airline is about to face a drop in annual profit for the second year in a row, despite low fuel prices and no significant external disturbances that wouldn’t affect other airlines. There is more to be done to put easyJet back to its feet than counting the increase in aircraft, flights, passengers, and load factors, which in this case proved to be counterproductive.

On the good side, the strategy chart has recently been transformed to include ‘customers and operational excellence’ the effect of which may need time to show up.

British Airways

Despite the fact that the BA low-fare low-cost experience is at its early stage, there are strong signals that this strategy may pan out not to be as good as originally expected. This may not be reflected in BA financial and operational results yet, but signs of a drop in quality haven’t passed unnoticed by BA’s most valued customers who shared their experiences publicly. Some of them provided insightful comments and suggestions, like Martin Geddes, a frequent flier, loyal BA customer, Executive Club Member, and Executive Club Gold card holder whose connection with BA is partly emotional (his father worked for BA for 34 years). As a frequent flyer, Martin is often in a position to experience operational and service mishaps, especially those affecting full fare passengers. His views about recent changes in BA service quality and how they affect business passengers are described in his post ‘Brand suicide case study: British Airways’. This is a rare chance to learn about quality pitfalls and disjointed services at various stages of journey of an airline passenger which is not unique to British Airways.

Another valued BA customer, Executive Club Member Scott Martin, MD Costa Express, has given up on BA after two decades of loyalty. This followed the recent drop in quality which he found unacceptable and has already taken over 15 business flights with a BA competitor in 6 months. His experience is described in ‘Have British Airways Lost the Plot’?

So, BA have already lost Scott and is on the way to lose Martin. It may have difficulties to compensate for the loss theoretically equivalent to 500 low-fare passengers in six months. How many more passengers are sharing the same experience? If their numbers start growing exponentially, how realistic it would be to replace them with more of lower fare passengers considering already high load factors? And how long will it take for the new low-fare passengers to realise that their disrupted journey can cost them much more in money, time, and anxiety that they are willing to bear.

As airlines don't measure impact of quality issues on overall business performance, they can grow unabated and come more costly than anyone can perceive - they can wipe out many of locally confined cost savings. 

Until the emerging methods for measuring quality become ingrained in standard practices, there are the elements of quality that could be improved without hard investment, something human and simple, things that Seth Godin described in his post ‘Maybe your customer isn’t trying to save money’:

Perhaps she wants to be heard instead.
Or find something better, or unique.
Or perhaps customer service, flexibility and speed are more important.
It might be that the way you treat your employees, or the side effects you create count for more than the price.
The interactions in the moment might be a higher priority.
Or it could even be the sense of fairplay and respect you bring (or don't bring) to the transaction.

All this prompted me to think: wouldn’t it be good for airlines to occasionally invite passengers like Seth, Martin, Scott, or other fresh thinkers to inspire leaders stuck in daily routines and bring them closer to real life?

Monday, 10 July 2017

First-Hand Experience of The Mockery of Passenger Surveys

I have recently returned from my trip to Belgrade with Wizz Air. The outbound flight was was over an hour late. It was one of those surprise delays that you learn about only when you reach the airport and the delay starts getting longer as you get stuck in an overcrowded departure lounge and then standing squeezed in even more crowded boarding gate. Nobody explained the reason for the delay, nor how long we were expected to wait, which resulted in some passengers becoming agitated, children becoming restless and those less able to stand becoming very uncomfortable.

The return flight to Luton went smoothly and arrived on-time.

Three days later I received the following email: 


Understanding the uselessness of these types of surveys, I treat them as commercial spam. No exemption this time apart from a twist: sharing my feedback was only possible for the return (on time) flight with no space to comment on my overall travel experience, including the unpleasant delay of the outbound flight. It is obvious that this kind of feedback will never tell the system managers what they need to know, especially when things get much worse (as they often do).

While these sorts of tricks can benefit marketing companies which conduct the surveys, ignorance about passenger experience during their critical travel segments only encourages operational dysfunction and comes costly for airlines.


Wednesday, 14 June 2017

The La-la Life of Delays - Isn’t It High Time to Rethink Flight Delays and Reinvent Their Role in Aviation Management?

