An increasingly
busy operational environment and a growing number of outsourced services make
airlines more susceptible to operational disruptions caused by third parties.
This can incur substantial losses to airlines unable to credibly document indirect damages - the ripple effects following
the initial disruptions.
Ground handling
incidents resulting in aircraft damage, for example, could put a plane out of
service for days or even months and cost an airline hundreds of thousands and
in some cases over a million dollars. Apart from the direct cost of aircraft
damage associated with aircraft repair, it often incurs several times higher
indirect costs caused by unserviceable aircraft.
While losses above the
deductible insurance values can be recovered for direct damages, as well as a
part of ‘straight’ indirect cost, like hired replacement aircraft, those below
highly set deductibles (over $1 million for wide body aircraft) must be borne
solely by the airline, unless protective contractual clauses are agreed with the
third parties. The situation is not much better in case of disruptions caused
by ground handling, aircraft maintenance or technology companies, ATC,
airports, or aircraft manufacturers.
At the core of
the problem lies a deeply rooted industrial approach to cost management and
inherited organisational departmentalisation - both contributing to the distortion
of communication channels and consequently the objectivity of information. This
is manifested through traditional, linear, top-down distribution of costs which
are multidimensional by nature, and their dissociation from operational events like
flight delays, cancellations, diversions, additional flights, and aircraft replacements.
The same applies to passenger related costs including additional handling, loss
of revenue and passenger compensation which remain disconnected from the events
that have created them, making their recovery impossible.
Another
obstacle to identifying the full impact of damages caused by third parties is
related to the responsibility for collecting this information. It is dependent
on people based in parts of an organisation who neither have much to do with
tracking of actual costs and their origins, nor are they equipped with a cross-system
tool necessary to successfully complete this complex task (job usually
delegated to Engineering, Insurance, Ground Operations, Flight Safety or other
operational departments).
However, improvement
in this area is possible even for the most complex organisations. To identify the
true value of disruption costs they need to be observed as close to real time
as possible. All it takes then is to create a system that provides links between
real time costs, initial and reactionary schedule changes (operational events)
and their root causes.
In addition to numbers, it needs to be accompanied with stories
of those directly and indirectly involved in the event captured as close to
real time as possible. It is amazing to see how this process opens the way to
true cost tracking crossing the departmental boundaries in all directions; it
sets a healthy ground for creation of the reliable information system that,
apart from many other internal purposes can well serve legislative requirements
for disruption loss recovery.
Designing and
implementing this relatively simple and inexpensive method for loss recovery requires
a good system knowledge, support at highest organisational level, and cross-system
cooperation. The results spread much wider than for the purpose of loss
recovery, with efforts and investments being minuscule compared to the benefits.
Those willing
to share their personal experience, or have questions related to this subject including
design of tools for disruption loss control can contact me at jasenka@astuteaviation.com.