Flight delays live in La-La land, way off from real world. In La-La land things look rosier. In La-La land of delays it is possible to:
  • Publish flawed delay reports even when industry officials deny responsibility for delay data accuracy, reliability, and integrity
  • Ignore the existence of passengers in delay reports 
  • Suspend Consumer Reports on flight delays
  • Let incomparable, make-believe reports circulate freely across the industry, be used to support a wide range of decisions and as a marketing ploy
  • Undermine strategic value of delay information in balancing profit and service quality  
  • Lose sight of the core purpose of aviation business   
In La-La land it has become common and ordinary to deny truth about delays and instead engage in creation of confusing reports so that by-products of hub concentration and inefficiencies remain unknown – right up to the moment when accumulated problems erupt, triggered by predictable but unforeseen events and reveal the vastness of system weaknesses.

Here are some insights and facts on fallacies in delay reporting.

ON SCOPE

The opportunity: taking the very best of delays 
To understand delays as indicators of forthcoming problems, we need to step above operational environment, so that we can see what drives changes in planned operations, cost, and revenue loss, their true origins, and their impact on passengers. Further, we must be aware about interconnections between people, data, involved in these processes. We also need to keep monitoring the effectiveness of investment in schedule buffers, additional aircraft, crew, and maintenance resources needed to keep punctuality at acceptable level. In this way, we merge the elements of cost and service quality into a single system – something that segmented information systems and legacy practices cannot provide.

The reality: missed opportunity
Of all these integral elements of delays, current metrics is narrowed down to delayed departures and arrivals. Even this data is not consistent and reliable due to the stretchy references and possibilities for subjective inputs. (Find out more about delay references  in the excerpt from Beyond Airline Disruptions).

ON RESPONSIBILITY

There are no rules and no responsibility for quality and accuracy of delay reports. Instead of taking a leading role in improving industry standards, regulators and industry organisations have become the observers and critics of the chaotic state in punctuality reporting, as shown below.

On disclaimers
CAA UK   ‘The information contained in [CAA punctuality] reports have been compiled from various sources of data. CAA validates this data, however, no warranty is given as to its accuracy, integrity, or reliability. CAA cannot accept liability for any financial loss caused by a person’s reliance on any of these statistics’. (report active)
European Commission     The information contained in [European] Community Quality and Punctuality Indicators Table has not been adopted or in any way approved by the European Commission’. ‘The European Commission does not guarantee the accuracy of the information made available, nor does it accept responsibility for any use made thereof.’  (report suspended)
On abolishing Consumer Report 
‘The [AEA punctuality] report is based upon a voluntary commitment by the members to provide consumer information according to a set of commonly defined standards…AEA cannot guarantee the accuracy of figures [not in line with these standards] and indeed has reason to believe that they may represent entirely different performance criteria.’
This note accompanied the AEA Consumer Report  before it was suspended in late 2000s.
On secrecy
‘Whilst punctuality of commercial aircraft operations is one of the key measures of airline and airport performance, consumer access to punctuality data aggregated across the EU for both airlines and airports is very limited’… ‘Data reporting on a pan-European basis is primarily limited to airline de-identified monthly reports produced by EUROCONTROL's Central Office for Delay Analysis (CODA)’ which keeps the data ‘under strict confidentiality and no attempt is made or permitted to identify the performance of any individual airline’ (EU officials).
On (dis)trust
European Commission does not guarantee the accuracy of the information given in their commissioned report ‘Annual Analyses of the EU Air Transport Market 2011’, carried out for the Directorate General for Mobility and Transport in the European Commission (includes punctuality&delays), nor does it accept responsibility for any use made thereof'.

ON ACCURACY

What are the reasons for such strong denial of responsibility coming from industry officials? How much does the absence of standards for delay reporting, especially the use of schedule references distort the truth about delays?  The following examples can give you some ideas.

Defying reality
On 18 December 2010, a small amount of snow fell over London, enough to cause chaos at Heathrow, unprepared for not so unusual winter condition. Massive flight cancellations and long delays affected about 800,000 passengers stranded worldwide (no schedule slacks, no chance to rebook, no information). It took Heathrow 7 days to recover, while neighbouring Gatwick was back to normal in two days.  Read more

Here is how this major event was recorded in CAA’s monthly report.

This kind of insights is only possible during events of bigger scale that expose otherwise hidden causes and consequences of disruptions to public scrutiny.

The Heathrow paradox 
At the moment, Heathrow is the world’s busiest two-runway airport operating at 98% capacity at all times, so any disruption has an immediate impact on some of 1300 flights per day. Instead of expected decline in punctuality, Heathrow reports the improvement over the last decade, indicating that punctuality can grow with congestion, but can it really?



The punctuality of British Airways doesn’t quite follow the Heathrowish direction. Nor does it match the CAA statistics.


 And this is what you cannot find in Heathrow reports:

  • 54% of 224,497 incoming flights were held in holding stacks in 2010. By comparison, 14% of Gatwick incoming flights were held in stacks and 5% at Stansted.
  • 18 million arriving passengers were kept circling in holding patterns for up to 20 minutes on a normal day and 45 minutes in bad weather.
  • Airlines wasted around £65 million in fuel while stack in the holding queues.
  • Airborne holding at Heathrow amounted to the equivalent of having approximately 10 aircraft grounded at airport each day. By comparison, in 2004 the equivalent of 5 British Airways aircraft a day were circling in airborne stacks above Heathrow.

The game of obscured references:
Can you explain the following difference in on-time departures reported by flightstats.com and flightontime.info?


 Who really tops the OAG rank table for medium airports in 2016?


Unlike the CAA who denies responsibility for data accuracy, OAG, the reseller of airline and airport information, doesn’t do so. Considering the messy state of delay references, one can question the OAG claim that they ‘provide accurate, timely and actionable information and applications across the travel sector to the world’s airlines, airports, government agencies, aircraft manufacturers, consultancies and travel related companies’.

Punctuality league tables – the charade
Who really tops punctuality league tables, why, and for how long considering their short shelf life? Should the big data recyclists be kept accountable for the misleading delay information and for putting the company’s reputation at risk?


In the absence of regulation and standards, airline and airport punctuality rankings have inevitably become influenced by subjective assumptions and interpretations of the data compilers and resellers, driven mostly by their commercial interests. By ignoring diversity and lacking the transparency of benchmark criteria and information they have made a mockery of quality – an invaluable measure of airline and airport performance. Data compilers like Skytrax, AirHelp, OAG, GEE Operations Soltions, flightontime.info, and flightstats.com support and feed off each other's data. They have found partners in the mainstream and social media who market their flawed products and spread the misinformation further. No wonder that some airlines are now looking for legal help. This situation will only get worse if the creation of an industry framework for delay reporting and Consumer Reports keeps being postponed.

Delay cost assumptions – the game of guesses
The following table describes the state of delay cost (dis)information based on local, frozen-in-time, non-actionable assumptions.


On role of flawed delay reports in decision making
Despite the evident inaccuracies, obsolescence, and inconsistency, delay reports are being used widely across the industry. They are used to support even the high level decisions like, for example, the expansion of airport capacity in the UK (see Final Delay Impacts Assessment undertaken by the UK Airports Commission).

ON RETHINKING DELAYS AND REINVENTING THEIR ROLE IN AVIATION MAMAGEMENT

Delays hold important messages. They can help with determining the trend and direction of the industry’s many facets. Failing to accurately monitor and interpret these messages is like failing to measure drift and determine wind speed and direction while in flight. It is important to alter the way we think about delays.

Put accuracy aside, assume that it has to be right and then consider this. Let's say you expected punctuality to be 78% but it was down to 72%. What do these figures mean anyway? What do you know about the situation that created the delays?  What was their impact on costs?  What were their true root causes? How many passengers were affected? How efficient are schedule buffers? How efficient and productive are the aircraft?  If you want to improve punctuality effectively, you need to know this information. When you look at 78%, the information is not there. When you are told punctuality is 72% instead of 78% all you know is that you missed your target.
By including the DDS (Deep Delay Scan) technique that combines numerical and non-numerical information, you will be able to answer these questions, predict what comes next and what you can do to minimise the risk of losses in cost, revenue, and reputation.

All you need to do is to combine the very best of what we have and find a better way of using it, assuming the introduction of new standards, methods, and techniques that allow an integrated view on system dysfunctions and prevent them from spreading wide and into the future. It requires involvement of industry leaders and smart regulation that inspires improvement, where interests of passengers, individual airlines, airports, and ATC services are respected, well balanced, and is open to changes. This is not a difficult nor a costly task, considering the current waste in time and resources that could be used more effectively.

And one more thing that can benefit passengers and airlines: if modest reduction of delays and better care of delayed passengers can increase the number of return passengers for say 10%, it will result in 33% more revenue (the work of geometric progression).

ON REFLECTION - WHAT IS YOUR ACTION PLAN?


Are you ever going to look at delay reports the same way as you did before? Are you going to let them obscure your vision of reality or make delays your allies that help you understand the true value of your actions from wider perspective? Are you prepared to bridge the gaps between segmented parts of the system, between assumptions and reality, understand their interconnections and measure progress?

If you are ready to take this step,   Astute Aviation  can help you get there. DDS method and technique are designed to let you see changes in planned operations from systemwide perspective and support you in making purposeful decisions.


Suggested reading

Tuesday, 30 May 2017

Why British Airways Disruptions Are Destined to Be More Frequent and More Severe, and Is There a Remedy?

'By removing slack, airlines create failure. In order to increase profit, airlines work hard to get the maximum number of flights out of each plane, each day. As a result, there are no spares, no downtime and no resilience. By assuming that their customer base prefers to save money, not anxiety, they create an anxiety-filled system'  (Seth Godin)

This explains why British Airways, one of the major world airlines based at the world's most congested two runway airport is being increasingly and systematically exposed to disruptions of a large scale affecting tens and even hundreds of thousands of passengers. The recent IT system outage was just one of the bigger events waiting to happen.

Whatever the disruption trigger (IT system outage, 10 cm of snowATC strikes, or bad weather) the ripples will be two, three, or more times longer than of any other airline caught up in the same or similar situation. Another major problem with handling disruptions is the nature of BA network, its aircraft size, high aircraft and cabin utilisation, which makes it hard or even impossible to rebook disrupted passengers on any of BA's flights. Add to this the company's culture where delayed passengers are often treated as packages (hub network model was inspired by FedEx) and future may not look rosy for BA. 

As the company's strategy and culture cannot be changed overnight, here are some suggestion and practical techniques that can help soften the impact of disruption related issues:

1. Improving communication and relationship with passengers
When Southwest approached the problems caused by the technical glitch which grounded 800 Southwest Airlines flights, delaying thousands of passengers, the airline was praised for how it handled what could have been catastrophic brand crisis - it had social media to thank. Learn How Southwest Airlines turned social media into social business.

Southwest Listening Center
2. Shaping the strategy on the go
As a mismatch between plans and reality disruptions create unique opportunity for validating existing strategies, measuring impact of disruptions on passengers, and balancing profit with quality - things that push through the limits of legacy practices. The basics of this method and technique are described in 'Beyond Airline Disruptions' (more in the second edition available at the beginning of next year), and SlideShares: Simplifying Complexity and Managing Costs We Don't Understand.



Related posts:



Tuesday, 18 April 2017

Are Airline Megamergers Becoming United in Losing Passengers They Can No Longer Afford to Serve? Does This Explain the Dr. Dao Story?

If there is an opposite to disruptions it is not punctuality, it is civilised air travel.

On Sunday 9th April Doctor Dao, United Airlines’ passenger, was violently dragged out from his seat just before the departure of his flight UA3411 from Chicago to Louisville. He was chosen to leave the plane against his will to make room for four unexpected employees of a partner airline who needed to get to Louisville by Monday morning to crew another flight. United originally characterized the flight as overbooked, but later said that was (obviously) not the case.

The incident would have probably stayed contained locally (as most of the disruptive events do) if it was not for the video that his fellow passengers posted on social media. It caused an outrage against United Airlines. Airline’s CEO Oscar Muñoz rushed to defend the employees' conduct and said that forcibly removed doctor had been "disruptive and belligerent". As the video went viral and company’s shares began to slide Mr Munoz reset the tone and softened his words. The way the case was handled has been widely condemned and described by some as a ‘mockery of the world leadership’.

Why would an airline that cares about its business and reputation ever think of allowing a paying passenger to be assaulted, so that its own employee could take his seat?  

To answer this question we need to dig a bit deeper. Doctor Dao’s case revealed the tip of the underlying pattern that is invisibly eroding the future of air travel. Major legacy airlines are caught in a self-made trap by choosing to operate a hub-network, wrongly assuming that they can expand indefinitely within finite airport capacities. Consequences experienced today include operational and financial volatility of major hub operators, a rise in operational disruptions and passenger dissatisfaction.

The origins
The situation that major airlines are in today started in 1980s when deregulated US airlines all rushed to copy FedEx’s hub-and-spoke business model, assuming it was more efficient and rewarding to fly passengers via huge hub airports instead of taking them straight to their destination (just as FedEx did with parcels). The idea of allowing fast expansion and offering passengers more travel choices sounded great, but soon proved to be a big mistake. Missed connections at hubs created huge passenger dissatisfaction and inefficiencies, and contributed to the bankruptcy of almost every big US airline.

The side effects
In the meantime, traffic concentration at major hub airports has continued to rise. Airlines have become less resilient and more vulnerable to even the smallest unforeseen events. The next big crises in 2001 (9/11), and 2008 (sharp increase in fuel prices, global economic downturn and increased low-cost competition) have shaken the industry even more as airport and airspace congestion restricted their opportunity for growth.  Airline consolidation was seen as the quickest fix in the battle for survival, creating unanticipated side effects that may have surpassed the benefits of mergers and acquisitions. The resulting massive cost cuts were made at the expense of employees and passengers. Deregulation allowed airlines to create monopolies wilfully ignoring the far-reaching consequences of such decisions.

The birth of megamergers and how it affected passengers
By definition, a megamerger creates one corporation that may maintain control over a large percentage of market share within its industry. This occurs through the acquisition, merger and consolidation. The big four megamergers (American Airlines, Delta Air Lines, Southwest Airlines, and United) now control 85 percent of the market, compared with 55 percent ten years ago. Having fewer competing airlines means that there is now less pressure to improve customer service or worry about losing passengers who often have no better travel alternatives. What they are still not measuring and accounting for are losses caused by increased inefficiencies and passenger dissatisfaction.

Beyond megamergers
As a result, flight schedules and system resources have become more difficult to manage and optimise. Despite some reduction in airline capacities, consolidation increased operational complexity resulting in growing number and harshness of flight disruptions with unreported consequences. Problems have been exacerbated by pushing aircraft utilisation and cabin load factors up, at times beyond manageable limits. And merging with partners’ schedules made things even more complicated. This has created a highly ineffective system prone to disruptions and inability to control them. The true causes of internally caused disruptions are not measured. Instead they are simplistically explained using the delay coding system designed to serve operational needs. Megamerged airlines have little control over their partners’ performance and losses they can potentially cause. Their own capabilities to respond to challenges have weakened, so that even the small unforeseen events can escalate the problems systemwide. The major airlines may have managed to survive and may financially flourish at times, but operationally, they are drifting into failure.

Who really cares about passengers?
Does the lack of competition give airlines the right to deprive passengers of dignified travel? There are no authorities nor passenger organisations that have the power to challenge the disruptive (and offending) airlines and protect passengers. Forced to reduce flight frequency at capacity constrained airports, megamerged airlines have increased cabin load factors, usually to barely manageable 80+ percent, which is why on monopolized routes their incentive to keep service quality up and fares down have disappeared. They also shifted some of the costs of standard services to passengers, like baggage charges and meals, to become source of airline additional revenue. The absence of enforceable regulations and complexity of the process itself have made a mockery of passenger protection and passenger rights to compensation. It will stay so as long as authorities and airlines continue to deny the reality and try to prove the unprovable through deceived delay reports and by ignoring passenger complaints. They fail to understand that it is not all about money. Passengers can never be compensated for loss in time, anxiety and as in the case of Doctor Dao, emotional scars.

Who cares about employees dealing with disruptive situations?
It is not just passengers that suffer the consequences of the rise in disruptive travel. It is also the employees. “Unhappy mechanics do not tend to go the extra mile—or the extra foot—to get the airplane ready to go,” says George Ferguson, a Bloomberg Intelligence airline analyst. Longtime fliers have noticed the delays, cancellations, and lost bags—and the short-tempered gate agents and flight attendants. “As individuals, they are really nice people,” says Jared Spool, a Web design consultant who flies 150,000 miles a year on the airline. “But they are in such a horrible situation, constantly trying to deal with customers that are not happy, and they’re completely powerless.” Does anybody pay attention to this kind of problem?

Who needs sterile surveys on customer experience and delay benchmarking?
Measuring passenger experience has become a farce. It is based on deceiving surveys on customer satisfaction carried out in a controlled environment. The same applies to the misuse of airline delay reports which are not suitable for benchmarking and decisions made outside operational environment.

Who needs customer service departments in the age or social media?
Do airlines really need customer service departments that deny or ignore most of the passenger complaints and compensation claims?  In the age of social media, it is becoming more and more difficult for an airline to escape these costs and more and more easy for passengers to get the compensation using the power of social media, like the musician who wrote a song called United Breaks Guitars. It was the song that finally won him compensation, which he donated to charity.   

Back to reality
Back to flight UA3411 of ‘mega-merged’ United. It was operated under the umbrella of United Express (United regional airline) by Republic Airways’ Republic Airline (one of its 9 subsidiaries) which offers scheduled commercial passenger service as US Airways Express, United Express and under the American Eagle brand.

The question is, how do magamerged airlines control their businesses faced not only by their own complexity, but the conglomerate of merged, yet independent carriers? How much do their leaders know about the impact of disruptive events on airline profitability and what actions should they be taking to make them beneficial for all members?

Let’s scale it down. What lessons can be learned from Doctor Dao’s case? It will much depend on the way the incident and its consequences are recorded and willingness and ability to raise the right questions that lead to the roots of the problems. For this kind of questioning one needs to have a good understanding of how the system works. Standard numerics and segmented reporting systems won’t help much here due to the disconnection between operational and strategic sides of management information. The following questions may serve as a guide:

  • Which of the following codes was used to describe the cause of delay: 14 (Oversales, booking errors), 66 (Late cabin crew boarding or departure procedures), 67 (Cabin crew shortage), 68 (Cabin crew error or special request)?
  • For how long was the flight delayed? How long did it take passengers to reach their destination? How long did it take Doctor Dao to get to the place he needed to be and was he accompanied by his luggage? How long did it take him to heal his wounds?
  • Is there an IATA code for passenger experience and emotional scars they may wear for life?
  • What caused the sudden assignment of deadhead crew from the partner airline?
  • How much will it all cost the airline in refunds, compensations, and future revenue loss?
  • How many passengers on other routes experienced long delays and cancellations and what are the real causes of losses in costs, revenue, and reputation?
  • Do high load factors of over 80% cause more harm from disruption losses than benefits from increased revenue? What are the most critical routes?
  • How much does high aircraft utilisation contribute to disruptions and what are the related losses?
  • How much does adding more routes at congested airports really cost the airline?
  • How many passengers lost connections and how much did it cost the airline?
  • What are the losses caused by outsourced service providers and partners and can they be recovered?
  • Do surveys about passenger satisfaction include disrupted passengers?
  • Can employees cope with a surge in disruptions and how does this reflect on their attitude towards disrupted passengers?
  • What needs to be done to make a better balance between profit and quality?
Published results about United’s operational performance indicate the lack of these insights. They are well beyond its competitors’ metrics on quality, including delays, cancellations, mishandled bags, and bumped passengers. The airline has, since 2012, been the worst or near worst among its competitors. In 2012, when reported punctuality was 58.7% according to the U.S. Department of Transportation, United was responsible for 43 percent of all consumer complaints filed against U.S. airlines’. Even though the punctuality has improved in the meantime, it is still  below the industry norm. Read more United’s Quest to be Less Awful (Bloomberg, Jan 2016).

What lessons can be learned?
‘There are lessons we can learn from this experience’ has become a common closing phrase used by airline executives interviewed after major disruptive events. What lessons did they really have in mind at that moment? Considering that airlines don’t have a system that controls wider strategic and management aspects of disruptions, it is unlikely that real improvement can be expected.

How to make improvements in the age of disruptions
Disruptions offer a still unexplored, if not the only opportunity to improve system performance from inside out. These are unique events where system planning and assumptions meet reality and customer numbers turn to real people. It’s the only way to get an insight into the interactions between data, people, and processes and most critical strategic and operational inputs in need of adjustments. The answer is in working continuously on identifying the most damaging influencers at time and keep repairing the broken parts on the go - a chance that shouldn’t be missed.


Tuesday, 4 April 2017

Do You Really Understand Your Business?

 Every decision we make shapes our future and future of our organisation. We may not be aware of this because we are conditioned by traditional practices which are obscuring our views of interconnected reality. The bigger and more complex our company, the less competent we become, and our business more vulnerable to even the smallest unforeseen disturbances.  We are suffering from the pike syndrome.

Still we continue to believe that we are in control of our business by optimising parts of the system, summing up the results, and applying the step-by-step approach to resolve complex nonlinear problems. And when we end up with surprise losses and growing travel disruptions with epicentres at congested hub airports, there is always someone or something else to blame.

To test your competence, look at your last month’s management report and answer the following questions:
  • What was the impact of traffic expansion at congested airports on airline punctuality, cost, and revenue?
  • Which routes were exposed to the most costly disruptions?
  • What were the reasons for the unexpected rise in reported fuel and crew costs considering that there were no changes in fuel prices, traffic program, or crew counts?
  • What was the impact of unscheduled maintenance on crew productivity?
  • How much did external service providers contribute to the rise in disruptions and how did it affect passengers? Can these costs be recovered or invested in service improvements?
  • How efficient are schedule buffers at congested airports? Do they justify investment in additional aircraft capacities?
  • How many passengers missed their connecting flights, arrived late or didn’t arrive to their destination because their flight was cancelled?
  • How many passenger compensation claims were ignored by your airline and to what extent did the passengers’ comments and complaints on social media affect your company’s reputation?
  • What will you do about it?
If you cannot answer these questions, you don’t quite understand your business, which is why:
  • You may think that a combination of high load factors, high aircraft utilisation, and expansion at congested airports are performance indicators to be proud of, while not knowing that they are the causes of hidden disruption losses in cost and revenue and sunk investments that surpass the expected benefits.
  • You may think that the crew shortage reported as the reason for frequent and costly delays may increase the disruption risk and are considering investing in more crew. This could be the wrong decision if you didn’t consider that crew shortage could have been caused by the lack of spare parts or some other reason - problems expected to be resolved within the next few months.
  • You may think that you will increase competitiveness by reducing air fares on routes where you are losing passengers, without knowing that even your most loyal customers will never come back because of the way they were treated during and after their disrupted travel and because of poor services and lack of care when it was most needed.
  • You may think that you can recover hundreds of millions in disruption losses caused by ground handling company that damaged your aircraft (unserviceable for the whole week), without being aware that this is not possible because traditional information systems are not designed to measure long ripple effects of disruptions and link them with authentic costs.
This is why most of the boardroom meetings look something like this:
  

No current information system nor the gut feeling can help you get these insights. To become a competent decision maker you must be aware how your business is  performing now, not six months or a year ago. At the end of each month you need to dig deeper beyond figures in management reports and repair the broken links. 

It is essential that you constantly interrogate changes and measure their impact. This requires a method and technique that translate operational information into language of senior executives, whom I support in developing this practice as a management habit.

If any of the points mentioned in this post resonate with you contact me at
jasenka@astuteaviation.com to see how I can help.

Tuesday, 14 March 2017

The Importance Of Playing The Right Tone

“Guitar gurus say, “Tone is in your fingers.” You can buy the same guitar, effects pedals, and amplifier that Eddie Van Halen uses. But when you play that rig, it’s still going to sound like you.” (Jason Fried, Rework)

So many airlines have replicated the tangible structure of Southwest's low-cost model (single aircraft type, point-to-point network), but not many have made it beyond baby steps and adolescence. What they couldn’t replicate is the Southwest tone.

Monday, 16 January 2017

Can a Bit Of Southwest’s ‘Secret Sauce’ Help European Airlines Rise Above Challenges Linked To Airport Capacity Constraints?

The Southwest Airlines Way

In his recent CNBC interview, the current CEO of Southwest Airlines Gary Kelly described the ingredients of company’s ‘secret sauce’ to competitiveness as follows:
‘We’ve never had a layoff, we’ve never had a pay cut, we've been profitable every single year since our first year of operation in 1972. There is a lot to a culture. And it is easier to have a strong culture if you feel like you are a champion. And that’s the way our employees feel. The other thing that we try to do for our people is to give them the tools and the resources they need to provide a product they are proud of. We don’t charge bag fees, we don’t charge change fees. And mainly, we care about passengers. And we try to have a family at Southwest Airlines and ask our people to treat all their customers like their guests in their homes, and it’s worked really well for us. Our people are fantastic. It really is what sets us apart competitively in the industry, and they are the ones that make Southwest so successful.’ (transcript)

Of course, everything doesn’t go smoothly all the time. Disruptions happen, flights are delayed or cancelled, causing inconvenience to passengers. Even giving the best possible service won’t make everyone happy. What makes Southwest unique is the attitude of care and best possible response in difficult situations.

And there is another thing. When faced by challenges, Southwest do make changes but don’t give up on their basic values. Their current plan to expand internationally and grab the market share of its conventional competitors American, Delta, and United requires investment in new fleet, rise in labour cost, and loss of additional revenue opportunity by not charging passengers to change their travel plans and to check their bags (‘bags fly free’ policy) - not a pleasing things for investors. But Southwest resists change to the core of company values and view those still unique consumer-friendly policies as key elements of the company’s advantage.
The European way
For European low-fare counterparts this kind of ‘secret sauce’ to competitiveness is not on the menu. They are used to put the culture of growth in profit and market share before people and quality, assuming that by offering low-fares to their customers they free themselves from responsibilities related to travel mishaps, passenger anxiety and discomfort. Take EasyJet as an example. Their relationship with passengers is spiralling down, measured by service quality, on-time performance, and passenger claim processing, with lots of negative publicity. Things got worse since Gatwick, the world’s busiest single runway airport, became EasyJet’s biggest base following the fast traffic expansion. The consistent drop in punctuality from 80.8% in 2012 to 63.2% in 2015 illustrates the scale of mismatch between company’s strategic plans and reality. As a result, the airline has become more vulnerable to external events than other airlines facing the same difficulties. Still, EasyJet plan to ‘proceed with strategy of building leading positions at important airports in key summer beach and European city destinations’ putting market expansion before other values.
Unable to grow revenue and stay competitive while trapped at congested hub bases, conventional European airlines continue to buy growth through mergers and acquisitions. They keep reducing costs and improving productivity mostly by laying off people. And they don’t seem to be too concerned about a growing army of passengers experiencing unpleasant delays and cancellations. After all, their competitors do the same - European regulation on passenger protection can easily be ignored. Their records on service quality are partial and short of information about unpleasant consequences of flight delays and cancellations on customers. Airline delay reporting is voluntary, based on self-made flexible rules. Official delay statistics is therefore unreliable – the information is incomplete, inconsistent, and includes assumptions needed to make up for missing data. Reliable consumer reports do not exist.

Considering infrastructural limitations at twenty busiest European airports with no hope of expansion during the next two decades, disruptions are destined to rise and with them system inefficiencies, airline costs, and travel inconvenience. 

There are suggestions that more cooperation between long-haul and low-cost carriers is on the way.  EasyJet and Ryanair, Europe's two biggest low cost carriers, see their future in serving long-haul airlines operating from European hub airports. This is seen as a cost-effective way for legacy carriers to bring their passengers to hub airports for long-haul flights connections. Major hub airlines have already surrendered around 40% of short-haul flights and have been forced to slash further their costs to offer rock-bottom fares to remain competitive. Lufthansa and Air France-KLM still prefer growing their own low-cost units to avoid giving up more market share to the external disruptors. There are many hurdles to be overcome before these arrangements take place. While passengers may benefit from lower ticket prices and more connectivity at hub airports, their travel will undoubtedly become more disruptive, even more costly in time and money, and filled with more anxiety, especially if responsibility for compensating passengers for missed connections is not clearly assigned. EasyJet’s experience at Gatwick offers some clues.

The good news is that the ‘secret sauce’ remains an option for improvement in culture and quality and with it increase in revenue and overall profitability. For those for who consider words ‘culture’ and ‘quality’ too abstract and overused, the impact of Southwest’s ‘secret sauce’ can be demonstrated in analytical terms through geometric progression. Say, for the sake of simplicity, that on the route between airports A and B an airline was carrying 1000 passengers before it improved punctuality and overall care of customers. As a result, total number of passengers was up by 10%, there were 10% more return passengers, and revenue per passenger increased by 10%. The airline benefited from 33% rise in revenue without additional investments and sales efforts. With the addition of cost saving through improved punctuality, the very real potential for improvement in quality to increase profit margin can be understood.



The way forward
Obviously, elements of Southwest’s culture cannot be introduced overnight. But even the smallest progress in motivating employees and treating customers well can bring the rewards relatively quickly, as Ryanair proved recently. After tasting a bit of Southwest’s ‘secret sauce’ Ryanair put its latest financial success down to its low fare and “extraordinary customer service”. Their CEO admits he made a mistake in not focusing on customer service sooner. Moving in this direction can come in handy, especially if company decides to go ahead with plans to serve long-haul airlines operating from European hub airports.

Airlines with long history of hub entrenchment must work it out from bottom up, getting closer to reality. The fastest way to start this practice is by learning from disruptions, and digging more deeply into their self-inflicted causes. Disruptions are events where plans and management practices meet reality and become validated by passenger experience. Tracking their true origins at system level and understanding their impact on both passengers and overall business performance (as they unfold) is the key to improving competitiveness. And here is a hint – before making decisions, find out their impact on customers. Add to this an opportunity to insure against disruption losses equipped with well documented claims, and you will have even more reasons to look forward to better times ahead.     

So, the remedies are available, surely more effective than regulatory interventions that may be on the way. Unlike regulations, they cannot be forced on airlines, they are something that airlines have to choose.